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Xplore Technologies Reports Increased Profit in Second Quarter

AUSTIN, Texas, Nov. 08, 2017 (GLOBE NEWSWIRE) -- Xplore Technologies Corp. (XPLR), a global leader in rugged computing, today reported increased revenue and net income for its fiscal 2018 second quarter, ended September 30, 2017.

Fiscal Second Quarter 2018 and Recent Highlights:

  • Reported revenue of $22.7 million, an increase of 13.7% from $20.0 million in the year-ago second quarter, reflecting increased sales of rugged tablets and ongoing fulfillment against multiple large customer order programs;
  • Ended the quarter with backlog of $11.9 million compared with $4.5 million at June 30, 2017;
  • Achieved gross margin of 27.9%, compared with 28.2% for the prior-year quarter;
  • Reported continued low operating expenses of $5.9 million, a reduction of 3.4% from the prior year second quarter;
  • Reported GAAP net profit of $397,000, or $0.04 per share, compared with a net loss of $536,000, or $0.05 per share, in the previous year second quarter;
  • Generated adjusted EBITDA of $1.0 million, Xplore’s fifth consecutive quarter of positive adjusted EBITDA, compared with adjusted EBITDA of positive $116,000 in the prior year second quarter;
  • Announced the retirement of Philip S. Sassower, 77, as chairman of the board, and the appointment of Thomas B. Pickens, III as Lead Independent Director;
  • Announced the resignation of Mark Holleran, as President and Chief Executive Officer, and the appointment of Tom Wilkinson as Acting Chief Executive Officer;
  • Secured multi-million dollar expansion orders from both major telecommunications customers for XSLATE R12 and XSLATE D10 devices going to new divisions;
  • Won an additional 200-unit Bobcat order to a Class I railroad customer;
  • Expanded international activity with several contracts, particularly in Latin America, including a $1 million Bobcat order to a Latin American law enforcement agency and an XSLATE D10 order for field inspection services;
  • Continued to secure additional warehousing and logistics orders, including conversion of a customer’s US facility to XSLATE R12 devices and a recent win with a global dietary supplements manufacturer; and
  • Secured a $3.2 million follow on order for ultra-rugged tablets in support of an ongoing US military project.

Acting CEO Tom Wilkinson stated: “We are pleased to significantly increase profitability on improved revenue in the second fiscal quarter, demonstrating the high operating profit leverage embedded in Xplore’s cost-efficient business model. Demand for rugged tablets continues to rise across multiple end markets, including telecommunications, railroad, warehousing and logistics and military. We also drove increased international sales activity, a key growth area for Xplore, particularly in new Latin America markets where our rugged mobile workforce solutions provide high value.

“In addition to new sales wins and expansions at existing customers, we also continued to execute against multi-year refresh projects as customers upgrade to our newest platforms based on Xplore’s best-in-class rugged mobility, computing performance, security and accessory capabilities. Customers are increasingly recognizing Xplore’s unparalleled value proposition in terms of highest ROI and lowest total cost of ownership. We remain focused on expanding sales in key markets, growing our international business and leveraging our highly scalable operating base to maximize profitability and cash flows.”  

Fiscal 2018 Second Quarter Financial Results
Xplore reported revenue of $22.8 million for the fiscal second quarter ended September 30, 2017, a 13.8% sequential increase from revenue of $20.0 million in the fiscal first quarter of 2018 and compared to $20.0 million in the year-ago second quarter. Revenue reflected increased sales momentum as demand for rugged tablets continues to increase, as well as fulfilment of large multi-quarter customer contracts.

Gross profit in the second quarter was $6.4 million, or 27.9% of revenue, compared to $6.2 million, or 30.9% of revenue, in the preceding quarter and $5.6 million, or 28.2% of revenue, in the prior year second quarter. The change in gross margin reflects product mix and increased contribution from large customer orders.

