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XRS Reports Fiscal 2013 Second Quarter Results

                XRS Reports Fiscal 2013 Second Quarter Results

Net income of $0.2 million drives free cash flow of $1.2 million for the
second quarter of fiscal 2013

PR Newswire

MINNEAPOLIS, May 9, 2013

MINNEAPOLIS, May 9, 2013 /PRNewswire/ --XRS Corporation (formerly Xata
Corporation, NASDAQ:XRSC) reported its results for its fiscal 2013 second
quarter ended March 31, 2013.

The Company reported net income to common shareholders for the second quarter
of fiscal 2013 of $0.1 million, or $0.01 per diluted share, compared to net
loss to common shareholders of $2.1 million, or $0.20 per diluted share for
the comparable period in fiscal 2012. Total revenue was $14.5 million for the
quarter ended March 31, 2013, compared to $15.9 million for the comparable
period in fiscal 2012. Further highlights for the quarter include:

  oMobile software revenue growth of 27 percent drove total software revenue
    to $11.6 million for the second quarter of fiscal 2013.
  oFiscal 2013 second quarter software revenue accounted for approximately 80
    percent of total revenue, compared to 74 percent for the same period of
    fiscal 2012, contributing to a 7 percentage point improvement in overall
    gross margins.
  oThe Company signed 98 new customers in the second quarter of fiscal 2013,
    all of whom selected the Turnpike mobile solution.
  oNet income of $0.2 million contributed to free cash flow of $1.2 million
    for the second quarter of fiscal 2013, compared to negative free cash flow
    of $2.2 million for the same period in fiscal 2012.

"We are encouraged by our second consecutive quarter of net income," said Jay
Coughlan, chairman and chief executive officer of XRS Corporation. "This
performance is consistent with our strategy of shifting our business to a
mobile solution. We are continuing to invest in the XRS mobile solution and
the growth opportunities in that market, while at the same time maintaining
our commitment to provide support to our existing customers."

For the second quarter of fiscal 2013, selling, general and administrative
expenses decreased to $5.3 million, compared to $6.6 million for the
comparable period in fiscal 2012. Reductions in the Company's amortization and
personnel expenses resulting from the fiscal 2012 third quarter intangible
asset impairment and business realignment events, respectively, drove the
favorability realized in the second quarter of fiscal 2013.

Research and development expenses were $2.8 million and $3.5 million for the
second quarter of fiscal 2013 and 2012, respectively, or 19 percent and 22
percent of revenue, respectively. During the second quarter of fiscal 2013,
the Company continued to invest in the development of the XRS mobile solution.
The Company capitalized $0.3 million in software development costs associated
with the XRS mobile solution in the second quarter of fiscal 2013,
representing approximately 9 percent of total research and development costs.

The Company reported non-GAAP earnings of $2.2 million, or $0.08 per diluted
share for the second quarter of fiscal 2013, compared to non-GAAP earnings of
$0.2 million, or $0.01 per diluted share for the same period in fiscal 2012,
an increase of $2.0 million. The increase in non-GAAP earnings is a reflection
of improved overall gross margins and a reduced cost structure.

"We had an enthusiastic response to our announcement in March that the new XRS
mobile solution for compliance and fleet optimization is available for sale,"
said Coughlan. "With the commencement ofshipment of XRS mobile subscriptions
in April, new and existing customers will be able to experience the benefits
of the leading fleet management platforms in a single mobile package."

For the six months ended March 31, 2013, mobile software revenue increased 23
percent, while total software revenue remained relatively consistent with the
comparable period in fiscal 2012. Total revenue was $28.7 million for the six
months ended March 31, 2013, compared to $32.5 million for the comparable
period in fiscal 2012 as a result of decreased hardware revenue as adoption of
the the Turnpike no upfront hardware cost solution continues to increase.

