Attached files
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| 8-K - CURRENT REPORT - Track Group, Inc. | trck8k_may2020.htm |
Exhibit 99.1
FOR
IMMEDIATE RELEASE
May 7, 2020
Peter
Poli
Chief Financial Officer
877-260-2010
peter.poli@trackgrp.com
Track
Group Reports 2nd Quarter Fiscal 2020 Financial
Results
Revenue up 1%, Operating Income improves 186%, Adjusted
EBITDA was flat
and Net Loss
higher
NAPERVILLE, ILLINOIS – Track Group, Inc. (OTCQX: TRCK), a
global leader in offender tracking and monitoring services, today
announced financial results for its second quarter ended March 31,
2020 (the “Q2 FY20”). In Q2 FY20, the Company
posted (i) revenue of $8.1
million ("M"), an increase of approximately 1% over the same period
last year, (ii) operating income of $0.2M representing an increase of 186%
compared to an operating loss of $0.3M
for the quarter ended March 31, 2019 (“Q2 FY19”), which
also led to a cash balance of $7.7M, up 36% compared to $5.7M for
the same period one year ago, (iii) adjusted EBITDA of
$1.6M, flat to Q2 FY19, and (iv) a net
loss attributable to common shareholders of $1.7M compared to a net
loss of $0.3M for the same period last year, largely due to
non-cash foreign exchange fluctuations.
“Our Company, our customers, our supply
partners and our employees have all performed extremely well
despite facing unprecedented challenges over the past 2 ½
months brought on by the Coronavirus,” said Derek Cassell, Track
Group’s CEO. “I am proud to work with all of these
people and remain confident that together, if we continue to work
hard and communicate effectively, we have the opportunity to record
even stronger results in the second half of our fiscal
year.”
FINANCIAL
HIGHLIGHTS
●
Quarterly
revenue of $8.13M in Q2 FY20, up 1% over Q2 FY19 revenue of $8.09M.
Revenue for the 6 months ended March 31, 2020 (“6M
FY20”) of $16.6M was up approximately 2% compared to revenue
of $16.3M for the 6 months ended March 31, 2019 (“6M
FY19”). Revenue in Q2 FY20 and 6M FY20 was $0.4M and
$0.6M lower than the same periods in FY19 due to the strengthening
of the U.S. dollar against the Chilean
peso.
●
Quarterly gross profit of $4.4M in Q2 FY20, down
1% over Q2 FY19 gross profit of $4.5M. Gross Profit for 6M FY20
was $9.1million,
or flat compared to gross profit of $9.1 million for 6M
FY19.
●
Total operating expense for Q2 FY20 of $4.2M is
down 12% versus Q2 FY19’s $4.8M of operating expense. The
reduction in quarterly operating expense when combined with Q2 FY20
gross profit of $4.4M led to a quarterly operating income of $237K,
which is an improvement of 186% compared to the $276K operating
loss for Q2 FY19. For 6M FY20, operating income was $38K compared
to the operating loss for 6M FY19 of $333K, representing an
improvement of approximately 261%.
●
Adjusted
EBITDA for the Q2 FY20 finished at $1.6M, flat compared to $1.6M
for Q2 FY19. Adjusted EBITDA for 6M FY20 of $3.4M, up approximately
2% vs $3.3M for 6M FY19.
●
Cash
balance of $7.7M for Q2 FY20, up 36% compared to $5.7M for Q2 FY19
and down 10% over the December 31, 2019 cash balance of
$8.5M.
●
Net
loss attributable to shareholders in the Q2 FY20 was $1.7M compared
to a net loss of $0.3M in Q2 FY19, a change principally
attributable to the non-cash impact of the volatility of the US
dollar as compared to the Chilean peso. The net loss attributable
to shareholders for the 6M FY20 was $2.0 million compared to a net
loss of $2.0 million in 6M FY19.
BUSINESS
OUTLOOK
As of May 7, 2020, the Company has not been
materially adversely impacted by the coronavirus disease
(“COVID-19”); however, the Company is operating
in a rapidly changing environment so the extent to which the
coronavirus pandemic impacts our business, operations and financial
results from this point forward will depend on numerous evolving
factors that the Company cannot accurately predict. Given this
uncertainty, the Company has removed specific guidance regarding
fiscal 2020 results.
About
Track Group, Inc.
Track
Group designs, manufactures, and markets location tracking devices;
as well as develops and sells a variety of related software,
services, and accessories, networking solutions, and monitoring
applications. The Company's products and services are designed to
empower professionals in security, law enforcement, corrections and
rehabilitation organizations worldwide with single-sourced offender
management solutions that integrate reliable intervention
technologies to support re-socialization and monitoring
initiatives.
The Company currently trades under the ticker symbol
"TRCK" on the OTCQX exchange. For more information, visit
www.trackgrp.com.
