×

Xplore Technologies Reports Fiscal First Quarter 2017 Results

Implements Additional Cost Reductions Estimated at More Than $3 Million Annually
Reiterates Annual Outlook and Long-term Targets

AUSTIN, Texas, Aug. 10, 2016 (GLOBE NEWSWIRE) -- Xplore Technologies Corp. (NASDAQ:XPLR), a global leader in rugged computing, today reported results for its fiscal 2017 first quarter ended June 30, 2016.

Fiscal First Quarter and Recent Highlights:

  • Reported revenue of $16.5 million, reflecting what the company believes is a short-term global slowdown in rugged tablet sales and the pushout of delivery for a significant communications customer order;
  • Achieved gross margin of 29.5%, in line with expectations;
  • Initiated annualized operating cost reductions in excess of $3 million through a combination of headcount adjustments announced at the start of the quarter plus additional headcount and non-headcount actions;
  • Reduced total operating expenses to $6.4 million in the quarter; and
  • Reported a GAAP net loss of $1.7 million, or ($0.16) per share, and adjusted negative EBITDA of $1.1 million.

“As released in our preliminary results and outlook announcement, revenue in the first fiscal quarter reflected a more than seasonal decline due to what we believe is a short-term global slowdown in rugged tablet sales and the pushout of a large order from a communications customer,” said Philip Sassower, chairman and chief executive officer for Xplore. “While revenue in our business can be lumpy from quarter to quarter, we remain committed to our long-term goals to gain further share in the global rugged tablet market and lead expansion into new vertical markets. To that end, we are currently in discussions for multiple large opportunities with both existing and new customers. We are also investing in our sales channel to maximize the return from our distributor and reseller relationships, including forward stocking select versions of our platforms for quicker delivery to global customers.”

“After five years of above-market revenue growth that moved Xplore to the #2 market share position, we have initiated aggressive cost reductions to transform us from a negative earnings company to one of profitable operations through all market cycles,” said Mark Holleran, president and chief operating officer for Xplore. “Since the start of this fiscal year, we have cut operating expenses by more than $3 million on an annualized basis through a combination of headcount reductions and other cost initiatives. We believe these actions will position Xplore to be at or near breakeven in fiscal 2017 based on our current full-year revenue outlook of $85 to $95 million, subject to strategic decisions around product development or one-time investments in the business. We believe these changes also create opportunities for substantially improved profitability and greater value for our stockholders as we continue to execute on our revenue growth strategies.”

Fiscal 2016 Financial Results
Xplore reported revenue of $16.5 million for the fiscal first quarter ended June 30, 2016, in line with the company’s pre-announcement and outlook release issued July 12, 2016. This compared to revenue of $20.6 million in the fiscal fourth quarter of 2016 and $24.0 million in the year-ago first quarter, which was the first reporting period that included the Motion Computing assets we acquired last April. The decrease in revenue reflected greater than typical seasonality driven by an industry-wide slowdown in rugged tablet sales, plus the effect of a large customer that has delayed shipment and a temporary slowdown in European sales related in part to uncertainty around the impact of Brexit.

Gross profit in the first quarter was $4.9 million, or 29.5% of revenue, in line with the company’s expectations, compared to $6.2 million, or 30.3% of revenue, in the preceding quarter and $8.2 million, or 33.9% of revenue, in the prior year first quarter. The change in gross margin was primarily attributable to changes in product mix.

Total operating expenses for the first quarter decreased to $6.4 million, declining 11.1% from $7.2 million in the preceding quarter and 17.9% from $7.8 million in the year-ago quarter. The estimated $3 million decline in annualized operating expenses reflects headcount reductions initiated at the start of the first quarter, estimated at approximately $2 million per year, additional cost saving initiatives and completion of the amortization of non-cash compensation issued in prior periods. These savings are in addition to approximately $3 million in annualized cost reductions previously undertaken in the second quarter of fiscal 2017. A portion of the cost reduction benefit is being reinvested in sales, marketing and channel and distributor development to drive future revenue growth.

