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
XRS Corporation Reports Fiscal 2014 Second Quarter Results
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