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03.04.2018 00:21:00
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xG Technology Reports 2017 Full Year Financial Results
SARASOTA, Fla., April 2, 2018 /PRNewswire/ -- xG Technology, Inc. ("xG" or the "Company") (Nasdaq: XGTI, XGTIW), a leading provider of wireless video solutions to broadcast, law enforcement and defense markets, and private mobile broadband networks for critical communications, announced its results for the fourth quarter and year ended December 31, 2017. Management will hold a conference call to discuss the results on Tuesday, April 3, 2018, at 5:00 p.m. Eastern Time (details below).
2017 xG Technology highlights:
- Revenues for the year were $47.8 million, representing a 624% increase from the prior year.
- Before one-time charges, transitioned to positive $3.2 million net income and $6 million adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the year.
- Achieved annual cost savings of approximately $4.4 million by eliminating redundant personnel and reducing facilities.
- Completed the acquisition of the net assets that constituted the business of Vislink and transitioned our focus to providing comprehensive video, broadband and satellite solutions for the broadcast, sports and entertainment, and defense markets.
- Was awarded a $12.5 million contract by the U.S Army for the supply of hand-held intelligence, surveillance and reconnaissance receiver devices. This represents the third contract received from the Army since 2013 for this same requirement, totaling over $17 million.
- Received a significant number of orders valued at over $100,000 each from domestic and internationally-based customers for wireless camera systems, aerial downlink components, satellite systems and other microwave transmission equipment. The customers include prominent news and sports organizations as well as local, regional and national law enforcement agencies.
- Received orders exceeding $1 million for HCAM HEVC (High Efficiency Video Coding) 4K Wireless Camera Systems for deployment in China.
- Was awarded a subcontract from Leidos to provide interference mitigation solutions and simulation models under a Defense Advanced Research Projects Agency (DARPA) shared spectrum research program.
- Entered into an agreement with Panasonic System Solutions Europe to collaborate on projects to bring Vislink's proven video communications technology to the rail industry.
- Unveiled HCAM, the next generation of HEVC 4K UHD wireless camera transmitters.
- Introduced the MicroLite 2 ultra-compact COFDM wireless video transmitter for capturing live video for electronic newsgathering, sports and entertainment applications.
- Launched the IMTDragonFly, an ultra-miniature wireless video system designed for drone/UAV, bodycam, broadcast, sports and reality-based production applications.
- Introduced the Nulinx-IP Compact, a self-contained point-to-point, bi-directional microwave link.
- Signed a memorandum of understanding ("MoU") with Tesacom to provide mobile broadband and video communications solutions in Latin America.
- Awarded a new patent covering an innovative method for enhancing the resilience of communications systems in the face of harmful interference.
"I am pleased to report that our top-line growth was very impressive, given the fact that Vislink was integrated under our umbrella for less than a year," said George Schmitt, CEO and Board Chairman of xG Technology. "We estimate that our run rate for the full twelve-month period would have been around $52 million." He added, "Also, investors should note that we achieved this top-line growth despite the fact that we had a shortfall on an expected U.S. Army order of about $4 million, and also had to backorder approximately $3 million worth of HCAM systems because of subcomponent supply constraints. We subsequently worked through all the issues with our HCAM suppliers, and began shipping these HCAM orders in Q1 2018. Industry demand for HCAM systems continues to exceed our expectations, as they have begun to be deployed in prestigious international sporting events such as the Daytona 500."
Mr. Schmitt concluded, "We are also happy to report that we have paid down $6 million in trade liabilities assumed with the Vislink acquisition out of cash flow. We feel that xG has fully transformed into an industry-leading company with the wind at its back and we will continue to win new business in all the markets we compete in."
Roger Branton, CFO and co-founder of xG Technology, said, "xG fully completed the integration of Vislink by December 2017. On a top-line basis, xG had over 600% growth in revenues from the prior year, despite only owning Vislink for approximately eleven months. While we admittedly set our bar high and had an even higher, aggressive target, we are nonetheless quite pleased with that growth. Growth brings inefficiencies, and we appropriately sought to mitigate those via the implementation of cost-saving programs. Before the completion of the acquisition, we projected cost synergies and savings of approximately $5 million. We are pleased to say we achieved that goal in only the first partial year after closing on Vislink. Cost savings and synergies are expected to continue with an additional $3-4 million to be realized in 2018. "
Mr. Branton continued, "We have consolidated around a stable base of business going forward, and now are well-positioned to grow further, both organically and via mergers and acquisitions. Among the ones we are considering are both strategic "bolt-on" ones and larger, more strategic acquisitions. On the latter, we are also emphasizing acquiring companies with strong management teams that will add to and supplement our own as well as position xG for the next level of growth."
