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Xplore Technologies Reports $0.09 Third Quarter EPS Before One-Time Charges

Continued Profit Leverage as Revenue Scales

Entering Rugged Laptop Market with High Performance, Cost Efficient XBOOK Platform

AUSTIN, Texas, Feb. 07, 2018 (GLOBE NEWSWIRE) -- Xplore Technologies Corp. (NASDAQ:XPLR), a global leader in rugged computing, today reported increased revenue and net income for its fiscal 2018 third quarter, ended December 31, 2017.

Fiscal Third Quarter 2018 and Recent Highlights:

  • Reported revenue of $23.9 million, reflecting new customer accounts, increased international sales and ongoing fulfillment against long-term customer programs;
  • Ended the quarter with backlog of $6 million;
  • Achieved gross margin of 31.9%, compared with 27.4% for the prior-year quarter;
  • Reported operating expenses of $7.2 million, including additional sales and marketing headcount and one-time severance and property tax costs;
  • Reported GAAP net profit of $302,000, or $0.03 per share, compared with net income of $219,000, or $0.02 per share, in the previous year third quarter;
  • Results include $575,000, or $0.05 per share, in severance costs associated with the resignations of previous Chairman Phillip Sassower and previous CEO Mark Holleran, and $91,000, or $0.01 per share, representing a one-time property tax payment related to assets acquired from Motion Computing in 2015;
  • Generated adjusted EBITDA, before one-time charges, of $1.7 million, Xplore’s sixth consecutive quarter of positive adjusted EBITDA, compared with adjusted EBITDA of positive $822,000 in the prior year third quarter;
  • Won sizeable orders across a number of targeted vertical markets, including telecommunications, automotive manufacturing, military, government agencies, consumer service and car rentals;
  • Secured orders with two leading US pharmaceutical companies to refresh existing Xplore tablets with the Xplore XC6 Clean Room version, designed to be easily disinfected on a regular basis;
  • Fulfilled orders from large fast food company using Xplore rugged tablets as part of its line-busting digital initiative;
  • Grew international sales to 34% of revenue as a result of sales efforts and improving distributor and reseller relationships;
  • Appointed Tom Wilkinson as CEO;
  • Announced an expansion and extension of the company’s Bank of America credit facility to $20 million; and
  • Launched the XBOOK line of Windows and Android mobile 2-in-1 convertible units, entering the $900 million rugged laptop market.

Chief Executive Officer Tom Wilkinson stated: “We are pleased to report a four-fold increase in adjusted EPS for the third quarter. We also see what we believe is a lessening of seasonality between third and fourth quarter orders, resulting in a slight 3% decline in third quarter topline, but a better than seasonal fourth quarter expectation. The third quarter reflected solid order flow from a wide range of both new and existing customers, high backlog and an improved product mix, driving one of our best profit quarters in the past two years. These trends have continued into the fourth quarter, positioning Xplore for a strong finish to the year.

“Fiscal third quarter sales included deliveries to leading global customers across a number of targeted vertical markets, including telecommunications, automotive manufacturing, military, government agencies, consumer service and pharmaceutical manufacturing. Xplore also secured orders from a global fast food company, the Veteran’s Administration and a leading national car rental company, showcasing the incredible breadth of the rugged mobility market we serve.

“Looking ahead, we believe EPS growth will continue to exceed revenue growth as we further expand our share in rugged tablets, including both existing platforms and additional form factors. We are also excited about the recently announced XBOOK launch, propelling Xplore solidly into the $900 million rugged laptop market with a high performance, lower cost solution than our competition. These growing offerings will be developed on average at a lower cost to our shareholders than prior products as we leverage the existing rugged technology and historical ODM relationships. Additionally, we see demand for our increasing product line within existing channel partners and customers. We are answering the existing demand in rugged mobility.”

Fiscal 2018 Third Quarter Financial Results
Xplore reported revenue of $23.9 million for the fiscal third quarter ended December 31, 2017, a 4.9% sequential increase from revenue of $22.8 million in the fiscal second quarter of 2018 and a 2.6% decline from $24.5 million in the year-ago third quarter. Revenue reflected increased demand for rugged tablets, increased international sales, fulfilment of large multi-quarter customer contracts. Additionally, revenue reflected a flattening of prior seasonal trends due to increased fulfillment of long-term orders and diversification of the customer base.

Gross profit in the third quarter was $7.6 million, or 31.9% of revenue, compared to $6.4 million, or 27.9% of revenue, in the preceding quarter and $6.7 million, or 28.1% of revenue, in the prior year third quarter. The change in gross margin reflects improved product mix.

Operating expenses were $7.2 million for the fiscal third quarter, compared with $5.9 million in the second quarter and $6.3 million in the prior year third quarter. Operating expenses reflect continued lean operating practices plus additional sales and marketing hires to drive further revenue growth. Expenses also included $575,000 in severance costs associated with the resignations of Phillip Sassower as Chairman and Mark Holleran as CEO, and $91,000 as a one-time property tax settlement related to assets purchased from Motion Computing in 2015.