Operating expenses were $5.9 million for the fiscal second quarter, a further 1.4% reduction from $6.0 million in the first quarter and a 3.4% reduction from $6.1 million in the prior year second quarter. Operating expenses reflect continued lean operating practices implemented in Fiscal 2017 to drive increased profitability as revenue scales. Xplore expects to reinvest in additional sales hires and marketing initiatives to drive revenue growth in fiscal 2018 and beyond.

For the quarter, Xplore reported net income of $397,000, or $0.04 per share, compared to net income of $239,000, or $0.02 per share, in the prior quarter and a net loss of $536,000, or ($0.05) per basic share in the fiscal second quarter 2017. The shift to continued profitable operations reflects improved revenue and significantly lower expenses under Xplore’s new operating model.

EBITDA adjusted for non-cash compensation and historical integration costs was $1.0 million, compared with $839,000 in the preceding quarter and $116,000 in the fiscal second quarter 2017. Xplore has now reported five consecutive quarters of positive adjusted EBITDA, totaling $2.9 million. A reconciliation is provided in the tables included in this release.

“Profit increased significantly as revenue ramped in the second fiscal quarter, demonstrating the scalability of our profit focused, cost-efficient operating model. We continue to anticipate multiple profitable quarters in Fiscal 2018, as well as solid free cash flow to fund operations and investment in our platforms,” said Wilkinson.

Cash Flow and Balance Sheet
Net cash used in operating activities was $5.4 million both the quarter ended September 30, 2017, and the prior quarter. The change in net cash reflects the acceleration of revenue and increased inventory to ensure fulfillment of large customer orders. Net cash used by operating activities in the first half of fiscal 2018 reflects an $8.9 million increase in accounts receivable, to $19.3 million, and a $9.7 million increase in inventory, to $22.5 million. At quarter end, cash was $260,000 and debt under the company’s line of credit was $8.4 million. 

Corporate Governance
Xplore recently announced the retirement of its long-term chairman, Philip Sassower, and the resignation of its President, and CEO, Mark Holleran.

The board of directors of Xplore has appointed Tom Wilkinson as Acting Chief Executive Officer.  A highly respected executive, Mr. Wilkinson brings 25 years of experience to the company. Prior to joining Xplore in 2015, he served as Chief Financial Officer for Amherst Holdings and as Managing Partner of a regional public accounting and marketing firm. His prior experience also includes business development for a subsidiary of Credit Suisse First Boston, and work at both Dell and KPMG. Mr. Wilkinson has been working with Xplore for over ten years, first as an auditor and business advisor, and most recently as CFO.

The board of directors of Xplore has appointed Thomas B. Pickens, III as Lead Independent Director, with delegated authority to serve in lieu of a chairman until such time as a chairman is appointed.  Mr. Pickens has been serving as the Chairman and Chief Executive of Astrotech Corporation (ASTC) since 2007.  His professional work history began while in College where he was the founder of Beta Computer Systems, Inc. from 1982 to 1985.  From 1986 to 1988 he was the founder and General Partner of Grace Pickens Acquisition Partners L.P.; from 1988 to 1989 founder and Managing Partner of Sumpter Partners.  From 1988 to 1994 Mr. Pickens was the CEO of Catalyst Energy Corporation and CEO of United Thermal Corporation (NYSE); from 1995 to 2003 Mr. Pickens was the founder and CEO of U.S. Utilities.  Mr. Pickens is currently the Chairman of the Board of Astrotech Corporation, 1st Detect Corporation, Astrogenetix Corporation and Astral Images, Inc. and is the Lead Independent Director of Xplore Technologies Corporation.  Over the years he has served as a board member of Century Power Corporation, Vidilia Hydroelectric Corporation, U.S. Utilities, Trenwick America Reinsurance Corporation, Spacehab Inc. (NASDAQ), Advocate MD, Optifab, Inc. (NASDAQ), Astrotech Space Operations, Inc., and was the New York chapter Chairman of United Shareholders Association, a shareholders rights organization.

