MINNEAPOLIS, May 11 /PRNewswire-FirstCall/ -- XATA Corporation , the leader in onboard fleet management systems for private fleet transportation, announced today that it achieved record revenue of $8.4 million in the second quarter of fiscal 2006, up 95 percent from a year ago and 31.3 percent from the first fiscal quarter of 2006.

The Company also announced that Craig S. Fawcett, Chairman and CEO, will be resigning from his current position at the end of this fiscal year to accept an executive role at Deere & Company, from which he took a leave of absence to join XATA four years ago. Mr. Fawcett will remain on the board of directors and will play an active role in the selection of his successor.

Net sales for the second quarter of fiscal 2006 increased to $8.4 million, compared to $4.3 million in the second quarter of fiscal 2005. Deferred revenue totaled $11.9 million at the end of the second quarter of fiscal 2006, compared to $7.1 million at the end of the second quarter of fiscal 2005. The growth in net sales and deferred revenue was due to strong demand for the Company's XATANET and OpCenter systems, for which sales increased 239 percent and 52 percent, respectively, on a year-over-year basis. Sales of XATANET, which is XATA's on-demand hosted fleet management system, increased to 40 percent of total net sales for the second quarter of fiscal 2006, compared to 23 percent for the second quarter of fiscal 2005. For the six months ended March 31, 2006, net sales increased 68 percent to $14.8 million, compared to $8.9 million in the same period of fiscal 2005. XATANET system sales amounted to 43 percent of total net sales for the six months ended March 31, 2006.

"It has been XATA's mission to lead our industry in the development and deployment of intelligent fleet management technologies that help our customers more profitably grow their businesses," stated Craig Fawcett, XATA Chairman and CEO. "Today, I am proud to announce that we are succeeding in that mission with over 430 companies embracing our latest innovation, XATANET, bringing the total number of OpCenter and XATANET systems deployed to over 49,000. Looking forward we expect sales of our systems to continue to grow in proportion to rising fuel costs, as our customers are experiencing significant energy cost savings through the use of our solutions."

Costs of sales for the second quarter of fiscal 2006 were $4.5 million, compared to $2.4 million for the second quarter of fiscal 2005. The increase of $2.1 million was primarily due to an increase in OpCenter and XATANET system sales. Gross margins improved 250 basis points or 2.5 percentage points in the quarter to 46.2 percent for the three months ended March 31, 2006, compared to 43.7 percent for the same period of fiscal 2005. For the six months ended March 31, 2006 and March 31, 2005 cost of sales totaled $8.3 million and $4.9 million, and the gross margins amounted to 44.1 percent and 44.8 percent, respectively.

Research and development costs for the second quarter of fiscal 2006 were $0.8 million, compared to $1.1 million for the second quarter of fiscal 2005. The decrease of $0.3 million was due to the capitalization of software development costs for projects that have reached technological feasibility. For the six months ended March 31, 2006 and March 31, 2005 these same costs totaled $1.6 million and $2.1 million, respectively.

Selling, general and administrative costs for the second quarter of fiscal 2006 were $3.0 million, compared to $2.3 million for the second quarter of fiscal 2005. The increase of $0.7 million was primarily due to an increase in back-office infrastructure costs to support the XATANET subscription based format that were added in late fiscal 2005, and higher sales and marketing costs associated with increased OpCenter and XATANET system sales. For the six months ended March 31, 2006 and March 31, 2005 these same costs totaled $5.7 million and $4.4 million, respectively.

"The $1.6 million year-over year improvement of our operating results during the second quarter was driven by a 64 percent increase in system shipments and the continued improvement that we have made in lowering our cost structure," stated Mark Ties, XATA CFO. "Although I would like to say that profitable results will continue, we still will require additional quarters for our cost control measures that we have implemented over the last year and our new model built around XATANET to take hold before we can finally say that quarterly losses are behind us."

