Track Group Reports 3rd Quarter Fiscal 2018 Financial Results
Revenue up 4%, Gross Profit up 13% and Operating Loss Improves 42%
NAPERVILLE, Ill., Aug. 9, 2018 /PRNewswire/ -- Track Group, Inc. (OTCQX: TRCK), a global leader in offender tracking and monitoring services, today announced financial results for its third quarter ended June 30, 2018 (the "Third Quarter"). The Company posted gross profit of $4.2M, on total revenue of $7.7M, for a gross margin of 55%. In addition, the Third Quarter adjusted EBITDA came in at $1.16M.
"We're thrilled to report record levels of active devices during our Third Quarter," said Derek Cassell, Track Group's CEO. "The implementation of a number of new customer opportunities combined with the record device levels positions us well for the remainder of the calendar year."
BUSINESS AND FINANCIAL HIGHLIGHTS
- Revenue for the Third Quarter ($7.7M) is up approximately 4% compared to the same period last year.
- Gross Profit for the Third Quarter increased approximately 13% from last year ($4.2M vs. $3.7M) which led to Gross Profit for the 9 months ended June 30, 2018 being up 12% compared to the prior year ($12.7M vs $11.3M). As a result, gross margin for the Third Quarter and the 9 months ended June 30, 2018 was 55% and 56%, respectively, up considerably from the gross margin of 51% for both periods last year.
- The quarterly operating loss of ($0.7M) is among the lowest in over three years, and allowed the Company to improve the 9 months ended June 30, 2018 operating loss to ($1.8M) down by 57% compared to the same period last year ($4.1M), due to a combination of a strong Gross Profit results and lower Operating Expenses.
- Adjusted EBITDA in the Third Quarter finished at ($1.16M), which led to Adjusted EBITDA for the 9 months ended June 30, 2018 increasing 75% ($4.0M) compared to the same period last year ($2.3M).
- Net loss, attributable to shareholders, for the 9 months ended June 30, 2018 was ($4.6M) compared to a loss of ($3.5M) for the same period last year due to a gain on settlement of a contingent liability of $3.2M in the same period last year. Without the gain on settlement of the contingent liability in 2017, loss attributable to shareholders would have been $6.7M for the 9 months ended June 30, 2017, compared to $4.6M in 2018.
- Net Cash Provided by Operating Activities remained strong for the 9 months ended June 30, 2018 ($5.3M) compared to the same period of fiscal year 2017 ($2.9M), or up 81%.
- On July 19, 2018, the Company and Conrent Invest S.A. ("Conrent") agreed to extend the maturity date to the earlier of April 1, 2019 or the date upon which the principal and interest is repaid for the Amended and Restated Unsecured Facility Agreement dated June 30, 2015 between the Company and Conrent.
- On July 23, 2018, the Company announced the introduction of BACtrack, a mobile alcohol monitoring system that integrates a smartphone app and a law enforcement-grade, handheld breathalyzer to provide breath alcohol content.
BUSINESS OUTLOOK
| Actual |
Outlook |
||
| FY 2016 |
FY 2017 |
FY 2018 |
|
| Revenue: |
$27.2M |
$29.7M |
$32-33M |
| Adjusted EBITDA Margin: |
7.3% |
12.2% |
18-22% |
The Revenue outlook for fiscal year 2018 has been narrowed to $32-$33 million. There is no modification to the Adjusted EBITDA Margin, which remains at 18-22%.
About Track Group, Inc.
