Attached files
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| 8-K - CURRENT REPORT - Track Group, Inc. | trck8k_may112018.htm |
FOR
IMMEDIATE RELEASE
May
11th, 2018
Peter
Poli
Chief
Financial Officer 877-260-2010
peter.poli@trackgrp.com
Track
Group Reports 2nd Quarter Fiscal 2018 Financial
Results
Adjusted EBITDA Up 96%, Operating Expenses Drop 6% and Operating
Loss Improves 29%
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, 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.
-1-
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.
-2-
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.
[The
rest of this page is intentionally blank]
-3-
TRACK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
BALANCE SHEETS
|
Assets
|
March 31,
2018
(unaudited)
|
September 30,
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
|
-4-
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
|
-5-
|
|
Three
Months Ended
March
31,
|
Six
Months Ended
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
March
31,
|
Six Months
Ended
March
31,
|
||
|
|
2018
|
2017
|
2018
|
2017
|
|
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.
-6-