XRS Corporation Reports Fiscal 2014 Second Quarter Results - WKRN News 2

XRS Corporation Reports Fiscal 2014 Second Quarter Results

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SOURCE XRS Corporation

Mobile software revenue grew 8 percent in the second quarter of fiscal 2014.

Second quarter results generated free cash flow of $1.0 million.

Non-GAAP earnings of $1.2 million, or $0.04 per diluted share in the second quarter of fiscal 2014.

MINNEAPOLIS, May 8, 2014 /PRNewswire/ -- XRS Corporation (NASDAQ:XRSC) reported results for its fiscal 2014 second quarter ended March 31, 2014.

"The acquisition of 90 new mobile customers of various sizes served to highlight the second quarter of fiscal 2014," said Jay Coughlan, chairman and chief executive officer of XRS Corporation. "Our strategy to provide the best product to all-sized fleets has been validated by the successful implementation of our XRS mobile solution at customers ranging in size and complexity from individual owner-operators to enterprise-sized fleets. We continue to focus on our XRS mobile solution by adding and enhancing functionality, including aligning with strategic third-party providers to meet the industry's integration requirements. This positions us well to continue to be a leader in the mobile revolution."

Second Quarter Results
For the three months ended March 31, 2014, mobile software revenue increased 8 percent, while total software revenue decreased $0.9 million with the comparable fiscal period in 2013. Total revenue was $12.8 million for the three months ended March 31, 2014, compared to $14.5 million for the comparable period in fiscal 2013 as a result of the Company's focus on selling XRS mobile subscriptions, conversions of existing customers and attrition in our legacy subscription base.

Overall gross margin percentage remained consistent at 58 percent for the three months ended March 31, 2014 and 2013. Software gross margins declined 4 percentage points to 70 percent for the three months ended March 31, 2014, compared to the same period in fiscal 2013. The decline is reflective of the Company's commitment to continue to support its legacy solutions while it transitions customers to its mobile solutions.

Selling, general and administrative expenses decreased to $5.1 million, compared to $5.3 million for the comparable period in fiscal 2013. The decrease in selling, general and administrative expenses reflects the Company's commitment to increased operational efficiencies. In addition, the current period reflects reduced legal expenses as the Company was involved in defending a patent litigation suit in the second quarter of fiscal 2013.

Research and development expenses were $3.1 million and $2.8 million for the second quarter of fiscal 2014 and 2013, respectively. Research and development expenses increased as the Company continued to focus on enhancements to its XRS solution to meet the operational needs of larger, more complex fleets.

The Company reported non-GAAP earnings of $1.2 million, or $0.04 per diluted share for the second quarter of fiscal 2014, compared to non-GAAP earnings of $2.2 million, or $0.08 per diluted share for the same period in fiscal 2013.

Year-to-Date Results
For the six months ended March 31, 2014, mobile software revenue increased 11 percent. Total revenue was $26.1 million for the six months ended March 31, 2014, compared to $28.7 million for the comparable period in fiscal 2013 as a result of a combination of decreased legacy software and hardware systems revenue. Attrition of legacy customers and lower average annual contract values on the XRS mobile solution contributed to the decreased software revenue, whereas the Company's focus on the sale of the no upfront hardware cost XRS mobile solution resulted in decreased hardware systems revenue.

For the for the six months ended March 31, 2014, the Company reported non-GAAP earnings of $3.1 million, or $0.11 per diluted share, compared to $4.4 million, or $0.16 per diluted share, for the comparable period in fiscal 2013.

Balance Sheet Results
Free cash flow of $1.6 million for the six months ended March 31, 2014 contributed to a cash balance of $12.1 million as of March 31, 2014. As of quarter end, the Company also maintained a debt free balance sheet. Working capital increased $1.9 million to $14.9 million as of March 31, 2014, compared to $13.0 million in working capital as of September 30, 2013.

