XRS Reports Fiscal 2012 Fourth Quarter and Year-End Results

         XRS Reports Fiscal 2012 Fourth Quarter and Year-End Results

Software revenue growth of 5 percent contributes to Non-GAAP earnings of $2.0
million for the fourth quarter of fiscal 2012

PR Newswire

MINNEAPOLIS, Nov. 8, 2012

MINNEAPOLIS, Nov. 8, 2012 /PRNewswire/ -- XRS Corporation (formerly Xata
Corporation, NASDAQ: XRSC) reported revenue of $15.0 million for its fiscal
fourth quarter ended September 30, 2012, versus $15.3 million for the
comparable period in 2011. Net loss to common shareholders for the fourth
quarter of fiscal 2012 was $0.3 million, or $0.03 per diluted share, compared
to $1.6 million, or $0.15 per diluted share, for the comparable period in
fiscal 2011.

The company's bottom-line improvement resulted from software revenue growth of
5 percent and benefits realized from the recent business realignment announced
in the third quarter.

Important developments for the quarter include:

  o Software revenue in the quarter increased $0.5 million, up 5 percent
    year-over-year, to $12.2 million. The growth in software revenue was
    fueled by a 24 percent and 8 percent growth in Turnpike and XataNet
    software revenue, respectively.
  o Higher margin software revenues increased as the market demand continues
    to evolve from hardware systems-based to lower-cost mobile solutions. As a
    result, fiscal 2012 fourth quarter software revenue accounted for
    approximately 82 percent of total revenue, compared to 77 percent for the
    same period of fiscal 2011. 
  o The company acquired 63 new customers in the fourth quarter of fiscal
    2012, all of whom selected XRS' Turnpike solution.
  o Fiscal 2012 fourth quarter total gross margin of 59 percent improved 7
    percentage points compared to the same period in fiscal 2011.

"Our revenue results in the fourth quarter are reflective of our continued
strategic shift away from hardware systems sales to mobile solutions," said
Jay Coughlan, chairman, president and CEO of XRS Corporation. "This positive
sales mix, coupled with improvements in software margins, delivered gross
margin results that we believe are sustainable into fiscal 2013."

For the fourth quarter of fiscal 2012, selling, general and administrative
expenses decreased to $5.4 million from $6.1 million for the fourth quarter of
2011.

For the fourth quarter of fiscal 2012, the company reported adjusted non-GAAP
earnings of $2.3 million or $0.08 per diluted share, compared to adjusted
non-GAAP earnings of $0.2 million or $0.01 per diluted share for the same
period of fiscal 2011, an increase of $2.1 million over the same period in the
prior year. The increase in adjusted non-GAAP earnings is a reflection of the
company's realigned cost structure, which reflects continued investment in its
new mobile solution and support of existing solutions.

As of September 30, 2012, XRS held $7.1 million in cash and cash equivalents
and had $9.6 million of working capital. 

Full-Year Results

For the fiscal year ended September 30, 2012, total revenue remained
relatively consistent with the previous year. Software revenue increased 4
percent as a result of strong growth in Turnpike and XataNet revenues of 35
percent and 7 percent, respectively.  In addition, software revenue as a
percentage of total revenue grew 3 percentage points as the company's
customers continue to shift to mobile-based platforms.

Research and development (R&D) spending for fiscal 2012 increased to $14.8
million versus $11.1 million in the previous year. "Fiscal 2012 was a year of
investment in our new XRS mobile platform," Coughlan said. "We are currently
in alpha testing and seeing excellent results. Beta testing is on schedule,
and we anticipate rollout of our new XRS mobile solution in the spring of
2013. Looking ahead to 2013, we anticipate additional R&D investments in the
first half of the year with reductions to follow in the second half."

For the fiscal year ended September 30, 2012, the company reported adjusted
non-GAAP earnings of $4.5 million or $0.17 per diluted share as compared to
$4.2 million or $0.15 per diluted share in the previous year.