For the quarter, Xplore reported net income of $302,000, or $0.03 per share, compared to net income of $397,000, or $0.04 per share, in the prior quarter and net income of $219,000, or $0.02 per share in the fiscal third quarter 2017. After adjusting for one-time severance costs, Xplore reported net income of 968,000, or $0.09 per share in the fiscal third quarter.

EBITDA adjusted for non-cash compensation and historical integration costs was $1.7 million, compared with $1.0 million in the preceding quarter and $822,000 in the fiscal third quarter 2017. Xplore has now reported six consecutive quarters of positive adjusted EBITDA and $3.6 million year-to-date. A reconciliation is provided in the tables included in this release.

Cash Flow and Balance Sheet
Net cash used in operating activities was $6 million for the quarter ended December 31, 2017. The change in net cash reflects increased accounts receivable as revenue increased as well as added inventory to ensure fulfillment of large customer orders and minimum order quantities on certain legacy products. Net cash used by operating activities reflects a $4 million increase in accounts receivable, to $23.2 million, and a $4.2 million increase in inventory, to $26.7 million. At quarter end, cash was $18,000 and debt under the company’s line of credit was $14.3 million.

“Our balance sheet is operating very efficiently to fund both our sequential growth through fiscal 2018, as well as prepare Xplore for further anticipated growth in fiscal 2019,” said Wilkinson. “Accounts receivable reflects continued strong order flow and increasing revenue, compounded the timing of sales which has shifted to later in each quarter, creating growing receivable balances. Inventory reflects certain purchases ahead of customer orders as well as minimum order quantity requirements to ensure availability of key platforms for existing customers, and to protect against inventory shortages that we experienced in the prior year. We are growing our product line, and while we expect to see inventory decreases in mid fiscal year 2019 due to shifting of our manufacturing schedule, our new products will require additional inventory. We expect to generate significant free cash flow once again as revenue stabilizes at these new higher levels and we sell-down inventory over the coming quarters. Our newly expanded line of credit facility with Bank of America supports our working capital needs without our having to seek new equity capital for growth.”

Outlook
For fiscal 2018, Xplore raised its revenue outlook to the high end of its range, approximately $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, excluding the aforementioned one-time charges, reflecting a full year of the company’s reduced operating expense profile. The company anticipates GAAP profitability for the full year.

Xplore also 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%.

“We continue to execute well, reporting solid sales in the December quarter and raising the revenue outlook to the high end of our previous range,” said CEO Tom Wilkinson. “We are seeing a better than seasonal fourth quarter with strong demand for Xplore rugged tablets, high backlog due to longer term customer orders and improved international execution. The entire team at Xplore is excited by our transformation into a rugged mobility company, and we look forward to continued execution on our operating goals.”

Conference Call
The company will conduct a conference call and webcast to review the results on Wednesday, February 7, 2018, at 4:30 p.m. ET. Interested parties in the United States can access the call by dialing 844-854-4410; interested parties outside the United States can access the call by dialing +1-412-858-4610. 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 February 21, 2018, by calling 877-344-7529 from the United States or +1-412-317-0088 from outside the United States and entering conference ID number 10116738.

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.

Contact Information:

Matt Kreps, Darrow Associates Investor Relations
(214) 597-8200
mkreps@darrowir.com

Tom Wilkinson
Chief Executive Officer
(512) 637-1162


XPLORE TECHNOLOGIES CORP.
Consolidated Balance Sheets
(in thousands)
December 31,
2017
March 31,
2017
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $18 $3,460
Accounts receivable, net 23,233 10,452
Inventory, net 26,726 12,858
Prepaid expenses and other current assets 473 469
Total current assets 50,450 27,239
Fixed assets, net 1,681 1,862
Intangible assets, net 1,155 1,425
Goodwill 15,159 15,159
Total assets $68,455 $45,685
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Short-term indebtedness $14,318 $
Accounts payable 10,228 7,342
Accrued liabilities 6,670 2,266
Deferred revenue and current warranty liabilities 2,913 3,145
Total current liabilities 34,129 12,753
Deferred revenue and non-current warranty liabilities 3,661 3,650
Total liabilities 37,790 16,403
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 and outstanding 11,021 and 10,908, respectively 11 11
Additional paid-in capital 172,219 171,784
Accumulated deficit (141,575) (142,513)
Total stockholders’ equity 30,655 29,282
Total liabilities and stockholders’ equity $68,445 $45,685


