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Xplore Technologies Reports Fourth Quarter Results

AUSTIN, Texas, May 31, 2017 (GLOBE NEWSWIRE) -- Xplore Technologies Corp. (NASDAQ:XPLR), a global leader in rugged computing, today reported results for its fiscal 2017 fourth quarter and full year, ended March 31, 2017.

Fiscal Fourth Quarter and Recent Highlights:

  • Reported revenue of $16.9 million, reflecting previously disclosed supply chain constraints which delayed delivery of multiple customer orders into the first fiscal quarter;
  • Ended the quarter with backlog of $7.4 million;
  • Responded to supply chain constraints through a number of actions, including extending order forecasts, lengthening purchase agreements and increasing inventory orders of key products in order to resume normalized shipments for the June quarter;
  • Achieved gross margin of 28.1% for the quarter;
  • Reported continued reduction in operating expenses to $5.2 million, a reduction of 27.5% and the lowest quarterly expense in fiscal 2017 or fiscal 2016;
  • Reported GAAP net loss of $488 thousand, or $0.04 per share, and adjusted EBITDA of $30 thousand;
  • Generated $4.9 million in cash flows from operating activities, bringing total cash flow to $10.6 million in the second half of fiscal 2017;
  • Announced multiple large follow-on orders, including additional workers and divisions at a large telecommunications customer;
  • Entered the vehicle emissions market with the leading software and services provider, including Xplore’s first state-wide customer win;
  • Expanded Xplore’s global customer service organization to enhance worldwide customer support;
  • Secured a new $15 million line of credit from Bank of America, including expanded support for inventory financing, with no debt on the balance sheet at March 31; and
  • Appointed Mark Holleran as Chief Executive Officer.

Fiscal Year 2017 Highlights:

  • Reported revenue of $77.9 million, and gross margin of 28.2%;
  • Reduced operating expenses 20.7% year-over-year through aggressive focus on operating efficiency, significantly reducing breakeven for the company;
  • Reported a net loss of $2.6 million, and adjusted EBITDA of negative $168 thousand;
  • Launched the category leading XSLATE R12 designed to meet the needs of Xplore’s targeted end user markets, including logistics, manufacturing, public safety and others;
  • Announced multiple large customer wins, including the company’s largest ever purchase order for Android rugged tablets with a top US telecommunications customer and a number of expansion orders with another large US telecommunications customer; and
  • Strengthened the board with the appointment of two new independent directors.

CEO Mark Holleran stated: “Fiscal 2017 was a transformative year for Xplore, characterized by fully integrating and refining the acquired Motion product lines, working through industry-wide disruptions that affected our first and fourth fiscal quarters, rebuilding of our sales team and a 21% reduction in full-year operating expenses. We enter fiscal 2018 as a leaner, more cost efficient business focused on expanding sales, producing profitable quarters and generating positive free cash flow.

“As anticipated, the previously announced supply chain disruptions impacting the fourth quarter created tighter market supplies and a lengthening of lead times on several key components, such as digitizers and SSDs, leading to deferral of multiple orders into the first quarter of 2018. While all of the affected components remain available and shipping, we have taken a number of actions to mitigate these disruptions, including lengthening our order forecasts, increasing component purchase commitments, adjusting our inventory practices and working closely with our ODMs to manage supplier relationships, including second sourcing options where appropriate.

“We are once again fulfilling customer orders largely on schedule. We remain focused on expanding sales in key markets, such as Europe, as well as working closely with a number of customer refresh opportunities that will occur in Fiscal 2018, and additional initiatives.”

Fiscal 2017 Fourth Quarter Financial Results
Xplore reported revenue of $16.9 million for the fiscal fourth quarter ended March 31, 2017, compared to revenue of $24.5 million in the fiscal third quarter of 2017 and compared to $20.6 million in the year-ago fourth quarter. The change in revenue reflected typical seasonality combined with the previously disclosed short-term supply chain constraints that limited shipments during the March 2017 quarter.

