Numerex Reports First Quarter 2013 Financial Results Net subscriptions grew 34%, adding 148,000 during Q1, increasing base to 2.03 million Subscriptions-based recurring revenue increases 22% year-over-year PR Newswire ATLANTA, May 9, 2013 ATLANTA, May 9, 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 first quarter ended March 31, 2013. "The Company experienced continued strong subscription growth, posting a record 148,000 net additions to its base during the quarter, and an acceleration in subscription-based recurring revenues," stated Stratton Nicolaides, CEO and chairperson of Numerex. "Our continued investment in our on-demand, interactive platforms is creating traction with new and existing enterprise customers across a number of vertical markets. We were very pleased to have surpassed the 2 million subscription milestone during the quarter and, as a result of a strong start in the second quarter combined with a robust pipeline of opportunities, we are increasing our 2013 subscription growth rate guidance to 30% to 35%. Also, we affirm our subscription-based recurring revenue growth guidance of 18% to 23%. In addition, we expect to leverage the investments made in engineering and development and improve our adjusted EBITDA margins to a range of 13% to 15% for the full year 2013. Furthermore, our significantly strengthened balance sheet allows us to pursue certain managed services opportunities, expected to launch later this year, which we anticipate will yield incremental subscription growth later this year and 2014." Financial metrics for the first quarter of 2013 include: Three Months Ended March 31 Non-GAAP Measures 2013 2012 Adjusted EBITDA ($ millions) 1.8 1.7 Adjusted EBITDA as a percent of total revenue 10.5% 11.4% New subscriptions (units) 148,000 83,000 Cumulative net subscriptions (units) 2,031,000 1,521,000 GAAP Measures Recurring revenue and support ($ millions) 12.2 10.1 Gross margin – recurring revenue and support 56.3% 58.8% Net income ($ millions) 0.0* 0.3 EPS (basic and diluted) $0.00 $0.02 *After non-recurring charges of $0.4 million Mr. Nicolaides continued, "The first quarter was impacted by a number of one-time costs. These costs totaled $378,000, which temporarily reduced service margins by 2 percentages points and increased general and administrative costs by $138,000. We expect service margins to return to a normal run-rate for the balance of the year." First Quarter Financial Highlights: oThe Company added a record 148,000 net new subscriptions in the first quarter of 2013, an increase of 78% compared to the 83,000 net new subscriptions added in the same quarter in 2012. Total subscriptions increased 34% to 2.0 million in the first quarter of 2013 compared to 1.5 million in the first 2012. The average cost of acquiring a net new subscription during the quarter was $13.90 compared to $25.68 during the same period last year, a 46% reduction in acquisition cost per subscription. oRecurring revenue and support of $12.2 million increased 20.0% in the first quarter of 2013 compared to the first quarter of 2012. After adjusting for one-time services and support revenue, subscription-based recurring revenues increased 22%. oGross margin generated by recurring revenue and support in the first quarter of 2013 was 56.3% compared to 58.8% recorded in the same period in 2012. The decrease was primarily due to non-recurring carrier fees of $0.2 million and excluding these charges, recurring revenue and support gross margins would have been approximately 58.3%. Embedded device and hardware margin declined to 3.2% in the first quarter of 2013 compared to 18.9% in the same period in 2012. This decline was primarily driven by promotional discounts associated with the introduction of new products. Continued First Quarter Financial Highlights oTotal GAAP operating expenses for the first quarter of 2013 were $7.0 million compared to $6.4 million in the first quarter of 2012. These expenses include depreciation and amortization (D&A) charges of $1.0 million and $0.8 million in the first quarters of 2013 and 2012, 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. During the first quarter of 2013, engineering and development costs increased 32.0% year-over-year to support the company's growing customer base and strengthening our Gateway as a Service (GaaS) and Portal offerings. oFirst quarter 2013 earnings before interest, taxes, depreciation, amortization, non-cash compensation and one-time costs, or adjusted EBITDA, were $1.8 million compared to $1.7 million in the first quarter of 2012. The Company reported GAAP net income for the first quarter of 2013 of breakeven compared to $0.3 million for the same period in the prior year. oAs of March 31, 2013, Numerex reported cash of $25.5 million and notes payable of $1.6 million compared to $4.9 million and $8.3 million, respectively as of December 31, 2012. The company generated positive cash from operations for the first quarter of 2013, compared to using $0.6 million during the first quarter of 2012. During the first quarter of 2013, Numerex completed an underwritten public equity offering which generated net proceeds of approximately $27.8 million. First Quarter 2013 Operational Highlights: oAnnounced that Jerry Rose, an experienced former senior executive with a track record of driving growth in key businesses within General Electric (GE) and United Technologies (UTC), was appointed to the Company's Board of Directors. oUplink Security LLC ("Uplink") and 2GIG Technologies announced an agreement for Uplink to offer cellular and interactive remote services for 2GIG alarm systems. This will enable alarm dealers to sell systems featuring Uplink's nationwide cellular communications as well as remote services consisting of event notifications to end-users, viewing of live or recorded video, and smart-phone control of the alarm system, thermostats, lighting, locks and other home control features. 