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Track Group Reports 2nd Quarter Fiscal 2018 Financial Results

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Track Group Reports 2nd Quarter Fiscal 2018 Financial Results

Adjusted EBITDA Up 96%, Operating Expenses Drop 6% and Operating Loss Improves 29%

PR Newswire

NAPERVILLE, Ill., May 11, 2018 /PRNewswire/ -- 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, 2018 (the "Second Quarter"). The Company posted gross profit of $4.0M, on total revenue of $7.3M, for a gross margin of 55%. In addition, the Second Quarter adjusted EBITDA came in at $1.3M, up 96% compared to the Second Quarter of FY2017 and total Operating Expenses were $4.7M, down 6%, both of which contributed to the second lowest operating loss ($0.7M) in over three years.

"We're delighted to follow our fiscal year 2018 record First Quarter results with another strong Quarter," said Derek Cassell, Track Group's CEO. "We have begun implementing a number of new customer opportunities from our pipeline and expect to see the results of our hard work in our upcoming Third and Fourth Quarters."

BUSINESS AND FINANCIAL HIGHLIGHTS

  • Revenue for the Second Quarter ($7.3M) is up nominally compared to the same period last year.
  • Gross Profit for the Second Quarter remained flat as compared to last year ($4.0M vs. $4.1M) which led to Gross Profit in the first half of FY2018 being up 12% compared to the prior year ($8.5M vs $7.6M).
  • Total operating expenses for the Second Quarter ($4.7M) are down 6% vs. last year ($5.1M) and has led to a 9% reduction in the first half of FY2018 Operating Expenses compared to the prior year ($9.5M vs $10.5M).
  • The quarterly operating loss of ($0.7M) is the second lowest loss in over three years and allowed the company to improve the first half FY2018 operating loss of ($1.0M) by 64% compared to the same period last year ($2.9M), due to a combination of a strong Gross Profit results and lower Operating Expenses.
  • Adjusted EBITDA in the Second Quarter finished up 96% ($1.3M) compared to last year ($0.6M) and represented the third highest Adjusted EBITDA in over 3 years. The Adjusted EBITDA for the first half of FY2018 is up 170% ($2.8M) compared to the first half of FY2017 ($1.0M).
  • Net loss, attributable to shareholders, for the Second Quarter was ($1.7M) compared to a loss of ($1.6M) for the same quarter last year due to foreign exchange movement.
  • Net Cash Provided by Operating Activities remained strong in the first half of FY2018 ($1.8M) compared to the first half of FY2017 ($2.0M) and ($0.8M) two years ago.
  • Discussions are ongoing regarding the proposed extension of the maturity of the Amended and Restated Unsecured Facility Agreement dated June 30, 2015 between the Company and Conrent Invest S.A.

BUSINESS OUTLOOK


Actual

Outlook


FY 2016

FY 2017

FY 2018





Revenue:

$27.2M

$29.7M

$32-35M





Adjusted EBITDA Margin:

7.3%

12.2%

18-22%

The revenue outlook for FY2018 has been adjusted downward from $35-$40 million to $32-$35 million; however, management believes that the annualized run rate based on the revenue estimated for the Quarter ended 30 September 2018 will range from $35-$40 million. The Adjusted EBITDA margin has been adjusted upward from 15-20% to 18-22% to reflect the results in the first half of the fiscal year and the outlook for the remainder of the fiscal year.

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



March 31,


September


2018


30,

Assets

(unaudited)


2017

Current assets:








Cash

$       2,661,829


$      2,027,321

Accounts receivable, net of allowance for doubtful accounts of $3,532,609 and $3,268,095, respectively

4,926,116


5,438,564

Note receivable, current portion

234,733


234,733

Prepaid expense and other

5,143,501


854,122

Inventory, net of reserves of $26,934, respectively

269,924


261,810

Total current assets

13,236,103


8,816,550

Property and equipment, net of accumulated depreciation of $1,950,847 and $1,778,634, respectively

913,232


903,100

Monitoring equipment, net of accumulated depreciation of $5,045,835 and $4,906,925, respectively

3,149,664


3,493,012

Intangible assets, net of accumulated amortization of $10,984,263 and $9,839,032, respectively

23,902,278


24,718,655

Goodwill

8,207,990


8,226,714

Other assets

202,581


2,989,101

Total assets

$     49,611,848


$ 49,147,132





Liabilities and Stockholders' Equity




Current liabilities:




Accounts payable

2,731,842


2,769,835

Accrued liabilities

9,109,373


6,650,291

Current portion of long-term debt, net of discount of $74,324 and $185,811, respectively