Forward-Looking
Statements
Any
statements contained in this document that are not historical facts
are forward-looking statements as defined in the U.S. Private
Securities Litigation Reform Act of 1995. Words such as
"anticipate," "believe," "estimate," "expect," "forecast,"
"intend," "may," "plan," "project," "predict," "if", "should" and
"will" and similar expressions as they relate to Track Group, Inc.
and subsidiaries ("Track Group") are intended to identify such
forward-looking statements. These statements are only predictions
and reflect Track Group's current beliefs and expectations with
respect to future events and are based on assumptions and subject
to risks and uncertainties and subject to change at any time. Track
Group may from time to time update these publicly announced
projections, but it is not obligated to do so. Any projections of
future results of operations should not be construed in any manner
as a guarantee that such results will in fact occur. These
projections are subject to change and could differ materially from
final reported results. For a discussion of such risks and
uncertainties, see "Risk Factors" in Track Group's annual report on
Form 10-K, its quarterly report on Form 10-Q, and its other reports
filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended. New risks emerge from
time to time. Readers are cautioned not to place undue reliance on
these forward- looking statements, which speak only as of the dates
on which they are made.
Non-GAAP
Financial Measures
This
release includes financial measures defined as “non-GAAP
financial measures” by the Securities and Exchange Commission
including non-GAAP EBITDA. These measures may be different from
non- GAAP financial measures used by other companies. The
presentation of this financial information, which is not prepared
under any comprehensive set of accounting rules or principles, is
not intended to be considered in isolation or as a substitute for
the financial information prepared and presented in accordance with
generally accepted accounting principles. Reconciliations of these
non-GAAP financial measures are based on the financial figures for
the respective period.
Non-GAAP
Adjusted EBITDA excludes items included but not limited to
interest, taxes, depreciation, amortization, impairment charges,
gains and losses, currency effects, one time charges or benefits
that are not indicative of operations, charges to consolidate,
integrate or consider recently acquired businesses, costs of
closing facilities, stock based or other non-cash compensation or
other stated cash and non-cash charges (the
“Adjustments”).
The Company believes the non-GAAP measures provide
useful information to both management and investors when factoring
in the Adjustments. Specific disclosure regarding the
Company’s financial results, including management’s
analysis of results from operations and financial condition, are
contained in the Company’s annual report on Form 10-K for the
fiscal year ended September 30, 2019, and other reports filed with the Securities and
Exchange Commission. Investors are encouraged to carefully read and
consider such disclosure and analysis contained in the
Company’s Form 10-K and other reports, including the risk
factors contained in such Form 10-K.
TRACK
GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(Unaudited)
March 31,
|
September
30,
|
|
Assets
|
2020
|
2019
|
|
Current assets:
|
|
|
|
Cash
|
$7,686,042
|
$6,896,711
|
|
Accounts
receivable, net of allowance for doubtful accounts of $2,580,537
and $2,454,281, respectively
|
4,960,428
|
6,763,236
|
|
Prepaid
expense and deposits
|
1,218,843
|
1,339,465
|
|
Inventory,
net of reserves of $62,147 and $26,934, respectively
|
60,132
|
274,501
|
|
Total
current assets
|
13,925,445
|
15,273,913
|
|
Property
and equipment, net of accumulated depreciation of $2,290,429 and
$2,248,913, respectively
|
532,343
|
675,037
|
|
Monitoring
equipment, net of accumulated amortization of $6,387,123 and
$6,322,768, respectively
|
2,591,391
|
2,624,900
|
|
Intangible
assets, net of accumulated amortization of $15,209,788 and
$14,157,090, respectively
|
21,052,972
|
21,955,679
|
|
Goodwill
|
8,012,536
|
8,187,911
|
|
Deferred
tax asset
|
580,058
|
540,563
|
|
Other
assets
|
594,719
|
124,187
|
|
Total
assets
|
$47,289,464
|
$49,382,190
|
|
|
|
|
|
Liabilities and Stockholders’ Equity (Deficit)
|
|
|
|
Current liabilities:
|
|
|
|
Accounts
payable
|
1,560,395
|
2,628,003
|
|
Accrued
liabilities
|
14,420,182
|