For the six months ended March 31, 2013, the Company reported non-GAAP
earnings of $4.4 million, or $0.16 per diluted share, compared to $0.7
million, or $0.03 per diluted share, for the comparable period in fiscal 2012.
The increase in non-GAAP earnings is a reflection of mobile revenue growth,
improved overall gross margins and a reduced cost structure.

As of March 31, 2013, the Company maintained a debt-free balance sheet and
reported an increase of $1.5 million in working capital to $11.2 million,
compared to debt of $2.3 million and working capital of $9.6 million as of
September 30, 2012. Free cash flow was $2.8 million for the six months ended
March 31, 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 Six Months Ended
                          March 31,                  March 31,
                          2013           2012        2013          2012
Revenue:
Software             $  11,578      $ 11,703    $  23,347     $ 23,389
Hardware systems     2,580          3,624       4,771         8,088
Services             338            532         573           983
Total revenue        $  14,496      $ 15,859    $  28,691     $ 32,460
Gross margins (deficits):
Software             73         %   71       %  74         %  72       %
Hardware systems     6          %   (4%)        13         %  (6%)
Services             (59%)          (24%)       (85%)         (35%)
Total gross margin   58         %   51       %  60         %  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 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
forwardlooking 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   For the Six Months

                                  Ended March 31,       Ended March 31,
(In thousands, except per share   2013       2012        2013       2012
data)
Revenue
Software                          $ 11,578   $ 11,703    $ 23,347   $ 23,389
Hardware systems                  2,580      3,624       4,771      8,088
Services                          338        532         573        983
Total revenue                     14,496     15,859      28,691     32,460
Cost of goods sold                6,046      7,834       11,352     16,485
Selling, general and              5,349      6,588       10,846     12,708
administrative
Research and development          2,798      3,509       5,848      6,997
Total costs and expenses          14,193     17,931      28,046     36,190
Operating income (loss)           303        (2,072)     645        (3,730)
Net interest and other expense    (29)       (153)       (47)       (264)
Income (loss) before income taxes 274        (2,225)     598        (3,994)
Income tax expense (benefit)      98         (178)       103        (278)
Net income (loss)                 176        (2,047)     495        (3,716)
Preferred stock dividends and
deemed                            (58)       (56)        (116)      (62)

 dividends
Net income (loss) to common       $ 118      $ (2,103)   $ 379      $ (3,778)
shareholders
Net income (loss) per common
share:
Basic                             $ 0.01     $ (0.20)    $ 0.04     $ (0.35)
Diluted                           $ 0.01     $ (0.20)    $ 0.02     $ (0.35)
Weighted average common and
common share equivalents:
Basic                             10,827     10,714      10,818     10,695
Diluted                           27,602     10,714      27,479     10,695



XRS Corporation

Consolidated Balance Sheets
                                               March 31,    September 30,
(In thousands)                                 2013         2012
                                               (Unaudited)
Current assets
Cash and cash equivalents                      $  7,569     $   7,120
Accounts receivable, net                       7,272        7,835
Inventories                                    2,365        3,811
Deferred product costs                         753          770
Prepaid expenses and other current assets      1,558        1,406
Total current assets                           19,517       20,942
Equipment and leasehold improvements, net      6,452        7,313
Intangible assets, net                         5,473        6,487
Goodwill                                       16,796       17,288
Deferred product costs, net of current portion 303          425
Other assets                                   642          351
Total assets                                   $  49,183    $   52,806
Current liabilities
Revolving line of credit                       $  —         $   2,300
Accounts payable                               3,193        3,436
Accrued expenses                               4,419        4,832
Deferred revenue                               1,921        2,314
Total current liabilities                      9,533        12,882
Deferred revenue, net of current portion       731          1,077
Deferred tax liabilities                       —            9
Other long-term liabilities                    189          314
Total liabilities                              10,453       14,282
Shareholders' equity
Preferred stock                                44,407       44,292
Common stock                                   108          108
Additional paid-in capital                     50,327       49,979
Accumulated deficit                            (56,940)     (57,319)
Accumulated other comprehensive income         828          1,464
Total shareholders' equity                     38,730       38,524
Total liabilities and shareholders' equity     $  49,183    $   52,806