GAAP RESULTS
- For the year ended December 31, 2017, revenue was $47.8 million compared to $6.6 million for the year ended 2016. For 2017, $46.9 resulted from the sales of equipment and $0.9 million resulted from engineering and consulting services agreements.
- Gross margins were 41% of revenue for the year ended December 31, 2017, compared to 52% of revenue for the year ended December 31, 2016. (Excluding one-time charges, gross margins were 49.3% for December 31, 2017, which was consistent with our current product mix).
- For the year ended December 31, 2017, net loss attributable to common shareholders was $10.5 million, or $(0.87) per share, compared to net loss of $22.7 million, or $(36.87) per share for the year ended December 31, 2016. (Excluding one-time charges, xG reported net income of $3.2 million for December 31, 2017).
- EBITDA for December 31, 2017 was a negative $5.5 million compared to a negative $16.2 million for the year ended December 31, 2016. The Company prospectively wrote down approximately $1.8 million of non-cash items related to inventory. (Excluding one-time charges, the Company reported positive EBITDA of $6 million for December 31, 2017)
- xG ended the fourth quarter 2017 with $2,799,000 in cash compared to $9,054,000 at December 31, 2016.
NON-GAAP RESULTS
- For the year ended December 31, 2017, adjusted revenue was $48.8 compared to $6.6 for the year ended 2016. $47.8 million resulted from the sales of equipment and $0.9 million resulted from engineering and consulting services agreements.
- Adjusted Gross margins were 49.3% of revenue for the year ended December 31, 2017, compared to 52% of revenue for the year ended December 31, 2016.
- For the year ended December 31, 2017, adjusted net income attributable to common shareholders was $3.2 million, compared to net loss of $22.7 million for December 31, 2016.
- Adjusted Earnings before interest, taxes, depreciation and amortization (EBITDA) for December 31, 2017 was $6 million compared to a negative $16.2 million for the year ended December 31, 2016.
NON-GAAP FINANCIAL MEASURES
We disclose non-GAAP financial measures as we believe they provide useful information on actual operating
performance. Readers are cautioned that non-GAAP financial measures do not have any standardized meaning prescribed by U.S. GAAP and therefore may not be comparable to similar measures presented by other companies.
Non-GAAP gross margin excludes the impact of purchase price amortization on the step up of assets as a result of the bargain purchase gain and the impact of foreign exchange gains or losses.
Non-GAAP income (loss) from operations excludes the impact of purchase price amortization related to the Vislink acquisition, acquisition-related expenses and restructuring expenses.
We use the above-noted non-GAAP financial measures for planning purposes and to allow us to assess the performance of our business before including the impacts of the items noted above as they affect the comparability of our financial results. These non-GAAP measures are reviewed regularly by management and the Board of Directors as part of the ongoing internal assessment of our operating performance. Adjusted EBITDA is defined as net income (loss) plus purchase price amortization, acquisition-related expense, restructuring expense, depreciation and amortization, foreign exchange gains or losses and interest expense.
Adjusted EBITDA is a metric used by investors and analysts for valuation purposes and we believe that it is an important indicator of our operating performance.
Financial Results Conference Call
xG management will hold a conference call to discuss xG's 2017 results on Tuesday, April 3, 2018 at 5:00 p.m. Eastern Time. To participate in the conference call, please call 1-844-825-9789 (toll free) or 1-412-317-5169 (international call-in) and ask to join the xG Technology call. The call will also be simultaneously webcast. Listeners can access the webcast live through the company's website at http://www.xgtechnology.com/about-xg-technology/investor-information/. For those who cannot participate in the call, an audio replay will be available on xG's website.
About xG Technology, Inc.
xG Technology's brands provide wireless video solutions to broadcast, law enforcement and defense markets, and private mobile broadband networks for use in challenging environments. xG's brand portfolio includes Integrated Microwave Technologies (IMT), Vislink and xMax.
IMT and Vislink are the leading suppliers of advanced digital microwave systems for capturing, transmitting and managing secure, high-quality, live video. IMT and Vislink are trusted suppliers to tier-1 global customers in the broadcast/sports/entertainment, and law enforcement/public safety/defense markets. Their products are recognized for high levels of performance, reliability, build quality, extended operating ranges and compact form factors. In the broadcast, sports and entertainment sectors, IMT and Vislink provide high-definition communication links to reliably collect and distribute live event footage. In the law enforcement, public safety & defense markets, IMT and Vislink provide secure video communications and mission-critical solutions to local, national and international agencies and organizations. More information can be found at www.imt-solutions.com and www.vislink.com.
xMax is a secure, rapid-deploy mobile broadband system that delivers mission-assured wireless connectivity in demanding operating environments. xMax was specifically designed to serve as an expeditionary and critical communications network for use in unpredictable scenarios and during fluid situations. This makes it a compelling solution for disaster response, emergency communications, and defense applications. More information about xMax can be found at http://www.xgtechnology.com/system-overview/. In addition to the above business lines, xG has a dedicated Federal Sector Group (xG Federal) focused on providing next-generation spectrum sharing solutions to national defense, scientific research and other federal organizations. Additional information about xG Federal can be found at http://www.xgtechnology.com/technology/xg-federal/.
