XRS Corporation Reports Fiscal 2013 Fourth Quarter and Year-end Results Mobile software revenue grew 20 percent in fiscal 2013. Four consecutive quarters of net income drove annual free cash flow of $5.6 million. Non-GAAP earnings of $2.1 million, or $0.07 per diluted share, for the fourth quarter of fiscal 2013. PR Newswire MINNEAPOLIS, Nov. 7, 2013 MINNEAPOLIS, Nov. 7, 2013 /PRNewswire/ --XRS Corporation (NASDAQ:XRSC) reported results for its fiscal 2013 fourth quarter and year ended September30, 2013. "This past fiscal year, our financial performance generated four consecutive quarters of profitability with strong mobile software growth of 20 percent," said Jay Coughlan, chairman and chief executive officer of XRS Corporation. "In addition, we launched our new XRS mobile solution and strengthened our management team, which improves our leadership position in the mobile trucking intelligence market. The mobile trucking intelligence market continues to expand as the trucking industry begins to anticipate the impact of the new federal mandate requiring commercial trucks to have an electronic logging device beginning in calendar 2015. "Fiscal 2014 will be a year of significant transition for the Company as we begin the migration of our legacy customers to the XRS mobile solution. As we transition from our legacy hardware-based solutions to our no upfront cost mobile solutions, we expect soft overall revenue. We expect accelerating mobile revenue growth with consistent margins and will continue to invest in the further development of the XRS mobile solution with key integrations to strategic third-party providers thereby creating a whole product that will position us to capitalize on this expanding market." Fourth Quarter Results Fourth quarter of fiscal 2013 net income to common shareholders was $0.1 million, an increase of $0.3 million compared to a net loss to common shareholders of $0.2 million for the same period in fiscal 2012. Research and development expenses were $3.0 million and $3.8 million for the fourth quarters of fiscal 2013 and 2012, respectively. The decrease in research and development expenses is due to the significant investment in the development of the Company's new XRS mobile solution during the fourth quarter of fiscal 2012. Comparatively, in the fourth quarter of fiscal 2013, the Company focused on enhancements to the XRS mobile solution's functionality. Selling, general and administrative expenses decreased to $5.1 million, compared to $5.3 million for the comparable period in fiscal 2012. Overall selling, general and administrative expenses remained relatively consistent as a percentage of revenue for the fourth quarters of fiscal 2013 and 2012 at 36 percent and 35 percent, respectively. The Company reported non-GAAP earnings of $2.1 million, or $0.07 per diluted share for the fourth quarter of fiscal 2013, compared to a non-GAAP earnings of $2.0 million, or $0.07 per diluted share for the same period in fiscal 2012. Full Year Results Important developments for the fiscal year include: oMobile software revenue grew 20 percent in fiscal 2013 compared to the same period in the prior year . oOverall gross margin improved to 60 percent of revenue for fiscal 2013 compared to 51 percent for fiscal 2012 as the result of the continuing shift to software revenue. oNet income of $0.9 million contributed to positive free cash flow of $5.6 million for fiscal 2013, compared to a negative free cash flow of $3.8 million for fiscal 2012. oThe Company signed 322 new mobile customers during fiscal 2013. The Company reported net income to common shareholders of $0.6 million for the fiscal year ended September30, 2013 compared to net loss to common shareholders of $10.2 million for the previous fiscal year. For the year ended September 30, 2013, mobile software revenue increased 20 percent, while total software revenue decreased slightly from the comparable period in fiscal 2012. The decrease in total revenue from $63.1 million for the year ended September30, 2012 to $56.2 million for the comparable period in fiscal 2013 largely was the result of decreased hardware revenue as customers continue to