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Track Group Reports 3rd Quarter Fiscal 2020 Financial Results

TRCK

Total Revenue down 5%, Monitoring Revenue up 5%, Operating Income improves 59%, Adjusted EBITDA up 17%, Net Income Turnaround

NAPERVILLE, Ill., Aug. 6, 2020 /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, 2020 (the "Q3 FY20"). In Q3 FY20, the Company posted (i) total revenue of $8.5M, down 5% from $9.0M in the third quarter last year due to device sales used to establish a large Latin American reseller in 2019; however, monitoring revenue which comprises the substantial majority of total revenue was $8.3M in Q3 FY20, an increase of approximately 5% over the same period last year , (ii) operating income of $1.0M representing an increase of 59% compared to operating income of $0.6M for the quarter ended June 30, 2019 ("Q3 FY19"), (ii) adjusted EBITDA of $2.3M, up 17% compared to $1.9M for Q3 FY19, and (iv) a net income attributable to common shareholders of $0.4M compared to a net loss of $0.1M for the same period last year.

FINANCIAL HIGHLIGHTS

  • Total revenue of $8.5M for the Q3 FY20 and $25.0M for the nine months ended June 30, 2020 ("9M FY20"), are down 5% and 1%, respectively, compared to Q3 FY19 and the nine months ended June 30, 2019 ("9M FY19") due to a decline in device sales. Quarterly monitoring revenue which comprises the substantial majority of total revenue was $8.33M in Q3 FY20, up 5% over Q3 FY19 monitoring revenue of $7.90M. Monitoring revenue for the 9M FY20 was $24.6M, up approximately 3% compared to monitoring revenue of $23.8M for the 9M FY19.
  • Quarterly gross profit of $4.6M in Q3 FY20 was down 4% vs. Q3 FY19 gross profit of $4.8M but up 4% over Q2 FY20 gross profit of $4.4M. Gross profit for the 9M FY20 was $13.7 million, or down 1% compared to gross profit of $13.9 million for the 9M FY19.
  • Total operating expense for Q3 FY20 of $3.6M is down 13% versus Q3 FY19's $4.2M of total operating expense. The reduction in quarterly operating expense when combined with Q3 FY20 gross profit of $4.6M led to Q3 FY20 quarterly operating income of $1.0M, which is an improvement of 59% compared to the $0.6M operating profit for Q3 FY19. For the 9M FY20, operating income was $1.6M compared to operating income of $0.3M for the nine-month period in FY19, representing an improvement of over 400%.
  • Adjusted EBITDA for the Q3 FY20 finished at $2.3M, up 17%, compared to $1.9M for Q3 FY19. Adjusted EBITDA for the 9M FY20 was $5.7M, up approximately 7% vs $5.3M for the nine-month period in FY19.
  • Cash balance of $9.0M for Q3 FY20, up 31% compared to $6.9M for Q3 FY19 and up 17% over the March 31, 2020 cash balance of $7.7M.
  • Net income attributable to shareholders in Q3 FY20 was $0.4M compared to a net loss of $0.1M in Q3 FY19, a change principally attributable to the Company's strong operating performance and exchange rate gains as the US dollar strengthened against the Chilean peso. The net loss attributable to shareholders for the 9M FY20 was $1.5 million compared to a net loss of $2.1 million in the nine-month period in FY19.

BUSINESS OUTLOOK

As of August 6, 2020, the adverse impact by the coronavirus pandemic (COVID-19) on the Company has been significant on the Chile operation and also has caused some delays with both the supply chain and certain requests for proposal administered by potential new clients. In addition, we are 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 we 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 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.

TRACK GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS




June 30,



September 30,


Assets


2020



2019


Current assets:


(Unaudited)





Cash


$

9,030,645



$

6,896,711


Accounts receivable, net of allowance for doubtful accounts of $2,617,996 and $2,454,281, respectively



4,811,533




6,763,236


Prepaid expense and deposits



989,094




1,339,465


Inventory, net of reserves of $7,225 and $26,934, respectively



87,322




274,501


Total current assets



14,918,594




15,273,913


Property and equipment, net of accumulated depreciation of $2,399,271 and $2,248,913, respectively



466,892




675,037


Monitoring equipment, net of accumulated amortization of $6,566,293 and $6,322,768, respectively



