XPLORE TECHNOLOGIES CORP - FORM 8-K - EX-99.1 - July 5, 2018

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8-K - 8-K - XPLORE TECHNOLOGIES CORPxploretechnologies8k070518_2.htm
 
Exhibit 99.1
 
 
Xplore Technologies Reports 12% Revenue Growth, $0.03 EPS in Fiscal 2018
Profitable Year Driven by Solid Growth, Operational Execution
Agreement to be Acquired by Zebra Technologies

AUSTIN, Texas – July 5, 2018 – Xplore Technologies Corp. (NASDAQ: XPLR), a global leader in rugged computing, today reported increased revenue and positive net income for its fiscal year 2018, ended March 31, 2018, and the signing of a definitive agreement to be acquired by Zebra Technologies.

Fiscal Year 2018 and Recent Highlights:
 
·
Reported revenue of $86.9 million, an increase of 11.6% year-over year;
·
Achieved gross margin of 29.8%, increased from 28.2% in fiscal 2017;
·
Maintained low operating expenses of $25.2 million, including $0.7 million in one-time charges;
·
Reported a net profit of $300,000, or $0.03 per diluted share, and adjusted EBITDA of positive $3.8 million, compared with a net loss of $2.6 million, or ($0.23) per basic share, and negative adjusted EBITDA of $168,000 in fiscal 2017;
·
Results for fiscal 2018 include $0.06 per share in one-time charges related to executive severance costs and $0.01 per share representing a one-time property tax payment related to assets acquired from Motion Computing in 2015;
·
Transformed Xplore into a rugged mobility company with the launch of the XBOOK line of 2-in-1 devices and entry into the $2.5 billion rugged handheld device market;
·
Continued to win orders across a number of targeted vertical markets, including manufacturing, industrial and government applications;
·
Furthered the company’s focus on improved domestic and international distributor and reseller relationships with the rollout of new incentive and co-promotion programs; and
·
Announced a definitive agreement for Zebra Technologies to acquire Xplore for $6.00 per share.

Chief Executive Officer Tom Wilkinson stated: “As promised, we reported a strong finish to fiscal 2018, delivering an almost 12% increase in annual sales, positive GAAP net income for the year and significant progress on our transformation into a diversified, profitable rugged mobility company serving an addressable market in excess of $4 billion. Our success as the #2 global provider of rugged tablets and strong growth outlook earned the notice of Zebra Technologies, the global leader in rugged mobile computers, barcode scanners and barcode printers. This morning we announced an agreement to be acquired by Zebra for $6.00 per share. We are excited to join Zebra, and believe this acquisition validates the incredible work our team does every day to develop innovative rugged mobility solutions to serve our customers. Our products are a natural fit for Zebra and gives them a highly complementary rugged tablet portfolio and customer base that stands strong against any competitor.”

Zebra Technologies Transaction
Xplore today announced a definitive agreement to be acquired by Zebra Technologies Corporation, a market leader in rugged mobile computers, barcode scanners and barcode printers enhanced with software and services to enable real-time enterprise visibility. Under terms of the agreement, Zebra will acquire all of the outstanding shares of Xplore for $6.00 per share. Zebra plans to effect the acquisition via commencing a tender offer. The transaction is subject to customary closing conditions and is expected to close in the third quarter of 2018. Xplore expects to file a Current Report on Form 8-K with the Securities and Exchange Commission later today providing further details regarding the terms of the transaction.

Full Year Financial Results
For the full fiscal year 2018, Xplore reported total revenue of $86.9 million, an increase of 11.6% from $77.9 million in fiscal 2017. The change in revenue reflected strong growth across Xplore’s customer base, increased international sales and rising adoption of rugged solutions in the mobile workplace. Gross margin in fiscal 2018 was 29.8%, an increase of 160 basis points from, 28.2% in fiscal 2017, reflecting changes in product mix and improved production efficiency.

