UPDATE -- Numerex Reports Second Quarter 2013 Financial Results Total subscriptions up 33% over the prior year Recurring revenue up 21% year-over-year ATLANTA, Aug. 8, 2013 (GLOBE NEWSWIRE) -- Numerex Corp (Nasdaq:NMRX), a leading provider of on-demand and interactive machine-to-machine (M2M) enterprise solutions, today announced financial results for its second quarter ended June 30, 2013. "The Company's performance in the second quarter reflected continued strong demand for its products and services and remains on track to meet its fiscal year 2013 subscriptions and recurring revenue growth guidance," stated Stratton Nicolaides, chairperson and CEO of Numerex. "Our pipeline of business continues to produce significant opportunities. Accordingly, we ramped up our services and support organizations to meet anticipated demand from managed services programs recently underwritten. In the first half of 2013, we began a transformation by focusing significant resources on two major programs: first, in improving our infrastructure to meet an increased customer demand for device management, incremental network services, data analytics and diagnostics; and second, in developing managed services solutions for the supply chain, asset tracking, and security vertical markets. This dramatic increase in activity, combined with upfront costs of ramping up our managed services programs, impacted margins and increased our expenses by approximately $700,000 year-to-date, most of which was incurred during the second quarter. Additionally, during the year we capitalized an incremental $900,000 associated with these initiatives. This is reflected in both our engineering and development spend and the increase in general and administrative costs. Although we will continue to invest in both programs, we expect the rate at which we spend during the balance of the year to decrease as a percentage of revenue. In addition, the Company is expected to record an incremental $4 million of embedded device and hardware revenue through year end, which will also lead to improved margins. As a result, we now expect adjusted EBITDA margins to be in the range of 9% to 11% for fiscal year 2013 and begin to improve beginning in Q3." Financial Metrics Three Months Ended Six Months Ended June 30 June 30 2013 2012 2013 2012 Non-GAAP Measures* Adjusted EBITDA ($ in $1.1 $1.8 $3.0 $3.6 millions) Adjusted EBITDA per $0.06 $0.11 $0.16 $0.23 diluted share Adjusted EBITDA as a 6.6% 11.6% 8.9% 12.0% percent of total revenue Net new subscriptions 139,000 116,000 287,000 199,000 (units) Total subscriptions 2,170,000 1,637,000 2,170,000 1,637,000 (units) * Refer to the section of this press release entitled "Non-GAAP (Adjusted) Financial Measures" for a discussion of these non-GAAP items. GAAP Measures Subscription revenue and $12.5 $10.4 $24.5 $20.3 support ($ in millions) Gross margin - subscription revenue and 54.6% 58.2% 55.4% 58.8% support Income from continuing operations ($ in $0.4 $0.6 $0.4 $1.0 millions) Diluted EPS from $0.02 $0.04 $0.02 $0.06 continuing operations Mr. Nicolaides concluded, "We enter the third 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.Numerex is in position to extend its leadership position in M2M and remains committed to growing its subscription base that generates high-margin service revenue." Second Quarter Financial Highlights: *Total subscriptions have increased 33% to 2.2 million at the end of the second quarter of 2013 compared to 1.6 million at the end of the second quarter of 2012.The Company added 139,000 net subscriptions in the second quarter of 2013, an increase of 20% compared to the 116,000 net subscriptions added in the same quarter of 2012. *Subscription revenue and support of $12.5 million was 20.4% higher in the second quarter of 2013 compared to the second quarter of 2012. *Gross margin generated by subscription revenue and support in the second quarter of 2013 was 54.6% compared to 58.2% recorded in the same period in 2012. The decrease in gross margin was primarily due to an increase in carrier fees and operating costs. *Embedded device and hardware margin declined to (3.9%) in the second quarter of 2013 compared to 16.0% in the same period in 2012.In the second quarter of 2013, we recorded a $0.5 million increase in the inventory reserve primarily related to excess older inventory.Excluding this adjustment, gross margin would have been 7.3% in the second quarter of 2013. *Total GAAP operating expenses for the second quarter of 2013 were $8.6 million compared to $6.3 million in the second quarter of 2012. *Operating expenses include depreciation and amortization charges of $1.3 million and $0.8 million in the second quarters of 2013 and 2012, respectively. The increase in depreciation and amortization was primarily the result of amortization of additional internally developed software and, to a lesser extent, intangible assets from the two acquisitions completed in the fourth quarter of 2012 and the first quarter of 2013. *General and administrative expenses in