Based in Sarasota, Florida, xG Technology has over 100 patents and pending patent applications. xG is a publicly traded company listed on the NASDAQ Capital Market (symbol: XGTI) For more information, please visit www.xgtechnology.com.
Cautionary Statement Regarding Forward Looking Statements
Statements contained herein that are not based upon current or historical fact are forward-looking in nature and constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements reflect the Company's expectations about its future operating results, performance and opportunities that involve substantial risks and uncertainties. These statements include but are not limited to statements regarding the intended terms of the offering, closing of the offering and use of any proceeds from the offering. When used herein, the words "anticipate," "believe," "estimate," "upcoming," "plan," "target", "intend" and "expect" and similar expressions, as they relate to xG Technology, Inc., its subsidiaries, or its management, are intended to identify such forward-looking statements.
These forward-looking statements are based on information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause the Company's actual results, performance, prospects, and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.
FOR MORE INFORMATION
xG Technology:
Daniel Carpini
941-953-9035
daniel.carpini@xgtechnology.com
Investor Relations:
John Marco
CORE IR
516-222-2560
johnm@coreir.com
xG TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (IN THOUSANDS EXCEPT NET LOSS PER SHARE DATA) | ||||||||
For the Years Ended | ||||||||
December 31, | ||||||||
2017 | 2016 | |||||||
Revenue, net | $ | 47,824 | $ | 6,574 | ||||
Cost of Revenue and operating expenses | ||||||||
Cost of components and personnel | 28,220 | 3,133 | ||||||
Inventory valuation adjustments | 1,781 | 2,417 | ||||||
General and administrative expenses | 27,015 | 9,534 | ||||||
Research and development | 9,799 | 6,106 | ||||||
Impairment charge | — | 2,683 | ||||||
Amortization and depreciation | 4,398 | 5,561 | ||||||
Total cost of revenue and operating expenses | (71,213) | (29,434) | ||||||
Loss from operations | (23,389) | (22,860) | ||||||
Other income (expenses) | ||||||||
Changes in fair value of derivative liabilities | (88) | 2,545 | ||||||
Offering expenses | — | (684) | ||||||
Gain on bargain purchase | 10,911 | 2,749 | ||||||
Gain on debt and payable extinguishment | 2,900 | — | ||||||
Other expense | (251) | (1,727) | ||||||
Interest expense | (629) | (925) | ||||||
Total other income | 12,843 | 1,958 | ||||||
Net loss | $ | (10,546) | $ | (20,902) | ||||
Dividends and deemed dividends | — | (1,808) | ||||||
Net loss attributable to common shareholders | $ | (10,546) | $ | (22,710) | ||||
Basic and diluted loss per share | $ | (0.87) | $ | (36.87) | ||||
Weighted average number of shares outstanding: | ||||||||
Basic and Diluted | 12,138 | 616 | ||||||
Comprehensive loss: | ||||||||
Net loss | $ | (10,546) | $ | (22,710) | ||||
Unrealized gain on currency translation adjustment | 354 | — | ||||||
Comprehensive loss | $ | (10,192) | $ | (22,710) | ||||
The accompanying notes are an integral part of these consolidated financial statements.
xG TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT PER SHARE DATA) | ||||||||
December 31, | ||||||||
2017 | 2016 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 2,799 | $ | 9,054 | ||||
Accounts receivable, net | 8,337 | 1,369 | ||||||
Inventories, net | 14,753 | 2,722 | ||||||
Prepaid expenses and other current assets | 626 | 111 | ||||||
Total current assets | 26,515 | 13,256 | ||||||
Property and equipment, net | 3,237 | 771 | ||||||
Intangible assets, net | 6,894 | 5,872 | ||||||
Total assets | $ | 36,646 | $ | 19,899 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 10,918 | $ | 1,606 | ||||
Accrued expenses | 3,150 | 2,082 | ||||||
Convertible notes payable | 2,000 | — | ||||||
Due to related parties | 998 | 96 | ||||||
Customer deposits and deferred revenue | 634 | 186 | ||||||
Obligation under capital lease | 18 | 58 | ||||||
Derivative liabilities | 1,271 | 1,183 | ||||||
Total current liabilities | 18,989 | 5,211 | ||||||
Obligation under capital lease, net of current portion | 30 | 49 | ||||||
Convertible notes payable | — | 2,000 | ||||||
Total liabilities | 19,019 | 7,260 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity | ||||||||
Preferred stock – $0.00001 par value per share: | — | — | ||||||
Common stock, – $0.00001 par value per share, 100,000,000 shares authorized, 14,897,392 | — | — | ||||||
Additional paid in capital | 237,140 | 221,960 | ||||||
Accumulated other comprehensive income | 354 | — | ||||||
Treasury stock, at cost – 2 shares as of December 31, 2017 and 2016, respectively | (22) | (22) | ||||||
Accumulated deficit | (219,845) | (209,299) | ||||||
Total Stockholders' equity | 17,627 | 12,639 | ||||||
Total liabilities and stockholders' equity | $ | 36,646 | $ | 19,899 | ||||
The accompanying notes are an integral part of these consolidated financial statements.|
Reconciliation of GAAP to Non-GAAP Results
Our financial statements are prepared in accordance with US GAAP on a basis consistent for all periods presented. In addition to results reported in accordance with US GAAP, we use non-GAAP financial measures as supplemental indicators of our operating performance. We disclose non-GAAP measures as we believe that these measures provide better information on actual operating results.