Summary of revenue and gross margins (deficits) is as follows (in thousands, except percentage data):


For the Three Months Ended


For the Six Months Ended


March 31,


March 31,


2014


2013


2014


2013













Revenue:












Software

$

10,690



$

11,578



$

21,598



$

23,347


Hardware systems

1,790



2,580



3,921



4,771


Services

310



338



568



573


Total revenue

$

12,790



$

14,496



$

26,087



$

28,691














Gross margins (deficits):












Software

70%



73%



70%



74%


Hardware systems

18%



6%



22%



13%


Services

(98%)



(59%)



(104%)



(85%)


Total gross margin

58%



58%



59%



60%


Non-GAAP vs. GAAP Financial Measures
To assist investors in understanding the Company's financial performance, the Company supplements the financial results that are generated in accordance with the accounting principles generally accepted in the United States, or GAAP, with non-GAAP financial measures, including non-GAAP earnings, non-GAAP earnings per diluted share, working capital and free cash flow. These non-GAAP financial measures are useful to investors for evaluating the Company's historical and prospective financial performance, as well as our performance relative to competitors. Management regularly uses these non-GAAP financial measures internally to understand, manage and evaluate its ongoing business operations and to make operating decisions. These non-GAAP financial measures are among the primary factors management uses in planning for and forecasting future period performance. Management believes that these non-GAAP financial measures reflect an additional way of analyzing aspects of the Company's ongoing operations that, when viewed with our GAAP results, provides a more complete understanding of the factors and trends affecting our business.

The end of this release contains a description of the non-GAAP financial measures and/or a reconciliation of the specific non-GAAP financial measures to the nearest comparable GAAP measures.

About XRS Corporation
XRS Corporation delivers fleet management and compliance software solutions to the trucking industry to help maintain regulatory compliance and reduce operating costs. XRS Corporation is leading the trucking industry's migration to mobile devices for collecting and analyzing compliance and management data. Its mobile solutions have no upfront hardware costs and run on smartphones, tablets and rugged handhelds. XRS Corporation has sales and distribution partnerships with the major wireless carriers supporting the U.S. and Canadian trucking industries.

Through XRS Corporation's solutions: XRS, Turnpike, XataNet and MobileMax, we serve 107,000 subscriptions through 1,200 customers. Our various solutions help fleet managers, dispatchers and drivers collect, sort, view and analyze data to help reduce costs, increase safety, attain compliance with governmental regulations and improve customer satisfaction.

For more information, visit www.xrscorp.com or call 1-800-745-9282.

Cautionary note regarding forward-looking statements
This announcement includes forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Such statements are based on current expectations, and actual results may differ materially. The forward-looking statements in this announcement are subject to a number of risks and uncertainties including, but not limited to, the possibility of operating losses, the ability to adapt to rapid technological change, the ability of our solutions to be compliant with future regulations, dependence on propriety technology and communication networks owned and controlled by others, the failure to renew contracts or failure to sell additional solutions or services to existing customers, the timely introduction and market acceptance of new products, the ability to fund future research and development activities, the ability to establish and maintain strategic partner relationships and the other factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2013 (as updated in our subsequent reports filed with the SEC). These reports are available under the "Investors" section of our website at www.xrscorp.com and through the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

 

XRS Corporation

Consolidated Statements of Operations

(Unaudited)






For the Three Months

Ended March 31,


For the Six Months

Ended March 31,

(In thousands, except per share data)

2014


2013


2014


2013













Revenue












Software

$

10,690



$

11,578



$

21,598



$

23,347


Hardware systems

1,790



2,580



3,921



4,771


Services

310



338



568



573


Total revenue

12,790



14,496



26,087



28,691














Costs and expenses












Cost of goods sold

5,327



6,046



10,746



11,352


Selling, general and administrative

5,074



5,349



9,933



10,846


Research and development

3,114



2,798



6,008



5,848


Total costs and expenses

13,515



14,193



26,687



28,046














Operating (loss) income

(725)



303



(600)



645


Net interest and other expense

(31)



(29)



(46)



(47)














(Loss) income before income taxes

(756)



274



(646)



598


Income tax (benefit) expense

(25)



98



(6)



103














Net (loss) income

(731)



176



(640)



495














Preferred stock dividends and deemed

    dividends

(60)



(58)



(120)



(116)














Net (loss) income to common shareholders

$

(791)



$

118



$

(760)



$

379














Net income per common share:












Basic

$

(0.07)



$

0.01



$

(0.07)



$

0.04


Diluted

$

(0.07)



$

0.01



$

(0.07)



$

0.02














Weighted average common and common share equivalents:












Basic

11,041



10,827



10,985



10,818


Diluted

11,041



27,602



10,985



27,479


 


XRS Corporation

Consolidated Balance Sheets






March 31,


September 30,

(In thousands)

2014


2013


(Unaudited)