the second quarter increased $1.3 million or 54.3% as compared to the second quarter of 2012.The increase was attributable to $0.3 million incurred as part of an organizational realignment, strategic planning costs of $0.2 million, and increased professional services fees of $0.3 million primarily related to improving the Company's M2M platform infrastructure and to underwrite managed service solutions related tointernal control weaknesses disclosed during the first quarter. *During the second quarter of 2013, engineering and development costs increased 62.3% year-over-year to support the Company's growing customer base and to strengthen our service offerings. *Second quarter 2013 earnings before interest, taxes, depreciation, amortization, non-cash compensation and infrequent or unusual costs, or Adjusted EBITDA, totaled $1.1 million compared to $1.8 million in the second quarter of 2012. *During the second quarter we recorded an income tax benefit of $2.0 million resulting from a tax accounting method change that allowed us to take a one-time acceleration and catch-up of depreciation and amortization. *Net income from continuing operations totaled $0.4 million for the second quarter of 2013 as compared to $0.6 million for the second quarter of 2012. *The Company reported a GAAP net loss for the second quarter of 2013 of $(1.0) million compared to net income of $0.7 million for the same period in the prior year. Discontinued Operations *In the second quarter, the Company made the decision to exit certain businesses and related products that are not core to future business plans.These businesses were previously disclosed in our annual financial statements as a separate segment "Other Services." *Discontinued operations in the second quarter of 2013 include $0.9 million for the impairment of goodwill, a reserve for accounts receivable of $0.6 million and less than $0.1 million for estimated costs to sell the businesses. Second Quarter 2013 Operational Highlights: *Announced senior management appointments including Rick Flynt as Chief Financial Officer and Scott Wiley as Senior Vice-President of Products and Programs. *Announced that Sherrie McAvoy, an experienced former partner of 18 years with Deloitte & Touche LLP has been appointed to the Board of Directors as a member of the audit committee and subsequently appointed as Chairperson.Ms. McAvoy has 30 years of experience in accounting, auditing, internal controls, risk management, corporate compliance and ethics, and corporate governance. Quarterly Conference Call Numerex will discuss its quarterly results via teleconference today at 4:30 p.m. Eastern Time. Please dial (877) 303-9240 or, if outside the U.S. and Canada, (760) 666-3571 to access the conference call at least five minutes prior to the 4:30 p.m. Eastern Time 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.You can also listen to a replay of the call by dialing (855) 859-2056 or (800) 585-8367 if outside the U.S. and Canada and entering code number 26288873. About Numerex Numerex Corp. (Nasdaq:NMRX) is a leading provider of interactive and on-demand machine-to-machine (M2M) enterprise solutions.The Company provides its technology and services through its integrated M2M horizontal platforms which are generallysold on a subscription basis. 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). The Company also provides business services 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 around-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 revenue; the risks that a substantial portion of our revenue 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 revenue; 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 Change Six Months Change Ended Ended June 30, Q213 v Q212 June 30, Q213 v Q212 2013 2012 $ % 2013 2012 $ % Net sales Subscription $ $ $ revenue and $ 12,543 10,420 $ 2,123 20.4% 24,450 20,348 $ 4,102 20.2% support Embedded devices 4,728 5,367 (639) 11.9% 9,258 9,707 (449) -4.6% and hardware Total net sales 17,271 15,787 1,484 9.4% 33,708 30,055 3,653 12.2% Cost of sales, exclusive of depreciation and amortization shown below: Subscription revenue and 5,694 4,360 1,334 30.6% 10,909 8,389 2,520 30.0% support Embedded devices 4,911 4,510 401 8.9% 9,227 8,092 1,135 14.0% and hardware Gross profit 6,666 6,917 (251) -3.6% 13,572 13,574 (2) 0.0% 38.6% 43.8% 40.3% 45.2% Operating expense: Sales and 2,328 2,267 61 2.7% 4,271 4,216 55 1.3% marketing General and 3,789 2,456 1,333 54.3% 6,654 5,064 1,590 31.4% administrative Engineering and 1,269 782 487 62.3% 2,309 1,609 700 43.5% development Depreciation and 1,263 760 503 66.2% 2,276 1,557 719 46.2% amortization Operating (loss) (1,983) 652 (2,635) nm (1,938) 1,128 (3,066) nm income Interest 55 69 (14) -20.3% 145 146 (1) -0.6% expense Other expense 4 3 1 33.3% (4) 6 (10) nm (income), net (Loss) income from continuing operations before income (2,042) 580 (2,622) nm (2,079) 976 (3,055) nm taxes Income tax (benefit) (2,454) 8 (2,462) nm (2,514) 11 (2,525) nm expense Net income from continuing 412 