Looking ahead to fiscal 2013, XRS will focus on the following strategic
objectives:

 1. Invest resources to ensure the successful development and rollout of the
    new XRS mobile solution, which will offer a cost-efficient, easy to
    install electronic onboard routing system (EOBR) to small and mid-size
    fleets.
 2. Continue to drive near-term mobile-based sales to mid-sized fleets with
    XRS' Turnpike solution and offer on-going support and service to existing
    XataNet customers.
 3. Align with third-party providers to broaden the capabilities of the new
    XRS mobile solution, once deployed, to meet the more complex demands of
    larger fleets.
 4. Remain diligent in positioning XRS for long-term financial success as the
    company strives to reach profitability in fiscal 2014.

"We remain diligent in our goal of reaching profitability, but anticipate soft
top line performance in fiscal 2013 as a result of changes in our customer
mix," Coughlan said. "Gross margins should stabilize, and we will continue to
make necessary investments in the first half of the fiscal year to support our
new XRS mobile solution. Mobile is the route the commercial trucking industry
is taking, and we are positioning XRS as the go-to provider of EOBR
solutions."

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

(in thousands, except percentage data) For the Year Ended September 30,
                                       2012           2011       Change
Revenue:
Software                               $    47,455    $  45,800  4%
Hardware systems                       13,893         14,635     (5)%
Services                               1,741          2,596      (33)%
Total revenue                          $  63,089      $ 63,031   0%

 

                          For the Year Ended September 30,
                          2012             2011
Gross margins (deficits):
Software                  73%              75%
Hardware systems          (10)%            (8)%
Services                  (34)%            (30)%
Total gross margin        51%              51%

 

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. 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 specific non-GAAP financial measures, along with a reconciliation to the
nearest comparable GAAP measures and further explanation of their usefulness
to investors can be found at the end of this release.

About XRS

XRS Corporation (NASDAQ: XRSC) provides intuitive, automated fleet management
software solutions to the commercial trucking industry. By delivering
real-time critical information on vehicle and driver performance, XRS makes it
easy for fleet managers, dispatchers and drivers to collect, sort, view and
analyze data to help reduce costs, increase safety and compliance and improve
customer satisfaction. Our award-winning solutions include 1) XataNet, a full
featured, enterprise-wide solution that helps private and for-hire fleets
drive continuous improvement, and 2) Turnpike, a technologically advanced,
low-cost, easy-to-install solution that runs on drivers' existing cell phones,
smartphones and tablet computers. Both solutions help fleet managers and
drivers meet established electronic onboard recorder (EOBR) regulations. We
also offer a portfolio of professional services, including implementation,
training and consulting to help our customers deliver bottom-line results.
Today, XRS solutions increase the productivity of approximately 114,000 trucks
across North America.  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, 2011 (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  For the Year Ended

                             September 30,               September 30,
(In thousands, except per    2012           2011         2012        2011
share data)
Revenue
Software                     $    12,233    $    11,698  $   47,455  $ 45,800
Hardware systems             2,325          3,128        13,893      14,635
Services                     429            462          1,741       2,596
Total revenue                14,987         15,288       63,089      63,031
Cost of goods sold           6,157          7,293        30,657      30,713
Selling, general and         5,377          6,074        24,706      24,691
administrative
Research and development     3,819          3,951        14,798      11,119
Impairment of intangible     —              —            3,500       —
asset
Total costs and expenses     15,353         17,318       73,661      66,523
Operating loss               (366)          (2,030)      (10,572)    (3,492)
Net interest and other       33             58           (264)       (214)
income (expense)
Loss before income taxes     (333)          (1,972)      (10,836)    (3,706)
Income tax benefit           (80)           (422)        (550)       (908)
Net loss                     (253)          (1,550)      (10,286)    (2,798)
Preferred stock dividends
and deemed                   (58)           (55)         (177)       (176)

    dividends
Net loss to common           $  (311)       $  (1,605)   $ (10,463)  $ (2,974)
shareholders
Net loss per common share:
Basic and diluted            $  (0.03)      $  (0.15)    $ (0.97)    $ (0.28)
Weighted average common and
common

    share equivalents:
Basic and diluted            10,795         10,672       10,734      10,488

 

 

