Numerex Reports Fourth Quarter and Full Year 2012 Financial Results Operating Earnings improve 68% in Q4 and 60% for the full year EBITDA increases 43% in Q4 and 28% for the full year PR Newswire ATLANTA, March 18, 2013 ATLANTA, March 18, 2013 /PRNewswire/ -- Numerex Corp (NASDAQ:NMRX), a leading provider of on-demand and interactive machine-to-machine (M2M) enterprise solutions, today announced financial results for its fourth quarter and full year ended December 31, 2012. "The Company's strong performance was driven by the heightened demand for M2M services across several markets, which resulted in a 32% increase in our subscription base in 2012 from the beginning of the year. New milestones were set in the fourth quarter and full year resulting in a significant improvement in several key performance measures," stated Stratton Nicolaides, chairperson and CEO of Numerex. "The 135,000 net new subscriptions added in the fourth quarter increased our base to nearly 1.9 million subscriptions at year-end resulting in an 18% increase in fourth quarter recurring revenues when compared to fourth quarter of 2011. Operating earnings grew 68% in the fourth quarter and 60% for the full year over comparable periods in 2011. In addition, the Company posted an improvement in EBITDA of 43% in the fourth quarter compared to fourth quarter in 2011, and 28% for the full year compared to EBITDA recorded in full year 2011." Financial metrics for the fourth quarter and full year of 2012 include: Three Months Ended Twelve Months Ended December 31 December 31 2012 2011 2012 2011 GAAP Measures 12.0 10.4 44.0 38.6 Recurring revenue and support ($ millions) Gross margin – recurring revenue and 58.5% 59.6% 58.3% 59.4% support Operating earnings ($ millions) 1.0 0.6 3.2 2.0 Earnings before income taxes ($ 0.9 0.5 2.9 1.8 millions) Non-GAAP Measures 2.3 2.0 8.0 6.7 Adjusted EBITDA ($ millions) EBITDA ($ millions) 1.9 1.4 6.6 5.1 New subscriptions added during period 135,000 93,000 454,000 268,000 (units) Cumulative net subscriptions (units) 1,893,000 1,438,000 1,893,000 1,438,000 Nicolaides continued, "The strategic direction of Numerex is centered on our on-demand and interactive M2M platform capabilities, which we continue to enhance through our internal development initiatives and strategic acquisitions of technology and talent. We have added several new enterprise customers spanning a number of vertical markets during 2012. The successful completion of our offering in January 2013 provides Numerex with additional resources necessary to maintain our leadership position in the M2M industry. We continue to focus our resources on growing our subscription base that generates our high-margin recurring service revenue and enter 2013 with a record pace of subscription growth and with solid momentum. As a result, we expect to grow our subscription base during 2013 within a range of 27% to 32%, which we anticipate will deliver an 18% to 23% growth rate in subscription-based recurring revenue. The Company remains committed to delivering innovative solutions while improving the efficacy of our cloud-based M2M platforms. We expect the recent purchases of intellectual property to enhance our overall capabilities." Fourth Quarter Financial Highlights: oThe Company added a record 135,000 net new subscriptions in the fourth quarter of 2012, an increase of 45% compared to the 93,000 net new subscriptions added in the same quarter in 2011. oRecurring revenue derived from subscriptions grew 18.0% in the fourth quarter of 2012 compared to the fourth quarter of 2011 and 7.3% sequentially from the third quarter of 2012, reflecting an annualized growth rate of 29.2%. oGross margin generated by recurring revenue and support in the fourth quarter of 2012 was 58.5% compared to 59.6% recorded in the same period in 2011. Embedded device and hardware margin declined to 6.7% in the fourth quarter of 2012 compared to 16.8% in the same period in 2011. This decline was primarily driven by promotional costs associated with the introduction of new products. oThe Company reported earnings before income taxes for the fourth quarter of 2012 of $0.9 million, compared to earnings before income taxes of $0.5 million for the same period in the prior year, an improvement of 72%. oFourth quarter 2012 earnings before interest, taxes, depreciation and amortization, or EBITDA, was $1.9 million compared to $1.4 million in the fourth quarter of 2011, reflecting an improvement of 43%. This includes non-cash compensation of $305,000, acquisition-related costs of approximately $90,000, and the impact of aggressive promotional costs associated with new product introductions in the fourth quarter. Adjusted EBITDA, which excludes non-cash compensation and one-time acquisitions costs, was $2.3 million for the fourth quarter and $8.0 million for the full year. oTotal operating expenses for the fourth quarter of 2012 were $6.5 million compared to $6.4 million in the fourth quarter of 2011. These expenses include depreciation and amortization (D&A) charges of $956,000 and $774,000 in the fourth quarters of 2012 and 2011, respectively. The increase in D&A