XRS Corporation Reports Fiscal 2014 Third Quarter Results

          XRS Corporation Reports Fiscal 2014 Third Quarter Results

- Mobile software revenue up 19% year-over-year

- Net income of $0.1 million, non-GAAP earnings of $1.8 million

- Generated free cash flow of $0.8 million

PR Newswire

MINNEAPOLIS, Aug. 7, 2014

MINNEAPOLIS, Aug. 7, 2014 /PRNewswire/ --XRS Corporation (NASDAQ: XRSC)
reported results for its fiscal 2014 third quarter ended June30, 2014.

"It's been an impressive quarter for customer growth and we are pleased that
over 190 fleets chose our XRS platform as their fleet management and
compliance solution," said Jay Coughlan chairman and chief executive officer
of XRS Corporation. "During the quarter we successfully launched additional
fuel tax and trip management functionality, supporting our commitment to
deliver the best product to fleets of all sizes. Continued investment in our
solution positions us well to capitalize on the growing compliance market."

Third Quarter Results

  oRevenue: For the three months ended June 30, 2014 mobile software revenue
    increased 19 percent compared with the comparable fiscal period in 2013 as
    customers continue to implement our mobile XRS solution. Total revenue was
    $12.8 million for the three months ended June 30, 2014, compared to $13.4
    million for the comparable period in fiscal 2013 as the Company continues
    to transition from its legacy hardware-based solutions to its mobile
    solutions.
  oGross Margin: Overall gross margin percentage remained consistent at 61
    percent for the three months ended June 30, 2014 and 2013. Software gross
    margins declined 3 percentage points to 70 percent for the three months
    ended June 30, 2014, compared to the same period in fiscal 2013. The
    decline in software gross margins is reflective of the Company's
    commitment to continue to support its legacy solutions while it
    transitions customers to its XRS mobile solution.
  oSelling, General & Administrative Expenses: Selling, general and
    administrative expenses decreased to $4.4 million, compared to $5.1
    million for the comparable period in fiscal 2013, driven by a decrease in
    personnel costs.
  oResearch & Development Expenses: Reserve and development expenses were
    $3.3 million and $2.9 million for the third quarter of fiscal 2014 and
    2013, respectively. Research and development expenses increased as the
    Company successfully released new solution functionality, including: trip
    management for managing routes and enhancements to fuel tax including
    print, sign and send automated reporting. This new functionality allows
    the XRS mobile solution to meet the requirements of larger, more complex
    fleets, while further differentiating our solution from competitors.
  oNet Income: GAAP net income for the third quarter was $0.1 million,
    compared to $0.2 million for the same period in the prior year.
  oNon-GAAP Earnings: The Company reported non-GAAP earnings of $1.8 million,
    or $0.06 per diluted share for the third quarter of fiscal 2014, compared
    to non-GAAP earnings of $2.1 million, or $0.07 per diluted share for the
    same period in fiscal 2013.
  oBalance Sheet: As of June30, 2014, XRS Corporation had cash of $13.0
    million, an increase of $2.6 million since September30, 2013. As of
    quarter end, the Company also maintained a debt free balance sheet.
  oStatement of Cash Flows: During the third quarter of fiscal 2014 the
    Company generated $1.4 million of cash flow from operations and invested
    $0.6 million in capital expenditures, Relay assets and software
    development, resulting in free cash flow of $0.8 million.
  oWorking Capital: Working capital increased $3.1 million to $16.1 million
    as of June30, 2014, compared to $13.0 million in working capital as of
    September30, 2013.

Year-to-Date Results

  oRevenue: For the nine months ended June 30, 2014, mobile software revenue
    increased 14 percent compared to the same period in fiscal 2013. Total
    revenue was $38.9 million for the nine months ended June 30, 2014,
    compared to $42.1 million for the comparable period in fiscal 2013.
    Attrition of legacy customers and a lower average annual contract values
    on the XRS mobile solution contributed to the decreased software revenue.
    The Company's focus on the sale of the no upfront hardware cost XRS mobile
    solution resulted in decreased hardware systems revenue.
  oNon-GAAP Earnings: For the for the nine months ended June 30, 2014, the
    Company reported non-GAAP earnings of $5.0 million, or $0.17 per diluted
    share, compared to $6.5 million, or $0.23 per diluted share, for the
    comparable period in fiscal 2013.

Summary of revenue and gross margins (deficits) is as follows (in thousands,
except percentage data):

                         For the Three Months Ended  For the Nine Months Ended
                         June 30,                    June 30,
                         2014            2013        2014           2013
Revenue:
Software                 $  10,867       $ 11,266    $  32,465      $ 34,613
Hardware systems         1,689           1,798       5,610          6,569
Services                 257             340         825            913
Total revenue            $  12,813       $ 13,404    $  38,900      $ 42,095
Gross margins
(deficits):
Software                 70         %    73       %  70         %   73       %
Hardware systems         26         %    18       %  23         %   14       %
Services                 (113)      %    (94)     %  (107)      %   (88)     %
Total gross margin       61         %    61       %  59         %   61       %



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 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 106,000 subscribers 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 their 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 Nine Months

