Xplore Technologies Reports Profitable Fiscal Third Quarter 2017
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Xplore Technologies Reports Profitable Fiscal Third Quarter 2017

Revenue Increases 22% Sequentially, $0.2 Million GAAP Net Income, $5.7 Million Positive Cash Flow

Strong Backlog at $5.6 Million

AUSTIN, Texas, Feb. 02, 2017 (GLOBE NEWSWIRE) -- Xplore Technologies Corp. (NASDAQ:XPLR), a global leader in rugged computing, today reported results for its fiscal 2017 third quarter ended December 31, 2016.

Fiscal Third Quarter and Recent Highlights:

“We are pleased to report a profitable fiscal third quarter, including GAAP net income of $0.02 per share, on 22% sequential revenue growth and continued lower operating expenses,” said Philip Sassower, chairman and chief executive officer. “In addition to fulfillment of the largest purchase order in company history with a top US telecommunications customer, we also secured a number of follow-on orders from customers in multiple end markets. These include our second follow-on order in six months from another major telecommunications customer, our second follow-on order this year from a top-10 US electric utility customer, and an initial 1,000-unit OEM order from CLS America, among others.”

Mark Holleran, president and chief operating officer, stated: “We continued to closely manage our lean operating structure in the fiscal third quarter. Total operating expenses declined by $1.3 million, or 17%, compared to the year-ago quarter, leading to profitability as revenue ramped. We also maintained higher than typical backlog, at $5.6 million entering the fiscal fourth quarter, indicative of increased demand for a number of our platforms, such as the XSLATE B10 and our popular XSLATE D10 Android device, as well as certain global supply chain and ODM constraints affecting our industry and delaying order fulfillment. We are coordinating closely with our production partners to increase parts availability and production capacity to meet steadily increasing demand for several of our product families, a process which will be ongoing over the next two quarters.”

Fiscal 2017 Third Quarter Financial Results
Xplore reported revenue of $24.5 million for the fiscal third quarter ended December 31, 2016, an increase of 22.0% compared to revenue of $20.0 million in the fiscal second quarter of 2017 and compared to $27.0 million in the year-ago third quarter. The prior year quarter included notable shipments of one-time catch-up orders related to Motion Computing’s screen supply issue. Revenue reflected increased sales and completion of shipments against the company’s large telecommunications customer purchase orders, offset by continued softness in Europe.

Gross profit in the second quarter was $6.7 million, or 27.4% of revenue, compared to $5.6 million, or 28.2% of revenue, in the preceding quarter and $8.8 million, or 32.7% of revenue, in the prior year third quarter. The change in gross margin was primarily attributable to product mix related to fulfillment of a large customer order.

Xplore continued to maintain significantly reduced operating costs, at $6.3 million for the fiscal third quarter, compared to $6.1 million in the preceding quarter and down 17.1% from $7.6 million in the prior year third quarter. The decline in operating expenses reflects continued aggressive implementation of the company’s focus on profitability, including cost reductions begun in August 2016. A portion of the cost reduction benefit is being reinvested in sales, marketing and channel and distributor development to drive revenue growth into fiscal 2018 and beyond.

For the quarter, Xplore reported net income of $219,000, or $0.02 per basic share, compared to net loss of $536,000, or $0.05 per basic share, in the second quarter of fiscal 2017 and a net profit of $786,000, or $0.07 per share, in the prior year third quarter. Current period profitability improved through the increase in sales and continued operational efficiency, offset by lower gross margin due to fulfillment of large-volume orders for lower ASP platforms.

EBITDA adjusted for non-cash compensation and historical integration costs was positive $822,000 compared to positive adjusted EBITDA of $116,000 in the fiscal second quarter 2017, and a positive $2.0 million in the prior year third quarter. A reconciliation is provided in the tables included in this release.

“We maintained our focus on operating efficiency and low operating expenses, driving Xplore to profitability in the fiscal third quarter,” said Tom Wilkinson, CFO of Xplore. “As a result of our cost diligence, we have greatly reduced the breakeven point of the business compared to prior quarters. We also generated operating cash flows of $5.7 million in the third fiscal quarter, and anticipate further cash flows in the fourth quarter due to collection of accounts receivable and sales from inventory, as well as greater working capital efficiency.”

Cash Flow and Balance Sheet
Net cash provided by operating activities was $5.7 million, compared to net cash used in operating activities of $3.9 million for the three months ended September 30, 2016. At quarter end, cash was $4.1 million and short-term debt $5.1 million.  Inventory declined at the end of the quarter, which is reflected in the accounts receivable increases, and the company expects to continue to ship substantial goods from inventory in the fiscal fourth quarter, which will drive continued high accounts receivable and ultimately generate further cash flows from operating activities.

Outlook
For fiscal 2017, Xplore revised its revenue outlook to a range of $78 million and $82 million, reflecting continued high demand offset by production capacity constraints and continued softness in Europe. Gross margin for the fiscal year is still expected to be between 28% and 30%, and operating expenses are expected to be approximately $25-27 million, compared to $30.3 million in the prior year.

