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

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  TwitterFacebookLinkedIn, 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% 

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