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Xata Reports Fiscal 2012 Third Quarter Results

August 2, 2012

MINNEAPOLIS, Aug. 2, 2012 /PRNewswire/ — Xata Corporation (NASDAQ:XATA) reported results for its fiscal 2012 third quarter, ended June 30, 2012.

Total revenue was $15.6 million for the quarter ended June 30, 2012, compared to $17.0 million for the same period of fiscal 2011. Net loss to common shareholders for the third quarter of fiscal 2012 was $6.3 million, compared to $0.5 million for the same period in fiscal 2011. The increased loss was due primarily to impairment and realignment charges of $5.7 million recorded to allow the Company to balance its investment in its legacy systems and mobile-based platforms to align with its strategic goals.

Realignment charges included $0.9 million in personnel expenses from a workforce reduction, $0.4 million for accelerated depreciation of fixed assets, $0.6 million to write off excess and obsolete inventory and $0.3 million in estimated costs to terminate inventory purchase commitments. The Company also recorded a non-cash impairment charge of $3.5 million associated with intangible assets originally recorded in conjunction with the 2008 acquisition of Geologic Solutions, Inc.

The Company reported a loss of $0.59 per diluted share for the quarter ended June 30, 2012, compared to a loss of $0.04 per diluted share for the same period of fiscal 2011. A non-cash intangible asset impairment charge of $0.33 per share and realignment charges of $0.21 per share were included in the 2012 third quarter diluted loss per share. Important developments for the quarter included:

  • Software revenue increased $0.5 million to $11.8 million for the quarter ended June 30, 2012. The 4 percent growth in software revenue in the third quarter of fiscal 2012 was fueled by a 31 percent and 8 percent growth in Xata Turnpike and XataNet software revenue, respectively.
  • Higher margin software revenues increased as the market continues to evolve from hardware systems-based to lower-cost mobile solutions. As a result, fiscal 2012 third quarter software revenue accounted for approximately 76 percent of total revenue, compared to 67 percent for the same period of fiscal 2011.
  • The Company acquired 77 new customers in the third quarter of fiscal 2012, with the majority selecting the Xata Turnpike solution.

“A major event in the third quarter involved Congress passing the Moving Ahead for Progress in the 21(st) Century Act (MAP-21) bill that requires the Federal Motor Carrier Safety Administration (FMCSA) to develop a regulation to require certain motor carriers to use electronic logging devices to track Hours of Service for their Record of Duty Status (RODS). This long-awaited legislation means that anyone keeping paper log books for RODS today will be required to use a FMCSA certified electronic logging device. It is estimated that this will provide a market opportunity of nearly three million trucks. The FMCSA will be required to create a regulation within one year,” said Jay Coughlan, Chairman and President of Xata. “With our current no upfront hardware cost Xata Turnpike solution, Xata is well-positioned to handle the increased demand once the regulation goes into effect.”

“Xata Turnpike recurring software continued its strong growth in the quarter, reflecting the market shift to mobility-based solutions using smart phones and tablets,” said Mike Weber, Xata’s Vice President, Finance.

Fiscal 2012 third quarter total gross margin of 49 percent improved 2 percentage points compared the same period in fiscal 2011. Margin improvement driven by the shift in revenue mix to higher margin software revenue was partially offset by the recording of $0.4 million for accelerated depreciation of fixed assets, $0.6 million to write off excess and obsolete inventory and $0.3 million in estimated costs to terminate inventory purchase commitments.

For the third quarter of fiscal 2012, selling, general and administrative expenses increased to $6.6 million from $5.8 million for the third quarter 2011. Selling, general and administrative expenses for the third quarter of 2012 included $0.8 million of employee separation costs from a workforce reduction.

Research and development costs increased $1.3 million to $4.0 million for the third quarter of fiscal 2012, compared to $2.7 million for the same period of fiscal 2011. The increase in research and development costs reflects the commitment to enhance functionality to meet our customers’ compliance and fleet optimization needs. We believe that leveraging new mobile technology is critical to our future success.

For the third quarter of fiscal 2012, the Company reported adjusted non-GAAP earnings of $1.5 million or $0.05 per diluted share, compared to adjusted non-GAAP earnings of $1.3 million or $0.05 per diluted share for the same period of fiscal 2011, an increase of 13 percent in adjusted non-GAAP earnings over the same period in the prior year.

As of June 30, 2012, Xata held $7.9 million in cash and cash equivalents and had $8.5 million of working capital.

