XRS Corporation Reports Fiscal 2014 Second Quarter Results

          XRS Corporation Reports Fiscal 2014 Second Quarter Results

Mobile software revenue grew 8 percent in the second quarter of fiscal 2014.

Second quarter results generated free cash flow of $1.0 million.

Non-GAAP earnings of $1.2 million, or $0.04 per diluted share in the second
quarter of fiscal 2014.

PR Newswire

MINNEAPOLIS, May 8, 2014

MINNEAPOLIS, May 8, 2014 /PRNewswire/ --XRS Corporation (NASDAQ:XRSC)
reported results for its fiscal 2014 second quarter ended March31, 2014.

"The acquisition of 90 new mobile customers of various sizes served to
highlight the second quarter of fiscal 2014," said Jay Coughlan, chairman and
chief executive officer of XRS Corporation."Our strategy to provide the best
product to all-sized fleets has been validated by the successful
implementation of our XRS mobile solution at customers ranging in size and
complexity from individual owner-operators to enterprise-sized fleets. We
continue to focus on our XRS mobile solution by adding and enhancing
functionality, including aligning with strategic third-party providers to meet
the industry's integration requirements. This positions us well to continue to
be a leader in the mobile revolution."

Second Quarter Results
For the three months ended March 31, 2014, mobile software revenue increased 8
percent, while total software revenue decreased $0.9 million with the
comparable fiscal period in 2013. Total revenue was $12.8 million for the
three months ended March 31, 2014, compared to $14.5 million for the
comparable period in fiscal 2013 as a result of the Company's focus on selling
XRS mobile subscriptions, conversions of existing customers and attrition in
our legacy subscription base.

Overall gross margin percentage remained consistent at 58 percent for the
three months ended March 31, 2014 and 2013. Software gross margins declined 4
percentage points to 70 percent for the three months ended March 31, 2014,
compared to the same period in fiscal 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 $5.1 million,
compared to $5.3 million for the comparable period in fiscal 2013. 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 second quarter of fiscal 2013.

Research and development expenses were $3.1 million and $2.8 million for the
second quarter of fiscal 2014 and 2013, respectively. Research and development
expenses increased as the Company continued to focus on enhancements to its
XRS solution to meet the operational needs of larger, more complex fleets.

The Company reported non-GAAP earnings of $1.2 million, or $0.04 per diluted
share for the second quarter of fiscal 2014, compared to non-GAAP earnings of
$2.2 million, or $0.08 per diluted share for the same period in fiscal 2013.

Year-to-Date Results
For the six months ended March 31, 2014, mobile software revenue increased 11
percent. Total revenue was $26.1 million for the six months ended March 31,
2014, compared to $28.7 million for the comparable period in fiscal 2013 as a
result of a combination of decreased legacy software and hardware systems
revenue. Attrition of legacy customers and lower average annual contract
values on the XRS mobile solution contributed to the decreased software
revenue, whereas the Company's focus on the sale of the no upfront hardware
cost XRS mobile solution resulted in decreased hardware systems revenue.

For the for the six months ended March 31, 2014, the Company reported non-GAAP
earnings of $3.1 million, or $0.11 per diluted share, compared to $4.4
million, or $0.16 per diluted share, for the comparable period in fiscal 2013.

Balance Sheet Results
Free cash flow of $1.6 million for the six months ended March31, 2014
contributed to a cash balance of $12.1 million as of March31, 2014. As of
quarter end, the Company also maintained a debt free balance sheet. Working
capital increased $1.9 million to $14.9 million as of March31, 2014, 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  For the Six Months Ended
                          March 31,                   March 31,
                          2014           2013         2014           2013
Revenue:
Software                  $  10,690      $  11,578    $  21,598      $ 23,347
Hardware systems          1,790          2,580        3,921          4,771
Services                  310            338          568            573
Total revenue             $  12,790      $  14,496    $  26,087      $ 28,691
Gross margins (deficits):
Software                  70%            73%          70%            74%
Hardware systems          18%            6%           22%            13%
Services                  (98%)          (59%)        (104%)         (85%)
Total gross margin        58%            58%          59%            60%

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 107,000 subscriptions through 1,200 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  For the Six Months

                                    Ended March 31,       Ended March 31,
(In thousands, except per share     2014       2013       2014       2013
data)
Revenue
Software                            $ 10,690   $ 11,578   $ 21,598   $ 23,347
Hardware systems                    1,790      2,580      3,921      4,771
Services                            310        338        568        573
Total revenue                       12,790     14,496     26,087     28,691
Costs and expenses
Cost of goods sold                  5,327      6,046      10,746     11,352
Selling, general and administrative 5,074      5,349      9,933      10,846
Research and development            3,114      2,798      6,008      5,848
Total costs and expenses            13,515     14,193     26,687     28,046
Operating (loss) income             (725)      303        (600)      645
Net interest and other expense      (31)       (29)       (46)       (47)
(Loss) income before income taxes   (756)      274        (646)      598
Income tax (benefit) expense        (25)       98         (6)        103
Net (loss) income                   (731)      176        (640)      495
Preferred stock dividends and
deemed                              (60)       (58)       (120)      (116)

 dividends
Net (loss) income to common         $ (791)    $ 118      $ (760)    $ 379
shareholders
Net income per common share:
Basic                               $ (0.07)   $ 0.01     $ (0.07)   $ 0.04
Diluted                             $ (0.07)   $ 0.01     $ (0.07)   $ 0.02
Weighted average common and common
share equivalents:
Basic                               11,041     10,827     10,985     10,818
Diluted                             11,041     27,602     10,985     27,479



