Track Group Reports 3rd Quarter Fiscal 2019 Financial Results

NAPERVILLE, Ill., Aug. 9, 2019 /PRNewswire/ -- Track Group, Inc. (OTCQX: TRCK), a global leader in offender tracking and monitoring services, today announced financial results for its third quarter ended June 30, 2019 (the "Q3 FY19"). In Q3 FY19, the Company posted (i) record revenue of $9.0M, an increase of 17% over the same period last year, (ii) record operating income of $0.6M compared to an operating loss of $0.7M for the quarter ended June 30, 2018 ("Q3 FY18"), (iii) adjusted EBITDA of $1.9M, up 67% compared to Q3 FY18, and (iv) a cash balance at June 30, 2019 of $6.9M, representing an increase of 26% over September 30, 2018 and up 21% compared to March 31, 2019 as well as the highest balance since September 2014.

"For our quarter ended June 30, 2019, I am proud that Track Group generated the highest ever quarterly revenue, gross profit, and operating income in the Company's history," said Derek Cassell, Track Group's CEO. "I would like to thank our employees, customers and partners for all of their efforts in making this happen."

FINANCIAL HIGHLIGHTS

    --  Quarterly revenue of $9.0M in Q3 FY19, up 17% over Q3 FY18 of $7.7M.
        Revenue for the 9 months ended June 30, 2019 ("9M FY19") of $25.3M was
        up approximately 12% compared to revenue of $22.5M for the 9 months
        ended June 30, 2018 ("9M FY18").
    --  Quarterly gross profit of $4.8M in Q3 FY19, up 14% over Q3 FY18 of
        $4.2M. Gross Profit for 9M FY19 was $13.9 million, up 10% compared to
        Gross Profit of $12.7 million for 9M FY18.
    --  Total operating expense for Q3 FY19 of $4.2M is down 16% versus Q3
        FY18's $4.9M of operating expenses. The drop in quarterly operating
        expense when combined with Q3 FY19 gross profit of $4.8M led to the
        highest quarterly operating income in the Company's history of $640K,
        which is a dramatic turnaround of 187% compared to the $738K operating
        loss for Q3 FY18. For 9M FY19, operating income was $306K compared to
        loss from operations of $1,779K for 9M FY18, representing an improvement
        of 117%.
    --  Adjusted EBITDA in the Q3 FY19 finished at $1.9M, up 67% compared to
        $1.2M for Q3 FY18. Adjusted EBITDA for 9M FY19 of $5.3M, up
        approximately 32% vs $4.0M for 9M FY18.
    --  The cash balance of $6.9M at June 30, 2019 is up 26% compared to a
        balance of $5.4M at September 30, 2018 and up 21% over the March 31,
        2019 cash balance of $5.7M and the highest level in nearly five years.
    --  The Net loss attributable to common shareholders for Q3 FY19 was $0.1M
        compared to a net loss of $1.9M in Q3 FY18, an improvement of
        approximately 96%. The net loss attributable to shareholders for the 9M
        FY19 was $2.1 million compared to a net loss of $4.6 million in 9M FY18
        representing an improvement of approximately 55%.



     
     BUSINESS OUTLOOK




                             Actual              Outlook


                             FY 2017     FY 2018            FY 2019    FY 2020

                                                                           ---

        Revenue:         
     $   29.7M 
     $   30.6M         
     $ 33-37M 
     $ 36-40M




        Adjusted EBITDA
         Margin:               12.2%       19.2%             18-23%    21-26%

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, and 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, 2018, 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
                                             CONDENSED CONSOLIDATED BALANCE SHEETS




                                                
              
                June 30,       
              
                September
                                                                                                                        30,
                                                                              2019
                                                                                                                       2018

                                                                                                                       ---

                                              
              
                (unaudited)



     
                Assets



     
                Current assets:



     Cash                                                              $6,878,916                               $5,446,557


      Accounts receivable, net of
       allowance for doubtful
       accounts of $2,542,103 and
       $3,152,966, respectively                                          5,533,258                                5,978,896


      Note receivable, net of
       allowance for doubtful
       accounts of $234,733 at
       September 30, 2018                                                        -


      Prepaid expense and other                                          1,374,236                                1,270,043


      Inventory, net of reserves of
       $26,934, respectively                                               253,238                                  277,119




     Total current assets                                              14,039,648                               12,972,615


      Property and equipment, net of
       accumulated depreciation of
       $2,235,720 and $1,999,222,
       respectively                                                        741,641                                  745,475


      Monitoring equipment, net of
       accumulated amortization of
       $6,215,061 and $5,325,654,
       respectively                                                      2,619,670                                3,162,542


      Intangible assets, net of
       accumulated amortization of
       $13,608,444 and $12,016,512,
       respectively                                                     22,283,352                               23,253,054



     Goodwill                                                           8,123,550                                8,076,759



     Other assets                                                         124,522                                  145,839




     Total assets                                                     $47,932,383                              $48,356,284




     
                Liabilities and Stockholders' Equity (Deficit)



     
                Current liabilities:



     Accounts payable                                                  $2,424,626                               $2,518,030



     Accrued liabilities                                               12,209,866                               10,333,103


      Current portion of long-term
       debt                                                             30,437,825                               30,437,810



      Total current liabilities                                         45,072,317                               43,288,943


      Long-term debt, net of current
       portion                                                           3,399,644                                3,428,975




     Total liabilities                                                 48,471,961                               46,717,918



      Commitments and contingencies                                              -

                                                                                                                       ---


     
                Stockholders' equity (deficit):