For the nine months ended June 30, 2012, total revenue remained relatively consistent with the same period of the prior year. However, software revenue over the same period increased by 3 percent as a result of strong growth in Xata Turnpike and XataNet of 40 percent and 7 percent, respectively. In addition, software revenue as a percentage of total revenue grew 2 percentage points as the Company’s customers continue to shift to mobile-based platforms.

For the nine months ended June 30, 2012, the Company reported adjusted non-GAAP earnings of $2.2 million or $0.08 per diluted share as compared to $4.0 million or $0.15 per diluted share for the same period in the prior year. The decrease in adjusted non-GAAP earnings is a reflection of the Company’s continued investments to enhance current solutions and develop new solutions that will meet the market’s current and anticipated fleet management and regulatory needs.

Summary of revenue and gross margins (deficits) is as follows (in thousands, except percentage data):

                          For the Nine Months Ended
                                   June 30,
                                   --------
                                        2012           2011  Change
                                        ----           ----  ------
    Revenue:
    Software                         $35,222        $34,102            3%
    Hardware systems                  11,568         11,507            1%
    Services                           1,312          2,134         (39%)
    Total revenue                    $48,102        $47,743            1%
                                     =======        =======          ===

                       For the Nine Months
                              Ended
                            June 30,
                            --------
                                        2012           2011
                                        ----           ----
    Gross margins
     (deficits):
    Software                              71%            76%
    Hardware systems                     (8%)           (9%)
    Services                            (45%)          (21%)
    Total gross margin                    49%            51%

Non-GAAP vs. GAAP Financial Measures

To assist investors in understanding the Company’s financial performance, the Company supplements the financial results that are generated in accordance with the accounting principles generally accepted in the United States, or GAAP, with non-GAAP financial measures. These non-GAAP financial measures are useful to investors for evaluating the Company’s historical and prospective financial performance, as well as our performance relative to competitors. Management regularly uses these non-GAAP financial measures internally to understand, manage and evaluate its ongoing business operations and to make operating decisions. These non-GAAP financial measures are among the primary factors management uses in planning for and forecasting future period performance. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s ongoing operations that, when viewed with our GAAP results, provides a more complete understanding of the factors and trends affecting our business.

The specific non-GAAP financial measures, along with a reconciliation to the nearest comparable GAAP measures and further explanation of their usefulness to investors can be found at the end of this release.

About Xata

Xata Corporation (NASDAQ: XATA) provides intuitive, automated fleet management software solutions to the commercial trucking industry. By delivering real-time critical information on vehicle and driver performance, Xata makes it easy for fleet managers, dispatchers and drivers to collect, sort, view and analyze data to help reduce costs, increase safety and compliance and improve customer satisfaction. Our award-winning solutions include 1) XataNet, a full featured, enterprise-wide solution that helps private and for-hire fleets drive continuous improvement, and 2) Xata Turnpike, a technologically advanced, low-cost, easy-to-install solution that runs on drivers’ existing cell phones, smartphones and tablet computers. Both solutions help fleet managers and drivers meet established electronic onboard recorder (EOBR) regulations. We also offer a portfolio of professional services, including implementation, training and consulting to help our customers deliver bottom-line results. Today Xata solutions increase the productivity of approximately 115,000 trucks across North America. For more information, visit www.xata.com or call 1-800-745-9282.

Cautionary note regarding forward-looking statements

This announcement includes forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Such statements are based on current expectations, and actual results may differ materially. The forward-looking statements in this announcement are subject to a number of risks and uncertainties including, but not limited to, the possibility of continuing operating losses, the ability to adapt to rapid technological change, the ability of our solutions to be compliant with future regulations, dependence on propriety technology and communication networks owned and controlled by others, the failure to renew contracts or failure to sell additional solutions or services to existing customers, the timely introduction and market acceptance of new products, the ability to fund future research and development activities, the ability to establish and maintain strategic partner relationships and the other factors discussed under “Risk Factors” in Part IA, Item 1 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2011 (as updated in our subsequent reports filed with the SEC). These reports are available under the “Investors” section of our website at www.xata.com and through the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

                                                                                             Xata Corporation
                                                                                  Consolidated Statements of Operations
                                                                                               (Unaudited)

                                                       For the Three Months
                                                              Ended                       For the Nine Months Ended
                                                            June 30,                               June 30,
                                                            --------                               --------
    (In thousands, except per share data)                                  2012                                   2011                                    2012                                   2011
                                                                           ----                                   ----                                    ----                                   ----