was primarily the result of amortization associated with the acquisition completed at the beginning of October 2012 as well as amortization of additional capitalized software development costs. Other overheads during the fourth quarter of 2012 for sales, marketing, engineering, development and general expenses were lower than in the same period in 2011. oOperating earnings of $1.0 million recorded in fourth quarter of 2012 increased by 68% compared to the $0.6 million reported during the same period in 2011. When operating earnings is adjusted for one-time acquisition costs and the increases in D&A, operating earnings was approximately $1.3 million. oAs of December 31, 2012, Numerex reported cash of $4.9 million and long-term debt of $6.0 million. The company used $0.1 million in net cash from operations for the fourth quarter of 2012, compared to generating $0.4 million during the fourth quarter of 2011. oSubsequent to the end of the quarter, Numerex completed an underwritten public equity offering on January 23, 2013, which generated net proceeds of approximately $28.1 million after the deduction of underwriting discounts and fees. To date, proceeds have been used to retire all outstanding bank debt and to fund the acquisition of the AVID transaction, announced in February of 2013. As recently noted, the Company's current cash balance is approximately $25 million. Full Year 2012 Financial Highlights: oThe Company added a record 454,000 new subscriptions in the full year 2012, an increase of 68% compared to 268,000 new subscriptions added in 2011. Total subscriptions increased 32% to 1.9 million at the end of 2012 compared to 1.4 million at the end of 2011. The average cost of acquiring a net new subscription in 2012 was approximately $19.46 compared to $34.28 in 2011, a 43% reduction in acquisition cost per subscription. oTotal revenue for the full year 2012 was $66.7 million, an increase of 14.4% on a year-over-year basis. Recurring revenue derived from subscriptions grew 16.5% year over year to $43.0 million from $36.9 million recorded in 2011. Embedded device and hardware revenue was $22.7 million in 2012 compared to $19.7 million recorded in the same period last year. oGross profit for the full year 2012 was $28.8 million compared to $26.2 million during the same period last year. Gross profit as a percentage of total revenue was 43.2% compared to 44.9% in 2011. The year-over-year decrease in gross margin is primarily due to higher embedded device and hardware revenue recorded during the year, which carry a significantly lower margin, and new product promotional costs that impacted gross profit. During the year, gross profit generated by recurring and support service revenues was 58.3% compared to 59.4% in 2011. oOperating earnings for 2012 was $3.2 million compared to $2.0 million for 2011, a 60% improvement, and net earnings of $7.5 million for 2012 compared to $1.9 million for 2011. Diluted earnings per share for 2012 was $0.47, based on 16.0 million weighted average shares outstanding, compared to diluted earnings per share of $0.12, based on 15.7 million weighted average diluted shares outstanding for the same period last year. Net earnings during 2012 included $4.6 million related to the release of the Company's valuation allowance against certain deferred tax assets. Excluding this tax valuation allowance, net earnings for 2012 were $2.9 million, an improvement of 60%. oThe Company generated $1.6 million in net cash from operations for the full year 2012, compared to a use of cash of $1.2 million during 2011. 2012 Operational Highlights: oCompleted the development of its suite of network services to enable wireless connectivity across disparate wireless networks and technologies. The Company offers managed, cloud-based M2M solutions, which integrate a variety of cellular, satellite and other wireless options together with voice services, automated activation and provisioning, fraud detection and policy management. oImplemented state-of-the-art network messaging infrastructure for the Company's wireless services and internet backhaul that strengthened our data redundancy, security, and back-up capabilities to ensure service reliability and availability as we expand geographically and extend our services to new vertical markets. oCompleted the development of the Numerex next-generation device management and customer portal 3.0 that improves the Company's device management capabilities. oUnveiled Numerex new Location-Based Services (LBS) platform, which provides enterprises with secure, scalable solutions for monitoring, tracking and recovering a wide variety of mobile assets. This new platform addresses the needs of agriculture, transportation, construction and many other industries seeking to rapidly implement cost-effective tracking and monitoring solutions for mobile or semi-mobile assets. oLaunched a complete portfolio of supply chain solutions, which includes all the necessary components – sensors, network elements, mobility and enterprise management interfaces – to deliver a single source solution that can be integrated into a customer's Enterprise