Numerex Reports Fourth Quarter and Full Year 2012 Financial Results

     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