XRS Corporation Reports Fiscal 2014 Third Quarter Results - KTUL.com - Tulsa, Oklahoma - News, Weather & Sports

XRS Corporation Reports Fiscal 2014 Third Quarter Results

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SOURCE XRS Corporation

- Mobile software revenue up 19% year-over-year

- Net income of $0.1 million, non-GAAP earnings of $1.8 million

- Generated free cash flow of $0.8 million

MINNEAPOLIS, Aug. 7, 2014 /PRNewswire/ -- XRS Corporation (NASDAQ: XRSC) reported results for its fiscal 2014 third quarter ended June 30, 2014.

"It's been an impressive quarter for customer growth and we are pleased that over 190 fleets chose our XRS platform as their fleet management and compliance solution," said Jay Coughlan chairman and chief executive officer of XRS Corporation. "During the quarter we successfully launched additional fuel tax and trip management functionality, supporting our commitment to deliver the best product to fleets of all sizes. Continued investment in our solution positions us well to capitalize on the growing compliance market."

Third Quarter Results

  • Revenue: For the three months ended June 30, 2014 mobile software revenue increased 19 percent compared with the comparable fiscal period in 2013 as customers continue to implement our mobile XRS solution. Total revenue was $12.8 million for the three months ended June 30, 2014, compared to $13.4 million for the comparable period in fiscal 2013 as the Company continues to transition from its legacy hardware-based solutions to its mobile solutions.
  • Gross Margin: Overall gross margin percentage remained consistent at 61 percent for the three months ended June 30, 2014 and 2013. Software gross margins declined 3 percentage points to 70 percent for the three months ended June 30, 2014, compared to the same period in fiscal 2013. The decline in software gross margins is reflective of the Company's commitment to continue to support its legacy solutions while it transitions customers to its XRS mobile solution.
  • Selling, General & Administrative Expenses: Selling, general and administrative expenses decreased to $4.4 million, compared to $5.1 million for the comparable period in fiscal 2013, driven by a decrease in personnel costs.
  • Research & Development Expenses: Reserve and development expenses were $3.3 million and $2.9 million for the third quarter of fiscal 2014 and 2013, respectively. Research and development expenses increased as the Company successfully released new solution functionality, including: trip management for managing routes and enhancements to fuel tax including print, sign and send automated reporting. This new functionality allows the XRS mobile solution to meet the requirements of larger, more complex fleets, while further differentiating our solution from competitors.
  • Net Income: GAAP net income for the third quarter was $0.1 million, compared to $0.2 million for the same period in the prior year.
  • Non-GAAP Earnings: The Company reported non-GAAP earnings of $1.8 million, or $0.06 per diluted share for the third quarter of fiscal 2014, compared to non-GAAP earnings of $2.1 million, or $0.07 per diluted share for the same period in fiscal 2013.
  • Balance Sheet: As of June 30, 2014, XRS Corporation had cash of $13.0 million, an increase of $2.6 million since September 30, 2013. As of quarter end, the Company also maintained a debt free balance sheet.
  • Statement of Cash Flows: During the third quarter of fiscal 2014 the Company generated $1.4 million of cash flow from operations and invested $0.6 million in capital expenditures, Relay assets and software development, resulting in free cash flow of $0.8 million.
  • Working Capital:  Working capital increased $3.1 million to $16.1 million as of June 30, 2014, compared to $13.0 million in working capital as of September 30, 2013.

Year-to-Date Results

  • Revenue: For the nine months ended June 30, 2014, mobile software revenue increased 14 percent compared to the same period in fiscal 2013. Total revenue was $38.9 million for the nine months ended June 30, 2014, compared to $42.1 million for the comparable period in fiscal 2013. Attrition of legacy customers and a lower average annual contract values on the XRS mobile solution contributed to the decreased software revenue. The Company's focus on the sale of the no upfront hardware cost XRS mobile solution resulted in decreased hardware systems revenue.
  • Non-GAAP Earnings: For the for the nine months ended June 30, 2014, the Company reported non-GAAP earnings of $5.0 million, or $0.17 per diluted share, compared to $6.5 million, or $0.23 per diluted share, for the comparable period in fiscal 2013.

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,


2014



2013



2014



2013














Revenue:












Software

$

10,867



$

11,266



$

32,465



$

34,613


Hardware systems

1,689



1,798



5,610



6,569


Services

257



340



825



913


Total revenue

$

12,813



$

13,404



$

38,900



$

42,095














Gross margins (deficits):












Software

70

%


73

%


70

%


73

%

Hardware systems

26

%


18

%


23

%


14

%

Services

(113)

%


(94)

%


(107)

%


(88)

%

Total gross margin

61

%


61

%


59

%


61

%

 

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 Corporation

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

Through XRS Corporation's solutions: XRS, Turnpike, XataNet and MobileMax, we serve 106,000 subscribers through 1,300 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 their 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 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, 2013 (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)



For the Three Months

Ended June 30,


For the Nine Months

Ended June 30,

(In thousands, except per share data)

2014


2013


2014


2013









Revenue








Software

$

10,867


$

11,266


$

32,465


$

34,613

Hardware systems

1,689


1,798


5,610


6,569

Services

257


340


825


913

Total revenue

12,813


13,404


38,900


42,095









Costs and expenses








Cost of goods sold

5,049


5,225


15,795


16,577

Selling, general and administrative

4,389


5,094


14,322


15,940

Research and development

3,289


2,873


9,297


8,721

Total costs and expenses

12,727


13,192


39,414


41,238









Operating income (loss)

