XRS Corporation Reports Fiscal 2014 First Quarter Results Mobile software revenue grew 14 percent in first quarter 2014. First quarter net income drove free cash flow of $0.6 million. Non-GAAP earnings of $1.9 million, or $0.07 per diluted share in first quarter 2014. PR Newswire MINNEAPOLIS, Feb. 6, 2014 MINNEAPOLIS, Feb. 6, 2014 /PRNewswire/ -- XRS Corporation (NASDAQ:XRSC) reported results for its fiscal 2014 first quarter ended December31, 2013. "The first quarter of fiscal 2014 was our fifth consecutive quarter of profitability, with mobile growth of 14 percent," said Jay Coughlan, chairman and chief executive officer of XRS Corporation. "We are committed to the ongoing success in transitioning to our no upfront hardware cost XRS mobile solution.We continue to enhance functionality of our XRS solution, including aligning with strategic third-party providers to meet the integration requirements of larger, more complex fleets. During this time of continued investment in our XRS mobile solution we are closely controlling costs, which resulted in decreased costs of $0.7 million year-over-year. This positions us well to support the long-term growth of the Company." First Quarter Results For the three months ended December 31, 2013, mobile software revenue increased 14 percent, while total software revenue decreased $0.9 million with the comparable fiscal period in 2013. Total revenue was $13.3 million for the three months ended December 31, 2013, compared to $14.2 million for the comparable period in fiscal 2013 as a result of new customers selecting the Company's mobile solutions, as well as by attrition in the legacy subscription base. Gross margin percentage decreased 4 percentage points to 59 percent for the three months ended December 31, 2013. Software gross margins drove the decline in total gross margin percent. Software gross margins declined 4 percentage points to 70 percent for the three months ended December 31, 2013. The decline is reflective of the Company's commitment to continue to support its legacy solutions while it transitions customers to its mobile solutions. Selling, general and administrative expenses decreased to $4.9 million, compared to $5.5 million for the comparable period in fiscal 2013. Overall selling, general and administrative expenses decreased as a percentage of revenue for the first quarter of fiscal 2014 and 2013 at 37 percent and 39 percent, respectively. The decrease in selling, general and administrative expenses reflects the Company's commitment to increased operational efficiencies. In addition, the current period reflects reduced legal expenses as the Company was involved in defending a patent litigation suit in the first quarter of fiscal 2013. Research and development expenses were $2.9 million and $3.1 million for the first quarter of fiscal 2014 and 2013, respectively. Research and development expense remained relatively consistent as the Company continued to focus on enhancements to its XRS solution to meet the operational needs of larger, more complex fleets. First quarter of fiscal 2014 net income was $0.1 million, a decrease of $0.2 million compared to a net income of $0.3 million for the same period in fiscal 2013. The Company reported non-GAAP earnings of $1.9 million, or $0.07 per diluted share for the first quarter of fiscal 2014, compared to a non-GAAP earnings of $2.2 million, or $0.08 per diluted share for the same period in fiscal 2013. As of December31, 2013, the Company maintained a debt-free balance sheet with $11.2 million in cash. Free cash flow was $0.6 million for the three months ended December31, 2013, compared to a $1.6 million for the comparable period in fiscal 2013. Working capital increased $1.4 million to $14.4 million as of December31, 2013, compared to $13.0 million in working capital as of September30, 2013. Summary of revenue and gross margins (deficits) is as follows (in thousands, except percentage data): For the Three Months Ended December 31, 2013 2012 Revenue: Software $ 10,908 $ 11,769 Hardware systems 2,131 2,191 Services 258 235 Total revenue $ 13,297 $ 14,195 Gross margins (deficits): Software 70% 74% Hardware systems 25% 21% Services (112%) (122%) Total gross margin 59% 63% 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 mobile solutions 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 109,000 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 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, 2013 (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) 2013 2012 Revenue Software $ 10,908 $ 11,769 Hardware systems 2,131 2,191 Services 258 235 Total revenue 13,297 14,195 Cost of goods sold 5,419 5,306 Selling, general and administrative 4,859 5,497 Research and development 2,894 3,050 Total costs and expenses 13,172 13,853 Operating income 125 342 Net interest and other expense (15) (18) Income before income taxes 110 324 Income tax expense 19 5 Net income 91 319 Preferred stock dividends and deemed (60) (58) dividends Net income to common shareholders $ 31 $ 261 Net income per common share: Basic $ — $ 0.02 Diluted $ — $ 0.01 Weighted average common and common share equivalents: Basic 10,930 10,809 Diluted 12,063 27,357 XRS Corporation Consolidated Balance Sheets December 31, September 30, (In thousands) 2013 2013 (Unaudited) Current assets Cash and cash equivalents $ 11,155 $ 10,445 Accounts receivable, net 6,739 6,864 Inventories 1,665 1,710 Deferred product costs 549 625 Prepaid expenses and other current assets 1,172 1,417 Total current assets 21,280 21,061 Equipment and leasehold improvements, net 5,320 5,980 Intangible assets, net 4,065 4,578 Goodwill 16,241 16,640 Deferred product costs, net of current portion 158 213 Other assets 451 667 Total assets $ 47,515 $ 49,139 Current liabilities Accounts payable $ 3,205 $ 2,885 Accrued expenses 3,133 4,560 Deferred revenue 1,759 1,886 Total current liabilities 8,097 9,331 Deferred revenue, net of current portion 360 496 Other long-term liabilities 12 62 Total liabilities 8,469 9,889 Shareholders' equity Preferred stock 44,643 44,524 Common stock 110 109 Additional paid-in capital 50,806 50,674 Accumulated deficit (56,657) (56,688) Accumulated other comprehensive income 144 631 Total shareholders' equity 39,046 39,250 Total liabilities and shareholders' equity $ 47,515 $ 49,139 XRS Corporation Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended December 31, (In thousands) 2013 2012 Operating activities Net income $ 91 $ 319 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,714 1,690 Amortization of deferred financing costs 25 12 Deferred income taxes — (9) Loss on sale or disposal of equipment and 10 5 leased equipment Stock-based compensation 58 160 Changes in assets and liabilities: Accounts receivable, net 321 287 Inventories, net 45 117 Deferred product costs 131 42 Prepaid expenses and other assets 171 57 Accounts payable 468 230 Accrued expenses and other liabilities (1,412) (204) Deferred revenue (258) (524) Net cash provided by operating activities 1,364 2,182 Investing activities Purchase of equipment and leasehold (734) (613) improvements Proceeds from the sale of equipment — 7 Net cash used in investing activities (734) (606) Financing activities Revolving line of credit — (2,300) Proceeds from exercise of options 75 — Net cash provided by (used in) financing 75 (2,300) activities Effects of exchange rate on cash 5 2 Increase (decrease) in cash and cash 710 (722) equivalents Cash and cash equivalents Beginning 10,445 7,120 Ending $ 11,155 $ 6,398 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) 2013 2012 Net income to common shareholders $ 31 $ 261 Adjustments: Depreciation & amortization expense 1,714 1,690 Stock-based compensation 58 160 Net interest expense 6 16 Preferred stock dividends and deemed dividends 60 58 Income taxes 19 5 Total adjustments 1,857 1,929 Non-GAAP earnings $ 1,888 $ 2,190 Non-GAAP earnings per diluted share $ 0.07 $ 0.08 Shares used in calculating non-GAAP earnings 28,669 27,357 per diluted share Working Capital December 31, September 30, (In thousands) 2013 2013 Current assets $ 21,280 $ 21,061 Current liabilities (8,097) (9,331) Net current assets 13,183 11,730 Current portion of deferred revenue net deferred 1,210 1,261 costs Working capital $ 14,393 $ 12,991 XRS Corporation Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited) Free Cash Flow For the Three Months Ended December 31, 2013 2012 Net cash provided by operating activities $ 1,364 $ 2,182 Net cash used in investing activities: Purchase of equipment and leasehold improvements (183) (114) Purchase of Relay assets (551) (499) Proceeds from the sale of equipment — 7 Net cash used in investing activities (734) (606) Free cash flow $ 630 $ 1,576 SOURCE XRS Corporation Website: http://www.xrscorp.com Contact: Michael Weber, Chief Financial Officer, XRS Corporation, 952-707-5600
XRS Corporation Reports Fiscal 2014 First Quarter Results
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