XRS Reports Fiscal 2013 First Quarter Results

                XRS Reports Fiscal 2013 First Quarter Results

Net income of $0.3 million drives free cash flow of $1.6 million for the first
quarter of fiscal 2013

PR Newswire

MINNEAPOLIS, Feb. 7, 2013

MINNEAPOLIS, Feb. 7, 2013 /PRNewswire/ -- XRS Corporation (formerly Xata
Corporation), (NASDAQ:XRSC) reported its results for its fiscal 2013 first
quarter ended December 31, 2012.

The Company reported net income to common shareholders for the first quarter
of fiscal 2013 of $0.3 million, or $0.01 per diluted share, compared to net
loss to common shareholders of $1.7 million, or $0.16 per diluted share, for
the comparable period in fiscal 2012. Total revenue was $14.2 million for the
quarter ended December 31, 2012, compared to $16.6 million for the comparable
period in fiscal 2012. Further highlights for the quarter include:

  o Growth in Turnpike software revenue of 19 percent year-over-year drove
    total software revenue to $11.8 million for the first quarter of fiscal
    2013.
  o Fiscal 2013 first quarter software revenue accounted for approximately 83
    percent of total revenue, compared to 70 percent percent for the same
    period of fiscal 2012 contributing to a 15 percentage point improvement in
    overall margins.
  o The Company acquired 109 new customers in the first quarter of fiscal
    2013, all of whom selected the Turnpike solution.
  o Net income of $0.3 million contributed to free cash flow of $1.6 million
    for the first quarter of fiscal 2013, compared to negative free cash flow
    of $0.7 million for the same period in fiscal 2012.

"We are pleased with the first quarter financial performance. We are also
encouraged by the progress we are making in the testing of our new XRS mobile
platform which is now in its beta phase," said Jay Coughlan, chairman,
president and CEO of XRS Corporation. "Customers are eager to begin using the
XRS solution, and we anticipate rollout of this new mobile solution in the
spring of 2013."

For the first quarter of fiscal 2013, selling, general and administrative
expenses decreased to $5.5 million compared to $6.1 million for the first
quarter of fiscal 2012. The intangible asset impairment and business
realignment events which occurred in the third quarter of fiscal 2012
contributed to a reduction in amortization and personnel expenses,
respectively, driving the fiscal 2013 favorability.

Research and development expenses were $3.1 million and $3.5 million for the
first quarter of fiscal 2013 and 2012, respectively, or 21 percent of revenue.
Research and development expenses reflect the Company's continued investment
in the successful development and roll out of the new XRS mobile solution.

The Company reported non-GAAP earnings of $2.2 million, or $0.08 per diluted
share for the first quarter of fiscal 2013, compared to non-GAAP earnings of
$0.5 million, or $0.02 per diluted share, for the same period in fiscal 2012,
an increase of $1.7 million. The increase in non-GAAP earnings is a reflection
of improved margins and a reduced cost structure.

During the first quarter of fiscal 2013, the Company used cash generated from
operations to pay down all outstanding debt facilities, resulting in a
debt-free balance sheet as of December 31, 2012 as compared to debt of $2.3
million recorded as of September 30, 2012.  In addition, the Company generated
positive free cash flow of $1.6 million for the first quarter of fiscal 2013,
compared to negative free cash flow of $0.7 million in the comparable period
in fiscal 2012, resulting in an improvement of $0.7 million in working
capital, which was $10.3 million at December 31, 2012.

"Looking ahead, we remain focused on the successful launch of our XRS mobile
solution, as well as continuing to serve our existing customer base to ensure
that our solutions are able to meet their needs now and into the future,"
Coughlan said. "As we move the new solution to market in fiscal 2013, the
Company will also continue to strive for operational effectiveness."

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

                 For the Three Months Ended December 31,
                 2012            2011           Change
Revenue:
                 $ 11,769        $ 11,686       1%
Software
Hardware systems 2,191           4,464          (51%)
Services         235             451            (48%)
Total revenue    $ 14,195        $ 16,601       (15%)

 

                          For the Three Months Ended
                          December 31,
                          2012             2011
Gross margins (deficits):
                          74%              73%
Software
Hardware systems          21%              (7%)
Services                  (122%)           (48%)
Total gross margin        63%              48%

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 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 (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 existing 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 and XRS, we are currently serving
114,000 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)
                                               For the Three Months Ended
                                               December 31,
(In thousands, except per share data)          2012           2011
Revenue
    Software                                   $      11,769  $      11,686
    Hardware systems                           2,191          4,464
    Services                                   235            451
    Total revenue                              14,195         16,601
Cost of goods sold                             5,306          8,651
Selling, general and administrative            5,497          6,120
Research and development                       3,050          3,488
Total costs and expenses                       13,853         18,259
Operating income (loss)                        342            (1,658)
Net interest and other expense                 (18)           (111)
Income (loss) before income taxes              324            (1,769)
Income tax expense (benefit)                   5              (100)
Net income (loss)                              319            (1,669)
Preferred stock dividends and deemed           (58)           (6)
dividends 
Net income (loss) to common shareholders       $         261  $       (1,675)
Net income (loss) per common share:
    Basic                                      $        0.02  $         (0.16)
    Diluted                                    $        0.01  $         (0.16)
Weighted average common and common share
equivalents:
    Basic                                      10,809         10,675
    Diluted                                    27,357         10,675