572 (160) 28.0% 435 965 (530) -55.0% operations (Loss) income from discontinued operations, net (1,424) 125 (1,549) nm (1,436) 53 (1,489) nm of income taxes Net (loss) $ $ 697 $ nm $ $ $ nm income (1,012) (1,709) (1,001) 1,018 (2,019) Basic earnings (loss) per share: Income from continuing $ 0.02 $ 0.04 $ 0.02 $ 0.06 operations (Loss) income on discontinued (0.07) 0.01 (0.08) 0.01 operations Net (loss) $ (0.05) $ 0.05 (0.06) $ 0.07 income Diluted earnings (loss) per share: (Loss) income from continuing $ 0.02 $ 0.04 $ 0.02 $ 0.06 operations (Loss) income on discontinued (0.07) 0 (0.07) 0 operations Net (loss) $ (0.05) $ 0.04 $ $ 0.06 income (0.05) Weighted average shares outstanding used in computing net earnings (loss) per share: Basic 18,411 15,419 18,004 15,304 Diluted 18,950 15,913 18,613 15,892 NUMEREX CORP. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, December 31, 2013 2012 ASSETS CURRENT ASSETS Cash and cash equivalents $24,112 $4,948 Accounts receivable, less allowance for doubtful 8,751 8,466 accounts of $709 and $367 Financing receivables, current 699 512 Inventory, net of provision of $945 and $332 8,344 7,363 Prepaid expense and other current assets 2,369 1,464 Assets of discontinued operations 830 2,068 TOTAL CURRENT ASSETS 45,105 24,821 Property and equipment, net of accumulated depreciation and amortization of $1,488 and $1,184 2,481 2,449 Software, net of accumulated amortization of $2,386 and 5,279 4,499 $1,815 Other intangibles, net of accumulated amortization of 6,328 6,154 $12,355, and $11,679 Financing receivables, non-current 1,767 1,329 Deferred tax assets 7,299 4,788 Goodwill 25,418 25,418 Other assets, non-current 2,595 2,689 TOTAL ASSETS $96,272 $72,147 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $7,750 $7,673 Accrued expense and other current liabilities 1,361 685 Current portion of long-term debt 686 2,286 Deferred revenues 2,352 1,823 Obligations under capital leases 270 -- Liabilities of discontinued operations 293 188 TOTAL CURRENT LIABILITIES 12,712 12,655 Note payable, non-current 792 6,008 Obligations under capital leases, non-current 298 -- Other non-current liabilities 1,112 679 TOTAL LIABILITIES 14,914 19,342 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; 19,686 and 17,171 issued; 18,445 and 15,609 outstanding -- -- Class B common stock, no par value; authorized 5,000; -- -- none issued Common stock issuable 925 -- Additional paid-in-capital 93,825 68,072 Treasury stock, at cost, 1,241 and 1,562 shares (5,239) (8,136) Accumulated other comprehensive loss (29) (8) Accumulated deficit (8,124) (7,123) TOTAL SHAREHOLDERS' EQUITY 81,358 52,805 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $96,272 $72,147 NUMEREX CORP. NON-GAAP (ADJUSTED) FINANANCIAL MEASURES In addition to providing financial measurements based on accounting principles generally accepted in the United States of America (GAAP), we have provided EBITDA, Adjusted EBITDA and Adjusted EBITDA per diluted share, financial measures that are not prepared in accordance with GAAP (non-GAAP). The most directly comparable GAAP equivalent to EBITDA and Adjusted EBITDA is net income from continuing operations.The most directly comparable GAAP equivalent to EBITDA and Adjusted EBITDA per diluted share is diluted earnings per share from continuing operations. Reconciliations of our non-GAAP financial measures to the most directly comparable financial measure are provided below. We believe that presentation of these non-GAAP financial measures provides useful information to investors regarding our results of operations. We believe that excluding depreciation and amortization of property, equipment and intangible assets to calculate EBITDA and Adjusted EBITDA provides supplemental information and an alternative presentation that is useful to investors' understanding of our core operating results and trends. Not only are depreciation and amortization expenses based on historical costs of assets that may have little bearing on present or future replacement costs, but also they are based on our estimates of remaining useful lives. Similarly, we believe that excluding the effects of stock-based compensation from non-GAAP financial measures provides supplemental information and an alternative presentation useful to investors' understanding of our core operating results and trends. Investors have indicated that they consider financial measures of our results of operations excluding stock-based compensation as important supplemental information useful to their understanding of our historical results and estimating our future results. We also believe that, in excluding the effects of stock-based compensation, our non-GAAP financial measures provide investors with transparency into what management uses to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods and to compare our results of operations on a more consistent basis against that of other companies, in making financial and operating decisions and to establish certain management compensation. Stock-based