Xplore continues to anticipate sales growth beyond its fiscal year 2017 revenue targets, as well as continued reduced operating costs. As such, Xplore 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%.

Conference Call
The company will conduct a conference call and webcast to review the results on Thursday, February 2, 2017, at 4:30 p.m. ET.  Interested parties in the United States can access the call by dialing 866-777-2509; interested parties outside the United States can access the call by dialing +1-412-317-5413. 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 February 16, 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 10100199.

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. 

 
XPLORE TECHNOLOGIES CORP.
Consolidated Balance Sheets
(in thousands)
 
  December 31,
2016
  March 31,
2016
 
ASSETS (unaudited)    
CURRENT ASSETS:      
Cash and cash equivalents $4,099  $5,594 
Accounts receivable, net  16,213   14,277 
Inventory, net  15,161   14,858 
Prepaid expenses and other current assets  475   800 
Total current assets  35,948   35,529 
Fixed assets, net  1,703   1,003 
Intangible assets, net  1,515   1,785 
Goodwill  15,159   14,872 
  $54.325  $53,189 
LIABILITIES AND STOCKHOLDERS’ EQUITY        
LIABILITIES:        
Short-term indebtedness with bank $5,096  $ 
Accounts payable  7,701   9,611 
Accrued liabilities  4,359   3,409 
Deferred revenue and current warranty liabilities  3,622   4,413 
Total current liabilities  20,778   17,433 
Deferred revenue and non-current warranty liabilities  3,898   4,568 
Total liabilities  24,676   22,001 
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 10,947 and 10,908, respectively  11   11 
Additional paid-in capital  171,663   171,138 
Accumulated deficit  (142,025)  (139,961)
   29,649   31,188 
  $54,325  $53,189 
         


 
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,
2016
 December 31,
2015
 December 31,
2016
 December 31,
2015
 
          
Revenue $24,499 $27,023 $60,979 $79,919 
Cost of revenue  17,784  18,181  43,764  54,818 
Gross profit  6,715  8,842  17,215  25,101 
          
Expenses:         
Sales, marketing and support  3,153  3,925  9,484  11,187 
Product research, development and engineering  1,303  1,129  3,573  4,536 
General administration  1,816  2,521  5,723  7,339 
   6,272  7,575  18,780  23,062 
Income (loss) from operations  443  1,267  (1,565) 2,039 
          
Other income (expense):         
Other  (96) (317) (214) (385)
Cost of integration    (95)   (887)
Interest expense  (79)   (156) (58)
   (175) (412) (370) (1,330)
Income (loss) before income taxes  268  855  (1,935) 709 
Income tax (expense) benefit  (49) (69) (129) (69)
Net income (loss) $219 $786 $(2,064)$640 

Income (loss) per common share, primary
 $0.02 $0.07 $(0.19)$0.06 

Income (loss) per common share, fully diluted
 $0.02 $0.07 $ $0.06 
              
Weighted average number of common shares outstanding, basic
  10,947,329  10,883,933  10,927,477  10,828,375 
Weighted average number of common shares outstanding, fully diluted  10,950,390  11,539,074    11,494,496 
              


 
XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Cash Flows—Unaudited
(in thousands)
 
  Nine Months Ended
December 31,
 
  2016  2015 
       
CASH FLOWS FROM OPERATING ACTIVITIES:      
Cash (used in) provided by operations:      
Net income (loss) $(2,064) $640 
Items not affecting cash:        
Depreciation and amortization  1,168   1,313 
Provision for doubtful accounts  (44)  48 
Loss on disposal of asset  28    
Stock-based compensation expense  413   1,634 
         
Changes in operating assets and liabilities:        
Accounts receivable  (1,892)  (3,021)
Inventory  (303)  (110)
Prepaid expenses and other current assets  325   (184)
Accounts payable and accrued liabilities  (2,421)  (5,234)
Net cash used in operating activities  (4,790)  (4,914)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Net cash received in purchase transaction     653 
Change in liabilities assumed in purchase of business  (287)  16 
Additions to fixed assets  (1,626)  (657)
Net cash provided by (used in) investing activities  (1,913)  12 
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from short-term borrowings  44,976   18,000 
Repayment of short-term indebtedness  (39,880)  (27,098)
Net proceeds from issuance of Common Stock  112   580 
Net cash provided by (used in) financing activities  5,208   (8,518)
         
CHANGE IN CASH AND CASH EQUIVALENTS  (1,495)  (13,420)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD  5,594   19,455 
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,099  $6,035 
         
NONCASH INVESTING AND FINANCING ACTIVITIES:        
Net assets acquired with debt in purchase transaction $  $9,079 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:        
Payments for interest $156  $58 
Payments for income taxes $129  $8 
         


 
XPLORE TECHNOLOGIES CORP.
Adjusted EBITDA Reconciliation—Unaudited
(in thousands)
 
  Three Months Ended
December 31,
  2016 2015
     
Net income (loss) $219 $786
     
Income taxes 49 69
Interest expense 79 
Depreciation and amortization 364 498
Stock-based compensation expense 111 535
Cost of integration  95
     
