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:
  • Reported revenue of $23.9 million, reflecting new customer accounts, increased international sales and ongoing fulfillment against long-term customer programs;
  • Ended the quarter with backlog of $6 million;
  • Achieved gross margin of 31.9%, compared with 27.4% for the prior-year quarter;
  • Reported operating expenses of $7.2 million, including additional sales and marketing headcount and one-time severance and property tax costs;
  • Reported GAAP net profit of $302,000, or $0.03 per share, compared with net income of $219,000, or $0.02 per share, in the previous year third quarter;
  • Results include $575,000, or $0.05 per share, in severance costs associated with the resignations of previous Chairman Phillip Sassower and previous CEO Mark Holleran, and $91,000, or $0.01 per share, representing a one-time property tax payment related to assets acquired from Motion Computing in 2015;
  • Generated adjusted EBITDA, before one-time charges, of $1.7 million, Xplore's sixth consecutive quarter of positive adjusted EBITDA, compared with adjusted EBITDA of positive $822,000 in the prior year third quarter;
  • Won sizeable orders across a number of targeted vertical markets, including telecommunications, automotive manufacturing, military, government agencies, consumer service and car rentals;
  • Secured orders with two leading US pharmaceutical companies to refresh existing Xplore tablets with the Xplore XC6 Clean Room version, designed to be easily disinfected on a regular basis;
  • Fulfilled orders from large fast food company using Xplore rugged tablets as part of its line-busting digital initiative;
  • Grew international sales to 34% of revenue as a result of sales efforts and improving distributor and reseller relationships;
  • Appointed Tom Wilkinson as CEO;
  • Announced an expansion and extension of the company's Bank of America credit facility to $20 million; and
  • Launched the XBOOK line of Windows and Android mobile 2-in-1 convertible units, entering the $900 million rugged laptop market.

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 ResultsXplore 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 SheetNet 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."   

OutlookFor 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 TechnologiesXplore 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 StatementsThis 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 Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
           
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 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 % 31.9 %   29.3 %
Operating margin 1.1 % 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 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 %  

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