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

AUSTIN, Texas, July 05, 2018 (GLOBE NEWSWIRE) -- 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 TwitterFacebookLinkedIn, 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 Qtr2nd Qtr3rd Qtr4th QtrYTD 
        
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 Qtr2nd Qtr3rd Qtr4th QtrYTD 
        
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 Qtr2nd Qtr3rd Qtr4th QtrYTD
           
Gross margin30.9%27.9%31.9%28.2%29.8%
Operating margin1.1%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 Qtr2nd Qtr3rd Qtr4th QtrYTD
           
Gross margin29.5%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%