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Xplore Technologies Reports Fiscal Second Quarter 2017 Results

Revenue Increases 21% Sequentially, Operating Cost Reductions Ahead of Target

Backlog at Company Record $11 Million

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

Fiscal Second Quarter and Recent Highlights:

  • Reported revenue of $20.0 million, reflecting steady seasonal trends offset by continued softer sales in Europe and timing of customer shipments;
  • Achieved gross margin of 28.2%, in line with expectations;
  • Reduced operating costs by more than $1.6 million from the prior year quarter, to $6.1 million;
  • Reported GAAP net loss of $536,000, or ($0.05) per share, and adjusted EBITDA of positive $116,000;
  • Announced the largest purchase order in company history to be fulfilled in the fiscal second and third quarter;
  • Secured a $1.1 million follow-on military order for ultra-rugged tablets from existing inventory;
  • Signed purchase agreements with multiple new customers, including Michelin and a global restaurant group;
  • Entered the vehicle emissions inspection market with a seven-figure state-level automated vehicle inspection program order; and
  • Secured an additional follow-on order with a major telecommunications customer.

“Fiscal second quarter revenue increased 21% sequentially on rising shipments while operating costs declined significantly, placing Xplore firmly on track for profitability in the second half of this year,” said Philip Sassower, chairman and chief executive officer. “We also secured multiple customer wins which will drive revenue in the second half. These include a record telecommunications order for rugged Android tablets that only partially shipped during the second quarter, a follow-on military order from existing inventory, a follow-on order with another telecommunications customer and our first sale in vehicle emissions testing, a large new addressable market for Xplore. Additionally, we signed purchase agreements with several new customers who will be submitting their first orders in the coming months.”

“As revenue further increases in the second half, we will continue to closely manage our lean operating structure to drive performance at the bottom line,” said Mark Holleran, president and chief operating officer. “Total operating expenses declined by $1.6 million, or 21%, compared to the year-ago quarter, allowing us to further reduce our annual operating expense outlook by approximately $2 million. We entered the fiscal third quarter with a record backlog of more than $11 million, and have subsequently won additional orders. We are working closely with a number of prospective customers actively field testing our rugged tablet solutions ahead of future purchase decisions, as well as with our production partners to increase capacity to meet this heightened demand.”

Fiscal 2017 Second Quarter Financial Results
Xplore reported revenue of $20.0 million for the fiscal second quarter ended September 30, 2016, an increase of 21.2% compared to revenue of $16.5 million in the fiscal first quarter of 2017 and compared to $28.9 million in the year-ago second quarter, which included catch-up orders as part of the Motion Computing assets acquisition. Revenue reflected increased sales and initial shipments against the company’s large telecommunications customer purchase order, offset by continued softness in Europe.

Gross profit in the second quarter was $5.6 million, or 28.2% of revenue, in line with the company’s expectations, compared to $4.9 million, or 29.5% of revenue, in the preceding quarter and $8.1 million, or 28.1% of revenue, in the prior year second quarter. The change in gross margin was primarily attributable to product mix.

Total operating expenses for the second quarter decreased to $6.1 million, declining 5.4% from $6.4 million in the preceding quarter and 21.1% from $7.7 million in the prior year second quarter. The decline in operating expenses reflects aggressive implementation of the company’s previously announced cost initiatives undertaken in August 2016. A portion of the cost reduction benefit is being reinvested in sales, marketing and channel and distributor development to drive revenue growth in the second half of fiscal 2017 and fiscal 2018.

For the quarter, Xplore reported net loss of $536,000, or $0.05 per basic share, compared to net loss of $1.7 million, or $0.16 per basic share, in the first quarter of fiscal 2017 and a net profit of $98,000, or $0.01 per share, in the prior year second quarter.

EBITDA adjusted for non-cash compensation and historical integration costs was positive $116,000, compared to negative adjusted EBITDA of $1.1 million in the fiscal first quarter 2016, and a positive $1.2 million in the prior year second quarter. A reconciliation is provided in the tables included in this release.

