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Track Group Reports 3rd Quarter Fiscal 2019 Financial Results

Record Quarterly Revenue Up 17%, Operating Income Rebounds 187% to Historical High, and Adjusted EBITDA Up 67%

NAPERVILLE, Ill., Aug. 9, 2019 /PRNewswire/ -- Track Group, Inc. (TRCK), a global leader in offender tracking and monitoring services, today announced financial results for its third quarter ended June 30, 2019 (the "Q3 FY19"). In Q3 FY19, the Company posted (i) record revenue of $9.0M, an increase of 17% over the same period last year, (ii) record operating income of $0.6M compared to an operating loss of $0.7M for the quarter ended June 30, 2018 ("Q3 FY18"), (iii) adjusted EBITDA of $1.9M, up 67% compared to Q3 FY18, and (iv) a cash balance at June 30, 2019 of $6.9M, representing  an increase of 26% over September 30, 2018 and up 21% compared to March 31, 2019 as well as the highest balance since September 2014.

"For our quarter ended June 30, 2019, I am proud that Track Group generated the highest ever quarterly revenue, gross profit, and operating income in the Company's history," said Derek Cassell, Track Group's CEO. "I would like to thank our employees, customers and partners for all of their efforts  in making this happen."

FINANCIAL HIGHLIGHTS

  • Quarterly revenue of $9.0M in Q3 FY19, up 17% over Q3 FY18 of $7.7M. Revenue for the 9 months ended June 30, 2019 ("9M FY19") of $25.3M was up approximately 12% compared to revenue of $22.5M for the 9 months ended June 30, 2018 ("9M FY18").
  • Quarterly gross profit of $4.8M in Q3 FY19, up 14% over Q3 FY18 of $4.2M. Gross Profit for 9M FY19 was $13.9 million, up 10% compared to Gross Profit of $12.7 million for 9M FY18.
  • Total operating expense for Q3 FY19 of $4.2M is down 16% versus Q3 FY18's $4.9M of operating expenses. The drop in quarterly operating expense when combined with Q3 FY19 gross profit of $4.8M led to the highest quarterly operating income in the Company's history of $640K, which is a dramatic turnaround of 187% compared to the $738K operating loss for Q3 FY18. For 9M FY19, operating income was $306K compared to loss from operations of $1,779K for 9M FY18, representing an improvement of 117%.
  • Adjusted EBITDA in the Q3 FY19 finished at $1.9M, up 67% compared to $1.2M for Q3 FY18. Adjusted EBITDA for 9M FY19 of $5.3M, up approximately 32% vs $4.0M for 9M FY18.
  • The cash balance of $6.9M at June 30, 2019 is up 26% compared to a balance of $5.4M at September 30, 2018 and up 21% over the March 31, 2019 cash balance of $5.7M and the highest level in nearly five years.
  • The Net loss attributable to common shareholders for Q3 FY19 was $0.1M compared to a net loss of $1.9M in Q3 FY18, an improvement of approximately 96%. The net loss attributable to shareholders for the 9M FY19 was $2.1 million compared to a net loss of $4.6 million in 9M FY18 representing an improvement of approximately 55%.

 

BUSINESS OUTLOOK



Actual    



 Outlook       


FY 2017


FY 2018



FY 2019


FY 2020

Revenue:

$     29.7M


$     30.6M



$ 33-37M


$ 36-40M










Adjusted EBITDA Margin:

12.2%


19.2%



18-23%


21-26%

About Track Group, Inc.

Track Group designs, manufactures, and markets location tracking devices; as well as develops and sells a variety of related software, services, and accessories, networking solutions, and monitoring applications. The Company's products and services are designed to empower professionals in security, law enforcement, corrections and rehabilitation organizations worldwide with single-sourced offender management solutions that integrate reliable intervention technologies to support re-socialization and monitoring initiatives.

The company currently trades under the ticker symbol "TRCK" on the OTCQX exchange. For more information, visit www.trackgrp.com.