      Common stock, $0.0001 par
       value: 30,000,000 shares
       authorized; 11,401,650 shares
       outstanding, respectively                                             1,140                                    1,140


      Series A Convertible Preferred
       stock, $0.0001 par value:
       1,200,000 shares authorized; 0
       shares outstanding                                                        -



     Paid in capital                                                  302,230,868                              302,102,866



     Accumulated deficit                                            (301,657,263)                           (299,495,370)


      Accumulated other comprehensive
       loss                                                            (1,114,323)                               (970,270)



      Total equity (deficit)                                             (539,578)                               1,638,366



      Total liabilities and
       stockholders' equity (deficit)                                  $47,932,383                              $48,356,284


                                                                    
              
                TRACK GROUP, INC. AND SUBSIDIARIES
                                                              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                                                                     
                (Unaudited)




                                                    Three Months Ended                                                                           Nine Months Ended


                                                
     
           June 30,                     
              
                June 30,                                            June 30,                   
     
     June 30,
                                                                  2019                                               2018                                                2019                              2018

                                                                                                                                                                                                         ---




     
                Revenue:


      Monitoring and other related
       services                                             $7,904,015                                         $7,549,779                                          23,841,746                       $22,062,789


      Product sales and other                                1,051,449                                            129,196                                           1,416,495                           423,056




     Total revenue                                          8,955,464                                          7,678,975                                          25,258,241                        22,485,845



     
                Cost of revenue:


      Monitoring, products and
       other related services                                3,661,470                                          3,039,755                 9,827,373                                 8,409,604


      Depreciation and
       amortization                                            500,704                                            432,952                 1,512,583                                 1,377,760



      Total cost of revenue                                  4,162,174                                          3,472,707                11,339,956                                 9,787,364




                   Gross profit                              4,793,290                                          4,206,268                13,918,285                                12,698,481





     
                Operating expense:


      General & administrative                               2,725,991                                          3,703,869                 9,464,332                                10,856,950


      Selling & marketing                                      556,122                                            466,048                 1,637,026                                 1,394,778


      Research & development                                   350,532                                            254,060                   954,276                                   600,814


      Depreciation & amortization                              521,013                                            520,639                 1,556,378                                 1,624,916



      Total operating expense                                4,153,658                                          4,944,616                13,612,012                                14,477,458





                   Income (loss) from
                    operations                                 639,632                                          (738,348)                  306,273                               (1,778,977)





     
                Other income (expense):


      Interest expense, net                                  (597,623)                                         (594,452)              (1,783,210)                              (2,074,245)


      Currency exchange rate
       gain(loss)                                              201,972                                          (166,586)                (134,795)                                (442,706)



     Other income, net                                              -                                             3,733                       143                                    21,199



                   Total other income (expense)              (395,651)                                         (757,305)              (1,917,862)                              (2,495,752)



                   Loss before income taxes                    243,981                                        (1,495,653)              (1,611,589)                              (4,274,729)


                   Income tax expense                          313,328                                            360,807                   457,335                                   360,807



                   Net loss attributable to
                    common shareholders                       (69,347)                                       (1,856,460)              (2,068,924)                              (4,635,536)


      Foreign currency translation
       adjustments                                              15,255                                          (861,637)                (144,053)                                (431,186)



                   Comprehensive loss                        $(54,092)                                      $(2,718,097)             $(2,212,977)                             $(5,066,722)



      Net loss per common share,
       basic and diluted                                       $(0.01)                                           $(0.17)                  $(0.18)                                  $(0.44)


      Weighted average common
       shares outstanding, basic
       and diluted                                          11,251,650                                         10,885,444                11,200,551                                10,608,127


                                                        Three Months Ended                      Nine Months Ended
                                               June 30,                      June 30,



                                               2019                     2018               2019           2018



                   Non-GAAP Adjusted EBITDA


                   Net loss attributable to
                    common shareholders       $(69)                $(1,857)          $(2,069)      $(4,636)


      Interest expense, net                     597                      594              1,783          2,074


      Depreciation and amortization           1,022                      953              3,069          3,003



     Income taxes (1)                          313                      361                457            361


      Board compensation and stock-
       based compensation                        95                      356                353          1,701


      Foreign exchange expense                (202)                     167                135            443


      Other charges, net (2)                    185                      589              1,549          1,045



                   Non GAAP Adjusted EBITDA  $1,941                   $1,163             $5,277         $3,991


                   Non GAAP Adjusted EBITDA,
                    percent of revenue        21.7%                   15.1%             20.9%         17.7%


                                                                              Three Months Ended                 Nine Months Ended
                                                                       June 30,                         June 30,



                                                       2019       2018                                 2019             2018



                   Non-GAAP EPS (in $000's,
                    except share data)


                   Net loss attributable to
                    common shareholders               $(69)  $(1,857)                            $(2,069)        $(4,636)


      Interest expense, net                             597        594                                1,783            2,074


      Depreciation and amortization                   1,022        953                                3,069            3,003



     Income taxes (1)                                  313        361                                  457              361


      Board compensation and stock-
       based compensation                                95        356                                  353             1701


      Foreign exchange expense                        (202)       167                                  135              443


      Other charges, net (2)                            185        589                                1,549            1,045



                   Non GAAP net income to common
                    shareholders                     $1,941     $1,163                               $5,277           $3,991


      Weighted average common
       shares outstanding                        11,251,650 10,885,444                           11,200,551       10,608,127



                   Non-GAAP earnings per share        $0.17      $0.11                                $0.47            $0.38




     (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) Other charges may include gains or losses and
            non-recurring accrual adjustments.

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SOURCE Track Group, Inc.