Operating expenses for fiscal 2018 were $25.2 million, an increase of 5.0% from $24.0 million in fiscal 2017. The increase in operating expenses was primarily caused by $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.

Net profit for fiscal 2018 was $300,000, or $0.03 per diluted share, compared to a net loss of $2.6 million, of ($0.23) per basic share in fiscal 2017. Adjusted EBITDA for fiscal 2018 was positive $3.8 million including one-time severance and tax charges, compared to negative $168,000 in fiscal 2017. The change in net income and adjusted EBITDA reflects Xplore’s successful transition to a sustainably profitable company through an emphasis on sales growth and operating efficiency.

Fiscal 2018 Fourth Quarter Financial Results
Xplore reported revenue of $20.3 million for the fiscal fourth quarter ended March 31, 2018, a 20% increase from $16.9 million in the year-ago fourth quarter. Revenue reflected increased demand for rugged tablets, increased international sales, fulfilment of large multi-quarter customer contracts. Additionally, revenue reflected a continued lessening of prior seasonal trends due to increased emphasis on long-term customer orders and diversification of the customer base.

Gross profit in the fourth quarter was $5.7 million, or 28.2% of revenue, compared with $4.8 million, or 28.1% of revenue, in the preceding year fourth quarter. The change in gross margin reflects a change in product mix and an overweighting of fulfillment for larger customers with negotiated pricing.

Operating expenses were $6.2 million for the fiscal fourth quarter, compared with $5.2 million in the prior year fourth quarter. Operating expenses reflect continued lean operating practices plus increased headcount in sales and marketing and expansion ahead of the company’s rugged handheld market entry.

For the quarter, Xplore reported a net loss of $638,000, or ($0.05) per share, compared to net loss of $488,000, or ($0.04) per share, in the prior year fourth quarter.

EBITDA adjusted for non-cash compensation, severance and tax settlement charges was $171,000, compared with positive $1.7 million in the preceding quarter and positive $30,000 in the fiscal fourth quarter 2017. A reconciliation is provided in the tables included in this release and the previously disclosed fiscal third quarter release.

Cash Flow and Balance Sheet
For the year ended March 31, 2018 net cash used in operating activities was $16.5 million, primarily to finance increased accounts receivable due to revenue growth and added inventory to ensure fulfillment of large customer orders and minimum order quantities on certain legacy products. Net cash used by operating activities reflects accounts receivable balances of $18.9 million, compared with $10.5 million at year end fiscal 2017, and inventory of $25.6 million, compared with $12.9 million at the prior year end. At quarter end, cash was $46,000 and debt under the company’s line of credit was $14.2 million.

Conference Call
Due to the acquisition agreement with Zebra Technologies, Xplore is cancelling its results conference call previously planned for today at 11:00 a.m. ET. Further information will be available to Xplore shareholders in documentation associated with the Zebra tender offer.

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:
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—Unaudited
(in thousands)


 
  
March 31,
 2018
    
March 31,
 2017
  
ASSETS
            
CURRENT ASSETS:
            
Cash and cash equivalents     
  
$
46
    
$
3,460
  
Accounts receivable, net   
    
18,913
      
10,452
  
Inventory, net
    
25,616
      
12,858
  
Prepaid expenses and other current assets
    
1,140
      
469
  
Total current assets
    
45,715
      
27,239
  
Fixed assets, net    
    
1,672
      
1,862
  
Intangible assets, net
    
1,065
      
1,425
  
Goodwill
    
15,159
      
15,159
  
 
  
$
63,611
    
$
45,685
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
LIABILITIES:
                
Bank indebtedness
  
$
14,159
    
$
—
  
Accrued payable
    
10,006
      
7,342
  
Accrued liabilities
    
2,668
      
2,266
  
Deferred revenue and current warranty liabilities
    
3,074
      
3,145
  
Total current liabilities
    
29,907
      
12,753
  
Deferred revenue and non-current warranty liabilities
    
3,429
      
3,650
  
Total liabilities
    
33,336
      
16,403
  
Commitments and contingencies
    
—
      
—
  
STOCKHOLDERS’ EQUITY:
                