Readers are cautioned that non-GAAP financial measures do not have any standardized meaning prescribed by US GAAP and therefore may not be comparable to similar measures presented by other companies.
xG TECHNOLOGY, INC. | |||||||||||
Purchase | Acquisition | Non | |||||||||
GAAP | Price | Related, | Foreign | GAAP | |||||||
In thousands of US$ | Q4 | Amortization | Restructuring | Exchange | Q4 | ||||||
Revenue | $14,113 | $7 | $14,120 | ||||||||
Gross margin | 44% | 50.7% | |||||||||
Cost of revenue and operating expenses | |||||||||||
Cost of components and personnel | 7,904 | (939) | 6,965 | ||||||||
Inventory valuation adjustments | 1,350 | 1,350 | |||||||||
General and administrative expenses | 7,667 | (579) | 7,088 | ||||||||
Research and development expenses | 2,656 | (407) | 2,249 | ||||||||
Amortization and depreciation | 1,138 | - | (606) | - | 532 | ||||||
Total Cost of revenue | 20,715 | (939) | (1,592) | - | 18,184 | ||||||
Income (loss) from operations | (6,602) | 939 | 1,592 | 7 | (4,064) | ||||||
Other income (expense) | |||||||||||
Changes in fair value of derivative liabilities | 94 | 94 | |||||||||
Gain on bargain purchase | (4,619) | (4,619) | |||||||||
Gain on debt & payables extinguishments | (1,099) | (1,099) | |||||||||
Other expense | (1) | (1) | |||||||||
Interest expense, net | (48) | - | - | - | (48) | ||||||
Total other income | (5,673) | - | - | - | (5,673) | ||||||
Net income (loss) | $(12,275) | $939 | $1,592 | $7 | $(9,737) | ||||||
EBITDA | $(11,089) | $939 | $986 | $7 | $(9,157) | ||||||
xG TECHNOLOGY, INC. RECONCILIATION OF GAAP to NON-GAAP RESULTS 2017 | ||||||||||||
Purchase | Acquisition | Non | ||||||||||
GAAP | Price | Related, | Foreign | GAAP | ||||||||
In thousands of US$ | 2017 | Amortization | Restructuring | Exchange | 2017 | |||||||
Revenue | $47,824 | $966 | $48,790 | |||||||||
Gross margin | 40.99% | 49.28% | ||||||||||
Cost of revenue and operating expenses | ||||||||||||
Cost of components and personnel | 28,220 | (3,473) | 24,747 | |||||||||
Inventory valuation adjustments | 1,781 | 1,781 | ||||||||||
General and administrative expenses | 27,015 | (5,432) | 21,583 | |||||||||
Research and development expenses | 9,799 | (1,399) | 8,400 | |||||||||
Amortization and depreciation | 4,398 | (2,254) | - | - | 2,144 | |||||||
Total Cost of revenue | 71,213 | (5,727) | (6,831) | - | 58,655 | |||||||
Income (loss) from operations | (23,389) | 5,727 | 6,831 | 966 | (9,865) | |||||||
Other income (expense) | ||||||||||||
Changes in fair value of derivative liabilities | (88) | (88) | ||||||||||
Gain on bargain purchase | 10,911 | 10,911 | ||||||||||
Gain on debt & payables extinguishments | 2,900 | 2,900 | ||||||||||
Other expense | (251) | 250 | (1) | |||||||||
Interest expense, net | (629) | - | - | - | (629) | |||||||
Total other income | 12,843 | - | 250 | - | 13,093 | |||||||
Net income (loss) | $(10,546) | 5,727 | 7,081 | 966 | 3,228 | |||||||
EBITDA | $(5,519) | $3,473 | $7,081 | $966 | $6,001 | |||||||
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SOURCE xG Technology, Inc.
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