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2014

XRS Reports Fiscal 2013 Third Quarter Results

Company records mobile software revenue growth of 21 percent, free cash flow of $1.7 million and third consecutive quarter of profitability

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MINNEAPOLIS, Aug. 8, 2013 /PRNewswire/ -- XRS Corporation (formerly Xata Corporation, NASDAQ: XRSC) reported results for its fiscal 2013 third quarter ended June 30, 2013.

For a third consecutive quarter, the Company reported net income to common shareholders. Specifically, for the third quarter of fiscal 2013, net income to common shareholders was $0.2 million, or $0.01 per diluted share, an increase of  $6.4 million compared to a fiscal 2012 third quarter net loss to common shareholders of $6.2 million, or $0.58 per diluted share.  The third quarter of fiscal 2012 included impairment and business realignment charges of $5.7 million, or $0.54 per diluted share.

Fiscal 2013 third quarter mobile software revenue grew 21 percent. The Company reported total software revenue and total revenue of $11.3 million and $13.4 million, respectively, for the third quarter of fiscal 2013, compared to total software revenue and total revenue of $11.8 million and $15.6 million, respectively, for the comparable period in fiscal 2012. Further highlights for the quarter include:

  • Fiscal 2013 third quarter software revenue accounted for approximately 84 percent of total revenue, compared to 76 percent for the same period of fiscal 2012, contributing to continuing improvement in overall gross margins.
  • The Company signed 69 new mobile customers in the third quarter of fiscal 2013.
  • Net income of $0.2 million contributed to free cash flow of $1.7 million for the third quarter of fiscal 2013, compared to free cash flow of $29,000 for the same period in fiscal 2012.

"A significant highlight this past quarter was bringing our new XRS mobile solution to market and the high level of interest it has already received," said Jay Coughlan, XRS Corporation chairman and chief executive officer. "At the same time, we were able to achieve three consecutive quarters of profitability and positive cash flow."

For the third quarter of fiscal 2013, selling, general and administrative expenses decreased to $5.1 million, compared to $6.5 million for the comparable period in fiscal 2012. The intangible asset impairment and workforce reduction charges recorded in the third quarter of fiscal 2012 continue to drive favorability in the Company's amortization and personnel expenses.

Research and development expenses were $2.9 million and $4.0 million for the third quarter of fiscal 2013 and 2012, respectively. During the third quarter of fiscal 2013, the Company capitalized $0.1 million in software development costs associated with the Company's XRS mobile solution. Continued investment in the enhancement of the XRS mobile solution's functionality and maintenance releases to the Company's legacy solutions to ensure compliance with continually changing governmental regulations drove the research and development expenses recorded in the third quarter of fiscal 2013.

The Company reported non-GAAP earnings of $2.1 million, or $0.07 per diluted share for the third quarter of fiscal 2013, compared to a non-GAAP loss of $0.3 million, or $0.03 per diluted share for the same period in fiscal 2012. Fiscal 2012 non-GAAP earnings was impacted by $1.8 million of business realignment charges. The improvement in non-GAAP earnings is a reflection of improved overall gross margins and a reduced cost structure.

"Consistent with our strategy, XRS Corporation will continue to invest in mobile revenue growth while continuing to meet the current needs of our existing customers and working with them to transition to the XRS solution," said Coughlan.

For the nine months ended June 30, 2013, mobile software revenue increased 22 percent, while total software revenue remained relatively consistent with the comparable period in fiscal 2012. Total revenue was $42.1 million for the nine months ended June 30, 2013, compared to $48.1 million for the comparable period in fiscal 2012 as a result of decreased hardware revenue as customers continue to adopt mobile solutions with no upfront hardware costs.

For the nine months ended June 30, 2013, the Company reported non-GAAP earnings of $6.5 million, or $0.23 per diluted share, compared to $0.4 million, or $0.01 per diluted share, for the comparable period in fiscal 2012, an increase of $6.1 million. Business realignment charges recorded in fiscal 2012 contributed $1.8 million to the increase in non-GAAP earnings, and the remaining improvement is a reflection of mobile revenue growth, improved overall gross margins and a reduced cost structure.

As of June 30, 2013, the Company maintained a debt-free balance sheet and reported an increase of $2.6 million in working capital to $12.2 million, compared to $9.6 million in working capital as of September 30, 2012. Free cash flow was $4.5 million for the nine months ended June 30, 2013, compared to negative $2.9 million for the comparable period in fiscal 2012.