Preferred Stock, par value $0.001 per share; authorized 5,000; shares issued none
    
—
      
—
  
Common Stock, par value $0.001 per share; authorized 15,000; shares issued 11,086 and 10,970, respectively
    
11
      
11
  
Additional paid-in capital          
    
172,477
      
171,784
  
Accumulated deficit          
    
(142,213
)
    
(142,513
)
 
    
30,275
      
29,282
  
 
  
$
63,611
    
$
45,685
  


XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Profit and Loss—Unaudited
(in thousands of dollars, except share and per share amounts)


 
 
 
  
Years Ended March 31,
  
 
  
2018
    
2017
  
Revenue          
  
$
86,939
    
$
77,928
  
Cost of revenue          
    
61,047
      
55,956
  
Gross profit          
    
25,892
      
21,972
  
 
                
Expenses:
                
Sales, marketing and support          
    
14,439
      
12,370
  
Product research, development and engineering          
    
3,354
      
4,462
  
General administration          
    
7,437
      
7,193
  
 
    
25,230
      
24,025
  
Income (loss)  from operations          
    
662
      
(2,053
)
 
                
Other income (expense):
                
Interest expense          
    
(426
)
    
(173
)
Other income (expense)          
    
71
      
(197
)
 
    
(355
)
    
(370
)
Income (loss) before income taxes          
    
307
      
(2,423
)
Income tax (expense) benefit          
    
(7
)
    
(129
)
Net income (loss)          
  
$
300
    
$
(2,552
)
 
                
Income (loss) per common share, primary          
  
$
0.03
    
$
(0.23
)
Income (loss) per common share, fully diluted          
  
$
0.03
    
$
(0.23
)
Weighted average number of common shares outstanding, primary          
    
11,019,715
      
10,938,057
  
Weighted average number of common shares outstanding, fully diluted          
    
11,039,715
      
10,938,057
  


XPLORE TECHNOLOGIES CORP.
Consolidated Statements of Cash Flows—Unaudited
(in thousands)

 
  
Years Ended March 31,
  
 
  
2018
    
2017
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Cash provided by (used in) operations:
            
Net income (loss)
  
$
300
    
$
(2,552
)
Items not affecting cash:
                
Depreciation and amortization
    
1,765
      
1,571
  
Provision for doubtful accounts
    
233
      
(91
)
Stock‑based compensation expense
    
588
      
511
  
Loss on disposal of asset
    
—
      
28
  
Reversal of inventory reserve
    
299
      
-
  
Changes in operating assets and liabilities:
                
Accounts receivable
    
(8,694
)
    
3,916
  
Inventory
    
(13,057
)
    
2,000
  
Prepaid expenses and other current assets
    
(671
)
    
331
  
Accounts payable and accrued liabilities, including deferred revenue
    
2,774
      
(5,598
)
Net cash provided by (used in) operating activities
    
(16,463
)
    
116
  
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Net cash received (paid) in purchase transaction
    
—
      
(287
)
Additions to fixed assets 
    
(1,215
)
    
(2,098
)
Net cash used in investing activities 
    
(1,215
)
    
(2,385
)
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Proceeds from short-term borrowings
    
83,927
      
50,476
  
Repayment of short-term indebtedness
    
(69,768
)
    
(50,476
)
Net proceeds on issuance of Common Stock
    
105
      
135
  
Net cash provided by financing activities
    
14,264
      
135
  
CHANGE IN CASH AND CASH EQUIVALENTS
    
(3,414
)
    
(2,134
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
3,460
      
5,594
  
CASH AND CASH EQUIVALENTS, END OF PERIOD
  
$
46
    
$
3,460
  
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
                
Payments for interest
  
$
426
    
$
173
  
Payments for income taxes, net of refunds
  
$
—
    
$
129
  


XPLORE TECHNOLOGIES CORP.
Adjusted EBITDA Reconciliation—Unaudited
(in thousands)