Outlook

For fiscal 2018, Xplore maintained its 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 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 have an incredibly engaged and competent management team that is ready to take the company forward,” said Tom Wilkinson. “Our financial condition is solid, as are our projections for the current fiscal year. Xplore is positioned to not only continue building on our strong operating results, but also to apply our capabilities in rugged devices to meet additional customer needs that exist in our served markets.”

Conference Call
The company will conduct a conference call and webcast to review the results on Wednesday, November 8, 2017, 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 5 p.m. ET on November 22, 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 10114114.

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:

Tom Wilkinson 
Acting Chief Executive Officer
(512) 637-1162
                                                                                                               
Matt Kreps, Darrow Associates Investor Relations
(214) 597-8200
mkreps@darrowir.com

   
XPLORE TECHNOLOGIES CORP.  
Consolidated Balance Sheets
 
(in thousands)  
   
    September 30,
2017
    March 31,
2017
 
ASSETS   (unaudited)        
CURRENT ASSETS:            
Cash and cash equivalents   $ 260     $ 3,460  
Accounts receivable, net     19,315       10,452  
Inventory, net     22,513       12,858  
Prepaid expenses and other current assets     505       469  
Total current assets     42,593       27,239  
Fixed assets, net     1,970       1,862  
Intangible assets, net     1,245       1,425  
Goodwill     15,159       15,159  
    $ 60,967     $ 45,685  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
LIABILITIES:                
Short-term indebtedness with bank   $ 8,371     $  
Accounts payable     12,674       7,342  
Accrued liabilities     3,126       2,266  
Deferred revenue and current warranty liabilities     2,915       3,145  
Total current liabilities     27,086       12,753  
Deferred revenue and non-current warranty liabilities     3,682       3,650  
Total liabilities     30,768       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 11,005 and 10,908, respectively     11       11  
Additional paid-in capital     172,066       171,784  
Accumulated deficit     (141,878 )     (142,513 )
      30,199       29,282  
    $ 60,967     $ 45,685  
                 


XPLORE TECHNOLOGIES CORP.  
Consolidated Statements of Loss—Unaudited
 
(in thousands of dollars, except share and per share amounts)  
   
    Three Months Ended     Six Months Ended  
    September
30, 2017
    September
30, 2016
    September
30, 2017
    September
30, 2016
 
                         
Revenue   $ 22,748     $ 20,007     $ 42,746     $ 36,480  
Cost of revenue     16,395       14,371       30,207       25,980  
Gross profit     6,353       5,636       12,539       10,500  
                                 
Expenses:                                
Sales, marketing and support     3,166       2,896       6,367       6,331  
Product research, development and engineering     922       1,317       1,729       2,270  
General administration     1786       1,868       3,736       3,907  
      5,874       6,081       11,832       12,508  
Income (loss) from operations     479       (445 )     707       (2,008
                                 
Other income (expense):                                
Other     7       (22 )     43       (77 )
Interest expense     (79 )     (69 )     (104 )     (118 )
      (72 )     (91 )     (61 )     (195 )
Income (loss) before income taxes     407       (536 )     646       (2,203 )
Income tax (expense) benefit     (10 )           (10 )     (80
Net income (loss)   $ 397     $ (536 )   $ 636     $ (2,283 )
                                 
Income (loss) per common share, basic   $ 0.04     $ (0.05 )   $ 0.06     $ (0.21 )
                                 
Income (loss) per common share, fully diluted   $     $     $     $  
Weighted average number of common shares outstanding, basic     11,005,189       10,926,542       10,997,526       10,917,498  
Weighted average number of common shares outstanding, fully diluted     11,010,159       10,926,542       11,002,496       10,917,498  
                                 


XPLORE TECHNOLOGIES CORP.  
Consolidated Statements of Cash Flows—Unaudited
 
(in thousands)  
   
    Six Months Ended
September 30,
 
    2017     2016  
             
CASH FLOWS FROM OPERATING ACTIVITIES:            
Cash (used in) provided by operations:            
Net loss   $ 636     $ (2,283 )
Items not affecting cash:                
Depreciation and amortization     927       804  
Provision for doubtful accounts     61       (52 )
Stock-based compensation expense     215       302  
                 