adopt mobile solutions with no upfront hardware costs. For the year ended September 30, 2013, the Company reported non-GAAP earnings of $8.6 million, or $0.31 per diluted share, compared to $2.4 million, or $0.09 per diluted share, for the comparable period in fiscal 2012, an increase of $6.2 million. As of September30, 2013, the Company maintained a debt-free balance sheet with $10.4 million in cash. Free cash flow was a positive $5.6 million for the year ended September30, 2013, compared to a negative $3.8 million for the comparable period in fiscal 2012. Working capital increased $3.4 million to $13.0 million as of September30, 2013, compared to $9.6 million in working capital as of September30, 2012. Summary of revenue and gross margins (deficits) is as follows (in thousands, except percentage data): For the Three Months Ended For the Year Ended September 30, September 30, 2013 2012 2013 2012 Revenue: Software $ 11,062 $ 12,233 $ 45,675 $ 47,455 Hardware systems 2,771 2,325 9,340 13,893 Services 268 429 1,181 1,741 Total revenue $ 14,101 $ 14,987 $ 56,196 $ 63,089 Gross margins (deficits): Software 72% 76% 73% 73% Hardware systems 28% (20%) 18% (10%) Services (103%) 1% (92%) (34%) Total gross margin 60% 59% 60% 51% XRS Corporation Outlook Looking ahead to fiscal 2014, the Company plans to focus on the following strategic objectives: 1.Invest resources to ensure continued success in the deployment of the XRS mobile solution, which offers a cost-efficient, easy to install electronic logging device to small and mid-size fleets. 2.Align with strategic third-party providers to broaden the capabilities of the XRS mobile solution to meet the more complex demands of larger fleets. 3.Continue to drive near-term mobile-based sales to small to mid-sized fleets with the XRS solution and offer on-going support and service to our existing Turnpike, XataNet and MobileMax customers. 4.Remain diligent in positioning XRS Corporation for long-term financial success that strives to capitalize on a growing market as the result of the mobile revolution converging with the recent government mandates. 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 description of the non-GAAP financial measures and/or 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 mobility-based products 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 111,000 subscriptions 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 customer satisfaction. For more information, visitwww.xrscorp.comor 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 September30, 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 For the Year Ended September September 30, 30, (In thousands, except per share 2013 2012 2013 2012 data) Revenue Software $ 11,062 $ 12,233 $ 45,675 $ 47,455 Hardware systems 2,771 2,325 9,340 13,893 Services 268 429 1,181 1,741 Total revenue 14,101 14,987 56,196 63,089 Cost of goods sold 5,691 6,157 22,268 30,657 Selling, general and 5,117 5,287 21,057 24,459 administrative Research and 3,013 3,819 11,734 14,798 development Impairment of — — — 3,500 intangible asset Total costs and 13,821 15,263 55,059 73,414 expenses Operating income 280 (276) 1,137 (10,325) (loss) Net interest and other (expense) (34) 33 (116) (264) income Income (loss) before 246 (243) 1,021 (10,589) income taxes Income tax expense 104 (80) 155 (550) (benefit) Net income (loss) 142 (163) 866 (10,039) Preferred stock dividends and deemed (60) (58) (235) (177) dividends Net income (loss) to $ 82 $ (221) $ 631 $ (10,216) common shareholders Net income (loss) per common share: Basic $ 0.01 $ (0.02) $ 0.06 $ (0.95) Diluted $ — $ (0.02) $ 0.03 $ (0.95) Weighted average common and common share equivalents: Basic 10,883 10,795 10,844 10,734 Diluted 28,814 10,795 28,028 10,734 XRS Corporation Consolidated Balance Sheets September 30, September 30, (In thousands) 2013 2012 (Unaudited) Current assets Cash and cash equivalents $ 10,445 $ 7,120 Accounts receivable, net 6,864 7,835 Inventories 1,710 3,811 Deferred product costs 625 770 Prepaid expenses and other current assets 1,417 1,406 Total current assets 21,061 20,942 Equipment and leasehold improvements, net 5,980 7,313 