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Track Group Reports Fiscal 2019 Financial Results

Record Annual Revenue Up 11%, Operating Income Rebounds 171% to Historical High, and Adjusted EBITDA Up 27%

NAPERVILLE, Ill., Jan. 13, 2020 /PRNewswire/ -- Track Group, Inc. (OTCQX: TRCK), a global leader in offender tracking and monitoring services, today announced financial results for its fiscal year ended September 30, 2019 (the "FY19"). In FY19, the Company posted (i) record revenue of $34.0M, an increase of 11% over the fiscal year ended September 30, 2018 (the "FY18"), (ii) record operating income of $1.2M compared to an operating loss of $1.7M for FY18, (iii) adjusted EBITDA of $7.4M, up 27% compared to FY18, and (iv) a cash balance at September 30, 2019 of $6.9M, representing an increase of 27% over September 30, 2018 as well as the highest balance since September 2014.

"It was an outstanding year for Track Group, our employees and our customers," said Derek Cassell, Track Group's CEO. "I look forward to the next year with a tremendous amount of momentum and enthusiasm."

FINANCIAL HIGHLIGHTS

  • Revenue for FY19 was $34.0M, up approximately 11% compared to revenue of $30.6M for FY18. Quarterly revenue of $8.8M in Q4 FY19, up 8% over Q4 FY18 of $8.1M.
  • Gross Profit for FY19 was $19.0 million, up 11% compared to Gross Profit of $17.2 million for FY18. Quarterly gross profit of $5.1M in Q4 FY19, up 13% over Q4 FY18 of $4.5M.
  • Total operating expense for FY19 of $17.9M is down 5% versus FY18's $18.9M of operating expenses. The drop in operating expense when combined with FY19 gross profit of $19.0M led to the highest annual operating income in the Company's history of $1.2M, which is a dramatic turnaround of 171% compared to the $1.7M operating loss for FY18.
  • Adjusted EBITDA for FY19 finished at $7.4M, up 27% compared to $5.9M for FY18.
  • The cash balance of $6.9M at September 30, 2019 is up 27% compared to a balance of $5.4M at September 30, 2018 and up less than 1% over the June 30, 2019 cash balance of $6.9M and the highest level in nearly five years.
  • The Net loss attributable to common shareholders for FY19 was $2.6M compared to a net loss of $5.4M in FY18, an improvement of approximately 53%.

 

BUSINESS OUTLOOK



Actual


Outlook


FY 2018


FY 2019


FY 2019 (a)


FY 2020

Revenue:

$     30.6M


$     34.0M


$ 33-37M


$ 36-40M









Adjusted EBITDA Margin:

19.2%


21.9%


18-23%


21-26%


(a) The FY 2019 outlook as released on August 9, 2019.

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, 2019, 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

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2019 AND 2018


Assets        

2019


2018

   Current assets:




Cash

$      6,896,711


$       5,446,557

Accounts receivable, net of allowance for doubtful accounts of $2,454,281 and $3,152,966, respectively

6,763,236


5,978,896

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

-


-

Prepaid expense and other

1,339,465


1,270,043

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

274,501


277,119

Total current assets

15,273,913


12,972,615

Property and equipment, net of accumulated depreciation of $2,248,913 and $1,999,222, respectively

675,037


745,475

Monitoring equipment, net of accumulated amortization of $6,322,768 and $5,325,654, respectively

2,624,900


3,162,542

Intangible assets, net of accumulated amortization of $14,157,090 and $12,016,512, respectively

21,955,679


23,253,054

Goodwill

8,187,911


8,076,759

Deferred tax assets

540,563


-

Other assets

124,187


145,839

Total assets

$    49,382,190


$   48,356,284





Liabilities and Stockholders' Equity (Deficit)




   Current liabilities:




Accounts payable

2,628,003


2,518,030

Accrued liabilities

12,969,489


10,333,103

Current portion of long-term debt

33,827,689


30,437,810

Total current liabilities

50,284,388


43,288,943

Long-term debt, net of current portion

-


3,428,975

Total liabilities

50,284,388


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

302,250,556


302,102,866

Accumulated deficit

(302,152,292)