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, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Revenue $23,853 $24,499 $66,599 $60,979
Cost of revenue 16,233 17,784 46,440 43,764
Gross profit 7,620 6,715 20,159 17,215
Expenses:
Sales, marketing and support 3,803 3,153 10,170 9,484
Product research, development and engineering 779 1,303 2,508 3,573
General administration 2,577 1,816 6,313 5,723
7,159 6,272 18,991 18,780
Income (loss) from operations 461 443 1,168 (1,565)
Other income (expense):
Other 2 (96) 45 (214)
Interest expense (143) (79) (247) (156)
(141) (175) 202 (370)
Income (loss) before income taxes 320 268 966 (1,935)
Income tax (expense) benefit (18) (49) (28) (129)
Net income (loss) $302 $219 $938 $(2,064)
Income (loss) per common share, basic $0.03 $0.02 $0.09 $(0.19)
Income (loss) per common share, fully diluted $0.03 $0.02 $0.09 $(0.19)
Weighted average number of common shares outstanding, basic 11,020,905 10,947,329 11,005,347 10,927,477
Weighted average number of common shares outstanding, fully diluted 11,026, 977 10,950,390 11,011,419 10,927,477


XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Cash Flows—Unaudited
(in thousands)
Nine Months Ended
December 31,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash (used in) provided by operations:
Net loss $938 $(2,064)
Items not affecting cash:
Depreciation and amortization 1,365 1,168
Provision for doubtful accounts 217 (44)
Loss on disposal of asset - 28
Stock-based compensation expense 337 413
Changes in operating assets and liabilities:
Accounts receivable (12,998) (1,892)
Inventory (13,868) (303)
Prepaid expenses and other current assets (4) 325
Accounts payable and accrued liabilities 7,070 (2,421)
Net cash used in operating activities (16,943) (4,790)
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in liabilities assumed in purchase of business (287)
Additions to fixed assets (914) (1,626)
Net used in investing activities (914) (1,913)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 59,444 44,976
Repayment of short-term indebtedness (45,126) (39,880)
Net proceeds from issuance of common stock 97 112,
Net cash provided by financing activities 14,415 5,208
CHANGE IN CASH AND CASH EQUIVALENTS (3,442) (1,495)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,460 5,594
CASH AND CASH EQUIVALENTS, END OF PERIOD $18 $4,099
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Payments for interest $247 $156
Payments for income taxes $ $129


XPLORE TECHNOLOGIES CORP.
Adjusted EBITDA Reconciliation—Unaudited
(in thousands)
Three Months Ended December, 31
2018 2017
Net income (loss) $ 302 $ 219
Income taxes 18 49
Interest expense 143 79
Depreciation and amortization 438 364
Stock-based compensation expense 122 111
ADJUSTED EBITDA $ 1,023 $ 822
Nine Months Ended December 31,
2018 2017
Net income (loss) $ 1,001 $ (2,064)
Income taxes 28 129
Interest expense 365 156
Depreciation and amortization 1,330 1,168
Stock-based compensation expense 357 413
ADJUSTED EBITDA $ 3,081 $ (198)


XPLORE TECHNOLOGIES CORP.
One-Time Charge Reconciliation—Unaudited
(in thousands, except per share amounts)
Three Months Ended December 31, 2017
Net Income Adjusted EBITDA
Presented $ 302 $ 1,023
Severance related costs 575 575
Motion property tax 91 91
Amounts before one-time charges $ 968 $ 1,689
Per share amounts before one time charges $ 0.09 $ 0.15


Xplore Technologies Quarterly Historical Information
FY 2018
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Revenue$ 19,998 $ 22,748 $ 23,853 $ - $ 66,599
Cost of revenue 13,812 16,395 16,233 - 46,440
Gross profit 6,186 6,353 7,620 - 20,159
Expenses
Sales, marketing and support 3,201 3,166 3,803 - 10,170
Product research, development & engineering 807 922 779 - 2,508
General administrative 1,950 1,786 2,577 - 6,313
Total expenses 5,958 5,874 6,006 - 18,991
Profit/(loss) from operations 228 479 461 - 1,168
Other expenses
Interest expense (25) (79) (143) - (247)
Other income/expenses 36 7 2 - 45
11 (72) (141) - (202)
Income/(loss) before taxes 239 407 320 - 966
Income taxes - (10) (18) - (28)
Net income$ 239 $ 397 $ 302 $ - $ 938
Depreciation & amortization 473 454 438 - 1,365
Interest expense 25 79 143 - 247
Income taxes - 10 18 - 28
EBITDA 737 940 901 - 2,578
Non-cash compensation 102 113 122 - 337
Adjusted EBITDA$ 839 $ 1,053 $ 1,023 $ - $ 2.915


FY 2017
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Revenue$ 16,473 $ 20,007 $ 24,499 $ 16,949 $ 77,928
Cost of revenue 11,609 14,371 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$ (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$ (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


Xplore Technologies Quarterly Key Statistics
FY 2018
1st Qtr2nd Qtr3rd Qtr4th QtrYTD
Gross margin30.9%27.9%31.9% 29.3%
Operating margin1.1%2.1%1.9% 1.7%
Periodic revenue %n/a n/a n/a n/a
Quarter over Quarter
Revenue Change %21.4%13.7%4.9%


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%

Source:Xplore Technologies Corp