Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - Track Group, Inc. | trck8k_aug82018.htm |
Exhibit 99.1
FOR
IMMEDIATE RELEASE
August
8, 2018
Peter
Poli
Chief
Financial Officer 877-260-2010
peter.poli@trackgrp.com
Track
Group Reports 3rd Quarter Fiscal 2018 Financial
Results
Revenue up 4%, Gross Profit up 13% and Operating Loss Improves
42%
NAPERVILLE,
ILLINOIS – Track Group, Inc. (OTCQX: TRCK), a global leader
in offender tracking and monitoring services, today announced
financial results for its third quarter that 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 that 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 that 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.
Allowing the Company to improve the operating loss for the 9 months
that ended June 30, 2018 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 that 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 that 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 that ended
June 30, 2017, compared to $4.6M in 2018.
●
Net Cash Provided
by Operating Activities remained strong for the 9 months that 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.
-1-
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;
as well as 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.
-2-
TRACK
GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS|
|
|
|
|
|
June
30,
|
September
|
|
|
2018
|
30,
|
|
|
(unaudited)
|
2017
|
|
Assets
|
|
|
|
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
|
|
|
|
Intangible assets,
net of accumulated amortization of $11,442,820 and
|
3,168,377
|
3,493,012
|
|
$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
|
-3-
TRACK
GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
|
|
Three Months Ended
|
Nine Months Ended
|
||
|
|
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|
|
2018
|
2017
|
2018
|
2017
|
|
Monitoring
services
|
$7,549,779
|
$7,157,424
|
$22,062,789
|
$$21,577,313
|
|
Other
|
129,196
|
193,930
|
423,056
|
665,574
|
|
Total
revenue
|
7,678,975
|
7,351,354
|
22,485,845
|
22,242,887
|
|
Cost
of revenue:
|
|
|
|
|
|
Monitoring,
products & other related services
|
3,039,755
|
2,944,920
|
8,409,604
|
9,281,288
|
|
Depreciation &
amortization
|
432,952
|
672,562
|
1,377,760
|
1,633,629
|
|
Total cost of
revenue
|
3,472,707
|
3,617,482
|
9,787,364
|
10,914,917
|
|
Gross
profit
|
4,206,268
|
3,733,872
|
12,698,481
|
11,327,970
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
General &
administrative
|
3,703,869
|
$3,611,903
|
10,856,950
|
9,142,113
|
|
(Gain) loss on sale
of asset
|
-
|
(2,500)
|
-
|
763,531
|
|
Restructuring
costs
|
-
|
(1,265)
|
-
|
569,135
|
|
Selling &
marketing
|
466,048
|
572,334
|
1,394,778
|
1,786,312
|
|
Research &
development
|
254,060
|
292,938
|
600,814
|
1,460,354
|
|
Depreciation &
amortization
|
520,639
|
535,892
|
1,624,916
|
1,744,276
|
|
Total operating
expenses
|
4,944,616
|
5,009,302
|
14,477,458
|
15,465,721
|
|
Loss from
operations
|
(738,348)
|
(1,275,430)
|
(1,778,977)
|
(4,137,751)
|
|
|
|
|
|
|
|
Interest expense,
net
|
(594,452)
|
(672,369)
|
(2,074,245)
|
(2,116,805)
|
|
Currency exchange
rate gain (loss)
|
(166,586)
|
181,966
|
(442,706)
|
75,859
|
|
Gain on settlement
of milestone payments
|
-
|
3,000,000
|
-
|
3,213,940
|
|
Other income,
net
|
3,733
|
4,934
|
21,199
|
13,701
|
|
Total
other income (expense)
|
(757,305)
|
2,514,531
|
(2,495,752)
|
1,186,695
|
|
Income
(loss) before income taxes
|
(1,495,653)
|
1,239,101
|
(4,274,729)
|
(2,951,056)
|
|
Income
tax expense
|
360,807
|
492,552
|
360,807
|
501,651
|
|
Net
income (loss) attributable to common shareholders
|
(1,856,460)
|
746,549
|
(4,635,536)
|
(3,452,707)
|
|
Foreign currency
translation adjustments
|
(861,637)
|
746,156
|
(431,186)
|
236,969
|
|
Comprehensive
income (loss)
|
$(2,718,097)
|
$1,492,705
|
$(5,066,722)
|
$(3,215,738)
|
|
Basic and diluted
income (loss) per common share
|
$(0.17)
|
$$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
|
-4-
|
|
Three
Months Ended
June
30,
|
Nine
Months Ended
June
30,
|
||
|
|
2018
|
2017
|
2018
|
2017
|
|
Non-GAAP
Adjusted EBITDA
|
$(1,857)
|
$746
|
$(4,636)
|
$(3,453)
|
|
Net
gain (loss) attributable to common shareholders
|
|
|
|
|
|
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
June
30,
|
Nine
Months Ended
June
30,
|
||
|
|
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.
-5-