Track Group designs, manufactures, and markets location tracking devices and develops and sells a variety of related software, services, 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, 2017, 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 |
|||
| Assets |
June 30, |
September |
|
| Current assets: |
|||
| Cash |
$ 5,210,145 |
$ 2,027,321 |
|
| Accounts receivable, net of allowance for doubtful accounts of $3,588,084 and $3,268,095, respectively |
5,071,783 |
5,438,564 |
|
| Note receivable, current portion |
234,733 |
234,733 |
|
| Prepaid expense and other |
1,231,318 |
854,122 |
|
| Inventory, net of reserves of $26,934 and $26,934, respectively |
420,114 |
261,810 |
|
| Total current assets |
12,168,093 |
8,816,550 |
|
| Property and equipment, net of accumulated depreciation of $1,965,061 and $1,778,634, respectively |
812,651 |
903,100 |
|
| Monitoring equipment, net of accumulated depreciation of $5,361,281 and $4,906,925, respectively |
3,168,377 |
3,493,012 |
|
| Intangible assets, net of accumulated amortization of $11,442,820 and $9,839,032, respectively |
23,366,983 |
24,718,655 |
|
| Goodwill |
8,027,882 |
8,226,714 |
|
| Other assets |
149,461 |
2,989,101 |
|
| Total assets |
$ 47,693,447 |
$ 49,147,132 |
|
| Liabilities and Stockholders' Equity |
|||
| Current liabilities: |
|||
| Accounts payable |
2,192,246 |
2,769,835 |
|
| Accrued liabilities |
9,425,116 |
6,650,291 |
|
| Current portion of long-term debt, net of discount of $18,581 and $185,811, respectively |
30,426,686 |
30,270,531 |
|
| Total current liabilities |
42,044,048 |
39,690,657 |
|
| Long-term debt, net of current portion |
3,438,484 |
3,480,717 |
|
| Total liabilities |
45,482,532 |
43,171,374 |
|
| Stockholders' equity: |
|||
| Common stock, $0.0001 par value: 30,000,000 shares authorized; 11,401,650 and 10,480,984 shares outstanding, respectively |
1,140 |
1,048 |
|
| Additional paid-in capital |
302,019,648 |
300,717,861 |
|
| Accumulated deficit |
(298,702,865) |
(294,067,329) |
|
| Accumulated other comprehensive loss |
(1,107,008) |
(675,822) |
|
| Total equity |
2,210,915 |
5,975,758 |
|
| Total liabilities and stockholders' equity |
$ 47,693,447 |
$ 49,147,132 |
|
| TRACK GROUP, INC. AND SUBSIDIARIES |
||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
||||||
| (Unaudited) |
||||||
| Three Months Ended |
Nine Months Ended |
|||||
| June 30, |
June 30, |
June 30, |
June 30, |
|||
| Monitoring services |
$ 7,549,779 |
$ 7,157,424 |
$ 22,062,789 |
$ $21,577,313 |
||
| Other |
129,196 |
193,930 |
423,056 |
665,574 |
||
| Total revenue |
7,678,975 |
7,351,354 |
22,485,845 |
22,242,887 |
||
| Cost of revenue: |
||||||
| Monitoring, products & other related services |
3,039,755 |
2,944,920 |
8,409,604 |
9,281,288 |
||
| Depreciation & amortization |
432,952 |
672,562 |
1,377,760 |
1,633,629 |
||
| Total cost of revenue |
3,472,707 |
3,617,482 |
9,787,364 |
10,914,917 |
||
| Gross profit |
4,206,268 |
3,733,872 |
12,698,481 |
11,327,970 |
||
| Operating expenses: |
||||||
| General & administrative |
3,703,869 |
3,611,903 |
10,856,950 |
9,142,113 |
||
| (Gain) loss on sale of asset |
- |
(2,500) |
- |
763,531 |
||
| Restructuring costs |
- |
(1,265) |
- |
569,135 |
||
| Selling & marketing |
466,048 |
572,334 |
1,394,778 |
1,786,312 |
||
| Research & development |
254,060 |
292,938 |
600,814 |
1,460,354 |
||
| Depreciation & amortization |
520,639 |
