Track Group Reports 2nd Quarter Fiscal 2020 Financial Results

NAPERVILLE, Ill., May 7, 2020 /PRNewswire/ -- Track Group, Inc. (OTCQX: TRCK), a global leader in offender tracking and monitoring services, today announced financial results for its second quarter ended March 31, 2020 (the "Q2 FY20"). In Q2 FY20, the Company posted (i) revenue of $8.1 million ("M"), an increase of approximately 1% over the same period last year, (ii) operating income of $0.2M representing an increase of 186% compared to an operating loss of $0.3M for the quarter ended March 31, 2019 ("Q2 FY19"), which also led to a cash balance of $7.7M, up 36% compared to $5.7M for the same period one year ago, (iii) adjusted EBITDA of $1.6M, flat to Q2 FY19, and (iv) a net loss attributable to common shareholders of $1.7M compared to a net loss of $0.3M for the same period last year, largely due to non-cash foreign exchange fluctuations.

"Our Company, our customers, our supply partners and our employees have all performed extremely well despite facing unprecedented challenges over the past 2 ½ months brought on by the coronavirus," said Derek Cassell, Track Group's CEO. "I am proud to work with all of these people and remain confident that together, if we continue to work hard and communicate effectively, we have the opportunity to record even stronger results in the second half of our fiscal year."


    --  Quarterly revenue of $8.13M in Q2 FY20, up 1% over Q2 FY19 revenue of
        $8.09M. Revenue for the 6 months ended March 31, 2020 ("6M FY20") of
        $16.6M was up approximately 2% compared to revenue of $16.3M for the 6
        months ended March 31, 2019 ("6M FY19"). Revenue in Q2 FY20 and 6M FY20
        was $0.4M and $0.6M lower than the same periods in FY19 due to the
        strengthening of the U.S. dollar against the Chilean peso.
    --  Quarterly gross profit of $4.4M in Q2 FY20, down 1% over Q2 FY19 gross
        profit of $4.5M. Gross Profit for 6M FY20 was $9.1 million, or flat
        compared to gross profit of $9.1 million for 6M FY19.
    --  Total operating expense for Q2 FY20 of $4.2M is down 12% versus Q2
        FY19's $4.8M of operating expense. The reduction in quarterly operating
        expense when combined with Q2 FY20 gross profit of $4.4M led to a
        quarterly operating income of $237K, which is an improvement of 186%
        compared to the $276K operating loss for Q2 FY19. For 6M FY20, operating
        income was $38K compared to the operating loss for 6M FY19 of $333K,
        representing an improvement of approximately 261%.
    --  Adjusted EBITDA for the Q2 FY20 finished at $1.6M, flat compared to
        $1.6M for Q2 FY19. Adjusted EBITDA for 6M FY20 of $3.4M, up
        approximately 2% vs $3.3M for 6M FY19.
    --  Cash balance of $7.7M for Q2 FY20, up 36% compared to $5.7M for Q2 FY19
        and down 10% over the December 31, 2019 cash balance of $8.5M.
    --  Net loss attributable to shareholders in the Q2 FY20 was $1.7M compared
        to a net loss of $0.3M in Q2 FY19, a change principally attributable to
        the non-cash impact of the volatility of the US dollar as compared to
        the Chilean peso. The net loss attributable to shareholders for the 6M
        FY20 was $2.0 million compared to a net loss of $2.0 million in 6M FY19.


As of May 7, 2020, the Company has not been materially adversely impacted by the coronavirus disease ("COVID-19"); however, the Company is operating in a rapidly changing environment so the extent to which the coronavirus pandemic impacts our business, operations and financial results from this point forward will depend on numerous evolving factors that the Company cannot accurately predict. Given this uncertainty, the Company has removed specific guidance regarding fiscal 2020 results.

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

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 including 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, 2019, 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.



                                                                   (Unaudited)                               September 30,
                                                          March 31,

              Assets                                                   2020                                         2019

              Current assets:

     Cash                                                                        $
            7,686,042                        $

      Accounts receivable, net of allowance
       for doubtful accounts of $2,580,537 and
       $2,454,281, respectively                                                             4,960,428                                6,763,236

     Prepaid expense and deposits                                                          1,218,843                                1,339,465

      Inventory, net of reserves of $62,147
       and $26,934, respectively                                                               60,132                                  274,501

     Total current assets                                                                 13,925,445                               15,273,913

      Property and equipment, net of
       accumulated depreciation of $2,290,429
       and $2,248,913, respectively                                                           532,343                                  675,037

      Monitoring equipment, net of accumulated
       amortization of $6,387,123 and
       $6,322,768, respectively                                                             2,591,391                                2,624,900

      Intangible assets, net of accumulated
       amortization of $15,209,788 and
       $14,157,090, respectively                                                           21,052,972                               21,955,679

     Goodwill                                                                              8,012,536                                8,187,911

     Deferred tax asset                                                                      580,058                                  540,563

     Other assets                                                                            594,719                                  124,187

     Total assets                                                               $
            47,289,464                       $

                 Liabilities and Stockholders' Equity

              Current liabilities:

     Accounts payable                                                                      1,560,395                                2,628,003

