Exhibit 99.1
 
 
FOR IMMEDIATE RELEASE
December 20, 2017
 
Peter Poli
Chief Financial Officer
877-260-2010
peter.poli@trackgrp.com
Track Group Reports Fiscal 2017 Financial Results
 
Revenue Up 9%, Adjusted EBITDA Up 82% and Net Cash from Operations Up 357%
 
NAPERVILLE, ILLINOIS – Track Group, Inc. (OTCQX: TRCK), a global leader in offender tracking and monitoring services, today announced financial results for its fiscal year ended September 30, 2017. The Company posted revenue of $29.7M, an increase of 9.3% over last year, adjusted EBITDA of $3.6M up 82.1% compared to FY2016 and Net Cash provided by Operating Activities of $4.1M, an increase of 357%. The Company’s reorganization and consolidation initiatives had a predictable impact on these results.
 
“We’re happy to report a very strong finish to a great fiscal 2017, with year-over-year growth in key financial categories including our best quarter ever for Adjusted EBITDA,” said Guy Dubois, Track Group’s Chairman and CEO. “With our fantastic new line-up of smartphone-based monitoring applications including BACtrack for criminal justice, we’re looking forward to a great 2018, and with the launch of our new device-agnostic operating platform getting underway right now, we couldn’t be more excited as we begin to deliver our vision for the future.”
 
FINANCIAL HIGHLIGHTS
 
Total revenue in FY2017 up 9.3% over last year ($29.7M vs. $27.2M)
 
Total operating expenses for the year ended 30 Sept 2017 are flat ($20.5M) vs. last year ($20.4M) despite the fact that the Company incurred restructuring costs, an impairment of intangible assets, and a loss on the sale of assets, which in aggregate, totaled approximately $1.8M for the year just ended
 
Adjusted EBITDA in FY2017 finished at $3.6M up 82.1% compared to $2.0M for FY2016
 
Adjusted EBITDA for the quarters of fiscal 2017 improved sequentially each quarter
o
Q1 or 31 Dec 2016 Adj EBITDA = $0.41M
o
Q2 or 31 March 2017 Adj EBITDA = $0.64M
o
Q3 or 30 June 2017 Adj EBITDA = $1.24M
o
Q4 or 30 Sept 2017 Adj EBITDA = $1.35M
 
Net Cash Provided by Operating Activities 
o
For year ended 30 Sept 2017 = $4.1M
o
For year ended 30 Sept 2016 = $0.9M
o
Up 357% or nearly five-fold
 
Net loss attributable to common shareholders in FY2017 improved to ($4.7M) up 44% compared to ($8.5M) for FY2016

 

 

 
 

5th Avenue Station  877.260.2010
200 E. 5th Avenue, Suite 100  trackgrp.com
Naperville, IL 60563
 
 
BUSINESS HIGHLIGHTS
 
The Company completed a major operational restructuring in 2017, which included the consolidation of key operational functions into its new Chicagoland Headquarters
 
Launch of the Company’s next generation operating platform is underway
 
Major smartphone application development initiatives were completed in 2017 and launches are currently underway including remote alcohol monitoring and domestic violence solutions
 
Key customer accounts are stable and growing
 
BUSINESS OUTLOOK
 
 
 
Actual
 
 
Outlook
 
 
 
FY 2016
 
 
FY 2017
 
 
FY 2018
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 $27.2M 
 $29.7M 
 $35-40M 
 
    
    
    
Adjusted EBITDA Margin:
  7.3%
  12.2%
  15-20%
 
 
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
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2017 AND 2016
 
Assets
 
2017
 
 
2016
 
Current assets:
 
 
 
 
 
 
Cash
 $2,027,321 
 $1,769,921 
Accounts receivable, net of allowance for doubtful accounts of $3,268,095 and $2,335,508, respectively
  5,438,564 
  6,894,095 
Note receivable, current portion
  234,733 
  334,733 
Prepaid expenses and other
  854,122 
  816,708 
Inventory, net of reserves of $26,934 and $98,150, respectively
  261,810 
  521,851 
Total current assets
  8,816,550 
  10,337,308 
Property and equipment, net of accumulated depreciation of $1,778,634 and $1,421,389, respectively
  903,100 
  1,226,461 
Monitoring equipment, net of accumulated amortization of $4,906,925 and $3,438,074, respectively
  3,493,012 
  4,358,117 
Intangible assets, net of accumulated amortization of $9,839,032 and $8,233,659, respectively
  24,718,655 
  25,540,650 
Goodwill
  8,226,714 
  7,955,876 
Other assets
  2,989,101 
  2,900,911 
Total assets
 $49,147,132 
 $52,319,323 
 