Resource Planning (ERP) system. oIntroduced through its security subsidiary a series of innovative products, capabilities and services for the industry such as the first 4G-enabled alarm communicator, a universal broadband communicator, as well as remote control services for alarm systems over secure cellular communications. oAnnounced the acquisition of certain assets, technology, and intellectual property - including a portfolio of patents - that will support and widen its M2M platform capabilities in real-time monitoring of critical assets and events. It is expected that these added capabilities will rapidly expand Numerex's range of critical monitoring services, addressing the needs of several vertical sectors including remote monitoring and access control, alarm security, and emergency services. oReceived Frost & Sullivan's 2012 Enabling Technology Award recognizing the Company's "unmatched innovation and strategic partnerships to create M2M solutions." Quarterly Conference Call Numerex will discuss its quarterly results via teleconference today at 9:00 a.m. Eastern Time. Please dial (877) 551-8082 or, if outside the U.S. and Canada, (904) 520-5770 to access the conference call at least five minutes prior to the 9:00 a.m. ET start time. A live webcast and replay of the call will also be available at http://www.numerex.com under the Investor Relations section. An audio replay will be available via the Numerex web site beginning two hours after the call end. You can also listen to a replay of the call by dialing (888) 284-7564 or (904) 596-3174 if outside the U.S. and Canada and entering code number 2978511. About Numerex Numerex Corp (NASDAQ: NMRX) is a leading provider of interactive and on-demand machine-to-machine (M2M) technology and service, offered on a subscription basis, used in the development and support of M2M solutions for the enterprise and government markets worldwide. The Company offers Numerex DNA® that may include hardware and smart Devices, cellular and satellite Network services, and software Applications that are delivered through Numerex FAST® (Foundation Application Software Technology). In addition, business services are offered to enable the development of efficient, reliable, and secure solutions while accelerating deployment. Numerex is ISO 27001 information security-certified, highlighting the Company's focus on M2M data security, service reliability, and round-the-clock support of its customers' M2M solutions. For additional information, please visit www.numerex.com. This press release contains, and other statements may contain, forward-looking statements with respect to Numerex future financial or business performance, conditions or strategies and other financial and business matters, including expectations regarding growth trends and activities. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intend," "estimate," "assume," "strategy," "plan," "outlook," "outcome," "continue," "remain," "trend," and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may," or similar expressions. Numerex cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. These forward-looking statements speak only as of the date of this press release, and Numerex assumes no duty to update forward-looking statements. Actual results could differ materially from those anticipated in these forward-looking statements and future results could differ materially from historical performance. The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: our inability to reposition our platform to capture greater recurring service revenues; the risks that a substantial portion of our revenues are derived from contracts that may be terminated at any time; the risks that our strategic suppliers materially change or disrupt flow of products and/or services; variations in quarterly operating results; delays in the development, introduction, integration and marketing of new machine-to-machine (M2M) products and services; customer acceptance of services; economic conditions resulting in decreased demand for our products and services; the risk that our strategic alliances and partnerships and/or wireless network operators will not yield substantial revenues; changes in financial and capital markets, and the inability to raise growth capital; the inability to attain revenue and earnings growth in our data business; changes in interest rates; inflation; the introduction, withdrawal, success and timing of business initiatives and strategies; competitive conditions; the inability to realize revenue enhancements; and extent and timing of technological changes. Numerex SEC reports identify additional factors that can affect forward-looking statements. Numerex Corp. Condensed Consolidated Statement of Operations (In thousands, except per share data) (Unaudited) Three Months Period to Twelve Months Period to Ended Period Ended Period December 31, Change December 31, Change 2012 2011 $ % 2012 2011 $ % Net revenues: M2M Services Recurring revenue $ $ $ 16% $ $ $ 14% and support 11,986 10,366 1,620 44,043 38,649 5,394 Embedded devices & 6,203 4,801 1,402 29% 22,697 19,711 2,986 15% hardware Total