Summary of revenue and gross margins (deficits) is as follows (in thousands, except percentage data):

 


For the Three Months Ended


For the Nine Months Ended


June 30,


June 30,


2013


2012


2013


2012









Revenue:








Software

$

11,266



$

11,833


$

34,613



$

35,222

Hardware systems

1,798



3,480


6,569



11,568

Services

340



329


913



1,312

Total revenue

$

13,404



$

15,642


$

42,095



$

48,102









Gross margins (deficits):








Software

73%



71%


73%



71%

Hardware systems

18%



(14%)


14%



(8%)

Services

(94%)



(74%)


(88%)



(45%)

Total gross margin

61%



49%


61%



49%

 

Non-GAAP vs. GAAP Financial Measures
To assist investors in understanding the Company's financial performance, the Company supplements the financial results that are generated in accordance with the accounting principles generally accepted in the United States, or GAAP, with non-GAAP financial measures, including non-GAAP earnings, non-GAAP earnings per diluted share, working capital and free cash flow. These non-GAAP financial measures are useful to investors for evaluating the Company's historical and prospective financial performance, as well as our performance relative to competitors. Management regularly uses these non-GAAP financial measures internally to understand, manage and evaluate its ongoing business operations and to make operating decisions. These non-GAAP financial measures are among the primary factors management uses in planning for and forecasting future period performance. Management believes that these non-GAAP financial measures reflect an additional way of analyzing aspects of the Company's ongoing operations that, when viewed with our GAAP results, provides a more complete understanding of the factors and trends affecting our business.

The end of this release contains a reconciliation of the specific non-GAAP financial measures to the nearest comparable GAAP measures.

About XRS
XRS Corporation (formerly Xata Corporation) delivers fleet management and compliance software solutions to the trucking industry to help maintain regulatory compliance and reduce operating costs. XRS is leading the trucking industry's migration to mobile devices for collecting and analyzing compliance and management data. Its mobility-based products have no upfront hardware costs and run on smartphones, tablets and rugged handhelds. XRS has sales and distribution partnerships with the major wireless carriers supporting the U.S. and Canadian trucking industries.

Through XRS' solutions: XataNet, Turnpike, MobileMax and XRS, we are currently serving 112,000 subscriptions through 1,400 customers. Our various solutions help fleet managers, dispatchers and drivers collect, sort, view and analyze data to help reduce costs, increase safety, attain compliance with governmental regulations and improve customer satisfaction.

For more information, visit www.xrscorp.com or call 1-800-745-9282.

Cautionary note regarding forward-looking statements
This announcement includes forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Such statements are based on current expectations, and actual results may differ materially. The forward-looking statements in this announcement are subject to a number of risks and uncertainties including, but not limited to, the possibility of continuing operating losses, the ability to adapt to rapid technological change, the ability of our solutions to be compliant with future regulations, dependence on propriety technology and communication networks owned and controlled by others, the failure to renew contracts or failure to sell additional solutions or services to existing customers, the timely introduction and market acceptance of new products, the ability to fund future research and development activities, the ability to establish and maintain strategic partner relationships and the other factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 (as updated in our subsequent reports filed with the SEC). These reports are available under the "Investors" section of our website at www.xrscorp.com and through the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

 


XRS Corporation
Consolidated Statements of Operations
(Unaudited)








(In thousands, except per share data)

For the Three Months Ended June 30,


For the Nine Months Ended June 30,


2013


2012


2013


2012

Revenue












Software

$

11,266


$

11,833


$

34,613


$

35,222

Hardware systems

1,798


3,480


6,569


11,568

Services

340


329


913


1,312

Total revenue

13,404


15,642


42,095


48,102



Cost of goods sold

5,225


8,015


16,577


24,500

Selling, general and administrative

5,094


6,463


15,940


19,172

Research and development

2,873


3,983


8,721


10,979

Impairment of intangible asset


3,500



3,500

Total costs and expenses

13,192


21,961


41,238


58,151



Operating income (loss)

212


(6,319)


857


(10,049)

Net interest and other expense

(35)


(33)


(82)


(297)



Income (loss) before income taxes

177


(6,352)


775


(10,346)

Income tax (benefit) expense

(52)


(192)


51


(470)



Net income (loss)

229


(6,160)


724


(9,876)



Preferred stock dividends and deemed dividends

(59)


(57)


(175)


(119)



Net income (loss) to common shareholders

$

170


$

(6,217)


$

549


$

(9,995)



Net income (loss) per common share:


Basic

$

0.02


$

(0.58)


$

0.05


$

(0.93)

Diluted

$

0.01


$

(0.58)


$

0.03


$

(0.93)



Weighted average common and common share equivalents:


Basic

10,858


10,753


10,831


10,714

Diluted

28,345


10,753


27,766


10,714

 

 



XRS Corporation
Consolidated Balance Sheets






June 30,


September 30,

(In thousands)

2013


2012


(Unaudited)