    Revenue
                        Software                                      $11,833                                $11,381                                 $35,222                                $34,102
                         Hardware
                         systems                                        3,480                                  4,875                                  11,568                                 11,507
                        Services                                          329                                    768                                   1,312                                  2,134
                        Total revenue                                  15,642                                 17,024                                  48,102                                 47,743

    Cost of goods sold                                                  8,015                                  9,119                                  24,500                                 23,420
    Selling, general and administrative                                 6,586                                  5,840                                  19,329                                 18,617
    Research and development                                            3,983                                  2,697                                  10,979                                  7,168
    Impairment of intangible asset                                      3,500                                      -                                   3,500                                      -
    Total costs and expenses                                           22,084                                 17,656                                  58,308                                 49,205
                                                                       ------                                 ------                                  ------                                 ------

    Operating loss                                                     (6,442)                                  (632)                                (10,206)                                (1,462)
    Net interest and other expense                                        (33)                                   (93)                                   (297)                                  (272)
                                                                          ---                                    ---                                    ----                                   ----

    Loss before income taxes                                           (6,475)                                  (725)                                (10,503)                                (1,734)
    Income tax benefit                                                   (192)                                  (289)                                   (470)                                  (486)
                                                                         ----                                   ----                                    ----                                   ----

    Net loss                                                           (6,283)                                  (436)                                (10,033)                                (1,248)

    Preferred stock dividends
                        and deemed dividends                              (57)                                   (32)                                   (119)                                  (122)
                                                                          ---                                    ---                                    ----                                   ----

    Net loss to common shareholders                                   $(6,340)                                 $(468)                               $(10,152)                               $(1,370)
                                                                      =======                                  =====                                ========                                =======

    Net loss per common share:
                         Basic and
                         diluted                                       $(0.59)                                $(0.04)                                 $(0.95)                                $(0.13)

    Weighted average common and common share
     equivalents:
                         Basic and
                         diluted                                       10,753                                 10,667                                  10,714                                 10,427

                                    Xata Corporation
                              Consolidated Balance Sheets

                                      June 30,            September 30,
    (In
     thousands)                                     2012                  2011
                                                    ----                  ----
                                    (Unaudited)
      Current
      assets
          Cash
           and
           cash
           equivalents                            $7,912               $12,407
           Accounts
           receivable,
           net                                     7,833                 8,556
          Inventories                              3,737                 3,374
           Deferred
           product
           costs                                     788                 1,148
           Prepaid
           expenses
           and
           other
           current
           assets                                  1,406                 1,006
                                                   -----                 -----
               Total
                current
                assets                            21,676                26,491

      Equipment
      and
      leasehold
      improvements,
      net                                          8,004                 9,155
      Intangible
      assets,
      net                                          6,766                12,158
     Goodwill                                     16,806                16,474
      Deferred
      product
      costs,
      net
      of
      current
      portion                                        556                   857
     Other
      assets                                         740                   690
                                                     ---                   ---

               Total
                assets                           $54,548               $65,825
                                                 =======               =======

      Current
      liabilities
     Revolving
     line
     of
     credit                                       $2,100        $            -
     Current
     portion
     of
     debt
     obligations                                      50                 1,746
     Accounts
     payable                                       4,218                 5,003
     Accrued
     expenses                                      6,002                 4,533
     Deferred
     revenue                                       2,467                 3,442
                                                   -----                 -----
               Total
                current
                liabilities                       14,837                14,724

     Debt
      obligations,
      net
      of
      current
      portion                                          -                 1,386
      Deferred
      revenue,
      net
      of
      current
      portion                                      1,301                 1,874
      Deferred
      tax
      liabilities                                     91                   596
     Other
      long-
      term
      liabilities                                    371                   559
                                                     ---                   ---
               Total
                liabilities                       16,600                19,139

      Shareholders'
      equity
           Preferred
           stock                                  44,322                44,149
           Common
           stock                                  48,141                47,356
           Contingent
           common
           stock
           earn-
           out                                     1,912                 1,912
           Accumulated
           deficit                               (57,255)              (47,103)
           Accumulated
           other
           comprehensive
           income                                    828                   372
                                                                           ---
               Total
                shareholders'
                equity                            37,948                46,686
                                                  ------                ------
               Total
                liabilities
                and
                shareholders'
                equity                           $54,548               $65,825
                                                 =======               =======