XRS Corporation

Consolidated Statements of Cash Flows

(Unaudited)
                                                      For the Six Months Ended
                                                      March 31,
(In thousands)                                        2013          2012
Operating activities
Net income (loss)                                     $  495        $ (3,716)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization                         3,362         3,967
Amortization of deferred financing costs              33            8
Deferred income taxes                                 (9)           —
Loss on sale or disposal of equipment and leased      40            64
equipment
Stock-based compensation                              348           493
Changes in assets and liabilities:
Accounts receivable, net                              552           1,583
Inventories, net                                      1,408         (1,183)
Deferred product costs                                138           297
Prepaid expenses and other assets                     (205)         (31)
Accounts payable                                      (642)         (863)
Accrued expenses and other liabilities                (538)         (531)
Deferred revenue                                      (735)         (994)
Net cash provided by (used in) operating activities   4,247         (906)
Investing activities
Purchase of equipment and leasehold improvements      (1,386)       (1,982)
Capitalized software development                      (85)          —
Proceeds from the sale of equipment                   16            2
Net cash used in investing activities                 (1,455)       (1,980)
Financing activities
Revolving line of credit                              (2,300)       2,953
Payments on debt obligations                          —             (3,624)
Deferred financing costs                              (50)          (93)
Net cash used in financing activities                 (2,350)       (764)
Effects of exchange rate on cash                      7             (18)
Increase (decrease) in cash and cash equivalents      449           (3,668)
Cash and cash equivalents
Beginning                                             7,120         12,407
Ending                                                $  7,569      $ 8,739



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  For the Six Months

                                    Ended March 31,       Ended March 31,
(In thousands, except per share     2013      2012        2013      2012
data)
Net income (loss) to common         $ 118     $ (2,103)   $ 379     $ (3,778)
shareholders
Adjustments:
Depreciation & amortization expense 1,672     2,012       3,362     3,967
Stock-based compensation            188       244         348       493
Net interest expense                25        164         41        273
Preferred stock dividends and       58        56          116       62
deemed dividends
Income taxes                        98        (178)       103       (278)
Other                               50        —           50        —
Total adjustments                   2,091     2,298       4,020     4,517
Non-GAAP earnings                   $ 2,209   $ 195       $ 4,399   $ 739
Non-GAAP earnings per diluted share $ 0.08    $ 0.01      $ 0.16    $ 0.03
Shares used in calculating non-GAAP
earnings per                        27,602    27,271      27,479    27,209

 diluted share



Working Capital
                                                      March 31,  September 30,
(In thousands)                                        2013       2012
Current assets                                        $ 19,517   $   20,942
Current liabilities                                   (9,533)    (12,882)
Net current assets                                    9,984      8,060
Current portion of deferred revenue net deferred      1,168      1,544
costs
Working capital                                       $ 11,152   $   9,604



XRS Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)
Free Cash Flow
                                    For the Three Months  For the Six Months

                                    Ended March 31,       Ended March 31,
                                    2013      2012        2013      2012
Net cash provided by (used in)      $ 2,065   $ (1,086)   $ 4,247   $ (906)
operating activities
Net cash used in investing
activities:
Purchase of equipment and leasehold
                                    (110)     (1,008)     (224)     (1,915)
 improvements
Purchase of Relay assets            (663)     (67)        (1,162)   (67)
Capitalized software development    (85)      —           (85)      —
Proceeds from the sale of equipment 9         —           16        2
Net cash used in investing          (849)     (1,075)     (1,455)   (1,980)
activities
Free cash flow                      $ 1,216   $ (2,161)   $ 2,792   $ (2,886)



SOURCE XRS Corporation

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