Forward-Looking Statements

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities  Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "if", "should" and "will" and similar expressions as they relate to Track Group, Inc. and subsidiaries ("Track Group") are intended to identify such forward-looking statements. These statements are only predictions and reflect Track Group's current beliefs and expectations with respect to future events and are based on assumptions and subject to risks and uncertainties and subject to change at any time. Track Group may from time to time update these publicly announced projections, but it is not obligated to do so. Any projections of future results of operations should not be construed in any manner as a guarantee that such results will in fact occur. These projections are subject to change and could differ materially from final reported results. For a discussion of such risks and uncertainties, see "Risk Factors" in Track Group's annual report on Form 10-K, its quarterly report on Form 10-Q, and its other reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. New risks emerge from time to time. Readers are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the dates on which they are made.

Non-GAAP Financial Measures

This release includes financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission including non- GAAP EBITDA. These measures may be different from non- GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. Reconciliations of these non-GAAP financial measures are based on the financial figures for the respective period.

Non-GAAP Adjusted EBITDA excludes items included but not limited to interest, taxes, depreciation, amortization, impairment charges, gains and losses, currency effects, one time charges or benefits that are not indicative of operations, charges to consolidate, integrate or consider recently  acquired businesses, costs of closing facilities, stock based or other non-cash compensation or other stated cash and non-cash charges (the "Adjustments").

The Company believes the non-GAAP measures provide useful information to both management and investors when factoring in the Adjustments. Specific disclosure regarding the Company's financial results, including management's analysis of results from operations and financial condition, are contained in the Company's annual report on Form 10-K for the fiscal year ended September 30, 2018, and other reports filed with the Securities and Exchange Commission. Investors are encouraged to carefully read and consider such disclosure and analysis contained in the Company's Form 10-K and other reports, including the risk factors contained in such Form 10-K.
 

TRACK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 





June 30,

2019


September
30,

2018


(unaudited)



Assets




Current assets:




Cash

$     6,878,916


$     5,446,557

Accounts receivable, net of allowance for doubtful accounts of $2,542,103 and $3,152,966, respectively

5,533,258


5,978,896

Note receivable, net of allowance for doubtful accounts of $234,733 at September 30, 2018

-


-

Prepaid expense and other

1,374,236


1,270,043

Inventory, net of reserves of $26,934, respectively

253,238


277,119

Total current assets

14,039,648


12,972,615

Property and equipment, net of accumulated depreciation of $2,235,720 and $1,999,222, respectively

741,641


745,475

Monitoring equipment, net of accumulated amortization of $6,215,061 and $5,325,654, respectively

2,619,670


3,162,542

Intangible assets, net of accumulated amortization of $13,608,444 and $12,016,512, respectively

22,283,352


23,253,054

Goodwill

8,123,550


8,076,759

Other assets

124,522


145,839

Total assets

$ 47,932,383


$ 48,356,284

Liabilities and Stockholders' Equity (Deficit)


Current liabilities:




Accounts payable

$     2,424,626


$     2,518,030

Accrued liabilities

12,209,866


10,333,103

Current portion of long-term debt

30,437,825


30,437,810

Total current liabilities

45,072,317


43,288,943

Long-term debt, net of current portion

3,399,644


3,428,975

Total liabilities

48,471,961


46,717,918

Commitments and contingencies

-


-

Stockholders' equity (deficit):




Common stock, $0.0001 par value: 30,000,000 shares authorized; 11,401,650 shares outstanding, respectively

1,140


1,140

Series A Convertible Preferred stock, $0.0001 par value: 1,200,000 shares authorized; 0 shares outstanding

-


-

Paid in capital

302,230,868


302,102,866

Accumulated deficit

(301,657,263)


(299,495,370)

Accumulated other comprehensive loss

(1,114,323)


(970,270)

Total equity (deficit)

(539,578)


1,638,366

Total liabilities and stockholders' equity (deficit)

$ 47,932,383


$ 48,356,284

 

TRACK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)



Three Months Ended 



Nine Months Ended


June 30,
2019


June 30,
2018



June 30,
2019


June 30,
2018

 

Revenue:









Monitoring and other related services

$     7,904,015


$     7,549,779



23,841,746


$ 22,062,789

Product sales and other

1,051,449


129,196



1,416,495


423,056

Total revenue

8,955,464


7,678,975



25,258,241


22,485,845

Cost of revenue:









Monitoring, products and other related services

3,661,470


3,039,755


9,827,373


8,409,604

Depreciation and amortization

500,704


432,952


1,512,583


1,377,760

Total cost of revenue

4,162,174


3,472,707


11,339,956


9,787,364








Gross profit

4,793,290


4,206,268


13,918,285


12,698,481









Operating expense:








General & administrative

2,725,991


3,703,869


9,464,332


10,856,950

Selling & marketing

556,122


466,048


1,637,026


1,394,778

Research & development

350,532


254,060


954,276


600,814

Depreciation & amortization

521,013


520,639


1,556,378


1,624,916

Total operating expense

4,153,658


4,944,616


13,612,012


14,477,458









Income (loss) from operations

639,632


(738,348)


306,273


(1,778,977)









Other income (expense):








Interest expense, net

(597,623)


(594,452)


(1,783,210)


(2,074,245)

Currency exchange rate gain(loss)

201,972


(166,586)


(134,795)


(442,706)

Other income, net

-


3,733


143


21,199

Total other income (expense)

(395,651)


(757,305)


(1,917,862)


(2,495,752)

Loss before income taxes

243,981


(1,495,653)


(1,611,589)


(4,274,729)

Income tax expense

313,328


360,807


457,335


360,807

Net loss attributable to common shareholders

(69,347)


(1,856,460)


(2,068,924)


(4,635,536)

Foreign currency translation adjustments

15,255


(861,637)


(144,053)


(431,186)

Comprehensive loss

$         (54,092)


$    (2,718,097)


$    (2,212,977)


$    (5,066,722)

Net loss per common share, basic and diluted

$             (0.01)


$             (0.17)


$             (0.18)


$             (0.44)

Weighted average common shares outstanding, basic and diluted

11,251,650


10,885,444


11,200,551


10,608,127

 



Three Months Ended
June 30,

Nine Months Ended
June 30,


2019


2018

2019

2018

Non-GAAP Adjusted EBITDA






Net loss attributable to common shareholders

$                (69)


$(1,857)

$           (2,069)

$           (4,636)

Interest expense, net

597


594

1,783

2,074

Depreciation and amortization

1,022


953

3,069

3,003

Income taxes (1)

313


361

457

361

Board compensation and stock-based compensation

95


356

353

1,701

Foreign exchange expense

(202)


167

135

443

Other charges, net (2)

185


589

1,549

1,045

Non GAAP Adjusted EBITDA

$            1,941


$1,163

$            5,277

$            3,991

Non GAAP Adjusted EBITDA, percent of revenue

21.7%


15.1%

20.9%

17.7%

 




Three Months Ended
June 30,

Nine Months Ended
June 30,


2019

2018


2019

2018

Non-GAAP EPS (in $000's, except share data)






Net loss attributable to common shareholders

$                (69)

$           (1,857)


$           (2,069)

$           (4,636)

Interest expense, net

597

594


1,783

2,074

Depreciation and amortization

1,022

953


3,069

3,003

Income taxes (1)

313

361


457

361

Board compensation and stock-based compensation

95

356


353

1701

Foreign exchange expense

(202)

167


135

443

Other charges, net (2)

185

589


1,549

1,045

Non GAAP net income to common shareholders

$            1,941

$            1,163


$            5,277

$            3,991

Weighted average common shares outstanding

11,251,650

10,885,444


11,200,551

10,608,127

Non-GAAP earnings per share

$              0.17

$              0.11


$              0.47

$              0.38



(1)

Currently, the Company has significant U.S. tax loss carryforwards that may be used to offset future taxable income, subject to IRS limitations. However, the Company is still subject to certain state, commonwealth, and other foreign based taxes.



(2)

Other charges may include gains or losses and non-recurring accrual adjustments.

 

Cision

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