                                                                 Xata Corporation
                                                      Consolidated Statements of Cash Flows
                                                                   (Unaudited)

                                                                                      For the Nine Months
                                                                                             Ended
                                                                                           June 30,
                                                                                           --------
    (In thousands)                                                                                    2012                               2011
                                                                                                      ----                               ----

    Operating activities
    Net loss                                                                                      $(10,033)                           $(1,248)
    Adjustments to reconcile net loss to net cash (used in) provided by
    operating activities:
                         Depreciation and
                         amortization                                       6,318                               4,675
                         Impairment of intangible
                         asset                                              3,500                                   -
                         Amortization of deferred
                         financing costs                                       20                                   -
                        Deferred income taxes                                (532)                               (389)
                         Loss on sale or disposal
                         of equipment and leased
                         equipment                                             75                                   7
                        Stock-based compensation                              785                                 860
                         Changes in assets and
                         liabilities:
                         Accounts receivable,
                         net                                                1,290                               1,923
                        Inventories, net                                     (363)                                890
                         Deferred product
                         costs                                                661                               1,419
                         Prepaid expenses and
                         other assets                                        (403)                                 42
                        Accounts payable                                     (874)                               (146)
                         Accrued expenses and
                         other liabilities                                    779                                 (99)
                        Deferred revenue                                   (1,546)                             (3,002)
                                                                           ------                              ------
                                                     Net cash (used in) provided
                                                     by operating activities                          (323)                             4,932

    Investing activities
                         Purchase of equipment and
                         leasehold improvements                            (2,536)                             (2,308)
                         Proceeds from the sale or
                         disposal of equipment                                  2                                   -
                                                     Net cash used in investing
                                                     activities                                     (2,534)                            (2,308)

    Financing activities
                         Revolving line of credit,
                         net                                                2,100                                   -
                         Payments on debt
                         obligations                                       (3,627)                               (885)
                        Deferred financing costs                              (97)                                  -
                         Proceeds from exercise of
                         options                                                -                                  36
                                                     Net cash used in financing
                                                     activities                                     (1,624)                              (849)

                                                     Effects of exchange rate on
                                                     cash                                              (14)                                84
                                                                                                       ---                                ---

                                                     (Decrease) increase in cash
                                                     and cash equivalents                           (4,495)                             1,859

    Cash and cash equivalents
                        Beginning                                          12,407                              13,374
                        ---------
                        Ending                                                                      $7,912                            $15,233

                                                                                       Xata Corporation
                                                                     Reconciliation of GAAP to Non-GAAP Financial Measures
                                                                                          (Unaudited)

    Non-GAAP Earnings and Non-GAAP Earnings per Diluted Share:

                                                              For the Three Months             For the Nine Months
                                                                      Ended                            Ended
                                                                    June 30,                         June 30,
                                                                    --------                         --------
    (In thousands, except per share data)                                      2012                            2011                                2012                             2011
                                                                               ----                            ----                                ----                             ----

    Net loss to common shareholders                                         $(6,340)                          $(468)                           $(10,152)                         $(1,370)

    Adjustments:
                                  Depreciation
                                  and
                                  amortization
                                  expense                                     2,351                           1,687                               6,318                            4,675
                                  Impairment of
                                  intangible
                                  asset                                       3,500                               -                               3,500                                -
                                  Stock-based
                                  compensation                                  258                             272                                 785                              860
                                  Net interest
                                  expense                                        31                              77                                 304                              171
                                  Preferred stock
                                  dividends and
                                  deemed dividends       57                               32                             119                                 122
                                 Income taxes                                  (192)                           (289)                               (470)                            (486)
    Total adjustments                                                         6,005                           1,779                              10,556                            5,342
                                                                              -----                           -----                              ------                            -----

    Non-GAAP (loss) earnings                                                  $(335)                         $1,311                                $404                           $3,972
                                                                              =====                          ======                                ====                           ======

    Non-GAAP (loss) earnings per diluted share                               $(0.03)                          $0.05                               $0.01                            $0.15
                                                                             ======                           =====                               =====                            =====

    Shares used in calculating non-GAAP (loss)
                                  earnings per
                                  diluted
                                  share                                      10,753                          27,086                              27,238                           26,876

    Adjusted Non-GAAP Earnings and Adjusted Non-GAAP Earnings per Diluted Share:

                                                              For the Three Months             For the Nine Months
                                                                      Ended                            Ended
                                                                    June 30,                         June 30,
                                                                    --------                         --------
    (In thousands, except per share data)                                      2012                            2011                                2012                             2011
                                                                               ----                            ----                                ----                             ----

    Non-GAAP (loss) earnings                                                  $(335)                         $1,311                                $404                           $3,972
    Adjustments for additional realignment charges*                           1,813                               -                               1,813                                -
                                                                              -----                             ---                               -----                              ---

    Adjusted non-GAAP earnings                                               $1,478                          $1,311                              $2,217                           $3,972
                                                                             ======                          ======                              ======                           ======

    Adjusted non-GAAP earnings per diluted share                              $0.05                           $0.05                               $0.08                            $0.15
                                                                              =====                           =====                               =====                            =====

    Shares used in calculating adjusted non-GAAP
                                  earnings per
                                  diluted
                                  share                                      27,298                          27,086                              27,238                           26,876

    *Additional realignment charges include $0.9 million in personnel expenses from a workforce reduction, $0.6 million to write off excess and obsolete inventory and $0.3
     million in estimated costs to terminate inventory purchase commitments excluded from the previous non-GAAP earnings adjustments.

                            Xata Corporation
         Reconciliation of GAAP to Non-GAAP Financial Measures
                              (Unaudited)

    Working Capital

                            June 30,                    September 30,
                                       2012                      2011
                                       ----                      ----

    Current assets                             $21,676                $26,491
    Current liabilities                        (14,837)               (14,724)
                                               -------                -------
                     Net current assets          6,839                 11,767
    Current portion of deferred
     revenue net of deferred costs               1,679                  2,294
                                                 -----                  -----
                     Working capital            $8,518                $14,061
                                                ======

Footnotes to GAAP to Non-GAAP Reconciliation

(Unaudited)

The non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. The method we use to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. The methods of calculation and explanations of the adjustments to the most comparable GAAP measures are set forth below:

Non-GAAP (Loss) Earnings

This measure provides a supplemental view of earnings trends. Non-GAAP (loss) earnings excludes depreciation, amortization, stock-based compensation, net interest expense, preferred stock dividends and deemed dividends, income taxes, acquisition and financing related costs and litigation settlement costs from GAAP net loss to common shareholders. We believe our investors benefit from understanding these exclusions when comparing current to historical results from operations.

Adjusted Non-GAAP Earnings

Adjusted non-GAAP earnings is based on non-GAAP (loss) earnings adjusted for additional realignment charges not included in the Company’s historical definition of non-GAAP (loss) earnings. We believe our investors benefit from understanding the impact of these charges on our historically presented non-GAAP (loss) earnings performance to allow for a more consistent view of results of ongoing operations.

Non-GAAP Diluted (Loss) Earnings per Share

We believe investors benefit by understanding the Company’s non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by ownership in the Company. Non-GAAP diluted earnings per share is based on non-GAAP earnings, as defined above, divided by the sum of the weighted average common and dilutive common shares equivalents, such as options, restricted stock awards, restricted stock units, warrants or convertible preferred stock, assuming they were exercised or converted into common stock that then shared in the non-GAAP earnings of the Company, as defined by GAAP. Non-GAAP diluted loss per share is based on non-GAAP loss, as defined above, divided by only the weighted average number of common shares outstanding for the period, as defined by GAAP. The non-GAAP diluted net loss per common share is equal to basic net loss per common share for all periods presented because the effect of including such securities or obligations would have been antidilutive. We believe that these exclusions provide investors an understanding these exclusions when comparing current to historical diluted earnings per share.

Adjusted Non-GAAP Diluted Earnings per Share

Adjusted non-GAAP diluted earnings per share is based on adjusted non-GAAP earnings, as defined above, divided by the sum of the weighted average common and dilutive common shares equivalents, such as options, restricted stock awards, restricted stock units, warrants or convertible preferred stock, assuming they were exercised or converted into common stock that then shared in the non-GAAP earnings of the Company, as defined by GAAP. We believe that the exclusion of the additional realignment charges provide investors a more consistent view diluted earnings per share.

Working Capital

Working capital represents current assets, less current liabilities, excluding the current portion of deferred revenue, net of deferred costs. We believe working capital provides investors with an additional view of the Company’s liquidity and ability to repay current obligations.

SOURCE Xata Corporation


Source: PR Newswire