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Track Group Reports 2nd Quarter Fiscal 2022 Financial Results

TRCK

Net income remains positive amidst a challenging environment and after a decrease in operating income due to technology and infrastructure investments.

NAPERVILLE, Ill., May 13, 2022 /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, 2022 ("Q2 FY22"). In Q2 FY22, the Company posted (i) total revenue of $9.5 million, a reduction of approximately 4% over total revenue for the second quarter ended March 31, 2022 ("Q2 FY21") of $9.9 million; (ii) operating income of $7,371 compared to Q2 FY21 operating income of $1.7M; and (iv) net income attributable to common shareholders of $0.5M in Q2 FY22 compared to net income of $2.2 million in Q2 FY21.

"Remaining supply chain constraints brought on by the pandemic, coupled with investments in new technology and telecommunications infrastructure, are reflected in our financial results for the second quarter ended March 31, 2022. Notwithstanding, we performed well despite the circumstances and remain resilient by employing adaptive strategies. Our team successfully managed a nationwide device upgrade, developed new products, and supported new contracts while remaining squarely focused on the agencies reintegrating our end users back into society. As we reinvest in our technology and prepare for a return to growth in FY23, we see encouraging progress on several fronts, from our customer experience, product roadmap, and smart integrations that ultimately create value for our customers." said Derek Cassell, Track Group's CEO.

FINANCIAL HIGHLIGHTS
  • Total revenue of $9.5 million in Q2 FY22 was down 4% compared to Q2 FY21 total revenue of $9.9 million. Revenue for the 6 months ended March 31, 2022 ("6M FY22") of $19.1 million was also down approximately 1% compared to revenue of $19.3 million for the 6 months ended March 31, 2021 ("6M FY21") as declines in North America monitoring revenue was offset by increases in Latin America and product sales.


  • Gross profit in Q2 FY22 was $4.5 million compared to Q2 FY21 gross profit of $5.4 million. Gross profit for the 6M FY22 was $9.3 million compared to gross profit of $10.6 million for 6M FY21, principally due to the nominal decline in revenue, higher depreciation and amortization, and additional expenses incurred in the preparation of implementing a new contract for an existing international customer.


  • Adjusted EBITDA for the Q2 FY22 was $1.7 million, compared to $2.9 million for Q2 FY21. Adjusted EBITDA for 6M FY22 was $3.9 million compared to the Adjusted EBITDA for 6M FY21 of $5.5 million. As a percentage of revenue, adjusted EBITDA continues to remain strong, staying above 20%, at 20.6%, for the 6M FY22 compared to 28.7% for the 6M FY21.


  • As of March 31, 2022, the cash balance was down to $7.1 million compared to $8.4 million on September 30, 2021, but up 7% compared to the $6.7 million cash balance one year ago on March 31, 2021. The reduction in cash from September 20, 2021, reflects continued significant capital investments made by the Company of approximately $2.4 million in the 6M FY22 to build additional monitoring devices, update software, and develop next-generation tracking technology.


  • Total operating expense for Q2 FY22 of $4.5 million was up 20% versus Q2 FY21's total operating expense of $3.8 million, principally due to the factors listed above. When combined with the reduction in gross profit, the increase in quarterly operating expense led to operating income in Q2 FY22 of $7,371 compared to operating income of $1.7 million for Q2 FY21, representing a material decline. Similarly, for 6M FY22, operating income was $0.6 million compared to operating income of $3.1 million for the 6M FY21 due to the reduction in gross profit and the increase in operating expense.


  • Net income attributable to common shareholders in Q2 FY22 was $0.5 million compared to $2.2 million in Q2 FY21. Net income attributable to common shareholders for the 6M FY22 was $0.2 million, compared to net income of $3.5 million for the 6M FY21, a change principally attributable to the reduction in Other Income caused by a lower foreign exchange gain and the forgiveness of the PPP loan one year ago.
Business Outlook

The extent to which supply chain delays, the Coronavirus, and the transition to 4G/LTE telecommunications technology impact our future operations will depend on numerous factors that we cannot accurately predict. However, we anticipate that we will not match our results for the fiscal year ended September 2021 ("FY21") in the upcoming year ending September 30, 2022 ("FY22"). Despite these short-term challenges faced by companies worldwide, Track Group remains confident that our continued focus on strategic adaptation, which evidenced success in FY21, will allow us to be well-positioned for a return to growth in FY23.

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.