535,892 |
1,624,916 |
1,744,276 |
||
| Total operating expenses |
4,944,616 |
5,009,302 |
14,477,458 |
15,465,721 |
||
| Loss from operations |
(738,348) |
(1,275,430) |
(1,778,977) |
(4,137,751) |
||
| Other income (expense): Interest expense, net |
(594,452) |
(672,369) |
(2,074,245) |
(2,116,805) |
||
| Currency exchange rate gain (loss) |
(166,586) |
181,966 |
(442,706) |
75,859 |
||
| Gain on settlement of milestone payments |
- |
3,000,000 |
- |
3,213,940 |
||
| Other income, net |
3,733 |
4,934 |
21,199 |
13,701 |
||
| Total other income (expense) |
(757,305) |
2,514,531 |
(2,495,752) |
1,186,695 |
||
| Income (loss) before income taxes |
(1,495,653) |
1,239,101 |
(4,274,729) |
(2,951,056) |
||
| Income tax expense |
360,807 |
492,552 |
360,807 |
501,651 |
||
| Net income (loss) attributable to common shareholders |
(1,856,460) |
746,549 |
(4,635,536) |
(3,452,707) |
||
| Foreign currency translation adjustments |
(861,637) |
746,156 |
(431,186) |
236,969 |
||
| Comprehensive income (loss) |
$(2,718,097) |
$1,492,705 |
$(5,066,722) |
$(3,215,738) |
||
| Basic and diluted income (loss) per common share |
$ (0.17) |
$ $0.07 |
$ (0.44) |
$(0.33) |
||
| Weighted average common shares outstanding, basic and diluted |
10,885,444 |
10,486,665 |
10,608,127 |
10,384,566 |
||
| Three Months Ended |
Nine Months Ended |
|||
| 2018 |
2017 |
2018 |
2017 |
|
| Non-GAAP Adjusted EBITDA |
$(1,857) |
$746 |
$(4,636) |
$(3,453) |
| Interest expense, net |
594 |
672 |
2,074 |
2,117 |
| Income taxes (1) |
361 |
493 |
361 |
502 |
| Depreciation, amortization and impairment |
953 |
1,419 |
3,003 |
3,723 |
| Board compensation and stock based compensation |
356 |
1,028 |
1,701 |
905 |
| Restructuring charges (2) |
- |
(1) |
- |
569 |
| Gain on contingent share liability |
- |
(3,000) |
- |
(3,214) |
| Loss on sale of assets |
- |
(2) |
- |
764 |
| Other charges, net (3) |
756 |
(120) |
1,488 |
371 |
| Non GAAP Adjusted EBITDA |
$1,163 |
$1,235 |
$3,991 |
$2,284 |
| Non GAAP Adjusted EBITDA, percent of revenue |
15.1% |
16.8% |
17.7% |
10.3% |
| Three Months Ended |
Nine Months Ended |
|||
| 2018 |
2017 |
2018 |
2017 |
|
| Non-GAAP EPS (in $000's, except share data) |
||||
| Net gain (loss) attributable to common shareholders |
$(1,857) |
$746 |
$(4,636) |
$(3,453) |
| Interest expense, net |
594 |
672 |
2,074 |
2,117 |
| Income taxes (1) |
361 |
493 |
361 |
502 |
| Depreciation, amortization and impairment |
953 |
1,419 |
3,003 |
3,723 |
| Board compensation and stock based compensation |
356 |
1,028 |
1,701 |
905 |
| Restructuring charges (2) |
- |
(1) |
- |
569 |
| Gain on contingent share liability |
- |
(3,000) |
- |
(3,214) |
| Loss on sale of assets |
- |
(2) |
- |
764 |
| Other charges, net (3) |
756 |
(120) |
1,488 |
371 |
| Non GAAP net income to common shareholders |
$1,163 |
$1,235 |
$3,991 |
$2,284 |
| Weighted average common shares outstanding |
10,885,444 |
10,486,665 |
10,608,127 |
10,384,566 |
| Non-GAAP earnings per share |
$0.11 |
$0.12 |
$0.38 |
$0.22 |
| (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) |
Includes restructuring charges associated with outsourcing one of our monitoring centers and moving our headquarters to the Chicagoland area. |
| (3) |
Other charges may include gains or losses, non-cash currency impacts and non-recurring accrual adjustments. |
SOURCE Track Group, Inc.
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