 

 

XRS Corporation

Consolidated Balance Sheets

 
 
                                December 31,             September 30,
                                                         2012
                                2012
(In thousands)
                                (Unaudited)
Current assets
Cash and cash equivalents       $               6,398    $                
                                                         7,120
Accounts receivable, net        7,543                    7,835
Inventories                     3,684                    3,811
Deferred product costs          784                      770
Prepaid expenses and other      1,348                    1,406
current assets
Total current assets            19,757                   20,942
Equipment and leasehold         6,917                    7,313
improvements, net
Intangible assets, net          5,987                    6,487
Goodwill                        17,082                   17,288
Deferred product costs, net of  369                      425
current portion
Other assets                    315                      351
Total assets                    $              50,427    $              52,806
Current liabilities
Revolving line of credit        $                     —  $                
                                                         2,300
Accounts payable                3,896                    3,436
Accrued expenses                4,756                    4,832
Deferred revenue                1,995                    2,314
Total current liabilities       10,647                   12,882
Deferred revenue, net of        870                      1,077
current portion
Deferred tax liabilities        —                        9
Other long-term liabilities     252                      314
Total liabilities               11,769                   14,282
                                                          
Shareholders' equity
                                                          
Preferred stock
                                44,275                   44,292
Common stock                    108                      108
Additional paid-in capital      50,386                   50,226
Accumulated deficit             (57,305)                 (57,566)
Accumulated other comprehensive 1,194                    1,464
income
Total shareholders' equity      38,658                   38,524
Total liabilities and           $              50,427    $              52,806
shareholders' equity

 

XRS Corporation Consolidated
Statements of Cash Flows (Unaudited)
                                              For the Three Months Ended

                                              December 31,
(In thousands)                                2012             2011
Operating activities
Net income (loss)                             $                $              
                                               319             (1,669)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization                 1,690            1,955
Amortization of deferred financing costs      12               —
Deferred income taxes                         (9)              —
Loss on sale or disposal of equipment and     5                64
leased equipment
Stock-based compensation                      160              249
Changes in assets and liabilities:
Accounts receivable, net                      287              222
Inventories, net                              117              115
Deferred product costs                        42               79
Prepaid expenses and other assets             57               (109)
Accounts payable                              230              (455)
Accrued expenses and other liabilities        (204)            74
Deferred revenue                              (524)            (345)
Net cash provided by operating activities     2,182            180
Investing activities
  Purchase of equipment and leasehold         (613)            (907)
improvements
  Proceeds from the sale of equipment         7                2
Net cash used in investing activities         (606)            (905)
Financing activities
  Revolving line of credit                    (2,300)          —
  Payments on debt obligations                —                (512)
Net cash used in financing activities         (2,300)          (512)
Effects of exchange rate on cash              2                (4)
                      Decrease in cash and    (722)            (1,241)
cash equivalents
Cash and cash equivalents
  Beginning                                   7,120            12,407
  Ending                                      $                $            
                                               6,398            11,166

 

 

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

                                        December 31,
(In thousands, except per share data)   2012               2011
Net income (loss) to common             $ 261              $ (1,675)
shareholders
Adjustments:
Depreciation & amortization expense     1,690              1,955
Stock-based compensation                160                249
Net interest expense                    16                 109
Preferred stock dividends and deemed    58                 6
dividends
Income taxes                            5                  (100)
Total adjustments                       1,929              2,219
Non-GAAP earnings                       $                  $                  
                                         2,190             544
Non-GAAP earnings per diluted share     $                  $                
                                         0.08               0.02
Shares used in calculating non-GAAP     27,357             27,146
earnings per diluted share
Working Capital
 (In thousands)                         December 31,       September 30,
                                        2012               2012
Current assets                          $ 19,757           $ 20,942
Current liabilities                     (10,647)           (12,882)
     Net current assets                 9,110              8,060
Current portion of deferred revenue net 1,211              1,544
deferred costs
Working capital                         $ 10,321           $ 9,604

 

 

XRS Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 
Free Cash Flow
                                            For the Three Months Ended

                                            December 31,
                                            2012             2011
Net cash provided by operating activities   $ 2,182          $ 180
Net cash provided by investing activities:
Purchase of equipment and leasehold         (114)            (907)
improvements
Purchase of Relay assets                    (499)            —
Proceeds from the sale of equipment         7                2
Net cash provided by investing activities   (606)            (905)
                                                              

Free cash flow                              $                $                
                                             1,576           (725)

 

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 income (loss) to common shareholders. We believe our investors
benefit from understanding these exclusions when comparing current to
historical results from operations.

Non-GAAP Earnings per Diluted 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 earnings
per diluted 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 loss per diluted 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 loss per diluted
common share is equal to basic non-GAAP loss per common share because the
effect of including such securities or obligations would be 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.

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.

Free Cash Flow

Free cash flow represents net cash provided by operating activities reduced by
net cash used in investing activities. We believe free cash flow provides
investors insight into the Company's ability to generate cash to support
operating and investing activities.

SOURCE XRS Corporation

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