Current assets




Cash and cash equivalents

$

9,309



$

7,120


Accounts receivable, net

6,760



7,835


Inventories

2,607



3,811


Deferred product costs

692



770


Prepaid expenses and other current assets

2,004



1,406


     Total current assets

21,372



20,942






Equipment and leasehold improvements, net

6,172



7,313


Intangible assets, net

4,940



6,487


Goodwill

16,386



17,288


Deferred product costs, net of current portion

261



425


Other assets

663



351


     Total assets

$

49,794



$

52,806






Current liabilities




Revolving line of credit

$



$

2,300


Accounts payable

3,523



3,436


Accrued expenses

4,925



4,832


Deferred revenue

1,928



2,314


     Total current liabilities

10,376



12,882






Deferred revenue, net of current portion

619



1,077


Deferred tax liabilities



9


Other long-term liabilities

132



314


Total liabilities

11,127



14,282






Shareholders' equity




Preferred stock

44,524



44,292


Common stock

108



108


Additional paid-in capital

50,490



49,979


Accumulated deficit

(56,770)



(57,319)


Accumulated other comprehensive income

315



1,464


     Total shareholders' equity

38,667



38,524


     Total liabilities and shareholders' equity

$

49,794



$

52,806














 

 


XRS Corporation
Consolidated Statements of Cash Flows
(Unaudited)




For the Nine Months Ended


June 30,

(In thousands)

2013


2012





Operating activities




Net income (loss)

$

724



$

(9,876)


Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:




Depreciation and amortization

5,080



6,318


Impairment of intangible asset



3,500


Amortization of deferred financing costs

57



20


Deferred income taxes

(9)



(532)


Loss on sale or disposal of equipment and leased equipment

48



75


Stock-based compensation

498



628


Changes in assets and liabilities:




     Accounts receivable, net

1,056



1,290


     Inventories, net

1,165



(363)


     Deferred product costs

242



661


     Prepaid expenses and other assets

(672)



(403)


     Accounts payable

(162)



(874)


     Accrued expenses and other liabilities

(10)



779


     Deferred revenue

(837)



(1,546)


       Net cash provided by (used in) operating activities

7,180



(323)






Investing activities




Purchase of equipment and leasehold improvements

(2,324)



(2,536)


Capitalized software development

(355)




Proceeds from the sale of equipment

16



2


     Net cash used in investing activities

(2,663)



(2,534)






Financing activities




Revolving line of credit

(2,300)



2,100


Payments on debt obligations



(3,627)


Deferred financing costs

(50)



(97)


Proceeds from exercise of options

13




     Net cash used in financing activities

(2,337)



(1,624)






     Effects of exchange rate on cash

9



(14)






     Increase (decrease) in cash and cash equivalents

2,189



(4,495)






Cash and cash equivalents




Beginning

7,120



12,407


Ending

$

9,309



$

7,912


 

 


XRS Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)


Non-GAAP Earnings and Non-GAAP Earnings Per Diluted Share






For the Three Months Ended June 30,


For the Nine Months Ended June 30,

(In thousands, except per share data)

2013


2012


2013


2012









Net income (loss) to common shareholders

$

170



$

(6,217)



$

549



$

(9,995)









Adjustments:








Depreciation & amortization expense

1,718



2,351



5,080



6,318

Impairment of intangible asset



3,500





3,500

Stock-based compensation

150



135



498



628

Net interest expense

27



31



68



304

Preferred stock dividends and deemed dividends

59



57



175



119

Income tax (expense) benefit

(52)



(192)



51



(470)

Other





50



Total adjustments

1,902



5,882



5,922



10,399









Non-GAAP earnings (loss)

$

2,072



$

(335)



$

6,471



$

404









Non-GAAP earnings (loss) per diluted share

$

0.07



$

(0.03)



$

0.23



$

0.01









Shares used in calculating non-GAAP earnings (loss) per diluted share

28,345



10,753



27,766



27,238


 

 

 

Working Capital






June 30,


September 30,

(In thousands)

2013


2012





Current assets

$

21,372



$

20,942


Current liabilities

(10,376)



(12,882)


Net current assets

10,996



8,060


Current portion of deferred revenue net deferred costs

1,236



1,544


Working capital

$

12,232



$

9,604














 

 


XRS Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)





Free Cash Flow






For the Three Months Ended June 30,


For the Nine Months Ended June 30,


2013


2012


2013


2012









Net cash provided by (used in) operating activities

$

2,933



$

583



$

7,180



$

(323)


Net cash used in investing activities:








Purchase of equipment and leasehold improvements

(95)



(62)



(319)



(1,977)


Purchase of Relay assets

(843)



(492)



(2,005)



(559)


Capitalized software development

(270)





(355)




Proceeds from the sale of equipment





16



2


Net cash used in investing activities

(1,208)



(554)



(2,663)



(2,534)










Free cash flow

$

1,725



$

29



$

4,517



$

(2,857)


SOURCE XRS Corporation



RELATED LINKS
http://www.xrscorp.com

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