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. 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, 2021, 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




(Unaudited)

March 31,

2022



September 30,

2021


Assets









Current assets:









Cash


$

7,118,168



$

8,421,162


Accounts receivable, net of allowance for doubtful accounts of $137,602 and $91,262, respectively



6,320,661




7,163,615


Prepaid expense and deposits



1,108,905




998,589


Inventory, net of reserves of $0 and $0, respectively



654,280




305,210


Total current assets



15,202,014




16,888,576


Property and equipment, net of accumulated depreciation of $2,712,641 and $2,615,967, respectively



180,170




202,226


Monitoring equipment, net of accumulated depreciation of $6,349,392 and $5,977,093, respectively



3,864,536




3,068,100


Intangible assets, net of accumulated amortization of $19,320,341 and $17,607,457, respectively



19,200,360




20,434,143


Goodwill



8,590,773




8,519,998


Deferred tax asset



-




101,159


Other assets



4,305,681




4,309,040


Total assets


$

51,343,534



$

53,523,242











Liabilities and Stockholders' Equity









Current liabilities:









Accounts payable


$

1,705,442



$

2,821,982


Accrued liabilities



3,280,713




4,350,030


Current portion of long-term debt



548,537




526,134


Total current liabilities



5,534,692




7,698,146


Long-term debt, net of current portion



43,265,114




43,452,216


Long-term liabilities



22,858




3,650


Total liabilities



48,822,664




51,154,012











Commitments and contingencies




-



-











Stockholders' equity:









Common stock, $0.0001 par value: 30,000,000 shares authorized; 11,541,452 and 11,524,978 shares outstanding, respectively



1,154




1,152


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



-




-


Paid in capital



302,258,446




302,250,954


Accumulated deficit



(298,681,608)




(298,828,527)


Accumulated other comprehensive loss



(1,057,122)




(1,054,349)


Total equity



2,520,870




2,369,230


Total liabilities and stockholders' equity


$

51,343,534



$

53,523,242


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




Three Months Ended



Six Months Ended




March 31,



March 31,



March 31,



March 31,




2022



2021



2022



2021


Revenue:













Monitoring and other related services


$

8,842,486



$

9,742,290



$

18,312,215



$

19,014,019


Product sales and other



641,633




119,540




767,560




249,716


Total revenue



9,484,119




9,861,830




19,079,775




19,263,735



















Cost of revenue:

















Monitoring, products and other related services



4,152,219




3,901,824




8,083,797




7,602,250


Depreciation and amortization included in cost of revenue



792,915




525,022




1,656,764




1,013,697


Total cost of revenue



4,945,134




4,426,846




9,740,561




8,615,947



















Gross profit



4,538,985




5,434,984




9,339,214




10,647,788



















Operating expense:

















General & administrative



2,770,657




2,313,836




5,269,016




4,714,571


Selling & marketing



720,709




614,409




1,418,581




1,164,866


Research & development



625,477




334,569




1,216,329




641,863


Depreciation & amortization



414,771




510,067




831,572




1,041,830


Total operating expense



4,531,614




3,772,881




8,735,498




7,563,130



















Operating income



7,371




1,662,103




603,716




3,084,658



















Other income (expense):

















Interest expense, net



(458,176)




(565,522)




(939,736)




(1,205,544)


Currency exchange rate gain



396,369




124,216




290,091




942,842


Other income, net



633,471




1,000,756




633,471




1,000,782


Total other income (expense)



571,664




559,450




(16,174)




738,080


Income before income tax



579,035




2,221,553




587,542




3,822,738


Income tax expense



126,794




37,322




440,623




315,013


Net income attributable to common shareholders



452,241




2,184,231




146,919




3,507,725


Foreign currency translation adjustments



20,085




(265,347)




(2,773)




52,489


Comprehensive income


$

472,326



$

1,918,884



$

144,146



$

3,560,214




































Net income per share – basic:

















Net income per share


$

0.04



$

0.19



$

0.01



$

0.31


Weighted average shares outstanding



11,541,452




11,435,291




11,533,296




11,424,605



















Net income per share – diluted:

















Net income per share


$

0.04



$

0.18



$

0.01



$

0.29


Weighted average shares outstanding



11,955,969




12,056,918




11,961,407




12,072,079


TRACK GROUP, INC. AND SUBSIDIARIES
NON-GAAP ADJUSTED EBITDA MARCH 31 (UNAUDITED)
(amounts in thousands, except share and per share data)



Three Months Ended

March 31,


Six Months Ended

March 31,


2022

2021


2022

2021







Non-GAAP Adjusted EBITDA






Net income attributable to common shareholders

$452

$2,185


$147

$3,508

Interest expense, net

458

566


940

1,206

Depreciation and amortization

1,207

1,036


2,488

2,056

Income taxes (1)

127

37


441

315

Board compensation

75

75


150

150

Foreign exchange expense

(396)

(1,001)


(290)

(1,001)

Gain on settlement of note payable

-

(125)


-

(943)

Gain on forgiveness of accrued vendor expenses

(633)

-


(633)

-

Other charges, net (2)

453

97


692

233

Non-GAAP Adjusted EBITDA

$1,743

$2,870


$3,935

$5,524

Non-GAAP Adjusted EBITDA, percent of revenue

18.4%

29.1%


20.6%

28.7%







Non-GAAP earnings per share - Basic






Weighted average common shares outstanding

11,541,452

11,435,291


11,533,296

11,424,605

Non-GAAP earnings per share

$0.15

$0.25


$0.34

$0.48







Non-GAAP earnings per share - Diluted






Weighted average common shares outstanding

11,955,969

12,056,918


11,961,407

12,072,079

Non-GAAP earnings per share

$0.15

$0.24


$0.33

$0.46









(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:https://www.prnewswire.com/news-releases/track-group-reports-2nd-quarter-fiscal-2022-financial-results-301546762.html

SOURCE Track Group, Inc.



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