XPLR Xplore Technologies Corp (delisted)

Profitable Year Driven by Solid Growth, Operational ExecutionAgreement to be Acquired by Zebra Technologies

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 TransactionXplore 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 ResultsFor 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 ResultsXplore 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 SheetFor 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 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) 597-8200mkreps@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	%