XRS Corporation
Consolidated Balance Sheets
                                               September 30,
(In thousands)                                 2012         2011
                                               (Unaudited)
Current assets
Cash and cash equivalents                      $    7,120   $ 12,407
Accounts receivable, net                       7,835        8,556
Inventories                                    3,811        3,374
Deferred product costs                         770          1,148
Prepaid expenses and other current assets      1,406        1,006
Total current assets                           20,942       26,491
Equipment and leasehold improvements, net      7,313        9,155
Intangible assets, net                         6,487        12,158
Goodwill                                       17,288       16,474
Deferred product costs, net of current portion 425          857
Other assets                                   351          690
Total assets                                   $  52,806    $ 65,825
Current liabilities
Revolving line of credit                       $  2,300     $ —
Current portion of debt obligations            —            1,746
Accounts payable                               3,436        5,003
Accrued expenses                               4,832        4,533
Deferred revenue                               2,314        3,442
Total current liabilities                      12,882       14,724
Debt obligations, net of current portion       —            1,386
Deferred revenue, net of current portion       1,077        1,874
Deferred tax liabilities                       9            596
Other long-term liabilities                    314          559
Total liabilities                              14,282       19,139
Shareholders' equity
Preferred stock                                44,292       44,149
Common stock                                   108          107
Contingent common stock earn-out               —            1,912
Additional paid-in capital                     50,226       47,249
Accumulated deficit                            (57,565)     (47,103)
Accumulated other comprehensive income         1,463        372
Total shareholders' equity                     38,524       46,686
Total liabilities and shareholders' equity     $  52,806    $ 65,825

 

 

XRS Corporation
Consolidated Statements of Cash Flows
(Unaudited)
                                              For the Year Ended September 30,
(In thousands)                                2012                2011
Operating activities
Net loss                                      $      (10,286)     $  (2,798)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization                 8,013               6,477
Impairment of intangible asset                3,500               —
Amortization of deferred financing costs      32                  —
Deferred income taxes                         (617)               (877)
Loss on sale or disposal of equipment and     76                  332
leased equipment
Stock-based compensation                      1,036               1,137
Reversal of unearned cash portion of          (51)                (68)
contingent earn-out
Changes in assets and liabilities:
Accounts receivable, net                      1,298               2,829
Inventories, net                              (437)               (275)
Deferred product costs                        810                 1,793
Prepaid expenses and other assets             (48)                (40)
Accounts payable                              (1,787)             (222)
Accrued expenses and other liabilities        (519)               (538)
Deferred revenue                              (1,926)             (3,342)
Net cash (used in) provided by operating      (906)               4,408
activities
Investing activities
Purchase of equipment and leasehold           (2,943)             (4,161)
improvements
Proceeds from the sale or disposal of         2                   12
equipment
Net cash used in investing activities         (2,941)             (4,149)
Financing activities
Revolving line of credit, net                 2,300               —
Payments on debt obligations                  (3,627)             (1,239)
Deferred financing costs                      (97)                —
Proceeds from exercise of options             —                   36
Net cash used in financing activities         (1,424)             (1,203)
Effects of exchange rate on cash              (16)                (23)
Decrease in cash and cash equivalents         (5,287)             (967)
Cash and cash equivalents
Beginning                                     12,407              13,374
Ending                                        $   7,120           $  12,407

 

 

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  For the Year Ended
                            September 30,
                                                        September 30,
(In thousands, except per   2012          2011          2012         2011
share data)
Net loss to common          $    (311)    $    (1,605)  $  (10,463)  $ (2,974)
shareholders
Adjustments:
Depreciation & amortization 1,695         1,802         8,013        6,477
expense
Impairment of intangible    —             —             3,500        —
asset
Stock-based compensation    251           277           1,036        1,137
Net interest expense        16            91            320          263
Preferred stock dividends
and deemed                  58            55            177          176

    dividends
Income taxes                (80)          (422)         (550)        (908)
Other                       400           —             400          —
Total adjustments           2,340         1,803         12,896       7,145
Non-GAAP earnings           $  2,029      $  198        $ 2,433      $ 4,171
Non-GAAP earnings per       $  0.07       $  0.01       $ 0.09       $ 0.15
diluted share
Shares used in calculating
non-GAAP
                            27,344        27,126        27,260       26,941
    earnings per diluted
share

 

 

XRS Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
Adjusted Non-GAAP Earnings and Adjusted Non-GAAP Earnings Per Diluted Share
                                For the Three Months Ended  For the Year Ended

