Implements Additional Cost Reductions Estimated at More Than $3 Million Annually
Reiterates Annual Outlook and Long-term Targets

AUSTIN, Texas, Aug. 10, 2016 (GLOBE NEWSWIRE) -- Xplore Technologies Corp. (NASDAQ:XPLR), a global leader in rugged computing, today reported results for its fiscal 2017 first quarter ended June 30, 2016.

Fiscal First Quarter and Recent Highlights:

• Reported revenue of $16.5 million, reflecting what the company believes is a short-term global slowdown in rugged tablet sales and the pushout of delivery for a significant communications customer order;
• Achieved gross margin of 29.5%, in line with expectations;
• Initiated annualized operating cost reductions in excess of $3 million through a combination of headcount adjustments announced at the start of the quarter plus additional headcount and non-headcount actions;
• Reduced total operating expenses to $6.4 million in the quarter; and
• Reported a GAAP net loss of $1.7 million, or ($0.16) per share, and adjusted negative EBITDA of $1.1 million.

“As released in our preliminary results and outlook announcement, revenue in the first fiscal quarter reflected a more than seasonal decline due to what we believe is a short-term global slowdown in rugged tablet sales and the pushout of a large order from a communications customer,” said Philip Sassower, chairman and chief executive officer for Xplore.  “While revenue in our business can be lumpy from quarter to quarter, we remain committed to our long-term goals to gain further share in the global rugged tablet market and lead expansion into new vertical markets. To that end, we are currently in discussions for multiple large opportunities with both existing and new customers. We are also investing in our sales channel to maximize the return from our distributor and reseller relationships, including forward stocking select versions of our platforms for quicker delivery to global customers.”

“After five years of above-market revenue growth that moved Xplore to the #2 market share position, we have initiated aggressive cost reductions to transform us from a negative earnings company to one of profitable operations through all market cycles,” said Mark Holleran, president and chief operating officer for Xplore. “Since the start of this fiscal year, we have cut operating expenses by more than $3 million on an annualized basis through a combination of headcount reductions and other cost initiatives. We believe these actions will position Xplore to be at or near breakeven in fiscal 2017 based on our current full-year revenue outlook of $85 to $95 million, subject to strategic decisions around product development or one-time investments in the business. We believe these changes also create opportunities for substantially improved profitability and greater value for our stockholders as we continue to execute on our revenue growth strategies.”

Fiscal 2016 Financial Results
Xplore reported revenue of $16.5 million for the fiscal first quarter ended June 30, 2016, in line with the company’s pre-announcement and outlook release issued July 12, 2016. This compared to revenue of $20.6 million in the fiscal fourth quarter of 2016 and $24.0 million in the year-ago first quarter, which was the first reporting period that included the Motion Computing assets we acquired last April. The decrease in revenue reflected greater than typical seasonality driven by an industry-wide slowdown in rugged tablet sales, plus the effect of a large customer that has delayed shipment and a temporary slowdown in European sales related in part to uncertainty around the impact of Brexit.

Gross profit in the first quarter was $4.9 million, or 29.5% of revenue, in line with the company’s expectations, compared to $6.2 million, or 30.3% of revenue, in the preceding quarter and $8.2 million, or 33.9% of revenue, in the prior year first quarter. The change in gross margin was primarily attributable to changes in product mix.

Total operating expenses for the first quarter decreased to $6.4 million, declining 11.1% from $7.2 million in the preceding quarter and 17.9% from $7.8 million in the year-ago quarter. The estimated $3 million decline in annualized operating expenses reflects headcount reductions initiated at the start of the first quarter, estimated at approximately $2 million per year, additional cost saving initiatives and completion of the amortization of non-cash compensation issued in prior periods. These savings are in addition to approximately $3 million in annualized cost reductions previously undertaken in the second quarter of fiscal 2017. A portion of the cost reduction benefit is being reinvested in sales, marketing and channel and distributor development to drive future revenue growth.

For the quarter, Xplore reported net loss of $1.7 million, or $0.16 per basic share, compared to net loss of $1.1 million, or $0.09 per basic share, in the fourth quarter of fiscal 2016 and a net loss of $0.2 million, or $0.02 per share, in the prior year first quarter.

EBITDA adjusted for non-cash compensation and historical integration costs was negative $1.1 million, compared to negative adjusted EBITDA of $0.1 million in the fiscal fourth quarter 2016, and a positive $1.4 million in the prior year first quarter. Non-cash compensation declined to $175,000 in the first quarter, from $522,000 in the preceding quarter and $607,000 in the prior year first quarter. The prior year first quarter also included $670,000 in integration costs related to the acquisition of Motion Computing assets. A reconciliation is provided in the tables included in this release.

Cash Flow and Balance Sheet
Net cash used in operating activities was $6.6 million for the three months ended June 30, 2016, compared to $3.6 million in the prior year quarter. At quarter end, cash was $4.4 million and short-term debt increased to $6.7 million. The increase in net cash used by operating activities and short term borrowing reflects the operating loss, changes in accounts receivable and accounts payable, as well as a $6.3 million increase in inventory, to $21.1 million, in anticipation of orders that were expected to ship during the quarter, but which have been delayed, as well as the need to take on larger shipments to meet minimum order quantities for various products.  This inventory is expected to be sold in the coming two quarters.

Outlook
For fiscal 2017, Xplore continues to anticipate revenue to range between $85 million and $95 million, reflecting the impact of what the company believes is a temporary global slowdown in the rugged tablet market and shipment delays experienced during the first fiscal quarter. Gross margin for the fiscal year is expected to be between 28% and 30%. Reflecting the company’s cost reductions, operating expenses are expected to be approximately $27-29 million. Based on these estimates, the company anticipates net income at or near breakeven for the full year.

Additionally, Xplore continues to anticipate significant bottom line contribution from sales growth beyond its fiscal year 2017 revenue targets, reflecting both efficiencies of scale provided by such growth and the reduced operating cost structure recently initiated. As such, the company reiterated the following business operating targets as revenue scales to a $120 million run-rate, assuming both organic growth and cost reduction initiatives are achieved in future periods: gross margin 28-30%, operating margin 8-10%, profit margin 6-8% and EBITDA margin 9-11%.

Conference Call
The company will conduct a conference call and webcast to review the results on Wednesday, August 10, 2016, at 4:30 p.m. ET.  Interested parties in the United States can access the call by dialing 877-269-7756; interested parties outside the United States can access the call by dialing +1-201-689-7817. A live and archived webcast will be available online in the investor relations section of Xplore’s website at www.xploretech.com. A replay of the conference call will be available until 5 p.m. ET on September 10, 2016, by calling 877-660-6853 from the United States or 201-612-7415 from outside the United States and entering conference ID number 13642570.

About Xplore Technologies
Established in 1996, Xplore Technologies Corp. is the #2 provider of rugged tablet PCs worldwide. With its recent acquisition of the Motion product line, the company now delivers the broadest range of rugged Windows and Android tablets available in the market. The company’s award-winning tablet PCs are among the most powerful and longest lasting in their class – able to withstand nearly any hazardous condition or environmental extreme – and are purpose-built for the unique workflow demands of critical industries including oil & gas, utilities, telecommunications, government, military, public safety, manufacturing, distribution, and healthcare. Xplore's products are sold and serviced on a global basis across the Americas, Europe, Middle East, Africa, and Asia Pacific regions. For more information, visit the Xplore Technologies website at www.xploretech.com . Follow us on Twitter , Facebook , LinkedIn , Vimeo and YouTube .