Gross profit in the fourth quarter was $4.8 million, or 28.1% of revenue, compared to $6.7 million, or 27.4% of revenue, in the preceding quarter and $6.2 million, or 30.3% of revenue, in the prior year fourth quarter. The change in gross margin was primarily attributable to product mix.

Operating expenses continued to decline to the lowest level of fiscal 2017, at $5.2 million for the fiscal fourth quarter, down 16.3% sequentially from $6.3 million in the preceding quarter and down 27.5% from $7.2 million in the prior year fourth quarter. The company believes the reduction in operating expenses reflects the company’s focus on operating efficiency to drive profitability as revenue grows. 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 loss of $488 thousand, or $0.04 per basic share, compared to net income of $219 thousand, or $0.02 per basic share, in the third quarter of fiscal 2017 and a net loss of $1.0 million, or $0.09 per share, in the prior year fourth quarter. The change in net loss reflects lower revenue, offset by the significantly reduced operating expenses.

EBITDA adjusted for non-cash compensation and historical integration costs was $30 thousand, compared to positive adjusted EBITDA of $822 thousand in the fiscal third quarter 2017, and a negative $112 thousand in the prior year fourth quarter. A reconciliation is provided in the tables included in this release.

“While topline was challenged by industry headwinds in fiscal 2017, we maintained our focus on operating efficiency and low operating expenses, which have significantly lowered our break-even point and improved our ability to generate free cash flow from operations,” said Tom Wilkinson, CFO of Xplore. “Looking ahead, we anticipate multiple profitable quarters in Fiscal 2018 on improving revenue, as well as solid free cash flow to fund operations and investment in planned platform refreshes.”

Full Year Financial Results
For the full fiscal year 2017, Xplore reported total revenue of $77.9 million, compared to $100.5 million in fiscal 2016. The change in revenue reflected one-time deferred orders fulfilled in fiscal 2016 related to the Motion acquisition, as well as the global tablet slowdown observed in the fiscal first quarter of 2017 and supply chain limitations impacting the fiscal fourth quarter of 2017. Gross margin in fiscal 2017 was 28.2%, compared to 31.2% in fiscal 2016, reflecting changes in product mix as well as fulfillment of several large customer orders in fiscal 2017, including a large telecommunications order for Xplore’s industry leading rugged Android tablet.

Operating expenses for fiscal 2017 were $24.0 million, compared to $30.3 million in fiscal 2016, a decline of 20.7%. The decline in operating expenses reflects cost reductions implemented throughout fiscal 2017, which the company believes are sustainable through its increased focus on operating efficiency.

Net loss for fiscal 2017 was $2.6 million, compared to a net loss of $362,000 in fiscal 2016. Adjusted EBITDA for fiscal 2017 was negative $168 thousand, compared to positive $4.5 million in fiscal 2016. The change in net income and adjusted EBITDA reflects the impact of revenue changes previously addressed and the reduction in operating expenses.

Cash Flow and Balance Sheet
Net cash provided by operating activities was $4.9 million for the three months ended March 31, 2017, compared to net cash used in operating activities of $233,000 for the three months ended March 31, 2016. At quarter end, cash was $3.5 million with no debt under the company’s line of credit. Xplore continues to have no debt under the new line of credit with Bank of America. Inventory declined at the end of the quarter, to $12.9 million, reflecting continued substantial shipment of goods from inventory in the fiscal fourth quarter. Accounts receivable declined to $10.5 million, compared to $16.2 million in the preceding quarter, on strong collections.

Outlook
For fiscal 2018, Xplore provided an initial revenue outlook in a range of $75 million to $85 million. Gross margin for the fiscal year is expected to be between 28% and 30%. Operating expenses are expected to be approximately $23-25 million, reflecting a full year of the company’s reduced operating expense profile. The company anticipates multiple profitable quarters and positive cash flow for the full fiscal year 2018.