86


212


(514)


857

Net interest and other expense

(6)


(35)


(52)


(82)









Income (loss) before income taxes

80


177


(566)


775

Income tax (benefit) expense

-


(52)


(6)


51









Net income (loss)

80


229


(560)


724









Preferred stock dividends and deemed

    dividends

(68)


(59)


(188)


(175)









Net income (loss) to common shareholders

$

12


$

170


$

(748)


$

549









Net income (loss) per common share:








Basic

$

-


$

0.02


$

(0.07)


$

0.05

Diluted

$

-


$

0.01


$

(0.07)


$

0.03









Weighted average common and common share equivalents:








Basic

11,159


10,858


11,043


10,831

Diluted

12,184


28,345


11,043


27,766

 


XRS Corporation

Consolidated Balance Sheets



June 30,


September 30,

(In thousands)

2014


2013


(Unaudited)



Current assets




Cash and cash equivalents

$

13,017


$

10,445

Accounts receivable, net

6,629


6,864

Inventories

1,156


1,710

Deferred product costs

426


625

Prepaid expenses and other current assets

1,639


1,417

Total current assets

22,867


21,061





Equipment and leasehold improvements, net

4,234


5,980

Intangible assets, net

3,221


4,578

Goodwill

16,199


16,640

Deferred product costs, net of current portion

112


213

Other assets

532


667

Total assets

$

47,165


$

49,139





Current liabilities




Accounts payable

$

3,118


$

2,885

Accrued expenses

3,236


4,560

Deferred revenue

1,648


1,886

Total current liabilities

8,002


9,331





Deferred revenue, net of current portion

225


496

Other long-term liabilities

13


62

Total liabilities

8,240


9,889





Shareholders' equity




Preferred stock

44,728


44,524

Common stock

112


109

Additional paid-in capital

51,445


50,674

Accumulated deficit

(57,436)


(56,688)

Accumulated other comprehensive income

76


631

Total shareholders' equity

38,925


39,250

Total liabilities and shareholders' equity

$

47,165


$

49,139

 


XRS Corporation

Consolidated Statements of Cash Flows

(Unaudited)



For the Nine Months Ended


June 30,

(In thousands)

2014


2013





Operating activities




Net (loss) income

$

(560)


$

724

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




Depreciation and amortization

4,957


5,080

Amortization of deferred financing costs

38


57

Deferred income taxes

-


(9)

Loss on sale or disposal of equipment and leased equipment

47


48

Stock-based compensation

550


498

Changes in assets and liabilities:




Accounts receivable, net

431


1,056

Inventories, net

555


1,165

Deferred product costs

299


242

Prepaid expenses and other assets

(269)


(672)

Accounts payable

460


(162)

Accrued expenses and other liabilities

(1,432)


(10)

Deferred revenue

(504)


(837)

Net cash provided by operating activities

4,572


7,180





Investing activities




Purchase of equipment and leasehold improvements

(2,023)


(2,324)

Capitalized software development

(138)


(355)

Proceeds from the sale of equipment

-


16

Net cash used in investing activities

(2,161)


(2,663)





Financing activities




Revolving line of credit

-


(2,300)

Deferred financing costs

(30)


(50)

Proceeds from exercise of options

183


13

Net cash provided by (used in) financing activities

153


(2,337)





Effects of exchange rate on cash

8


9





Increase in cash and cash equivalents

2,572


2,189





Cash and cash equivalents




Beginning

10,445


7,120

Ending

$

13,017


$

9,309

 

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)

2014


2013


2014


2013









Net income (loss) to common shareholders

$

12


$

170


$

(748)


$

549









Adjustments:








Depreciation and amortization expense

1,603


1,718


4,957


5,080

Stock-based compensation

150


150


550


498

Net interest expense

8


27


25


68

Preferred stock dividends and deemed dividends

68


59


188


175

Income taxes

-


(52)


(6)


51

Other

-


-


-


50

Total adjustments

1,829


1,902


5,714


5,922









Non-GAAP earnings

$

1,841


$

2,072


$

4,966


$

6,471









Non-GAAP earnings per diluted share

$

0.06


$

0.07


$

0.17


$

0.23

Shares used in calculating non-GAAP earnings per diluted share

28,819


28,345


28,773


27,766

 

Working Capital





June 30,


September 30,

(In thousands)

2014


2013





Current assets

$

22,867


$

21,061

Current liabilities

(8,002)


(9,331)

Net current assets

14,865


11,730

Current portion of deferred revenue net deferred costs

1,222


1,261

Working capital

$

16,087


$

12,991

 

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,

(In thousands)

2014


2013


2014


2013









Net cash provided by operating activities

$

1,395


$

2,933


$

4,572


$

7,180

Net cash used in investing activities:








Purchase of equipment and leasehold improvements

(84)


(95)


(604)


(319)

Purchase of Relay assets

(408)


(843)


(1,419)


(2,005)

Capitalized software development

(110)


(270)


(138)


(355)

Proceeds from the sale of equipment

-


-


-


16

Net cash used in investing activities

(602)


(1,208)


(2,161)


(2,663)









Free cash flow

$

793


$

1,725


$

2,411


$

4,517

 

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