For the quarter, Xplore reported net loss of $1.7 million, or $0.16 per basic share, compared to net loss of $1.1 million, or $0.09 per basic share, in the fourth quarter of fiscal 2016 and a net loss of $0.2 million, or $0.02 per share, in the prior year first quarter.

EBITDA adjusted for non-cash compensation and historical integration costs was negative $1.1 million, compared to negative adjusted EBITDA of $0.1 million in the fiscal fourth quarter 2016, and a positive $1.4 million in the prior year first quarter. Non-cash compensation declined to $175,000 in the first quarter, from $522,000 in the preceding quarter and $607,000 in the prior year first quarter. The prior year first quarter also included $670,000 in integration costs related to the acquisition of Motion Computing assets. A reconciliation is provided in the tables included in this release.

Cash Flow and Balance Sheet
Net cash used in operating activities was $6.6 million for the three months ended June 30, 2016, compared to $3.6 million in the prior year quarter. At quarter end, cash was $4.4 million and short-term debt increased to $6.7 million. The increase in net cash used by operating activities and short term borrowing reflects the operating loss, changes in accounts receivable and accounts payable, as well as a $6.3 million increase in inventory, to $21.1 million, in anticipation of orders that were expected to ship during the quarter, but which have been delayed, as well as the need to take on larger shipments to meet minimum order quantities for various products. This inventory is expected to be sold in the coming two quarters.

Outlook
For fiscal 2017, Xplore continues to anticipate revenue to range between $85 million and $95 million, reflecting the impact of what the company believes is a temporary global slowdown in the rugged tablet market and shipment delays experienced during the first fiscal quarter. Gross margin for the fiscal year is expected to be between 28% and 30%. Reflecting the company’s cost reductions, operating expenses are expected to be approximately $27-29 million. Based on these estimates, the company anticipates net income at or near breakeven for the full year.

Additionally, Xplore continues to anticipate significant bottom line contribution from sales growth beyond its fiscal year 2017 revenue targets, reflecting both efficiencies of scale provided by such growth and the reduced operating cost structure recently initiated. As such, the company reiterated the following business operating targets as revenue scales to a $120 million run-rate, assuming both organic growth and cost reduction initiatives are achieved in future periods: gross margin 28-30%, operating margin 8-10%, profit margin 6-8% and EBITDA margin 9-11%.

Conference Call
The company will conduct a conference call and webcast to review the results on Wednesday, August 10, 2016, at 4:30 p.m. ET. Interested parties in the United States can access the call by dialing 877-269-7756; interested parties outside the United States can access the call by dialing +1-201-689-7817. A live and archived webcast will be available online in the investor relations section of Xplore’s website at www.xploretech.com. A replay of the conference call will be available until 5 p.m. ET on September 10, 2016, by calling 877-660-6853 from the United States or 201-612-7415 from outside the United States and entering conference ID number 13642570.

About Xplore Technologies
Established in 1996, Xplore Technologies Corp. is the #2 provider of rugged tablet PCs worldwide. With its recent acquisition of the Motion product line, the company now delivers the broadest range of rugged Windows and Android tablets available in the market. The company’s award-winning tablet PCs are among the most powerful and longest lasting in their class – able to withstand nearly any hazardous condition or environmental extreme – and are purpose-built for the unique workflow demands of critical industries including oil & gas, utilities, telecommunications, government, military, public safety, manufacturing, distribution, and healthcare. Xplore's products are sold and serviced on a global basis across the Americas, Europe, Middle East, Africa, and Asia Pacific regions. For more information, visit the Xplore Technologies website at www.xploretech.com. Follow us on Twitter, Facebook, LinkedIn, Vimeo and YouTube.

Forward Looking Statements
This news release contains forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” and similar expressions are intended to identify forward-looking statements. Such statements reflect Xplore’s current views with respect to future events and are subject to such risks and uncertainties. Many factors could cause actual results to differ materially from the statements made including those factors detailed from time to time in filings made by Xplore with securities regulatory authorities. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated or expected. Xplore does not intend and does not assume any obligation to update these forward-looking statements.