     Accrued liabilities                                                                  14,420,182                               13,828,696

      Current portion of long-term debt                                                     3,408,413                               33,827,689

     Total current liabilities                                                            19,388,990                               50,284,388

      Long-term debt, net of current portion                                               30,400,000

     Long-term liabilities                                                                   268,179

     Total liabilities                                                                    50,057,169                               50,284,388

       Commitments and contingencies

                 Stockholders' equity (deficit):

      Common stock, $0.0001 par value:
       30,000,000 shares authorized;
       11,414,150 and 11,401,650 shares
       outstanding, respectively                                                                1,141                                    1,140

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

     Paid in capital                                                                     302,270,242                              302,250,556

     Accumulated deficit                                                               (304,105,976)                           (302,152,292)

      Accumulated other comprehensive loss                                                  (933,112)                             (1,001,602)

     Total equity (deficit)                                                              (2,767,705)                               (902,198)

      Total liabilities and stockholders'
       equity (deficit)                                                          $
            47,289,464                       $




                                                              Three Months Ended                                                                                  Six Months Ended

                                                   March 31,                                             March 31,                                                           March 31,             March 31,

                                                        2020                                                   2019                                                                 2020                   2019


      Monitoring and other related services                    $
              7,993,092                                               $
              7,877,403                                    $
          16,261,515     $

     Product sales and other                                                138,634                                                             213,839                                               291,042                365,046

     Total revenue                                                        8,131,726                                                           8,091,242                                            16,552,557             16,302,777

                   Cost of revenue:

      Monitoring, products and other related
       services                                                            3,201,677                                                           3,065,710                                             6,468,586              6,165,903

      Depreciation and amortization included
       in cost of revenue                                                    494,157                                                             533,590                                               981,599              1,011,879

     Total cost of revenue                                                3,695,834                                                           3,599,300                                             7,450,185              7,177,782

      Gross profit                                                        4,435,892                                                           4,491,942                                             9,102,372              9,124,995

                    Operating expense:

     General & administrative                                             2,723,219                                                           3,316,069                                             5,735,073              6,738,341

     Selling & marketing                                                    642,432                                                             576,974                                             1,183,981              1,080,904

     Research & development                                                 323,737                                                             354,879                                               619,892                603,744

     Depreciation & amortization                                            509,287                                                             520,384                                             1,025,226              1,035,365

     Total operating expense                                              4,198,675                                                           4,768,306                                             8,564,172              9,458,354

                   Income (loss) from operations                             237,217                                                           (276,364)                                              538,200              (333,359)

                   Other income (expense):

     Interest expense, net                                                (596,324)                                                          (584,348)                                          (1,198,857)           (1,185,587)

      Currency exchange rate gain (loss)                                 (1,334,240)                                                            595,910                                           (1,190,932)             (336,767)

     Other income (loss), net                                               (4,347)                                                                143                                               (4,347)                   143

                   Total other income (expense)                          (1,934,911)                                                             11,705                                           (2,394,136)           (1,522,211)

                   Loss before income taxes                              (1,697,694)                                                          (264,659)                                          (1,855,936)           (1,855,570)

                   Income tax expense                                         23,365                                                                                                                   97,748                144,007

                   Net loss attributable to common
                    shareholders                                         (1,721,059)                                                          (264,659)                                          (1,953,684)           (1,999,577)

      Foreign currency translation
       adjustments                                                           132,588                                                           (255,981)                                               68,490              (159,308)

                   Comprehensive loss                        $
              (1,588,471)                                              $
              (520,640)                                  $
          (1,885,194)    $

      Net loss per common share, basic and
       diluted                                                    $
              (0.15)                                                 $
              (0.02)                                       $
          (0.17)        $

      Weighted average common shares
       outstanding, basic and diluted                                     11,414,150                                                          11,251,650                                            11,336,690             11,175,002

                                                    Three Months Ended        
              Six Months Ended
                                                               March 31,                                     March 31,

                                       2020                              2019                          2020                          2019

                  Non-GAAP Adjusted

                  Net income (loss)
                   attributable to
                   common shareholders      $
           (1,721)                    $
           (265)                         $
          (1,954)    $

     Interest expense,
      net                                                596                                585                                    1,199              1,186

     Depreciation and
      amortization                                     1,004                              1,054                                    2,007              2,047

     Income taxes (1)                                     24                                                                         98                144

     Board compensation
      and stock-based
      compensation                                        75                                100                                      170                258

     Foreign exchange
      expense                                          1,334                              (596)                                   1,191                337

     Other charges, net
      (2)                                               303                                740                                      680              1,364

                  Non GAAP Adjusted
                   EBITDA                     $
           1,618                     $
           1,618                           $
           3,391     $

                  Non GAAP Adjusted
                   EBITDA, percent of                      %                                 %                                       %                 %
                   revenue                              19.9                               20.0                                     20.5               20.5

     Weighted average
      common shares
      outstanding                                 11,414,150                         11,251,650                               11,336,690         11,175,002

                  Non-GAAP earnings
                   per share                   $
           0.14                      $
           0.14                            $
           0.30      $

               (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

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SOURCE Track Group, Inc.