net 18,189 15,167 3,022 20% 66,740 58,360 8,380 14% revenues: Cost of recurring subscription and 4,970 4,191 779 19% 18,358 15,697 2,661 17% support Cost of embedded 5,788 3,994 1,794 45% 19,580 16,461 3,119 19% devices & hardware Gross Profit 7,431 6,982 449 6% 28,802 26,202 2,600 10% 41% 46% 43% 45% Sales and marketing 2,060 2,471 (411) -17% 8,662 9,169 (507) -6% expenses General, administrative and 2,727 2,409 318 13% 10,395 9,197 1,198 13% legal expenses Engineering and development 716 749 (33) -4% 3,183 2,726 457 17% expenses Depreciation and 956 774 182 24% 3,370 3,114 256 8% amortization Operating earnings 972 579 393 68% 3,192 1,996 1,196 60% Interest expense (121) (81) (40) 49% (337) (214) (123) 57% Other (expense) (3) - (3) nm 14 16 (2) -13% income Earnings before 854 498 356 70% 2,869 1,798 1,071 60% tax Provision (benefit) (94) (194) 100 47% (4,634) (56) (4,578) nm for income tax Net earnings $ $ $ 37% $ $ $ nm 948 692 256 7,503 1,854 5,649 Basic earnings per $ $ $ $ common share 0.06 0.05 0.49 0.12 Diluted earnings 0.06 0.04 0.47 0.12 per common share Number of shares used in per share calculation Basic 15,571 15,109 15,412 15,055 Diluted 16,249 15,657 16,013 15,710 NUMEREX CORP. Consolidated Balance Sheets (In thousands) December 31, December 31, 2012 2011 ASSETS CURRENT ASSETS Cash and cash equivalents $ 4,948 $ 9,547 Restricted cash - 221 Accounts receivable, less allowance for doubtful accounts of $383 and $236 9,381 6,846 Financing receivable 512 165 Inventory net of provision of $362 and $578 7,503 7,057 Prepaid expenses and other current assets 1,511 957 TOTAL CURRENT ASSETS 23,855 24,793 Property and equipment, net 2,964 1,252 Software, net 4,506 3,388 Other intangibles, net 6,154 4,901 Goodwill, net 26,367 23,787 Financing receivables - non current 1,329 498 Deferred tax asset - long term 4,626 - Other assets - long term 2,698 2,809 TOTAL ASSETS $ 72,499 $ 61,428 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 7,679 $ 8,239 Other current liabilities 880 1,392 Note payable 2,286 1,200 Deferred revenues 1,824 1,317 Obligations under capital leases - 237 TOTAL CURRENT LIABILITIES 12,669 12,385 LONG TERM LIABILITIES Note payable - non current 6,008 4,500 Other long term liabilities 679 346 TOTAL LIABILITIES 19,356 17,231 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock - no par value; authorized 3,000; - - none issued Class A common stock - no par value, authorized 30,000; issued 17,171 and 16,691 shares; outstanding 15,610 and 15,143 shares - - Class B common stock – no par value; authorized - - 5,000; none issued Additional paid-in-capital 68,072 66,634 Treasury stock, at cost, 1,562 shares (8,136) (8,136) Accumulated other comprehensive earnings (loss) (8) (13) Accumulated deficit (6,785) (14,288) TOTAL SHAREHOLDERS' EQUITY 53,143 44,197 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 72,499 $ 61,428 Reconciliation of Non-GAAP net income The following table reconciles non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP). These non-GAAP financials use net earnings before non-cash items as an additional measure of our operating performance. Non-GAAP financial measures should not be considered as a substitute for, or superior to, GAAP financial measures, which should be considered as the primary financial metrics for evaluating our financial performance. Significantly, non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. Instead, they are based on subjective determinations by management designed to supplement our GAAP financial measures. They are subject to a number of important limitations and should be considered only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Accordingly, investors should exercise caution when evaluating our non-GAAP financial measures. Despite these limitations, we believe our non-GAAP financial measures provide meaningful supplemental information about our operating results, primarily because they exclude non-cash items that we do not believe are indicative of the ongoing operating performance of our business. Although these items should properly be considered in our GAAP financial measures, we believe they should be excluded when evaluating our current operating performance. The following table reconciles the specific items excluded from GAAP in the calculation of Adjusted EBITDA for the periods indicated below: Reconciliation of Non-GAAP Measures Three Months Ended Twelve Months Ended December 31, December 31, 2012 2011 2012 2011 (unaudited) (unaudited) Net earnings $ $ $ 7,503 $ 948 692 1,854 Depreciation and amortization 956 774 3,370 3,114 Interest expense and other, 118 81 322 198 net Income tax (94) (194) (4,634) (56) EBITDA $ $ $ 6,562 $ 1,928 1,353 5,110 Non-cash compensation 305 436 1,388 1,231 One time acquired costs 90 100 Litigation related legal fees 169 338 Adjusted EBITDA $ $ $ 8,049 $ 2,323 1,958 6,679 Numerex Corp. Contact: Alan Catherall 770 485-2527 Investor Relations Contact: Seth Potter 646 277-1230 SOURCE Numerex Corp Website: http://www.numerex.com
Numerex Reports Fourth Quarter and Full Year 2012 Financial Results
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