XPLORE TECHNOLOGIES CORP.
Consolidated Balance Sheets
(in thousands)
June 30,
2016

March 31,
2016
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $4,418 $5,594
Accounts receivable, net 9,992 14,277
Inventory, net 21,130 14,858
Prepaid expenses and other current assets 375 800
Total current assets 35,915 35,529
Fixed assets, net 1,152 1,003
Intangible assets, net 1,695 1,785
Goodwill 15,159 14,872
$53,921 $53,189
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Short-term indebtedness with bank $6,124 $
Accounts payable 7,741 9,611
Accrued liabilities 1,975 3,409
Deferred revenue and current warranty liabilities 4,255 4,413
Total current liabilities 20,095 17,433
Deferred revenue and non-current warranty liabilities 4,210 4,568
Total liabilities 24,305 22,001
Commitments and contingencies
STOCKHOLDERS’ EQUITY:
Preferred Stock, par value $0.001 per share; authorized 5,000; no shares issued
Common Stock, par value $0.001 per share; authorized 15,000; shares issued 10,908 and 10,908, respectively 11 11
Additional paid-in capital 171,313 171,138
Accumulated deficit (141,708) (139,961)
29,616 31,188
$53,921 $53,189

XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Loss—Unaudited
(in thousands of dollars, except share and per share amounts)
Three Months Ended
June 30,
2016
June 30,
2015
Revenue $16,473 $24,043
Cost of revenue 11,609 15,893
Gross profit 4,864 8,150
Expenses:
Sales, marketing and support 3,435 3,620
Product research, development and engineering 953 1,830
General administration 2,039 2,331
6,427 7.781
Income (loss) from operations (1,563) 369
Other income (expense):
Other (96) 63
Cost of integration (670)
Interest expense (8) (6)
(104) (613)
Loss before income taxes (1,667) (244)
Income tax (expense) (80)
Net loss $(1,747) $(244)
Loss per common share $(0.16) $(0.02)
Weighted average number of common shares outstanding, basic and fully diluted 10,908,355 10,789,967

XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Cash Flows—Unaudited
(in thousands)
Three Months Ended
June 30,
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash (used in) provided by operations:
Net loss $(1,747) $(244)
Items not affecting cash:
Depreciation and amortization 348 358
Provision for doubtful accounts 15 (84)
Stock-based compensation expense 175 607
Changes in operating assets and liabilities:
Accounts receivable 4,270 (4,151)
Inventory (6,272) (1,932)
Prepaid expenses and other current assets 425 11
Accounts payable and accrued liabilities (3,820) 1788
Net cash used in operating activities (6,606) (3,647)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash received in purchase transaction 653
Change in liabilities assumed in purchase of business (287)
Additions to fixed assets (407) (237)
Net cash provided by (used in) investing activities (694) 416
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 11,600 5,000
Repayment of short-term indebtedness (5,476) (10,233)
Net proceeds from issuance of Common Stock 26
Net cash provided by (used in) financing activities 6,124 (5,207)
CHANGE IN CASH AND CASH EQUIVALENTS (1,176) (8,438)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,594 19,455
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,418 $11,017
NONCASH INVESTING AND FINANCING ACTIVITIES:
Net assets acquired with debt in purchase transaction $ $9,079
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Payments for interest $8 $6
Payments for income taxes $80 $


XPLORE TECHNOLOGIES CORP.
Adjusted EBITDA Reconciliation—Unaudited
(in thousands)
Three Months Ended
June 30,
2016 2015
Net loss $(1,747) $(244)
Income taxes 80
Interest expense 8 6
Depreciation and amortization 348 358
Stock-based compensation expense 175 607
Cost of integration 670
ADJUSTED EBITDA $(1,136) $1,397