    
    
Liabilities and Stockholders’ Equity
    
    
Current liabilities:
    
    
Accounts payable
  2,769,835 
  2,771,101 
Accrued liabilities
  6,650,291 
  3,976,192 
Current portion of long-term debt, net of discount of $185,811 and $222,973, respectively
  30,270,531 
  3,245,732 
Total current liabilities
  39,690,657 
  9,993,025 
Stock payable - related party
  - 
  3,289,879 
Long-term debt, net of current portion and discount of $0 and $185,811, respectively
  3,480,717 
  30,345,803 
Total liabilities
  43,171,374 
  43,628,707 
 
    
    
Stockholders’ equity:
    
    
Common stock, $0.0001 par value: 30,000,000 shares authorized; 10,480,984 and 10,333,516 shares outstanding, respectively
  1,048 
  1,034 
Additional paid-in capital
  300,717,861 
  298,876,399 
Accumulated deficit
  (294,067,329)
  (289,341,503)
Accumulated other comprehensive loss
  (675,822)
  (845,314)
Total equity
  5,975,758 
  8,690,616 
Total liabilities and stockholders’ equity
 $49,147,132 
 $52,319,323 
 
 
 
 
 
TRACK  GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2017 AND 2016
 
 
 
2017
 
 
2016
 
Revenues:
 
 
 
 
 
 
Monitoring services
 $28,887,460 
 $26,343,783 
Other
  839,558 
  850,024 
Total revenues
  29,727,018 
  27,193,807 
 
    
    
Cost of revenues:
    
    
Monitoring, products and other related services
  11,997,031 
  10,327,486 
Depreciation and amortization included in cost of revenues
  2,128,668 
  2,009,437 
Impairment of monitoring equipment and parts
  - 
  80,000 
Total cost of revenue
  14,125,699 
  12,416,923 
 
    
    
Gross profit
  15,601,319 
  14,776,884 
 
    
    
Operating expenses: 
    
    
General & administrative
  12,216,041 
  13,038,760 
Loss on sale of assets
  763,531 
  - 
Restructuring costs
  558,833 
  - 
Impairment of intangible assets
  506,413 
  - 
Selling & marketing
  2,311,725 
  2,270,733 
Research & development
  1,784,867 
  2,415,924 
Depreciation & amortization
  2,332,217 
  2,709,918 
Total operating expense
  20,473,627 
  20,435,335 
 
    
    
Loss from operations
  (4,872,308)
  (5,658,451)
 
    
    
Other income (expense):
    
    
Interest income
  20,086 
  114,235 
Interest expense
  (2,820,924)
  (2,829,003)
Currency exchange rate gain (loss)
  223,475 
  (151,258)
Gain on settlement of milestone payments
  3,213,940 
  - 
Other income/expense, net
  11,556 
  28,856 
Total other income (expense)
  648,133 
  (2,837,170)
Net loss before income taxes
  (4,224,175)
  (8,495,621)
Income tax expense
  501,651 
  - 
Net loss attributable to common shareholders
  (4,725,826)
  (8,495,621)
Foreign currency translation adjustments
  169,492 
  1,532,751 
Comprehensive loss
 $(4,556,334)
 $(6,962,870)
Net loss per common share, basic and diluted
 $(0.45)
 $(0.83)
Weighted average common shares outstanding, basic and diluted
  10,408,870 
  10,285,947 
 
 
 
 
 
TRACK GROUP, INC. AND  SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2017 AND 2016
 
 
 
2017 
 
 
2016 
 
Cash flows from operating activities: 
 
 
 
 
 
 
Net loss
 $(4,725,826)
 $(8,495,621)
Adjustments to reconcile net loss to net cash provided by operating activities:
    
    
Depreciation and amortization
  4,460,885 
  4,719,355 
Impairment of monitoring equipment and parts
  - 
  80,000 
Impairment of intangible assets
  506,413 
  - 
Bad debt expense
  1,048,737 
  1,996,348 
Accretion of debt discount
  222,973 
  222,973 
Stock based compensation
  1,140,520 
  1,353,295 
Loss on disposal of property and equipment
  763,531 
  39,290 
Gain on settlement of milestone payments
  (3,213,940)
  - 
Loss on monitoring equipment included on cost of sales
  569,371 
  90,838 
Change in assets and liabilities:
    
