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Xplore Technologies Reports Profitable Fiscal Third Quarter 2017

Revenue Increases 22% Sequentially, $0.2 Million GAAP Net Income, $5.7 Million Positive Cash Flow

Strong Backlog at $5.6 Million

AUSTIN, Texas, Feb. 02, 2017 (GLOBE NEWSWIRE) -- Xplore Technologies Corp. (NASDAQ:XPLR), a global leader in rugged computing, today reported results for its fiscal 2017 third quarter ended December 31, 2016.

Fiscal Third Quarter and Recent Highlights:

  • Reported revenue of $24.5 million, reflecting increased demand for multiple Xplore platforms, offset slightly by production capacity constraints caused by orders weighted heavily toward XSLATE D10 and Bobcat devices;
  • Achieved gross margin of 27.4% for the quarter, and 28.2% year to date, which is in line with expectations;
  • Held operating costs to $6.3 million, a decline of more than $1.3 million from the prior year quarter, in line with the company’s focus on increased operating efficiency;
  • Reported GAAP net income of $219,000, or $0.02 per share, and adjusted EBITDA of positive $770,000;
  • Announced multiple large follow-on orders, including a second follow on order in the past six months from a major telecommunications customer using Xplore’s XSLATE B10 platform and the second follow on order this year from a top-10 US electric utility provider;
  • Entered an OEM relationship with Strategic Robotic Systems exclusively using the XSLATE D10 in its new FUSION underwater vehicle;
  • Began fulfillment of an initial order for 1,000 units from OEM customer CLS America for the Thorium X, the first satellite communication enabled rugged tablet;
  • Celebrated Xplore’s 20th Anniversary as the rugged tablet authority;
  • Launched the industry leading XSLATE R12 designed for the needs of large and growing Xplore end markets; and
  • Strengthened the Board of Directors through the appointment of Thomas B. Pickens, III and Donald F. Neville as Independent Directors.

“We are pleased to report a profitable fiscal third quarter, including GAAP net income of $0.02 per share, on 22% sequential revenue growth and continued lower operating expenses,” said Philip Sassower, chairman and chief executive officer. “In addition to fulfillment of the largest purchase order in company history with a top US telecommunications customer, we also secured a number of follow-on orders from customers in multiple end markets. These include our second follow-on order in six months from another major telecommunications customer, our second follow-on order this year from a top-10 US electric utility customer, and an initial 1,000-unit OEM order from CLS America, among others.”

Mark Holleran, president and chief operating officer, stated: “We continued to closely manage our lean operating structure in the fiscal third quarter. Total operating expenses declined by $1.3 million, or 17%, compared to the year-ago quarter, leading to profitability as revenue ramped. We also maintained higher than typical backlog, at $5.6 million entering the fiscal fourth quarter, indicative of increased demand for a number of our platforms, such as the XSLATE B10 and our popular XSLATE D10 Android device, as well as certain global supply chain and ODM constraints affecting our industry and delaying order fulfillment. We are coordinating closely with our production partners to increase parts availability and production capacity to meet steadily increasing demand for several of our product families, a process which will be ongoing over the next two quarters.”

Fiscal 2017 Third Quarter Financial Results
Xplore reported revenue of $24.5 million for the fiscal third quarter ended December 31, 2016, an increase of 22.0% compared to revenue of $20.0 million in the fiscal second quarter of 2017 and compared to $27.0 million in the year-ago third quarter. The prior year quarter included notable shipments of one-time catch-up orders related to Motion Computing’s screen supply issue. Revenue reflected increased sales and completion of shipments against the company’s large telecommunications customer purchase orders, offset by continued softness in Europe.

Gross profit in the second quarter was $6.7 million, or 27.4% of revenue, compared to $5.6 million, or 28.2% of revenue, in the preceding quarter and $8.8 million, or 32.7% of revenue, in the prior year third quarter. The change in gross margin was primarily attributable to product mix related to fulfillment of a large customer order.

Xplore continued to maintain significantly reduced operating costs, at $6.3 million for the fiscal third quarter, compared to $6.1 million in the preceding quarter and down 17.1% from $7.6 million in the prior year third quarter. The decline in operating expenses reflects continued aggressive implementation of the company’s focus on profitability, including cost reductions begun 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 into fiscal 2018 and beyond.

