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Track Group, Inc. (TRCK) SEC Filing 10-K Annual report for the fiscal year ending Sunday, September 30, 2018

Track Group, Inc.

CIK: 1045942 Ticker: TRCK
 
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-

The following information was filed by Track Group, Inc. (TRCK) on Wednesday, August 8, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Accrued Liabilities (Details)
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Summary Of Significant Accounting Policies (Details 2)
Summary Of Significant Accounting Policies (Details 3)
Summary Of Significant Accounting Policies (Details 4)
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Summary Of Significant Accounting Policies (Details)
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Ticker: TRCK
CIK: 1045942
Form Type: 10-K Annual Report
Accession Number: 0001654954-18-014088
Submitted to the SEC: Wed Dec 19 2018 11:59:42 AM EST
Accepted by the SEC: Wed Dec 19 2018
Period: Sunday, September 30, 2018
Industry: Communications Equipment

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