Intangible assets, net 4,578 6,487 Goodwill 16,640 17,288 Deferred product costs, net of current portion 213 425 Other assets 667 351 Total assets $ 49,139 $ 52,806 Current liabilities Revolving line of credit $ — $ 2,300 Accounts payable 2,885 3,436 Accrued expenses 4,560 4,832 Deferred revenue 1,886 2,314 Total current liabilities 9,331 12,882 Deferred revenue, net of current portion 496 1,077 Deferred tax liabilities — 9 Other long-term liabilities 62 314 Total liabilities 9,889 14,282 Shareholders' equity Preferred stock 44,524 44,292 Common stock 109 108 Additional paid-in capital 50,674 49,979 Accumulated deficit (56,688) (57,319) Accumulated other comprehensive income 631 1,464 Total shareholders' equity 39,250 38,524 Total liabilities and shareholders' equity $ 49,139 $ 52,806 XRS Corporation Consolidated Statements of Cash Flows (Unaudited) For the Year Ended September 30, (In thousands) 2013 2012 Operating activities Net income (loss) $ 866 $ (10,039) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 6,783 8,013 Impairment of intangible asset — 3,500 Amortization of deferred financing costs 81 32 Deferred income taxes (9) (617) Loss on sale or disposal of equipment and leased 80 76 equipment Stock-based compensation 644 789 Reversal of unearned cash portion of contingent — (51) earn-out Changes in assets and liabilities: Accounts receivable, net 956 1,298 Inventories, net 2,062 (437) Deferred product costs 356 810 Prepaid expenses and other assets (171) (48) Accounts payable (657) (1,787) Accrued expenses and other liabilities (513) (519) Deferred revenue (1,004) (1,926) Net cash provided by (used in) operating 9,474 (906) activities Investing activities Purchase of equipment and leasehold improvements (3,526) (2,943) Capitalized software development (355) — Proceeds from the sale of equipment 16 2 Net cash used in investing activities (3,865) (2,941) Financing activities Revolving line of credit (2,300) 2,300 Payments on debt obligations — (3,627) Deferred financing costs (50) (97) Proceeds from exercise of options 51 — Net cash used in financing activities (2,299) (1,424) Effects of exchange rate on cash 15 (16) Increase (decrease) in cash and cash equivalents 3,325 (5,287) Cash and cash equivalents Beginning 7,120 12,407 Ending $ 10,445 $ 7,120 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 2013 2012 2013 2012 per share data) Net income (loss) to $ 82 $ (221) $ 631 $ (10,216) common shareholders Adjustments: Depreciation & 1,703 1,695 6,783 8,013 amortization expense Impairment of — — — 3,500 intangible asset Stock-based 146 161 644 789 compensation Net interest expense 27 16 95 320 Preferred stock dividends and deemed 60 58 235 177 dividends Income taxes 104 (80) 155 (550) Other — 400 50 400 Total adjustments 2,040 2,250 7,962 12,649 Non-GAAP earnings $ 2,122 $ 2,029 $ 8,593 $ 2,433 Non-GAAP earnings per $ 0.07 $ 0.07 $ 0.31 $ 0.09 diluted share Shares used in calculating non-GAAP earnings 28,814 27,344 28,028 27,260 per diluted share Working Capital September 30, September 30, (In thousands) 2013 2012 Current assets $ 21,061 $ 20,942 Current liabilities (9,331) (12,882) Net current assets 11,730 8,060 Current portion of deferred revenue net deferred 1,261 1,544 costs Working capital $ 12,991 $ 9,604 XRS Corporation Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited) Free Cash Flow For the Three Months Ended September For the Year Ended 30, September 30, 2013 2012 2013 2012 Net cash provided by (used in) $ 2,294 $ (583) $ 9,474 $ (906) operating activities Net cash used in investing activities: Purchase of equipment and (194) (35) (513) (2,012) leasehold improvements Purchase of (1,008) (372) (3,013) (931) Relay assets Capitalized software — — (355) — development Proceeds from the sale of — — 16 2 equipment Net cash used in investing (1,202) (407) (3,865) (2,941) activities Free cash $ 1,092 $ (990) $ 5,609 $ (3,847) flow SOURCE XRS Corporation Website: http://www.xrscorp.com Contact: Michael Weber, Chief Financial Officer, XRS Corporation, 952-707-5600
XRS Corporation Reports Fiscal 2013 Fourth Quarter and Year-end Results
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