Numerex Reports Second Quarter 2013 Financial Results

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.

                                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.

The financial tables will follow in a separate release shortly.

CONTACT: Numerex Corp. Contact:
         Rick Flynt
         770 615-1387
        
         Investor Relations Contact:
         Seth Potter
         646 277-1230

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