                                September 30,               September 30,
(In thousands, except per share 2012             2011       2012       2011
data)
Non-GAAP earnings               $      2,029     $    198   $   2,433  $ 4,171
Adjustments for additional
realignment                     282              —          2,095      —

    charges *
Adjusted non-GAAP earnings      $   2,311        $  198     $  4,528   $ 4,171
Adjusted non-GAAP earnings per
diluted                         $   0.08         $  0.01    $  0.17    $ 0.15

    share
Shares used in calculating
adjusted
                                27,344           27,126     27,260     26,941
    non-GAAP earnings per
diluted share

* For the fourth quarter of fiscal 2012, additional realignment charges
include $0.3 million to write off excess and obsolete inventory, $38,000 in
estimated costs to terminate inventory purchase commitments and a reduction of
$10,000 in personnel expenses from a workforce reduction. For the fiscal year
ended September 30, 2012, additional realignment charges include $0.9 million
in personnel expenses from a workforce reduction, $0.8 million to write off
excess and obsolete inventory and $0.4 million in estimated costs to terminate
inventory purchase commitments.

 

 

XRS Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
Working Capital
                                                       September 30,
                                                       2012       2011
Current assets                                         $  20,942  $ 26,491
Current liabilities                                    (12,882)   (14,724)
Net current assets                                     8,061      11,767
Current portion of deferred revenue net deferred costs 1,544      2,294
Working capital                                        $ 9,605    $ 14,061

 

Footnotes to GAAP to Non-GAAP Reconciliation
(Unaudited)

The non-GAAP financial measures are not meant to be considered in isolation or
as a substitute for comparable GAAP measures. The method we use to produce
non-GAAP results is not computed according to GAAP and may differ from the
methods used by other companies. The methods of calculation and explanations
of the adjustments to the most comparable GAAP measures are set forth below:

Non-GAAP Earnings

This measure provides a supplemental view of earnings trends. Non-GAAP
earnings excludes depreciation, amortization, stock-based compensation, net
interest expense, preferred stock dividends and deemed dividends, income
taxes, acquisition and financing related costs and litigation settlement
costs  from GAAP net loss to common shareholders.  We believe our investors
benefit from understanding these exclusions when comparing current to
historical results from operations.

Adjusted Non-GAAP Earnings

Adjusted non-GAAP earnings is based on non-GAAP earnings adjusted for
additional realignment charges not included in the company's historical
definition of non-GAAP earnings. We believe our investors benefit from
understanding the impact of these charges on our historically presented
non-GAAP earnings performance to allow for a more consistent view of results
of ongoing operations.

Non-GAAP Diluted Earnings per Share

We believe investors benefit by understanding the company's non-GAAP operating
performance as reflected in a per share calculation as a way of measuring
non-GAAP operating performance by ownership in the company. Non-GAAP diluted
earnings per share is based on non-GAAP earnings, as defined above, divided by
the sum of the weighted average common and dilutive common shares equivalents,
such as options, restricted stock awards, restricted stock units, warrants or
convertible preferred stock, assuming they were exercised or converted into
common stock that then shared in the non-GAAP earnings of the company, as
defined by GAAP. Non-GAAP diluted loss per share is based on non-GAAP loss, as
defined above, divided by only the weighted average number of common shares
outstanding for the period, as defined by GAAP. The non-GAAP diluted net loss
per common share is equal to basic net loss per common share for all periods
presented because the effect of including such securities or obligations would
have been antidilutive. We believe that these exclusions provide investors a
useful view of current operations when comparing current to historical
non-GAAP diluted earnings per share.

Adjusted Non-GAAP Diluted Earnings per Share

Adjusted non-GAAP diluted earnings per share is based on adjusted non-GAAP
earnings, as defined above, divided by the sum of the weighted average common
and dilutive common shares equivalents, such as options, restricted stock
awards, restricted stock units, warrants or convertible preferred stock,
assuming they were exercised or converted into common stock that then shared
in the non-GAAP earnings of the company, as defined by GAAP. We believe that
the exclusion of the additional realignment charges provide investors a more
consistent view diluted earnings per share.

Working Capital

Working capital represents current assets, less current liabilities, excluding
the current portion of deferred revenue, net of deferred costs. We believe
working capital provides investors with an additional view of the company's
liquidity and ability to repay current obligations.

 

 

SOURCE XRS Corporation

Website: http://www.xrscorp.com
Contact: Michael Weber, Chief Financial Officer, XRS Corporation,
+1-952-707-5600