2,051,128




2,624,900


Intangible assets, net of accumulated amortization of $15,801,787 and $14,157,090, respectively



21,149,358




21,955,679


Goodwill



8,169,117




8,187,911


Deferred tax asset



451,127




540,563


Other assets



545,130




124,187


Total assets


$

47,751,346



$

49,382,190











Liabilities and Stockholders' Equity (Deficit)









Current liabilities:









Accounts payable



574,519




2,628,003


Accrued liabilities



14,571,805




13,828,696


Current portion of long-term debt



3,758,031




33,827,689


Total current liabilities



18,904,355




50,284,388


Long-term debt, net of current portion



30,974,813




-


Long-term liabilities



217,324




-


Total liabilities



50,096,492




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



(303,691,914)




(302,152,292)


Accumulated other comprehensive loss



(924,615)




(1,001,602)


Total equity (deficit)



(2,345,146)




(902,198)


Total liabilities and stockholders' equity (deficit)


$

47,751,346



$

49,382,190


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,




2020



2019



2020



2019


Revenue:













Monitoring and other related services


$

8,325,697



$

7,904,015



$

24,587,212



$

23,841,746


Product sales and other



158,213




1,051,449




449,255




1,416,495


Total revenue



8,483,910




8,955,464




25,036,467




25,258,241



















Cost of revenue:

















Monitoring, products and other related services



3,379,934




3,661,470




9,848,520




9,827,373


Depreciation and amortization



482,797




500,704




1,464,396




1,512,583


Total cost of revenue



3,862,731




4,162,174




11,312,916




11,339,956



















Gross profit



4,621,179




4,793,290




13,723,551




13,918,285



















Operating expense:

















General & administrative



2,329,520




2,725,991




8,064,593




9,464,332


Selling & marketing



487,786




556,122




1,671,767




1,637,026


Research & development



281,820




350,532




901,712




954,276


Depreciation & amortization



505,585




521,013




1,530,811




1,556,378


Total operating expense



3,604,711




4,153,658




12,168,883




13,612,012



















Operating income



1,016,468




639,632




1,554,668




306,273



















Other income (expense):

















Interest expense, net



(622,869)




(597,623)




(1,821,726)




(1,783,210)


Currency exchange rate gain (loss)



535,141




201,972




(655,791)




(134,795)


Other income, net



-




-




(4,347)




143


Total other income (expense)



(87,728)




(395,651)




(2,481,864)




(1,917,862)


Income (loss) before income taxes



928,740




243,981




(927,196)




(1,611,589)


Income tax expense



514,678




313,328




612,426




457,335


Net income (loss) attributable to common shareholders



414,062




(69,347)




(1,539,622)




(2,068,924)


Foreign currency translation adjustments



8,497




15,255




76,987




(144,053)


Comprehensive income (loss)


$

422,559



$

(54,092)



$

(1,462,635)



$

(2,212,977)


Net income (loss) per common share, basic and diluted


$

0.04



$

(0.01)



$

(0.14)



$

(0.18)


Weighted average common shares outstanding, basic and diluted



11,414,150




11,251,650




11,362,416




11,200,551






Three Months Ended
June 30,



Nine Months Ended
June 30,




2020



2019



2020



2019















Non-GAAP Adjusted EBITDA













Net income (loss) attributable to common shareholders


$

414



$

(69)



$

(1,540)



$

(2,069)


Interest expense, net



623




597




1,822




1,783


Depreciation and amortization



988




1,022




2,995




3,069


Income taxes (1)



514




313




612




457


Board compensation and stock-based compensation



75




95




245




353


Foreign exchange expense



(535)




(202)




656




135


Other charges, net (2)



196




185




876




1,549


Non-GAAP Adjusted EBITDA


$

2,275



$

1,941



$

5,666



$

5,277


Non-GAAP Adjusted EBITDA, percent of revenue



26.8

%



21.7

%



22.6

%



20.9

%


















Weighted average common shares outstanding



11,414,150




11,251,650




11,362,416




11,200,551


Non-GAAP earnings per share


$

0.20



$

0.17



$

0.50



$

0.47



















(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.

Cision View original content:http://www.prnewswire.com/news-releases/track-group-reports-3rd-quarter-fiscal-2020-financial-results-301107766.html

SOURCE Track Group, Inc.



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