    
Accounts receivable, net
  583,694 
  (2,718,115)
Notes receivable
  - 
  (28,299)
Inventories
  260,041 
  258,519 
Prepaid expenses and other
  (433,978)
  190,951 
Accounts payable, accrued expenses and other
  2,965,365 
  3,198,029 
Net cash provided by operating activities
  4,147,786 
  907,563 
 
    
    
Cash flow from investing activities:
    
    
Purchase of property and equipment
  (84,749)
  (105,121)
Capitalized software
  (2,416,804)
  (2,090,962)
Purchase of monitoring equipment and parts
  (1,838,779)
  (2,861,100)
Proceeds from sale of assets
  512,500 
  - 
 Net cash used in investing activities
  (3,827,832)
  (5,057,183)
 
    
    
Cash flow from financing activities:
    
    
Proceeds from notes payable
  - 
  2,000,000 
Principal payments on notes payable
  (67,775)
  (1,021,832)
Net cash provided by (used in) financing activities
  (67,775)
  978,168 
 
    
    
Effect of exchange rate changes on cash
  5,221 
  38,328 
 
    
    
Net increase (decrease) in cash
  257,400 
  (3,133,124)
Cash, beginning of year
  1,769,921 
  4,903,045 
Cash, end of year
 $2,027,321 
 $1,769,921 
 
 
 
 
TRACK GROUP, INC. AND SUBSIDIARIES
Reconciliation of GAAP and Non-GAAP Financial Measures
 
For the Fiscal Years Ended September 30, 2017 and 2016
 
 
 
Three Months ended
 
 
Twelve Months ended
 
 
September 30,
 September 30,
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
 
Non-GAAP Adjusted EBITDA (In $000s, except share data)
 
 
 
 
 
 
 
 
 
 
Net loss attributable to common shareholders
  (1,273)
  (2,664)
  (4,726)
  (8,496)
Interest expense, net
  684 
  705 
  2,801 
  2,715 
Income taxes (1)
  - 
  (28)
  502 
  - 
Depreciation, amortization and impairment
  1,244 
  998 
  4,967 
  4,799 
Stock based compensation
  236 
  69 
  1,141 
  1,353 
Restructuring charges (2)
  (10)
  - 
  559 
  - 
Gain on contingent share liability
  - 
  - 
  (3,214)
  - 
Loss on sale of assets
  - 
  - 
  764 
  - 
Other charges, net (3)
  471 
  986 
  842 
  1,626 
Non GAAP Adjusted EBITDA
  1,352 
  66 
  3,636 
  1,997 
Non GAAP Adjusted EBITDA, percent of revenue
  18.1%
  0.9%
  12.2%
  7.3%
 
 
 
Three Months ended
 
 
Twelve Months ended
 
 
 September 30,
 September 30,
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Non-GAAP EPS (In $000's, except share data)
 
 
 
 
 
 
 
 
 
 
 
 
Net loss attributable to common shareholders
  (1,273)
  (2,664)
  (4,726)
  (8,496)
Interest expense, net
  684 
  705 
  2,801 
  2,715 
Income taxes (1)
  - 
  (28)
  502 
  - 
Depreciation, amortization and impairment
  1,244 
  998 
  4,967 
  4,799 
Stock based compensation
  236 
  69 
  1,141 
  1,353 
Restructuring charges (2)
  (10)
  - 
  559 
  - 
Gain on contingent share liability
  - 
  - 
  (3,214)
  - 
Loss on sale of assets
  - 
  - 
  764 
  - 
Other charges, net (3)
  471 
  986 
  842 
  1,626 
Non GAAP net income to common shareholders
  1,352 
  66 
  3,636 
  1,997 
Weighed average common shares outstanding
  10,480,984 
  10,333,516 
  10,408,870 
  10,285,947 
Non-GAAP earnings per share
 $0.13 
 $0.01 
 $0.35 
 $0.19 
 
(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, non-recurring accrual adjustments, legal settlements and reserves associated with contracts in Mexico.
 
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.
 
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. & 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.
 
 
 
 

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