13,828,696
|
|
Current
portion of long-term debt
|
3,408,413
|
33,827,689
|
|
Total
current liabilities
|
19,388,990
|
50,284,388
|
|
Long-term
debt, net of current portion
|
30,400,000
|
-
|
|
Long-term
liabilities
|
268,179
|
-
|
|
Total
liabilities
|
50,057,169
|
50,284,388
|
|
|
|
|
|
Commitments and contingencies
|
-
|
-
|
|
|
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
Common
stock, $0.0001 par value: 30,000,000 shares authorized;
11,414,150 and 11,401,650 shares outstanding,
respectively
|
1,141
|
1,140
|
|
Series
A Convertible Preferred stock, $0.0001 par value: 1,200,000 shares
authorized; 0 shares outstanding
|
-
|
-
|
|
Paid
in capital
|
302,270,242
|
302,250,556
|
|
Accumulated
deficit
|
(304,105,976)
|
(302,152,292)
|
|
Accumulated
other comprehensive loss
|
(933,112)
|
(1,001,602)
|
|
Total
equity (deficit)
|
(2,767,705)
|
(902,198)
|
|
Total
liabilities and stockholders’ equity (deficit)
|
$47,289,464
|
$49,382,190
|
TRACK
GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
(Unaudited)
|
|
Three
Months Ended
|
Six
Months Ended
|
||
|
|
March
31,
|
March
31,
|
March
31,
|
March
31,
|
|
|
2020
|
2019
|
2020
|
2019
|
|
Revenue:
|
|
|
|
|
|
Monitoring
and other related services
|
$7,993,092
|
$7,877,403
|
$16,261,515
|
$15,937,731
|
|
Product
sales and other
|
138,634
|
213,839
|
291,042
|
365,046
|
|
Total
revenue
|
8,131,726
|
8,091,242
|
16,552,557
|
16,302,777
|
|
|
|
|
|
|
|
Cost
of revenue:
|
|
|
|
|
|
Monitoring,
products and other related services
|
3,201,677
|
3,065,710
|
6,468,586
|
6,165,903
|
|
Depreciation
and amortization included in cost of revenue
|
494,157
|
533,590
|
981,599
|
1,011,879
|
|
Total cost of
revenue
|
3,695,834
|
3,599,300
|
7,450,185
|
7,177,782
|
|
|
|
|
|
|
|
Gross profit
|
4,435,892
|
4,491,942
|
9,102,372
|
9,124,995
|
|
|
|
|
|
|
|
Operating
expense:
|
|
|
|
|
|
General &
administrative
|
2,723,219
|
3,316,069
|
5,735,073
|
6,738,341
|
|
Selling &
marketing
|
642,432
|
576,974
|
1,183,981
|
1,080,904
|
|
Research &
development
|
323,737
|
354,879
|
619,892
|
603,744
|
|
Depreciation &
amortization
|
509,287
|
520,384
|
1,025,226
|
1,035,365
|
|
Total operating
expense
|
4,198,675
|
4,768,306
|
8,564,172
|
9,458,354
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
237,217
|
(276,364)
|
538,200
|
(333,359)
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
Interest expense,
net
|
(596,324)
|
(584,348)
|
(1,198,857)
|
(1,185,587)
|
|
Currency exchange
rate gain (loss)
|
(1,334,240)
|
595,910
|
(1,190,932)
|
(336,767)
|
|
Other income
(loss), net
|
(4,347)
|
143
|
(4,347)
|
143
|
|
Total other income (expense)
|
(1,934,911)
|
11,705
|
(2,394,136)
|
(1,522,211)
|
|
Loss
before income taxes
|
(1,697,694)
|
(264,659)
|
(1,855,936)
|
(1,855,570)
|
|
Income
tax expense
|
23,365
|
-
|
97,748
|
144,007
|
|
Net
loss attributable to common shareholders
|
(1,721,059)
|
(264,659)
|
(1,953,684)
|
(1,999,577)
|
|
Foreign currency
translation adjustments
|
132,588
|
(255,981)
|
68,490
|
(159,308)
|
|
Comprehensive
loss
|
$(1,588,471)
|
$(520,640)
|
$(1,885,194)
|
$(2,158,885)
|
|
Net
loss per common share, basic and diluted
|
$(0.15)
|
$(0.02)
|
$(0.17)
|
$(0.18)
|
|
Weighted
average common shares outstanding, basic and diluted
|
11,414,150
|
11,251,650
|
11,336,690
|
11,175,002
|
|
|
Three
Months Ended
March
31,
|
Six
Months Ended
March
31,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Non-GAAP Adjusted EBITDA
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
$(1,721)
|
$(265)
|
$(1,954)
|
$(2,000)
|
|
Interest
expense, net
|
596
|
585
|
1,199
|
1,186
|
|
Depreciation
and amortization
|
1,004
|
1,054
|
2,007
|
2,047
|
|
Income taxes (1)
|
24
|
-
|
98
|
144
|
|
Board
compensation and stock-based compensation
|
75
|
100
|
170
|
258
|
|
Foreign
exchange expense
|
1,334
|
(596)
|
1,191
|
337
|
|
Other charges, net (2)
|
303
|
740
|
680
|
1,364
|
|
Non GAAP Adjusted EBITDA
|
$1,618
|
$1,618
|
$3,391
|
$3,336
|
|
Non GAAP Adjusted EBITDA, percent of revenue
|
19.9%
|
20.0%
|
20.5%
|
20.5%
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
11,414,150
|
11,251,650
|
11,336,690
|
11,175,002
|
|
Non-GAAP earnings per share
|
$0.14
|
$0.14
|
$0.30
|
$0.30
|
(1) Currently, the Company has significant U.S. tax loss
carryforwards that may be used to offset future taxable income,
subject to IRS limitations. However, the Company is still subject
to certain state, commonwealth, and other foreign based
taxes.
(2) Other charges may include gains or losses and
non-recurring accrual adjustments.