Current assets






Cash and cash equivalents

$

12,138



$

10,445


Accounts receivable, net

5,875



6,864


Inventories

1,319



1,710


Deferred product costs

483



625


Prepaid expenses and other current assets

1,135



1,417


Total current assets

20,950



21,061








Equipment and leasehold improvements, net

4,706



5,980


Intangible assets, net

3,561



4,578


Goodwill

15,801



16,640


Deferred product costs, net of current portion

130



213


Other assets

429



667


Total assets

$

45,577



$

49,139








Current liabilities






Accounts payable

$

2,342



$

2,885


Accrued expenses

3,211



4,560


Deferred revenue

1,667



1,886


Total current liabilities

7,220



9,331








Deferred revenue, net of current portion

261



496


Other long-term liabilities

18



62


Total liabilities

7,499



9,889








Shareholders' equity






Preferred stock

44,601



44,524


Common stock

111



109


Additional paid-in capital

51,205



50,674


Accumulated deficit

(57,448)



(56,688)


Accumulated other comprehensive (loss) income

(391)



631


Total shareholders' equity

38,078



39,250


Total liabilities and shareholders' equity

$

45,577



$

49,139


 


XRS Corporation

Consolidated Statements of Cash Flows

(Unaudited)




For the Six Months Ended


March 31,

(In thousands)

2014


2013







Operating activities






Net (loss) income

$

(640)



$

495


Adjustments to reconcile net (loss) income to net cash provided by operating activities:






Depreciation and amortization

3,354



3,362


Amortization of deferred financing costs

33



33


Deferred income taxes

-



(9)


Loss on sale or disposal of equipment and leased equipment

42



40


Stock-based compensation

400



348


Changes in assets and liabilities:






Accounts receivable, net

1,179



552


Inventories, net

392



1,408


Deferred product costs

225



138


Prepaid expenses and other assets

216



(205)


Accounts payable

(156)



(642)


Accrued expenses and other liabilities

(1,424)



(538)


Deferred revenue

(444)



(735)


Net cash provided by operating activities

3,177



4,247








Investing activities






Purchase of equipment and leasehold improvements

(1,531)



(1,386)


Capitalized software development

(28)



(85)


Proceeds from the sale of equipment

-



16


Net cash used in investing activities

(1,559)



(1,455)








Financing activities






Revolving line of credit

-



(2,300)


Deferred financing costs

(27)



(50)


Proceeds from exercise of options

92



-


Net cash provided by (used in) financing activities

65



(2,350)








Effects of exchange rate on cash

10



7








Increase in cash and cash equivalents

1,693



449








Cash and cash equivalents






Beginning

10,445



7,120


Ending

$

12,138



$

7,569


 

XRS Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)


Non-GAAP Earnings and Non-GAAP Earnings Per Diluted Share






For the Three Months

Ended March 31,


For the Six Months

Ended March 31,

(In thousands, except per share data)

2014


2013


2014


2013













Net (loss) income to common shareholders

$

(791)



$

118



$

(760)



$

379














Adjustments:












Depreciation and amortization expense

1,640



1,672



3,354



3,362


Stock-based compensation

342



188



400



348


Net interest expense

11



25



17



41


Preferred stock dividends and deemed dividends

60



58



120



116


Income taxes

(25)



98



(6)



103


Other

-



50



-



50


Total adjustments

2,028



2,091



3,885



4,020














Non-GAAP earnings

$

1,237



$

2,209



$

3,125



$

4,399














Non-GAAP earnings per diluted share

$

0.04



$

0.08



$

0.11



$

0.16














Shares used in calculating non-GAAP earnings

    per diluted share

28,743



27,602



28,713



27,479


 


Working Capital









March 31,


September 30,

(In thousands)

2014


2013







Current assets

$

20,950



$

21,061


Current liabilities

(7,220)



(9,331)


Net current assets

13,730



11,730


Current portion of deferred revenue net deferred costs

1,184



1,261


Working capital

$

14,914



$

12,991


 

XRS Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)


Free Cash Flow






For the Three Months

Ended March 31,


For the Six Months

Ended March 31,


2014


2013


2014


2013













Net cash provided by operating activities

$

1,813



$

2,065



$

3,177



$

4,247


Net cash used in investing activities:












Purchase of equipment and leasehold improvements

(337)



(110)



(520)



(224)


Purchase of Relay assets

(460)



(663)



(1,011)



(1,162)


Capitalized software development

(28)



(85)



(28)



(85)


Proceeds from the sale of equipment

-



9



-



16


Net cash used in investing activities

(825)



(849)



(1,559)



(1,455)














Free cash flow

$

988



$

1,216



$

1,618



$

2,792


 

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