ADJUSTED EBITDA $822 $1,983
       
  Nine Months Ended
December 31,
  2016 2015
     
Net income (loss) $(2,064)$640
     
Income taxes 129 69
Interest expense 156 58
Depreciation and amortization 1,168 1,313
Stock-based compensation expense 413 1,634
Cost of integration  887
     
ADJUSTED EBITDA $(198)$4,601
       


 
XPLORE TECHNOLOGIES CORP.
Supplemental Three Months Consolidated Statements of Cash Flows—Unaudited
(in thousands)
 
  Three Months Ended
December 31,
 
  2016 2015 
      
Net loss $219 $786 
Items not affecting cash:     
Depreciation and amortization 364 498 
Provision for doubtful accounts 8 24 
Loss on disposal of asset 28  
Stock based compensation expense 111 535 
Other adjustments to cash used in operations 4,968 118 
Net cash provided by operating activities 5,698 1,961 
Net cash used in investing activities (974)(228)
Net cash provided by (used in) financing activities (4,080)415 
      
Change in cash and cash equivalents $644 $2,148 
        


  
 Xplore Technologies Quarterly Historical Information
  
  FY 2017
  1st Qtr2nd Qtr3rd Qtr4th QtrYTD 
        
Revenue$16,473 $20,007 $24,499 $- $60,979  
Cost of revenue   11,609    14,31    17,784    -    43,764  
 Gross profit 4,864  5,636  6,715  -  17,215  
          
Expenses        
 Sales, marketing and support 3,435  2,896  3,153  -  9,484  
 Product research, development & engineering 953  1,317  1,303  -  3,573  
 General administrative   2,039    1,868    1,816    -    5,723  
Total expenses   6,427    6,081    6,272    -    18,780  
                  
 Profit/(loss) from operations (1,563) (445) 443  -  (1,565) 
                  
Other expenses                
 Interest expense (8) (69) (79) -  (156) 
 Other income/expenses   (96)   (22)    (96)   -    (214) 
     (104)   (91)   (175)   -    (370) 
                  
 Income/(loss) before taxes (1,667) (536) 268  -  (1,935) 
 Income taxes   (80)   -    (49)   -    (129) 
Net income$  (1,747)$  (536)$   219 $  - $  (2,064) 
                  
 Depreciation & amortization 348  456  364  -  1,168  
 Interest expense 8  69  79  -  156  
 Income taxes   80    -     49    -    129  
 EBITDA (1,311) (11) 711  -  (611) 
            -     
 Non-cash compensation   175    127    111    -    413  
 Adjusted EBITDA$  (1,136)$  116 $   822 $  - $   (198) 
                  


  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 
       


  FY 2015
  1st Qtr2nd Qtr3rd Qtr4th QtrYTD
       
Revenue$8,267 $7,522 $16,443 $10,407 $42,639 
Cost of revenue 5,203  5,255  10,569  7,293  28,320 
 Gross profit 3,064  2,267  5,874  3,114  14,319 
       
Expenses     
 Sales, marketing and support 1,598  1,714  1,630  1,410  6,352 
 Product research, development & engineering 991  739  815  992  3,537 
 General administrative 1,007  977  980  1,139  4,103 
Total operating expenses 3,596  3,430  3,425  3,541  13,992 
       
 Profit/(loss) from operations (532) (1,163) 2,449  (427) 327 
       
Other expenses     
 Interest expense  (1) (2) -  (3)
 Cost of integration -  -  -  -  - 
 Other income/expenses (19) (3) (7) (7) (36)
   (19) (4) (9) (7) (39)
       
 Income/(loss) before taxes (551) (1,167) 2,440  (434) 288 
 Income taxes -  -  (39) -  (39)
Net income$(551)$(1,167)$2,401 $(434)$249 
       
 Depreciation & amortization 172  264  253  230  919 
 Interest expense -  1  2  -  3 
 Income taxes -  -  39  -  39 
 EBITDA (379) (902) 2,695  (204) 1,210 
       
 Non-cash compensation 159  166  152  207  684 
 Cost of integration -  -  -  -  - 
 Adjusted EBITDA$(220)$(736)$2,847 $3 $1,894 
       


 
Xplore Technologies Quarterly Key Statistics
 
 FY 2017
  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  YTD
       
Gross margin29.5%28.2%27.4% -   28.2%
Operating margin-9.5%-2.2%1.8% -   -2.6%
Periodic revenue %N/A  N/A  NA   -   100.0%
Quarter over Quarter      
Revenue Change %-20.1%21.5%22.5% -    
       


 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% 


 FY 2015
 1st Qtr2nd Qtr3rd Qtr4th QtrYTD
      
Gross margin37.1%30.1%35.7%29.9%33.6%
Operating margin-6.4%-15.5%14.9%-4.1%0.8%
Periodic revenue %19.4%17.6%38.6%24.4%100.0%
Quarter over Quarter     
Revenue Change %-0.9%-9.0%118.6%-36.7% 
          
Contact Information:
Tom Wilkinson  
Chief Financial Officer
(512) 637-1162
twilkinson@xploretech.com
                                                                                                                
Matt Kreps, Darrow Associates Investor Relations
(512) 696-6401
xplr@darrowir.com

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