SALT LAKE CITY, Dec. 14, 2015
Track Group, Inc. (OTCQX: TRCK), a cloud-based end-to-end B2B and B2G tracking solutions company that combines real-time proprietary tracking devices, monitoring services in combination with advanced data analytics for the global offender management market, announces results for its fiscal year ended September 30, 2015, and provides Management’s plans, goals and outlook for 2016 and beyond.
Financial Highlights:
- Total net revenues grew 70% for fiscal 2015 – “Given our expansion in Chile, organic growth in our legacy operations in the Americas including those of our recently acquired companies, we achieved record revenue growth in fiscal 2015,” said Guy Dubois, Track Group’s Chairman and acting CEO.
- Gross profit grew to 60% in fiscal 2015 – “Led by higher overall sales activities in the Americas, outsourcing of our supply chain operation, lower device costs, and software automation, we are confident that gross profit will continue to accelerate in 2016 and beyond,” stated Mr. Dubois.
- Tag subscriptions grew from 6,400 units in 2014 to over 10,000 in 2015 – “Our 56% growth in tag subscriptions is strong evidence that combined with a suite of competitive services and a superior sales staff, we can provide an effective alternative to incarceration solution at an affordable price,” said Mr. Cassell, Divisional President Americas. He continued “For 2016 we see a continued acceleration of our tag subscription numbers.”
- EPS loss of (0.56) for 2015 compared to (0.88) for 2014, a 36% improvement. “In 2014 and 2015 we heavily invested in our global business to transform from a device centric distinct basket of products to a cloud based Platform-As-A-Service solution (“PaaS”) that combines a device agnostic real-time GPS collection appliance (“Tag”), 24/7/365 monitoring, mobile applications, and exceptional predictive data analytics,” said Mr. Dubois.
- Adjusted EBITDA of $1.23M in 2015 compared to ($2.05M) loss in 2014. “Given our significant investments in 2014 and 2015, we experienced a large amount of non-cash and one-time charges in connection with integrating those companies we acquired,” said John Merrill, Chief Financial Officer. On a GAAP basis, we had a net loss of $5.569M for 2015 compared to a net loss of $8.762M for the same period in 2014. Mr. Merrill continued, “We believe that Adjusted EBITDA is a better reflection of our performance such that it gives the investor a more complete picture of performance through the eyes of management and the relevant impacts on cash as a PaaS business.”
Fiscal 2015 GAAP Results: For the fiscal year ended September 30, 2015, the company reported net revenues of $20.793M compared to net revenues of $12.262M for the same period in 2014, an increase of 70%. During the fiscal year ended September 30, 2015, gross profit totaled $12.511M, resulting in a 60% gross margin, compared to $6.763M, or a 55% gross margin during the same period in 2014, an increase of $5.748M. The increase in gross profit and margin was due to (i) higher overall revenues due to sales activity in Chile; (ii) growth of revenues generated by legacy operations and acquired subsidiaries; and (iii) lower incremental cost due to more efficient supply channels, outsourcing, and software automation. Total operating expenses for 2015 were $20.736M, a 43% increase from $14.511M in 2014. The increase in operating expense was the result of increased activity generated by our Chilean operation, higher non-cash costs of depreciation, amortization, stock compensation expense, and activities generated by company’s we acquired during 2014 and 2015. Net loss for 2015 totaled $5.669M or ($0.56) per common share, compared to a net loss of $8.762M or ($0.88) per common share for the same period in 2014. On an adjusted basis, the company reported EBITDA of $1.225M for 2015 compared to a loss of ($2.045M) for the same period in 2014 thus generating an Adjusted EBITDA margin of 5.9% versus a loss of 16.7% the previous year.
Strategy and Outlook:
Over the last 12 months, the company has transformed itself into a service business. Although the company still manufactures monitoring devices, we see the physical goods as a smaller part of the “integrated justice solutions” going forward. We believe our ability to offer analytics under a PaaS model gives us a unique selling proposition and competitive advantage. Rather than receiving a steady stream of ongoing revenue, just for a piece of manufactured equipment, more of our ongoing revenue will be derived from device agnostic subscription contracts that should help make the administration of justice better, faster, and less expensive for taxpayers. This not only may accelerate our continued revenue growth, it will be done at a lower cost per revenue dollar; resulting in higher margins and improved operating cash flows.
Furthermore, the company will explore and may execute selected M&A transactions in the future to accelerate growth opportunities globally. As we have shown over the past 24 months, the company was able to attract funding at favorable terms and we remain optimistic that this will continue going forward. In addition, the company is pursuing up listing of its stock to a regulated exchange. Once completed, it should provide additional sources of funding, and focused IR activities should over time bring more liquidity to our shares. Our senior management is well incentivized to deliver on these goals through a long term equity incentive plan which aligns the creation of shareholder value.
Based on our current organic performance, our outlook for 2016 and 2017 is as follows:
| Actual | Outlook |
| 2014 | 2015 | 2016 | 2017 |
| Net Revenue (USD$) | $ 12.3 M | $ 20.8 M | $ 28 – 31 M | $ 42 – 47 M |
| Adjusted EBITDA Margin (%) | -16.70% | 5.90% | 15-20% | 25-30% |
Non-GAAP Financial Measures
This press release includes financial measures defined as “non-GAAP financial measures” by the Securities and Exchange Commission including non-GAAP EBITDA and non-GAAP EPS. 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, on an annual basis, are provided utilizing audited financial figures for the respective periods.
Non-GAAP Adjusted EBITDA excludes items included but not limited to taxes, dividends, depreciation, amortization, impairment charges, charges to consolidate, integrate or consider recently acquired businesses, costs of closing facilities, non-cash stock based compensation and other stated one-time cash and non-cash charges (“the Adjustments”). Non-GAAP EPS excludes the Adjustments when considering net income or loss attributable to common shareholders.
The company believes the non-GAAP measures provide useful information to both management and investors by excluding certain cash and non-cash expenses, gains and losses, one time charges or benefits, and acquisition charges which may not be indicative of its core operation results and business outlook. Specific disclosure relating to acquisitions 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 year ended September 30 2015 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.
About Track Group, Inc.
Track Group develops, manufactures, and provides tracking solutions that combine real-time GPS tracking devices and 24/7/365 monitoring services with advanced data analytics for the global offender management market which includes corrections, military and law enforcement. For more information, visit www.trackgrp.com.
Forward-Looking Statement
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. & 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.