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 Wednesday, May 31, 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 June 14, 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 10107744.

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)
March 31,
2017
March 31,
2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $3,460 $5,594
Accounts receivable, net 10,452 14,277
Inventory, net 12,858 14,858
Prepaid expenses and other current assets 469 800
Total current assets 27,239 35,529
Fixed assets, net 1,862 1,003
Intangible assets, net 1,425 1,785
Goodwill 15,159 14,872
$45,685 $53,189
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Accounts payable $7,342 $9,611
Accrued liabilities 2,266 3,409
Deferred revenue and current warranty liabilities 3,145 4,413
Total current liabilities 12,753 17,433
Deferred revenue and non-current warranty liabilities 3,650 4,568
Total liabilities 16,403 22,001
Commitments and contingencies
STOCKHOLDERS’ EQUITY:
Preferred Stock, par value $0.001 per share; authorized 5,000, and none, respectively; shares issued none and none, respectively
Common Stock, par value $0.001 per share; authorized 15,000; shares issued 10,970 and 10,908, respectively 11 11
Additional paid-in capital 171,784 171,138
Accumulated deficit (142,513) (139,961)
29,282 31,188
$45,685 $53,189


XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Loss—Unaudited
(in thousands of dollars, except share and per share amounts)
Years Ended March 31,
2017 2016
Revenue $77,928 $100,530
Cost of revenue 55,956 69,183
Gross profit 21,972 31,347
Expenses:
Sales, marketing and support 12,370 15,096
Product research, development and engineering 4,462 5,771
General administration 7,193 9,427
24,025 30,294
Income (loss) from operations (2,053) 1,053
Other income (expense):
Interest expense (173) (58)
Cost of integration (913)
Other income (expense) (197) (450)
(370) (1,421)
Income (loss) before income taxes (2,423) (368)
Income tax (expense) benefit (129) 6
Net income (loss) $(2,552) $(362)
Income (loss) per common share, primary $(0.23) $(0.03)
Income (loss) per common share, fully diluted $(0.23) $(0.03)
Weighted average number of common shares outstanding, primary 10,938,057 10,848,255
Weighted average number of common shares outstanding, fully diluted 10,938,057 10,848,255


XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Cash Flows—Unaudited
(in thousands)
Years Ended March 31,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash provided by (used in) operations:
Net income (loss) $(2,552) $(362)
Items not affecting cash:
Depreciation and amortization 1,571 1,730
Provision for doubtful accounts (91) 69
Stock‑based compensation expense 511 2,156
Loss on disposal of asset 28
Changes in operating assets and liabilities:
Accounts receivable 3,916 (329)
Inventory 2,000 (1,180)
Prepaid expenses and other current assets 331 (514)
Accounts payable and accrued liabilities, including deferred revenue (5,598) (6,717)
Net cash provided by (used in) operating activities 116 (5,147)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash received (paid) in purchase transaction (287) 669
Additions to fixed assets (2,098) (888)
Net cash used in investing activities (2,385) (219)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 50,476 18,000
Repayment of short-term indebtedness (50,576) (27,098)
Net proceeds on issuance of Common Stock 135 603
Net cash provided by (used in) financing activities 35 (8,495)
CHANGE IN CASH AND CASH EQUIVALENTS (2,134) (13,861)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,594 19,455
CASH AND CASH EQUIVALENTS, END OF PERIOD $3,460 $5,594
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Payments for interest $173 $58
Payments for income taxes, net of refunds $129 $8


XPLORE TECHNOLOGIES CORP.
Adjusted EBITDA Reconciliation—Unaudited
(in thousands)
Three Months Ended
March 31,
2017
2016
Net income (loss) $(488) $(1,002)
Income taxes - (75)
Interest expense 17
Depreciation and amortization 403 417
Stock-based compensation expense 98 522
Cost of integration 26
ADJUSTED EBITDA $30 $(112)