For the quarter, Xplore reported net income of $219,000, or $0.02 per basic share, compared to net loss of $536,000, or $0.05 per basic share, in the second quarter of fiscal 2017 and a net profit of $786,000, or $0.07 per share, in the prior year third quarter. Current period profitability improved through the increase in sales and continued operational efficiency, offset by lower gross margin due to fulfillment of large-volume orders for lower ASP platforms.

EBITDA adjusted for non-cash compensation and historical integration costs was positive $822,000 compared to positive adjusted EBITDA of $116,000 in the fiscal second quarter 2017, and a positive $2.0 million in the prior year third quarter. A reconciliation is provided in the tables included in this release.

“We maintained our focus on operating efficiency and low operating expenses, driving Xplore to profitability in the fiscal third quarter,” said Tom Wilkinson, CFO of Xplore. “As a result of our cost diligence, we have greatly reduced the breakeven point of the business compared to prior quarters. We also generated operating cash flows of $5.7 million in the third fiscal quarter, and anticipate further cash flows in the fourth quarter due to collection of accounts receivable and sales from inventory, as well as greater working capital efficiency.”

Cash Flow and Balance Sheet
Net cash provided by operating activities was $5.7 million, compared to net cash used in operating activities of $3.9 million for the three months ended September 30, 2016. At quarter end, cash was $4.1 million and short-term debt $5.1 million. 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 in the fiscal fourth quarter, which will drive continued high accounts receivable and ultimately generate further cash flows from operating activities.

Outlook
For fiscal 2017, Xplore revised its revenue outlook to a range of $78 million and $82 million, reflecting continued high demand offset by production capacity constraints and continued softness in Europe. Gross margin for the fiscal year is still expected to be between 28% and 30%, and operating expenses are expected to be approximately $25-27 million, compared to $30.3 million in the prior year.

Xplore continues to anticipate sales growth beyond its fiscal year 2017 revenue targets, as well as continued reduced operating costs. As such, Xplore maintained its previously disclosed 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 Thursday, February 2, 2017, 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 February 16, 2017, by calling 877-344-7529 from the United States or +1-412-317-0088 from outside the United States and entering conference ID number 10100199.

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)
December 31,
2016
March 31,
2016
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $4,099 $5,594
Accounts receivable, net 16,213 14,277
Inventory, net 15,161 14,858
Prepaid expenses and other current assets 475 800
Total current assets 35,948 35,529
Fixed assets, net 1,703 1,003
Intangible assets, net 1,515 1,785
Goodwill 15,159 14,872
$54.325 $53,189
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Short-term indebtedness with bank $5,096 $
Accounts payable 7,701 9,611
Accrued liabilities 4,359 3,409
Deferred revenue and current warranty liabilities 3,622 4,413
Total current liabilities 20,778 17,433
Deferred revenue and non-current warranty liabilities 3,898 4,568
Total liabilities 24,676 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 10,947 and 10,908, respectively 11 11
Additional paid-in capital 171,663 171,138
Accumulated deficit (142,025) (139,961)
29,649 31,188
$54,325 $53,189


XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Profit and Loss—Unaudited
(in thousands of dollars, except share and per share amounts)
Three Months Ended Nine Months Ended
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Revenue $24,499 $27,023 $60,979 $79,919
Cost of revenue 17,784 18,181 43,764 54,818
Gross profit 6,715 8,842 17,215 25,101
Expenses:
Sales, marketing and support 3,153 3,925 9,484 11,187
Product research, development and engineering 1,303 1,129 3,573 4,536
General administration 1,816 2,521 5,723 7,339
6,272 7,575 18,780 23,062
Income (loss) from operations 443 1,267 (1,565) 2,039
Other income (expense):
Other (96) (317) (214) (385)
Cost of integration (95) (887)
Interest expense (79) (156) (58)
(175) (412) (370) (1,330)
Income (loss) before income taxes 268 855 (1,935) 709
Income tax (expense) benefit (49) (69) (129) (69)
Net income (loss) $219 $786 $(2,064)$640

Income (loss) per common share, primary
$0.02 $0.07 $(0.19)$0.06

Income (loss) per common share, fully diluted
$0.02 $0.07 $ $0.06
Weighted average number of common shares outstanding, basic
10,947,329 10,883,933 10,927,477 10,828,375
Weighted average number of common shares outstanding, fully diluted 10,950,390 11,539,074 11,494,496


XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Cash Flows—Unaudited
(in thousands)
Nine Months Ended
December 31,
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash (used in) provided by operations:
Net income (loss) $(2,064) $640
Items not affecting cash:
Depreciation and amortization 1,168 1,313
Provision for doubtful accounts (44) 48
Loss on disposal of asset 28
Stock-based compensation expense 413 1,634
Changes in operating assets and liabilities:
Accounts receivable (1,892) (3,021)
Inventory (303) (110)
Prepaid expenses and other current assets 325 (184)
Accounts payable and accrued liabilities (2,421) (5,234)
Net cash used in operating activities (4,790) (4,914)
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 (1,626) (657)
Net cash provided by (used in) investing activities (1,913) 12
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 44,976 18,000
Repayment of short-term indebtedness (39,880) (27,098)
Net proceeds from issuance of Common Stock 112 580
Net cash provided by (used in) financing activities 5,208 (8,518)
CHANGE IN CASH AND CASH EQUIVALENTS (1,495) (13,420)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,594 19,455
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,099 $6,035
NONCASH INVESTING AND FINANCING ACTIVITIES:
Net assets acquired with debt in purchase transaction $ $9,079
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Payments for interest $156 $58
Payments for income taxes $129 $8


XPLORE TECHNOLOGIES CORP.
Adjusted EBITDA Reconciliation—Unaudited
(in thousands)
Three Months Ended
December 31,
2016 2015
Net income (loss) $219 $786
Income taxes 49 69
Interest expense 79
Depreciation and amortization 364 498
Stock-based compensation expense 111 535
Cost of integration 95
ADJUSTED EBITDA $822 $1,983
Nine Months Ended
December 31,
2016 2015
Net income (loss) $(2,064)$640
Income taxes 129 69
Interest expense 156 58
Depreciation and amortization 1,168 1,313
Stock-based compensation expense 413 1,634
Cost of integration 887
ADJUSTED EBITDA $(198)$4,601


XPLORE TECHNOLOGIES CORP.
Supplemental Three Months Consolidated Statements of Cash Flows—Unaudited
(in thousands)
Three Months Ended
December 31,
2016 2015
Net loss $219 $786
Items not affecting cash:
Depreciation and amortization 364 498
Provision for doubtful accounts 8 24
Loss on disposal of asset 28
Stock based compensation expense 111 535
Other adjustments to cash used in operations 4,968 118
Net cash provided by operating activities 5,698 1,961
Net cash used in investing activities (974)(228)
Net cash provided by (used in) financing activities (4,080)415
Change in cash and cash equivalents $644 $2,148


Xplore Technologies Quarterly Historical Information
FY 2017
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Revenue$16,473 $20,007 $24,499 $- $60,979
Cost of revenue 11,609 14,31 17,784 - 43,764
Gross profit 4,864 5,636 6,715 - 17,215
Expenses
Sales, marketing and support 3,435 2,896 3,153 - 9,484
Product research, development & engineering 953 1,317 1,303 - 3,573
General administrative 2,039 1,868 1,816 - 5,723
Total expenses 6,427 6,081 6,272 - 18,780
Profit/(loss) from operations (1,563) (445) 443 - (1,565)
Other expenses
Interest expense (8) (69) (79) - (156)
Other income/expenses (96) (22) (96) - (214)
(104) (91) (175) - (370)
Income/(loss) before taxes (1,667) (536) 268 - (1,935)
Income taxes (80) - (49) - (129)
Net income$ (1,747)$ (536)$ 219 $ - $ (2,064)
Depreciation & amortization 348 456 364 - 1,168
Interest expense 8 69 79 - 156
Income taxes 80 - 49 - 129
EBITDA (1,311) (11) 711 - (611)
-
Non-cash compensation 175 127 111 - 413
Adjusted EBITDA$ (1,136)$ 116 $ 822 $ - $ (198)


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


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


Xplore Technologies Quarterly Key Statistics
FY 2017
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
Gross margin29.5%28.2%27.4% - 28.2%
Operating margin-9.5%-2.2%1.8% - -2.6%
Periodic revenue %N/A N/A NA - 100.0%
Quarter over Quarter
Revenue Change %-20.1%21.5%22.5% -


FY 2016
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Gross margin33.9%28.1%32.7%30.3%31.2%
Operating margin1.5%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 margin37.1%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 Matt Kreps, Darrow Associates Investor Relations (512) 696-6401 xplr@darrowir.com

Source:Xplore Technologies Corp