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XRS Corporation Reports Fiscal 2014 First Quarter Results



          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 December 31, 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 December 31, 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 December 31, 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
December 31, 2013, compared to $13.0 million in working capital as of
September 30, 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, 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
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, 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
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