compensation is an important part of total compensation, especially from the perspective of employees. We believe, however, that supplementing GAAP net income from continuing operations by providing normalized net income, excluding the effect of stock-based compensation in all periods, is useful to investors because it enables additional and more meaningful period-to-period comparisons. Adjusted EBITDA also excludes infrequent or unusual items, consisting of temporarily higher carrier fees, professional service fees incurred in response to and in remediation of internal control weaknesses, acquisition-related expenses, costs related to the realignment of our executive team, and asset write-downs. We believe that these costs are unusual costs that we do not expect to recur on a regular basis, and consequently, we do not consider these charges as a normal recurring component of ongoing operations. EBITDA and Adjusted EBITDA are not measures of liquidity calculated in accordance with GAAP, and should be viewed as a supplement to – not a substitute for – results of operations presented on the basis of GAAP. EBITDA and Adjusted EBITDA do not purport to represent cash flow provided by operating activities as defined by GAAP. Furthermore, EBITDA and Adjusted EBITDA are not necessarily comparable to similarly-titled measures reported by other companies. We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA per diluted share are useful to and used by investors and other users of the financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performanceacross periods. We believe that: *EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, income taxes, depreciation and amortization, which can vary substantially from company-to-company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired; and *Investors commonly adjust EBITDA information to eliminate the effect of stock-based compensation and other unusual or infrequently occurring items which vary widely from company-to-company and impair comparability. We use EBITDA, Adjusted EBITDA and Adjusted EBITDA per diluted share: *as a measure of operating performance to assist in comparing performance from period-to-period on a consistent basis; *as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; and *in communications with the board of directors, analysts and investors concerning our financial performance. Although we believe, for the foregoing reasons, that the presentation of non-GAAP financial measures provides useful supplemental information to investors regarding our results of operations, the non-GAAP financial measures should only be considered in addition to, and not as a substitute for, or superior to, any measure of financial performance prepared in accordance with GAAP. Use of non-GAAP financial measures is subject to inherent limitations because they do not include all the expenses that must be included under GAAP and because they involve the exercise of judgment of which charges should properly be excluded from the non-GAAP financial measure. Management accounts for these limitations by not relying exclusively on non-GAAP financial measures, but only using such information to supplement GAAP financial measures. The non-GAAP financial measures may not be the same non-GAAP measures, and may not be calculated in the same manner, as those used by other companies. NUMEREX CORP. RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO EBITDA AND ADJUSTED EBITDA, INCLUDING PER SHARE AMOUNTS The following table reconciles the specific items excluded from GAAP in the calculation of EBITDA and Adjusted EBITDA for the periods indicated below (in thousands, except per share amounts): Three Months Ended Six Months Ended June 30, June 30, 2013 2012 2013 2012 (unaudited) (unaudited) Net income from continuing operations $412 $572 $435 $965 (GAAP) Depreciation and amortization 1,279 793 2,326 1,624 Interest expense and other non-operating 59 72 141 152 expense, net Income tax (benefit) expense (2,454) 8 (2,514) 11 EBITDA (non-GAAP) $(704) $1,445 $388 $2,752 Non-cash compensation 395 326 717 748 Infrequent or unusual items 1,452 55 1,884 109 Adjusted EBITDA (non-GAAP) $1,143 $1,826 $2,989 $3,609 Net income from continuing operations per $0.02 $0.04 $0.02 $0.06 diluted share (GAAP) EBITDA per diluted share (non-GAAP) (0.04) 0.09 0.02 0.17 Adjusted EBITDA per diluted share 0.06 0.11 0.16 0.23 (non-GAAP) Weighted average shares outstanding used in computing diluted earnings per share 18,950 15,913 18,613 15,892 Infrequent or unusual items include temporarily higher carrier fees; professional services fees incurred in response to and in remediation of internal control weaknesses, acquisition-related expenses, costs related to the realignment or our executive team and asset write-downs. CONTACT: Numerex Corp. Contact: Rick Flynt 770 615-1387 Investor Relations Contact: Seth Potter 646 277-1230 Numerex Corp logo
UPDATE -- Numerex Reports Second Quarter 2013 Financial Results
Press spacebar to pause and continue. Press esc to stop.