XPLORE TECHNOLOGIES CORP.
Supplemental Three Months Consolidated Statements of Cash Flows—Unaudited
(in thousands)
Three Months Ended
March 31,
2017
2016
Net loss $(488) $(1,002)
Items not affecting cash:
Depreciation and amortization 403 417
Provision for doubtful accounts (47) 21
Stock based compensation expense 98 522
Other adjustments to cash used in operations 4,940 (191)
Net cash used in operating activities 4,906 (233)
Net cash used in investing activities (472) (231)
Net cash provided by (used in) financing activities (5,073) 23
Change in cash and cash equivalents $(639) $(441)


Xplore Technologies Quarterly Historical Information
FY 2017
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Revenue$16,473 $20,007 $24,499 $16,949 $77,928
Cost of revenue 11,609 14,31 17,784 12,192 55,956
Gross profit 4,864 5,636 6,715 4,757 21,972
Expenses
Sales, marketing and support 3,435 2,896 3,153 2,886 12,370
Product research, development & engineering 953 1,317 1,303 889 4,462
General administrative 2,039 1,868 1,816 1,470 7,193
Total expenses 6,427 6,081 6,272 5,245 24,025
Profit/(loss) from operations (1,563) (445) 443 (488) (2,053)
Other expenses
Interest expense (8) (69) (79) (17) (173)
Other income/expenses (96) (22) (96) 17 (197)
(104) (91) (175) - (370)
Income/(loss) before taxes (1,667) (536) 268 (488) (2,423)
Income taxes (80) - (49) - (129)
Net income/(loss)$(1,747) $(536) $219 $(488) $(2,552)
Depreciation & amortization 348 456 364 403 1,571
Interest expense 8 69 79 17 173
Income taxes 80 - 49 - 129
EBITDA (1,311) (11) 711 (632) (679)
Non-cash compensation 175 127 111 98 511
Adjusted EBITDA$(1,136) $116 $822 $30 $(168)


FY 2016
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Revenue$24,043 $28,853 $27,023 $20,611 $100,530
Cost of revenue 15,893 20,744 18,181 14,365 69,183
Gross profit 8,150 8,109 8,842 6,246 31,347
Expenses
Sales, marketing and support 3,620 3,642 3,925 3,909 15,096
Product research, development & engineering 1,830 1,577 1,129 1,235 5,771
General administrative 2,331 2,487 2,521 2,088 9,427
Total operating expenses 7,781 7,706 7,575 7,232 30,294
Profit/(loss) from operations 369 403 1,267 (986) 1,053
Other expenses
Interest expense (6) (52) - - (58)
Cost of integration (670) (122) (95) (26) (913)
Other income/expenses 63 (131) (317) (65) (450)
(613) (305) (412) (91) (1,421)
Income/(loss) before taxes (244) 98 855 (1,077) (368)
Income taxes - - (69) 75 6
Net income/(loss)$(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 $42,639
Cost of revenue 5,203 5,255 10,569 7,293 28,320
Gross profit 3,064 2,267 5,874 3,114 14,319
Expenses
Sales, marketing and support 1,598 1,714 1,630 1,410 6,352
Product research, development & engineering 991 739 815 992 3,537
General administrative 1,007 977 980 1,139 4,103
Total operating expenses 3,596 3,430 3,425 3,541 13,992
Profit/(loss) from operations (532) (1,163) 2,449 (427) 327
Other expenses
Interest expense (1) (2) - (3)
Cost of integration - - - - -
Other income/expenses (19) (3) (7) (7) (36)
(19) (4) (9) (7) (39)
Income/(loss) before taxes (551) (1,167) 2,440 (434) 288
Income taxes - - (39) - (39)
Net income/(loss)$(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 margin29.5%28.2%27.4%28.1%28.2%
Operating margin-9.5%-2.2%1.8%-2.9%-2.6%
Periodic revenue %21.1%25.7%31.4%21.7%100.0%
Quarter over Quarter
Revenue Change %-20.1%21.5%22.5%-30.8%


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