   
Three Months Ended March, 31
  
   
2018
    
2017
  
             
Net income (loss)
  
$
(638
)
  
$
(488
)
                 
Income taxes
    
(21
)
    
-
  
Interest expense
    
179
      
17
  
Depreciation and amortization
    
400
      
403
  
Stock-based compensation expense
    
251
      
98
  
                 
ADJUSTED EBITDA
  
$
171
    
$
30
  


XPLORE TECHNOLOGIES CORP.
One-Time Charge Reconciliation—Unaudited
(in thousands, except per share amounts)

   
Fiscal Year Ended March 31, 2018
  
   
Net Income
    
Adjusted EBITDA
  
Presented
  
$
300
    
$
3,086
  
                 
Severance related costs
    
575
      
575
  
Motion property tax
    
91
      
91
  
                 
Amounts before one-time charges
  
$
966
    
$
3,752
  
                 
Per Share amounts before One Time Charges
  
$
0.09
    
$
0.34
  

Xplore Technologies Quarterly Historical Information

   
FY 2018
  
    
1st Qtr
    
2nd Qtr
    
3rd Qtr
    
4th Qtr
    
YTD
  
                               
Revenue
  
$
19,998
    
$
22,748
    
$
23,853
    
$
20,340
    
$
86,939
  
Cost of revenue
    
13,812
      
16,395
      
16,233
      
14,607
      
61,047
  
Gross profit
    
6,186
      
6,353
      
7,620
      
5,733
      
25,892
  
                                         
Expenses
                                        
Sales, marketing and support
    
3,201
      
3,166
      
3,803
      
4,269
      
14,439
  
Product research, development & engineering
    
807
      
922
      
779
      
846
      
3,354
  
General administrative
    
1,950
      
1,786
      
2,577
      
1,124
      
7,437
  
Total expenses
    
5,958
      
5,874
      
6,006
      
6,239
      
25,230
  
                                         
Profit/(loss) from operations
    
228
      
479
      
461
      
(506
)
    
662
  
                                         
Other expenses
                                        
Interest expense
    
(25
)
    
(79
)
    
(143
)
    
(179
)
    
(426
)
Other income/expenses
    
36
      
7
      
2
      
26
      
(7
)
     
11
      
(72
)
    
(141
)
    
(153
)
    
(355
)
                                         
Income/(loss) before taxes
    
239
      
407
      
320
      
(659
)
    
307
  
Income taxes
    
-
      
(10
)
    
(18
)
    
21
      
(7
)
Net income
  
$
239
    
$
397
    
$
302
    
$
(638
)
  
$
300
  
                                         
Depreciation & amortization
    
473
      
454
      
438
      
400
      
1,765
  
Interest expense
    
25
      
79
      
143
      
179
      
426
  
Income taxes
    
-
      
10
      
18
      
(21
)
    
7
  
EBITDA
    
737
      
940
      
901
      
(80
)
    
2,498
  
                                         
Non-cash compensation
    
102
      
113
      
122
      
251
      
588
  
Adjusted EBITDA
  
$
839
    
$
1,053
    
$
1,023
    
$
171
    
$
3,086
  

   
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
)

Xplore Technologies Quarterly Key Statistics

   
FY 2018
  
   
1st Qtr
    
2nd Qtr
    
3rd Qtr
    
4th Qtr
    
YTD
  
                               
Gross margin
    
30.9
%
    
27.9
%
    
31.9
%
    
28.2
%
    
29.8
%
Operating margin
    
1.1
%
    
2.1
%
    
1.9
%
    
-2.5
%
    
0.8
%
Periodic revenue %
    
25.7
%
    
29.2
%
    
30.6
%
    
26.1
%
    
100.0
%
Quarter over Quarter
                                        
Revenue Change %
    
18.0
%
    
13.8
%
    
4.9
%
    
-14.7
%
        

   
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
%
        
                                         


XPLORE TECHNOLOGIES CORP Reports