XRS Corporation Reports Fiscal 2013 Fourth Quarter and Year-end Results

   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
 
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