XRS Corporation
Consolidated Balance Sheets
                                               March 31,    September 30,
(In thousands)                                 2014         2013
                                               (Unaudited)
Current assets
Cash and cash equivalents                      $  12,138    $   10,445
Accounts receivable, net                       5,875        6,864
Inventories                                    1,319        1,710
Deferred product costs                         483          625
Prepaid expenses and other current assets      1,135        1,417
Total current assets                           20,950       21,061
Equipment and leasehold improvements, net      4,706        5,980
Intangible assets, net                         3,561        4,578
Goodwill                                       15,801       16,640
Deferred product costs, net of current portion 130          213
Other assets                                   429          667
Total assets                                   $  45,577    $   49,139
Current liabilities
Accounts payable                               $  2,342     $   2,885
Accrued expenses                               3,211        4,560
Deferred revenue                               1,667        1,886
Total current liabilities                      7,220        9,331
Deferred revenue, net of current portion       261          496
Other long-term liabilities                    18           62
Total liabilities                              7,499        9,889
Shareholders' equity
Preferred stock                                44,601       44,524
Common stock                                   111          109
Additional paid-in capital                     51,205       50,674
Accumulated deficit                            (57,448)     (56,688)
Accumulated other comprehensive (loss) income  (391)        631
Total shareholders' equity                     38,078       39,250
Total liabilities and shareholders' equity     $  45,577    $   49,139



XRS Corporation
Consolidated Statements of Cash Flows
(Unaudited)
                                                      For the Six Months Ended
                                                      March 31,
(In thousands)                                        2014           2013
Operating activities
Net (loss) income                                     $  (640)       $  495
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization                         3,354          3,362
Amortization of deferred financing costs              33             33
Deferred income taxes                                 —              (9)
Loss on sale or disposal of equipment and leased      42             40
equipment
Stock-based compensation                              400            348
Changes in assets and liabilities:
Accounts receivable, net                              1,179          552
Inventories, net                                      392            1,408
Deferred product costs                                225            138
Prepaid expenses and other assets                     216            (205)
Accounts payable                                      (156)          (642)
Accrued expenses and other liabilities                (1,424)        (538)
Deferred revenue                                      (444)          (735)
Net cash provided by operating activities             3,177          4,247
Investing activities
Purchase of equipment and leasehold improvements      (1,531)        (1,386)
Capitalized software development                      (28)           (85)
Proceeds from the sale of equipment                   —              16
Net cash used in investing activities                 (1,559)        (1,455)
Financing activities
Revolving line of credit                              —              (2,300)
Deferred financing costs                              (27)           (50)
Proceeds from exercise of options                     92             —
Net cash provided by (used in) financing activities   65             (2,350)
Effects of exchange rate on cash                      10             7
Increase in cash and cash equivalents                 1,693          449
Cash and cash equivalents
Beginning                                             10,445         7,120
Ending                                                $  12,138      $  7,569



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 data) 2014        2013      2014      2013
Net (loss) income to common           $  (791)    $ 118     $ (760)   $ 379
shareholders
Adjustments:
Depreciation and amortization expense 1,640       1,672     3,354     3,362
Stock-based compensation              342         188       400       348
Net interest expense                  11          25        17        41
Preferred stock dividends and deemed  60          58        120       116
dividends
Income taxes                          (25)        98        (6)       103
Other                                 —           50        —         50
Total adjustments                     2,028       2,091     3,885     4,020
Non-GAAP earnings                     $  1,237    $ 2,209   $ 3,125   $ 4,399
Non-GAAP earnings per diluted share   $  0.04     $ 0.08    $ 0.11    $ 0.16
Shares used in calculating non-GAAP
earnings                              28,743      27,602    28,713    27,479

 per diluted share



Working Capital
                                                      March 31,  September 30,
(In thousands)                                        2014       2013
Current assets                                        $ 20,950   $   21,061
Current liabilities                                   (7,220)    (9,331)
Net current assets                                    13,730     11,730
Current portion of deferred revenue net deferred      1,184      1,261
costs
Working capital                                       $ 14,914   $   12,991



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,
                                      2014        2013      2014      2013
Net cash provided by operating        $  1,813    $ 2,065   $ 3,177   $ 4,247
activities
Net cash used in investing
activities:
Purchase of equipment and leasehold   (337)       (110)     (520)     (224)
improvements
Purchase of Relay assets              (460)       (663)     (1,011)   (1,162)
Capitalized software development      (28)        (85)      (28)      (85)
Proceeds from the sale of equipment   —           9         —         16
Net cash used in investing activities (825)       (849)     (1,559)   (1,455)
Free cash flow                        $  988      $ 1,216   $ 1,618   $ 2,792



SOURCE XRS Corporation

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