Xplore Technologies Quarterly Historical Information
FY 2017
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
Revenue$16,473 $16,473
Cost of revenue 11,609 11,609
Gross profit 4,864 4,884
Expenses
Sales, marketing and support 3,435 3,435
Product research, development & engineering 953 953
General administrative 2,039 2,039
Total operating expenses (6,427) (6,427)
Profit/(loss) from operations (1,563) (1,563)
Other expenses
Interest expense (6) (6)
Cost of integration (670) (670)
Other income/expenses (80) (80)
(104) (104)
Income/(loss) before taxes (1,667) (1,667)
Income taxes (80) (80)
Net income$(1,747) $(362)
Depreciation & amortization 348 348
Interest expense 8 8
Income taxes 80 80
EBITDA (1,311) (1,311)
Non-cash compensation 175 175
Cost of integration - -
Adjusted EBITDA $(1,136) $(1,136)
Key Statistics
Gross margin 29.5% 29.5%
Operating margin -9.5% -9.5%
Periodic revenue % N/A N/A
Quarter over Quarter
Revenue Change % -20.1%


FY 2016
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Revenue$24,043 $28,853 $27,023 $20,611 $100,530
Cost of revenue 15,893 20,744 18,181 14,365 69,183
Gross profit 8,150 8,109 8,842 6,246 31,347
Expenses
Sales, marketing and support 3,620 3,642 3,925 3,909 15,096
Product research, development & engineering 1,830 1,577 1,129 1,235 5,771
General administrative 2,331 2,487 2,521 2,088 9,427
Total operating expenses 7,781 7,706 7,575 7,232 30,294
Profit/(loss) from operations 369 403 1,267 (986) 1,053
Other expenses
Interest expense (6) (52) - - (58)
Cost of integration (670) (122) (95) (26) (913)
Other income/expenses 63 (131) (317) (65) (450)
(613) (305) (412) (91) (1,421)
Income/(loss) before taxes (244) 98 855 (1,077) (368)
Income taxes - - (69) 75 6
Net income$(244)$98 $786 $(1,002)$(362)
Depreciation & amortization 358 457 498 417 1,730
Interest expense 6 52 - - 58
Income taxes - - 69 (75) (6)
EBITDA 120 607 1,353 (660) 1,420
Non-cash compensation 607 492 535 522 2,156
Cost of integration 670 122 95 26 913
Adjusted EBITDA$1,397 $1,221 $1,983 $(112)$4,489
Key Statistics
Gross margin 33.9% 28.1% 32.7% 30.3% 31.2%
Operating margin 1.5% 1.4% 4.7% -4.8% 1.0%
Periodic revenue % 23.9% 28.7% 26.9% 20.5% 100.0%
Quarter over Quarter
Revenue Change % 131.0% 20.0% -6.3% -23.7%


FY 2015
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Revenue$8,267 $7,522 $16,443 $10,407 $42,639
Cost of revenue 5,203 5,255 10,569 7,293 28,320
Gross profit 3,064 2,267 5,874 3,114 14,319
Expenses
Sales, marketing and support 1,598 1,714 1,630 1,410 6,352
Product research, development & engineering 991 739 815 992 3,537
General administrative 1,007 977 980 1,139 4,103
Total operating expenses 3,596 3,430 3,425 3,541 13,992
Profit/(loss) from operations (532) (1,163) 2,449 (427) 327
Other expenses
Interest expense (1) (2) - (3)
Cost of integration - - - - -
Other income/expenses (19) (3) (7) (7) (36)
(19) (4) (9) (7) (39)
Income/(loss) before taxes (551) (1,167) 2,440 (434) 288
Income taxes - - (39) - (39)
Net income$(551)$(1,167)$2,401 $(434)$249
Depreciation & amortization 172 264 253 230 919
Interest expense - 1 2 - 3
Income taxes - - 39 - 39
EBITDA (379) (902) 2,695 (204) 1,210
Non-cash compensation 159 166 152 207 684
Cost of integration - - - - -
Adjusted EBITDA$(220)$(736)$2,847 $3 $1,894
Key Statistics
Gross margin 37.1% 30.1% 35.7% 29.9% 33.6%
Operating margin -6.4% -15.5% 14.9% -4.1% 0.8%
Periodic revenue % 19.4% 17.6% 38.6% 24.4% 100.0%
Quarter over Quarter
Revenue Change % -0.9% -9.0% 118.6% -36.7%

Contact Information: Tom Wilkinson Chief Financial Officer (512) 637-1162 twilkinson@xploretech.com Darrow Associates Investor Relations (512) 696-6401 xplr@darrowir.com

Source:Xplore Technologies Corp