30,370,943


30,270,531

Total current liabilities

42,212,158


39,690,657

Long-term debt, net of current portion

3,451,588


3,480,717

Total liabilities

45,663,746


43,171,374





Stockholders' equity:




Common stock, $0.0001 par value: 30,000,000 shares authorized; 10,462,433 and 10,480,984 shares outstanding, respectively

1,046


1,048

Additional paid-in capital

301,038,832


300,717,861

Accumulated deficit

(296,846,405)


(294,067,329)

Accumulated other comprehensive loss

(245,371)


(675,822)

Total equity

3,948,102


5,975,758

Total liabilities and stockholders' equity

$     49,611,848


$ 49,147,132


 

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,


2018


2017


2018


2017













Monitoring services

$

7,162,205


$

6,986,612


$

14,513,010


$

14,419,889

Other


153,971



233,431



293,860



471,644

Total revenue


7,316,176



7,220,043



14,806,870



14,891,533

Cost of revenue:












Monitoring, products & other related services


2,827,842



2,654,305



5,369,849



6,336,368

Depreciation & amortization


467,666



515,574



944,808



961,067

Total cost of revenue


3,295,508



3,169,879



6,314,657



7,297,435













Gross profit


4,020,668



4,050,164



8,492,213



7,594,098

 Operating expenses:












General & administrative


3,495,343



2,355,156



7,153,081



5,530,210

Loss on sale of asset


-



766,031



-



766,031

Restructuring costs


-



4,070



-



570,400

Selling & marketing


518,993



624,210



928,730



1,213,978

Research & development


182,808



679,238



346,754



1,167,416

Depreciation & amortization


539,537



633,273



1,104,277



1,208,384

Total operating expenses


4,736,681



5,061,978



9,532,842



10,456,419

Loss from operations


(716,013)



(1,011,814)



(1,040,629)



(2,862,321)

Other income (expense):












Interest expense, net


(805,966)



(797,333)



(1,479,793)



(1,444,436)

Currency exchange rate gain (loss)


(221,048)



10,335



(276,120)



(106,107)

Other income, net


6,542



222,414



17,466



222,707

Total other income (expense)


(1,020,472)



(564,584)



(1,738,447)



(1,327,836)

Loss before income taxes


(1,736,485)



(1,576,398)



(2,779,076)



(4,190,157)

Income tax expense


-



9,099



-



9,099

Net loss attributable to common shareholders


(1,736,485)



(1,585,497)



(2,779,076)



(4,199,256)

Foreign currency translation adjustments


241,726



(15,615)



430,451



(509,187)

Comprehensive loss

$

(1,494,759)


$

(1,601,112)


$

(2,348,625)


$

(4,708,443)

Basic and diluted loss per common share

$

(0.17)


$

(0.15)


$

(0.27)


$

(0.41)

Weighted average common shares outstanding, basic and diluted


10,462,433



10,352,485



10,469,466



10,342,948

 


Three Months Ended


Six Months Ended


March 31,


March 31,


2018


2017


2018


2017

Non-GAAP Adjusted EBITDA








Net loss attributable to common shareholders

$(1,736)


$(1,585)


$(2,779)


$(4,199)

Interest expense, net

806


798


1,480


1,445

Income taxes (1)

-


9


-


9

Depreciation, amortization and impairment

1,008


1,209


2,050


2,304

Stock based compensation

557


(348)


1,345


(123)

Restructuring charges (2)

-


4


-


570

Loss on sale of assets

-


766


-


766

Other charges, net (3)

626


(210)


732


277

Non GAAP Adjusted EBITDA

$1,261


$643


$2,828


$1,049

Non GAAP Adjusted EBITDA, percent of revenue

17.2%


8.9%


19.1%


7.0%










Three Months Ended


Six Months Ended


March 31,


March 31,


2018


2017


2017


2016

Non-GAAP EPS (in $000's, except share data)







Net loss attributable to common shareholders

$(1,736)


$(1,585)


$(2,779)


$(4,199)

Interest expense, net

806


798


1,480


1,445

Income taxes (1)

-


9


-


9

Depreciation, amortization and impairment

1,008


1,209


2,050


2,304

Stock based compensation

557


(348)


1,345


(123)

Restructuring charges (2)

-


4


-


570

Loss on sale of assets

-


766


-


766

Other charges, net (3)

626


(210)


732


277

Non GAAP net income to common shareholders

$1,261


$643


$2,828


$1,049

Weighted average common shares outstanding

10,462,433


10,352,486


10,469,466


10,342,949

Non-GAAP earnings per share

$0.12


$0.06


$0.27


$0.10


(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.

 

Cision View original content:http://www.prnewswire.com/news-releases/track-group-reports-2nd-quarter-fiscal-2018-financial-results-300646853.html

SOURCE Track Group, Inc.

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