“We accelerated the benefit of our cost reduction initiatives in the second quarter, greatly reducing the breakeven point of the business compared to the prior year and even our fiscal first quarter,” said Tom Wilkinson, CFO of Xplore. “As a result, we expect to be profitable in the second half, as well as show the bottom-line benefit of our operating profit leverage model. In addition, we anticipate these operational changes will lead to greater cash flows beginning in the third fiscal quarter due to both improved profitability and greater working capital efficiency as we ship against multiple larger orders currently being fulfilled from existing inventories.”

Cash Flow and Balance Sheet
Net cash used in operating activities was $3.9 million, compared to $6.6 million for the three months ended June 30, 2016. At quarter end, cash was $3.5 million and short-term debt $9.2 million. Short term borrowing and use of cash reflects increased working capital, primarily in accounts receivable and inventory, to meet rising shipment demand. Inventory declined at the end of the quarter, which is reflected in the accounts receivable increases, and the company expects to continue to ship substantial goods from inventory of the next two quarters, which will generate increases in accounts receivable and ultimately generate cash flows from operating activities.

Conference Call
The company will conduct a conference call and webcast to review the results on Thursday, November 10, 2016, at 4:30 p.m. ET. Interested parties in the United States can access the call by dialing 866-777-2509; interested parties outside the United States can access the call by dialing +1-412-317-5413. Callers should dial in at least 5 minutes prior to the all start time. 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 November 24, 2016, by calling 877-344-7529 from the United States or +1-412-317-0088 from outside the United States and entering conference ID number 10094843.

About Xplore Technologies
Xplore is The Rugged Tablet Authority™, exclusively manufacturing powerful, long-lasting, and customer-defined rugged tablet PCs since 1996. Today, Xplore offers the broadest portfolio of genuinely rugged tablets – and the most complete lineup of rugged tablet accessories – on Earth. Its mobility solutions are purpose-built for the energy, utilities, telecommunications, military and defense, manufacturing, distribution, public safety, healthcare, government, and field service sectors. The company’s award-winning military-grade computers are also among the most powerful and longest lasting in their class, built to withstand nearly any hazardous condition or environmental extreme for years without fail. Visit www.xploretech.com for more information on how Xplore and its global channel partners engineer complete mobility solutions to meet specialized workflow demands. Follow us on Twitter, Facebook, LinkedIn, 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)
September 30,
2016
March 31,
2016
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $3,455 $5,594
Accounts receivable, net 14,553 14,277
Inventory, net 19,151 14,858
Prepaid expenses and other current assets 331 800
Total current assets 37,490 35,529
Fixed assets, net 1,031 1,003
Intangible assets, net 1,605 1,785
Goodwill 15,159 14,872
$55,285 $53,189
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Short-term indebtedness with bank $9,246 $
Accounts payable 5,960 9,611
Accrued liabilities 3,110 3,409
Deferred revenue and current warranty liabilities 4,038 4,413
Total current liabilities 22,354 17,433
Deferred revenue and non-current warranty liabilities 3,682 4,568
Total liabilities 26,036 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 10,926 and 10,908, respectively 11 11
Additional paid-in capital 171,482 171,138
Accumulated deficit (142,244) (139,961)
29,249 31,188
$55,285 $53,189


XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Loss—Unaudited
(in thousands of dollars, except share and per share amounts)
Three Months Ended Six Months Ended
September 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
Revenue $20,007 $28,853 $36,480 $52,896
Cost of revenue 14,371 20,744 25,980 36,637
Gross profit 5,636 8,109 10,500 16,259
Expenses:
Sales, marketing and support 2,896 3,642 6,331 7,262
Product research, development and engineering 1,317 1,577 2,270 3,407
General administration 1,868 2,487 3,907 4,818
6,081 7,706 12,508 15,487
Income (loss) from operations (445) 403 (2,008) 772
Other income (expense):
Other (22) (131) (77) (68)
Cost of integration (122) (792)
Interest expense (69) (52) (118) (58)
(91) (305) (195) (918)
Income (loss) before income taxes (536) 98 (2,203) (146)
Income tax (expense) benefit (80)
Net income (loss) $ (536) $ 98 $ (2,283) $ (146)


Income (loss) per common share, primary
$(0.05) $0.01 $(0.21) $(0.01)


Income (loss) per common share, fully diluted
$ $0.01 $ $
Weighted average number of common shares outstanding, basic 10,926,542 10,811,056 10,917,498 10,800,441
Weighted average number of common shares outstanding, fully diluted 10,922,795



XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Cash Flows—Unaudited
(in thousands)
Six Months Ended
September 30,
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash (used in) provided by operations:
Net loss $(2,283) $(146)
Items not affecting cash:
Depreciation and amortization 804 815
Provision for doubtful accounts (52) 24
Stock-based compensation expense 302 1,099
Changes in operating assets and liabilities:
Accounts receivable (224) (4,436)
Inventory (4,293) (932)
Prepaid expenses and other current assets 469 (326)
Accounts payable and accrued liabilities (5,211) (2,973)
Net cash used in operating activities (10,488) (6,875)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash received in purchase transaction 653
Change in liabilities assumed in purchase of business (287) 16
Additions to fixed assets (652) (429)
Net cash provided by (used in) investing activities (939) 240
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 27,600 18,000
Repayment of short-term indebtedness (18,354) (27,098)
Net proceeds from issuance of Common Stock 42 165
Net cash provided by (used in) financing activities 9,288 (8,933)
CHANGE IN CASH AND CASH EQUIVALENTS (2,139) (15,568)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,594 19,455
CASH AND CASH EQUIVALENTS, END OF PERIOD $3,455 $3,887
NONCASH INVESTING AND FINANCING ACTIVITIES:
Net assets acquired with debt in purchase transaction $ $9,079
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Payments for interest $77 $58
Payments for income taxes $80 $



XPLORE TECHNOLOGIES CORP.
Adjusted EBITDA Reconciliation—Unaudited
(in thousands)
Three Months Ended
September 30,
2016 2015
Net loss $(536) $98
Income taxes
Interest expense 69 52
Depreciation and amortization 456 457
Stock-based compensation expense 127 492
Cost of integration 122
ADJUSTED EBITDA $116 $1,221
Six Months Ended
September 30,
2016 2015
Net loss $(2,283) $(146)
Income taxes 80
Interest expense 77 58
Depreciation and amortization 804 815
Stock-based compensation expense 302 1,099
Cost of integration 792
ADJUSTED EBITDA $(979) $2,618


XPLORE TECHNOLOGIES CORP.
Supplemental Three Months Consolidated Statements of Cash Flows—Unaudited
(in thousands)
Three Months Ended
September 30,
2016 2015
Net loss $(536) $98
Items not affecting cash:
Depreciation and amortization 456 457
Provision for doubtful accounts (67) 108
Stock based compensation expense 127 492
Other adjustments to cash used in operations (3,862) (4,383)
Net cash used in operating activities (3,882) (3,228)
Net cash used in investing activities (245) (176)
Net cash provided by(used in) financing activities 3,164 (3,726)
Change in cash and cash equivalents $(963) $(7,130)


Xplore Technologies Quarterly Historical Information
FY 2017
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
Revenue$16,473 $20,007 $ - $ - $36,480
Cost of revenue 11,609 14,31 - - 25,980
Gross profit 4,864 5,636 - - 10,500
Expenses
Sales, marketing and support 3,435 2,896 - - 6,331
Product research, development & engineering 953 1,317 - - 2,270
General administrative 2,039 1,868 - - 3,907
Total expenses 6,427 6,081 - - 12,508
Profit/(loss) from operations (1,563) (445) - - (2,008)
Other expenses
Interest expense (8) (69) - - (77)
Cost of integration - - - - -
Other income/expenses (96) (22) - - (118)
(104) (91) - - (195)
Income/(loss) before taxes (1,667) (536) - - (2,203)
Income taxes (80) - - - (80)
Net income$ (1,747) $ (536) $ - $ - $ (2,283)
Depreciation & amortization 348 456 - - 804
Interest expense 8 69 - - 77
Income taxes 80 - - - 80
EBITDA (1,311) (11) - - (1,322)
-
Non-cash compensation 175 127 - - 302
Cost of integration - - - - -
Adjusted EBITDA$ (1,136) $116 $ - $ - $ (1,020)
FY 2016
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
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
FY 2015
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
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

Xplore Technologies Quarterly Key Statistics
FY 2017
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Gross margin 29.5% 28.2% 28.8%
Operating margin -9.5% -2.2% -5.5%
Periodic revenue %N/AN/A 100.0%
Quarter over Quarter
Revenue Change % -20.1% 21.5%
FY 2016
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
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
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