Changes in operating assets and liabilities:                
Accounts receivable     (8,924 )     (224 )
Inventory     (9,655 )     (4,293 )
Prepaid expenses and other current assets     (36 )     (469 )
Accounts payable and accrued liabilities     5,994       (5,211 )
Net cash used in operating activities     (10,782 )     (10,488 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Change in liabilities assumed in purchase of business           (287 )
Additions to fixed assets     (855 )     (652 )
Net cash provided by (used in) investing activities     (855 )     (939 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from short-term borrowings     34,185       27,600  
Repayment of short-term indebtedness     (25,814 )     (18,354 )
Net proceeds from issuance of Common Stock     66       42  
Net cash provided by (used in) financing activities     8,437       (9,288 )
                 
CHANGE IN CASH AND CASH EQUIVALENTS     (3,200 )     (2,139 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     3,460       5,594  
CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 260     $ 3,455  
                 
NONCASH INVESTING AND FINANCING ACTIVITIES:                
Net assets acquired with debt in purchase transaction   $     $  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:                
Payments for interest   $ 104     $ 77  
Payments for income taxes   $     $ 80  
                 


XPLORE TECHNOLOGIES CORP.
Adjusted EBITDA Reconciliation—Unaudited
(in thousands)
 
    Three Months Ended
September 30,
    2017   2016  
         
Net income (loss)   $ 397   $ (536 )
         
Income taxes   10   -  
Interest expense   79   69  
Depreciation and amortization   454   456  
Stock-based compensation expense   113   127  
         
ADJUSTED EBITDA   $ 1,053   $ 116  
             


    Six  Months Ended
September 30,
    2017   2016  
         
Net income (loss)   $ 636   $ (2,283 )
         
Income taxes   10   80  
Interest expense   104   77  
Depreciation and amortization   927   804  
Stock-based compensation expense   215   302  
         
ADJUSTED EBITDA   $ 1,892   $ (1,020 )
             


Xplore Technologies Quarterly Historical Information  
       
    FY 2018  
    1st Qtr 2nd Qtr 3rd Qtr
  4th Qtr
  YTD
   
                                   
Revenue $ 19,998   $ 22,748   $ -   $ -   $ 42,749    
Cost of revenue   13,812     16,395     -     -     30,207    
  Gross profit   6,186     6,353     -     -     12,539    
                                   
Expenses                                
  Sales, marketing and support   3,201     3,166     -     -     6,367    
  Product research, development & engineering   807     922     -     -     1,729    
  General administrative   1,950     1,786     -     -     3,736    
Total expenses   5,958     5,874     -     -     11,832    
                                   
  Profit/(loss) from operations   228     479     -     -     707    
                                   
Other expenses                                
  Interest expense   (25)     (79)     -     -     (104)    
  Other income/expenses   36     7     -     -     43    
      11     (72)     -     -     (61)    
                                   
  Income/(loss) before taxes   239     407     -     -     646    
  Income taxes   -     (10)     -     -     (10)    
Net income $ 239   $ 397   $ -   $ -   $ 636    
                                   
  Depreciation & amortization   473     454     -     -     917    
  Interest expense   25     79     -     -     104    
  Income taxes   -     10     -     -     10    
  EBITDA   737     940     -     -     1,667    
                                   
  Non-cash compensation   102     113     -     -     215    
  Adjusted EBITDA $ 839   $ 1,053   $ -   $ -   $ 1,882    
                                   



    FY 2017  
    1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD  
               
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 Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
             
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 Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
           
Gross margin 30.9 % 27.9 %     29.3 %
Operating margin 1.1 % 2.1 %     1.7 %
Periodic revenue % n/a   n/a       n/a  
Quarter over Quarter          
Revenue Change % 21.4 % 13.7 %      


  FY 2017
  1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
           
Gross margin 29.5 % 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 Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
           
Gross margin 33.9 % 28.1 % 32.7 % 30.3 % 31.2 %
Operating margin 1.5 % 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 %