                                     Ended June 30,        Ended June 30,
(In thousands, except per share      2014        2013      2014       2013
data)
Revenue
Software                             $  10,867   $ 11,266  $  32,465  $ 34,613
Hardware systems                     1,689       1,798     5,610      6,569
Services                             257         340       825        913
Total revenue                        12,813      13,404    38,900     42,095
Costs and expenses
Cost of goods sold                   5,049       5,225     15,795     16,577
Selling, general and administrative  4,389       5,094     14,322     15,940
Research and development             3,289       2,873     9,297      8,721
Total costs and expenses             12,727      13,192    39,414     41,238
Operating income (loss)              86          212       (514)      857
Net interest and other expense       (6)         (35)      (52)       (82)
Income (loss) before income taxes    80          177       (566)      775
Income tax (benefit) expense         —           (52)      (6)        51
Net income (loss)                    80          229       (560)      724
Preferred stock dividends and deemed
                                     (68)        (59)      (188)      (175)
 dividends
Net income (loss) to common          $  12       $ 170     $  (748)   $ 549
shareholders
Net income (loss) per common share:
Basic                                $  —        $ 0.02    $  (0.07)  $ 0.05
Diluted                              $  —        $ 0.01    $  (0.07)  $ 0.03
Weighted average common and common
share equivalents:
Basic                                11,159      10,858    11,043     10,831
Diluted                              12,184      28,345    11,043     27,766



XRS Corporation
Consolidated Balance Sheets
                                               June 30,     September 30,
(In thousands)                                 2014         2013
                                               (Unaudited)
Current assets
Cash and cash equivalents                      $   13,017   $    10,445
Accounts receivable, net                       6,629        6,864
Inventories                                    1,156        1,710
Deferred product costs                         426          625
Prepaid expenses and other current assets      1,639        1,417
Total current assets                           22,867       21,061
Equipment and leasehold improvements, net      4,234        5,980
Intangible assets, net                         3,221        4,578
Goodwill                                       16,199       16,640
Deferred product costs, net of current portion 112          213
Other assets                                   532          667
Total assets                                   $   47,165   $    49,139
Current liabilities
Accounts payable                               $   3,118    $    2,885
Accrued expenses                               3,236        4,560
Deferred revenue                               1,648        1,886
Total current liabilities                      8,002        9,331
Deferred revenue, net of current portion       225          496
Other long-term liabilities                    13           62
Total liabilities                              8,240        9,889
Shareholders' equity
Preferred stock                                44,728       44,524
Common stock                                   112          109
Additional paid-in capital                     51,445       50,674
Accumulated deficit                            (57,436)     (56,688)
Accumulated other comprehensive income         76           631
Total shareholders' equity                     38,925       39,250
Total liabilities and shareholders' equity     $   47,165   $    49,139



XRS Corporation
Consolidated Statements of Cash Flows
(Unaudited)
                                                     For the Nine Months Ended
                                                     June 30,
(In thousands)                                       2014            2013
Operating activities
Net (loss) income                                    $   (560)       $  724
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization                        4,957           5,080
Amortization of deferred financing costs             38              57
Deferred income taxes                                —               (9)
Loss on sale or disposal of equipment and leased     47              48
equipment
Stock-based compensation                             550             498
Changes in assets and liabilities:
Accounts receivable, net                             431             1,056
Inventories, net                                     555             1,165
Deferred product costs                               299             242
Prepaid expenses and other assets                    (269)           (672)
Accounts payable                                     460             (162)
Accrued expenses and other liabilities               (1,432)         (10)
Deferred revenue                                     (504)           (837)
Net cash provided by operating activities            4,572           7,180
Investing activities
Purchase of equipment and leasehold improvements     (2,023)         (2,324)
Capitalized software development                     (138)           (355)
Proceeds from the sale of equipment                  —               16
Net cash used in investing activities                (2,161)         (2,663)
Financing activities
Revolving line of credit                             —               (2,300)
Deferred financing costs                             (30)            (50)
Proceeds from exercise of options                    183             13
Net cash provided by (used in) financing activities  153             (2,337)
Effects of exchange rate on cash                     8               9
Increase in cash and cash equivalents                2,572           2,189
Cash and cash equivalents
Beginning                                            10,445          7,120
Ending                                               $   13,017      $  9,309



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 Nine Months

                                     Ended June 30,        Ended June 30,
(In thousands, except per share      2014        2013      2014        2013
data)
Net income (loss) to common          $  12       $  170    $  (748)    $ 549
shareholders
Adjustments:
Depreciation and amortization        1,603       1,718     4,957       5,080
expense
Stock-based compensation             150         150       550         498
Net interest expense                 8           27        25          68
Preferred stock dividends and deemed 68          59        188         175
dividends
Income taxes                         —           (52)      (6)         51
Other                                —           —         —           50
Total adjustments                    1,829       1,902     5,714       5,922
Non-GAAP earnings                    $  1,841    $  2,072  $  4,966    $ 6,471
Non-GAAP earnings per diluted share  $  0.06     $  0.07   $  0.17     $ 0.23
Shares used in calculating non-GAAP  28,819      28,345    28,773      27,766
earnings per diluted share



Working Capital
                                                       June 30,  September 30,
(In thousands)                                         2014      2013
Current assets                                         $ 22,867  $    21,061
Current liabilities                                    (8,002)   (9,331)
Net current assets                                     14,865    11,730
Current portion of deferred revenue net deferred costs 1,222     1,261
Working capital                                        $ 16,087  $    12,991



XRS Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
Free Cash Flow
                                     For the Three Months  For the Nine Months

                                     Ended June 30,        Ended June 30,
(In thousands)                       2014        2013      2014        2013
Net cash provided by operating       $  1,395    $  2,933  $  4,572    $ 7,180
activities
Net cash used in investing
activities:
Purchase of equipment and leasehold  (84)        (95)      (604)       (319)
improvements
Purchase of Relay assets             (408)       (843)     (1,419)     (2,005)
Capitalized software development     (110)       (270)     (138)       (355)
Proceeds from the sale of equipment  —           —         —           16
Net cash used in investing           (602)       (1,208)   (2,161)     (2,663)
activities
Free cash flow                       $  793      $  1,725  $  2,411    $ 4,517



SOURCE XRS Corporation

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