(299,495,370)

Accumulated other comprehensive loss

(1,001,602)


(970,270)

Total equity (deficit)

(902,198)


1,638,366

Total liabilities and stockholders' equity (deficit)

$   49,382,190


$ 48,356,284

 

TRACK GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

SEPTEMBER 30, 2019 and 2018




(Unaudited)
3 months ended

September 30,

12 months ended

September 30,


2019

2018

2019

2018

Revenue:





Monitoring and other related services

8,258,624

7,880,774

32,100,370

29,943,563

Product sales and other

502,287

203,600

1,918,782

626,656

Total revenue

8,760,911

8,084,374

34,019,152

30,570,219






Cost of revenue:





Monitoring, products and other related services

3,161,813

3,101,737

12,989,186

11,511,341

Depreciation and amortization

500,392

478,974

2,012,975

1,856,734

Total cost of revenue

3,662,205

3,580,711

15,002,161

13,368,075






Gross profit

5,098,706

4,503,663

19,016,991

17,202,144


58%

56%

56%

56%

Operating expense:





General and administrative

2,779,127

3,126,974

12,243,459

13,983,924

(Gain) / loss on sale of assets

(10,563)

(8,500)

(10,563)

(8,500)

Selling and Marketing

620,075

500,674

2,257,101

1,895,452

Research & development

359,223

261,328

1,313,499

862,142

Depreciation and amortization

491,602

495,830

2,047,980

2,120,746

Total operating expense

4,239,464

4,376,306

17,851,476

18,853,764

Operating Income (loss)

859,242

127,357

1,165,515

(1,651,620)






Other income (expense)





Interest income

6,638

-

23,929

242,973

Interest expense

(602,546)

(687,735)

(2,403,047)

(3,004,983)

Currency exchange rate gain (loss)

(331,345)

(2,720)

(466,140)

(445,426)

Other income/expense, net

-

2,541

143

23,740

Total other income (expense)

(927,253)

(687,914)

(2,845,115)

(3,183,696)

Net loss before income taxes

(68,011)

(560,557)

(1,679,600)

(4,835,316)

Income tax expense

427,018

231,918

884,353

592,725

Net loss attributable to stockholders

(495,029)

(792,475)

(2,563,953)

(5,428,041)

 

TRACK GROUP, INC.

NON-GAAP ADJUSTED EBITDA

SEPTEMBER 30, 2019

(UNAUDITED)



Three Months Ended
September 30,

Twelve Months Ended
September 30,


2019

2018

2019

2018

Non-GAAP Adjusted EBITDA





Net loss attributable to common shareholders

$(495)

$(792)

$(2,564)

$(5,428)

Interest expense, net

596

688

2,379

2,762

Depreciation and amortization

992

974

4,061

3,977

Income taxes (1)

427

232

884

593

Board compensation and stock-based compensation

(32)

269

321

1,970

Foreign exchange expense

331

2

466

445

Other charges, net (2)

353

494

1,902

1,539

Non GAAP Adjusted EBITDA

$2,172

$1,867

$7,449

$5,858

Non GAAP Adjusted EBITDA, percent of revenue

24.8%

23.1%

21.9%

19.2%







Three Months Ended
September 30,

Twelve Months Ended
September 30,


2019

2018

2019

2018

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





Net loss attributable to common shareholders

$(495)

$(792)

$(2,564)

$(5,428)

Interest expense, net

596

688

2,379

2,762

Depreciation and amortization

992

974

4,061

3,977

Income taxes (1)

427

232

884

593

Board compensation and stock-based compensation

(32)

269

321

1,970

Foreign exchange expense

331

2

466

445

Other charges, net (2)

353

494

1,902

1,539

Non GAAP net income to common shareholders

$2,172

$1,867

$7,449

$5,858

Weighted average common shares outstanding

11,251,650

11,101,650

11,213,431

10,702,523

Non-GAAP earnings per share

$0.19

$0.17

$0.66

$0.55



(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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SOURCE Track Group, Inc.