With regard to his decision to resign from his current role at XATA, Mr. Fawcett commented: "Four years of hard work throughout our company has led to the re-invention of XATA Corporation as an industry leader in onboard fleet management systems. It is with a sense of great accomplishment and a touch of sadness that I announce my resignation as CEO effective the end of fiscal 2006. I have enjoyed my time at XATA and will be leaving the company in a state where it has never been stronger and the outlook has never been brighter. Our latest innovation, XATANET, continues to gain strong market acceptance as it is successfully sold through both direct and indirect distribution channels while XATA's long-term future is secured by a world class management team, exceptional employees and invaluable strategic partners. I will work closely with the management team and the Board to assure that the transition is seamless for both our customers and shareholders."

About XATA

A pioneer in onboard fleet management solutions since 1985, XATA revolutionized the trucking industry by being the first to introduce paperless driver logs, exception-based reporting and dynamically updated fleet standards. Today, XATA continues to lead the industry by seamlessly combining global positioning, wireless communication and fleet management software to help companies optimize the efficiency of their fleets. The Company's proven solutions enable its customers to reduce fuel costs, increase productivity, improve safety and enhance customer service. Today, XATA systems increase the productivity of more than 49,000 trucks at over 1,600 distribution centers across North America. For more information, visit http://www.xata.com/ or call 1-800-745-9282.

This announcement includes forward-looking statements based on current expectations. Actual results may differ materially. These forward-looking statements involve a number of risks and uncertainties including, but not limited to, the possibility of continuing operating losses, the ability to adapt to rapid technological change, dependence on positioning systems and communication networks owned and controlled by others, the receipt and fulfillment of new orders for current products, the timely introduction and market acceptance of new products, the ability to fund future research and development activities, and the ability to establish and maintain strategic partner relationships.

XATA CORPORATION CONDENSED BALANCE SHEETS (Amounts in thousands) (UNAUDITED) March 31, September 30, 2006 2005 Current assets Cash and cash equivalents $5,355 $6,473 Accounts receivable, net 6,853 7,812 Inventories 2,112 1,257 Deferred product costs 3,654 4,671 Prepaid expenses 337 204 Total current assets 18,311 20,417 Equipment and leasehold improvements, net 2,144 1,085 Deferred product costs, non-current 1,429 1,002 Total assets $21,884 $22,504 Current liabilities Bank line of credit $500 $1,800 Note and capital lease obligations 88 - Accounts payable 1,509 2,387 Accrued liabilities 2,746 2,171 Deferred revenue 7,233 7,774 Total current liabilities 12,076 14,132 Note and capital lease obligations, non-current 136 - Deferred revenue, non-current 4,677 3,335 Total liabilities 16,889 17,467 Shareholders' equity Common stock 21,173 20,527 Preferred stock 9,243 9,105 Accumulated deficit (25,421) (24,595) Total shareholders' equity 4,995 5,037 Total liabilities and shareholders' equity $21,884 $22,504 XATA CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) (UNAUDITED) Three Months Six Months Ended Ended March 31, March 31, 2006 2005 2006 2005 Net sales $8,418 $4,316 $14,841 $8,854 Cost of sales 4,530 2,429 8,302 4,888 Selling, general and administrative 3,011 2,339 5,692 4,433 Research and development 840 1,137 1,567 2,133 Total costs and expenses 8,381 5,905 15,561 11,454 Income (loss) from operations 37 (1,589) (720) (2,600) Interest and other income, net 26 39 34 56 Income (loss) before income taxes 63 (1,550) (686) (2,544) Income tax expense - - - - Net income (loss) 63 (1,550) (686) (2,544) Preferred stock dividends and deemed dividends (44) (42) (140) (192) Net income (loss) to common shareholders $19 ($1,592) ($826) ($2,736) Net income (loss) per common share - basic and diluted Net income (loss) to common shareholders $0.00 ($0.22) ($0.11) ($0.38) Weighted average common and common share equivalents Basic 7,406 7,172 7,354 7,151 Diluted 11,071 9,464 10,881 9,428

CONTACT: Mark Ties, CFO, XATA Corporation, +1-952-707-5600, or
mark.ties@xata.com

Web site: http://www.xata.com/