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. oNumerex and Cascade Engineering announced their collaboration for the development and implementation of an asset management solution for the solid waste and recycling market. oAnnounced an extensive collaboration with Sentaca, a leading, niche supplier of strategic consulting, services & innovation to the international telecoms industry, headquartered in the United Kingdom. Nicolaides concluded, "We enter the second quarter with strong momentum driven by the introduction of new products and the commercialization and launch of several solutions to a broad range of customers through our horizontal platforms. Numerex is in position to extend its leadership position in M2M and remains committed to growing our subscription base that generates our high-margin recurring service revenue." Quarterly Conference Call Numerex will discuss its quarterly results via teleconference today at 9:00 a.m. Eastern Time. Please dial (877) 641-0093 or, if outside the U.S. and Canada, (904) 520-5773 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 2981911511. 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. -continued- Numerex Corp. Unaudited Condensed Consolidated Statement of Operations (In thousands, except per share data) Three Months Ended March 31, 2013 vs 2012 2013 2012 $ % Net revenues: Recurring revenue and support $ $ $ 2,063 20% 12,171 10,108 Embedded devices and hardware 4,559 4,424 135 3% Total net revenues 16,730 14,532 2,198 15% Cost of recurring revenue and 5,320 4,161 1,159 28% support Cost of embedded devices and 4,415 3,588 827 23% hardware Gross Profit 6,995 6,783 212 3% 41.8% 46.7% - - Sales and marketing expenses 1,976 2,072 (96) -5% General and administrative 2,911 2,688 223 8% expenses Engineering and development 1,063 805 258 32% expenses Depreciation and amortization 1,017 815 202 25% Operating income 28 403 (375) -93% Interest expense 89 77 12 16% Other (income) expense (7) 3 (10) nm (Loss) earnings before income (54) 323 (377) nm taxes (Benefit) provision for income (65) 2 (67) nm tax Net income $ $ $ (310) -97% 11 321 Basic earnings per common $ $ share 0.00 0.02 Diluted earnings per common $ $ share 0.00 0.02 Weighted average common shares used in per share calculation Basic 17,661 15,189 Diluted 18,353 15,872 nm – not meaningful NUMEREX CORP. Unaudited Condensed Consolidated Balance Sheets (In thousands) March 31, December 31, 2013 2012 ASSETS CURRENT ASSETS Cash and cash equivalents $ $ 25,471 4,948 Accounts receivable, less allowance for 8,951 9,381 doubtful accounts of $455 and $383 Financing receivables, current 633 512 Inventory net of provision of $392 and $362 8,207 7,503 Prepaid expenses and other current assets 2,532 1,511 TOTAL CURRENT ASSETS 45,794 23,855 Property and equipment, net of accumulated depreciation and amortization of $1,323 and $1,185 2,548 2,450 Software, net of accumulated amortization of 5,096 4,506 $2,113 and $1,848 Other intangibles, net of accumulated 6,817 6,154 amortization of $11,982 and $11,689 Other assets, non-current 2,680 2,698 Financing receivables, non-current 1,593 1,329 Deferred tax assets 4,852 4,788 Goodwill 26,367 26,367 TOTAL ASSETS $ $ 95,747 72,147 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ $ 6,720 7,679 Other current liabilities 1,694 866 Current portion of long term debt 528 2,286 Deferred revenues 2,309 1,824 Obligations under capital leases, current 264 - TOTAL CURRENT LIABILITIES 11,515 12,655 LONG TERM LIABILITIES Note payable, long term 1,109 6,008 Obligations under capital leases, long-term 430 - Other long term liabilities 871 679 TOTAL LIABILITIES 13,925 19,342 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, no par value; authorized - - 3,000; none issued Class A common stock, no par value; authorized 30,000; 19,549 and 17,171 issued; 18,383 and 15,609 outstanding - - Class B common stock, no par value; - - authorized 5,000; none issued Common stock issuable 925 - Additional paid-in-capital 93,273 68,072 Treasury stock, at cost; 1,241 and 1,562 (5,239) (8,136) shares Accumulated other comprehensive loss (25) (8) Accumulated deficit (7,112) (7,123) TOTAL STOCKHOLDERS' EQUITY 81,822 52,805 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ $ 95,747 72,147 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 and one time costs 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 March 31, 2013 2012 (unaudited) Net income (loss) $ 11 $ 321 Depreciation and amortization 1,017 815 Interest expense and other, net 82 80 Income tax (65) 2 EBITDA $ 1,045 $ 1,218 Non-cash compensation 339 432 One time costs* 378 - Adjusted EBITDA $ 1,762 $ 1,650 *One-time costs include non recurring carrier charges, acquisition costs and travel expenses incurred as a result of the capital raise. 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 First Quarter 2013 Financial Results
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