Numerex Reports Third Quarter 2013 Financial Results

Numerex Reports Third Quarter 2013 Financial Results

  *Total net sales of $22.0 million, up 28% compared to the third quarter of
    2012
  *Subscription-based recurring revenue increased 24% year-over-year
  *Total subscriptions up 31% to 2.3 million compared to the prior year

ATLANTA, Nov. 6, 2013 (GLOBE NEWSWIRE) -- Numerex Corp (Nasdaq:NMRX), a
leading provider of interactive and on-demand machine-to-machine (M2M)
enterprise solutions, today announced financial results for its third quarter
ended September 30, 2013.

"The Company delivered a strong third quarter performance as a result of
continued high demand for its products and services and the favorable impact
of focused execution on delivery of managed M2M services through
vertically-aligned business units," stated Stratton Nicolaides, CEO and
chairman of Numerex. "Our Integrated Services unit recorded substantial
increases in revenue from both hardware and services, particularly module
sales associated with advanced security systems and accompanying recurring
services. Our Security Solutions group also posted an improved performance in
the quarter resulting from an accelerated customer adoption of new
fully-integrated services. In addition, our Supply Chain business unit gained
traction from the commercialization of turn-key solutions by certain
enterprise customers." Additional financial highlights for the third quarter
include:

  oSubscription and support revenue of $13.5 million up 22% compared to third
    quarter of last year;
  oRecurring revenue generated by subscriptions was up 24% compared to third
    quarter of last year; year-to-date recurring revenue growth is well within
    our full year growth guidance of 18% to 23%;
  o135,000 net new subscriptions added during the third quarter, bringing the
    cumulative base at the end of the quarter to 2.31 million, up from the
    1.76 million reported at the end of third quarter last year, a growth rate
    of 31% and in-line with our full year guidance of 30% to 35%;
  oGAAP net income and GAAP income from continuing operations, net of income
    tax benefit, for the quarter were both $0.6 million, or $0.03 per diluted
    share;
  oAdjusted EBITDA margin (non-GAAP) was 11.5% for the third quarter, up
    substantially from 8.9% for the first half of the year, and 9.9% for the
    nine month period ended September 30, 2013. We affirm our guidance of 10%
    to 12% for the full year;
  oAdjusted EBITDA (non-GAAP) of $2.5 million, or $0.13 per diluted share,
    compared to $2.2 million, or $0.14 per diluted share, for the same period
    last year;
  oTotal revenue for the third quarter of $22.0 million, up 28% compared to
    the third quarter of 2012;
  oEmbedded devices and hardware revenue for the third quarter of $8.5
    million, up 39% over the third quarter last year;
  oNet cash generated by operating activities of continuing operations was
    $3.3 million year-to-date.

Mr. Nicolaides continued, "Gross margins improved across the board during the
quarter compared to the first half of the year. Also, investments made during
the year in our M2M platforms supporting supply chain applications and other
managed services are beginning to contribute to our performance. In addition,
our opportunity funnel has significantly expanded with several projects
initiated specifically for enterprise direct and channel partners. The
combination of improved margins, the launch of new innovative products and
services, and a healthy pipeline of opportunities bodes well for a strong
finish to 2013 and for future growth. As a result, we affirm our full year
guidance for growth in recurring revenues, Adjusted EBITDA (non-GAAP), and
growth in our subscription base."

Financial Metrics

                           ThreeMonths Ended      Nine Months Ended
                           September 30,           September 30,
Non-GAAP Measures*        2013       2012       2013       2012
                                                               
Adjusted EBITDA ($ in      $2.5       $2.2       $5.5       $5.8
millions)
Adjusted EBITDA as a       11.5%        12.8%        9.9%         12.3%
percent of total revenue
Adjusted EBITDA per        $0.13      $0.14      $0.29      $0.36
diluted share
Net new subscriptions      135,000     121,000     423,000     310,000
(units)
Total subscriptions        2,306,000   1,758,000   2,306,000   1,758,000
(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 and support   $13.5      $11.1      $37.9      $31.4
revenue ($ in millions)
Gross margin ---
subscription and support    58.3%        57.7%        56.4%        58.4%
revenue
Income from continuing
operations, netof income   $0.6       $5.7       $1.0       $6.7
tax benefit ($ in
millions)
Diluted EPS from           $0.03      $0.35      $0.05      $0.42
continuing operations

Additional Third Quarter Financial Highlights:

  *Gross margin generated by subscription and support revenue in the third
    quarter of 2013 was 58.3% compared to 57.7% recorded in the same period in
    2012. The increase in gross margin was primarily due to an internal
    realignment of personnel to focus on our key vertical markets beginning
    July 1, 2013 that resulted in recording certain personnel costs to
    operating expenses instead of cost of sales.
  *Total GAAP operating expenses for the third quarter of 2013 were $8.3
    million compared to $6.1 million in the third quarter of 2012.

    *Sales and marketing expense was $2.6 million in the third quarter of
      2013 compared to $2.0 million for the same period last year. The
      increase was primarily due to the addition of sales and marketing
      personnel to support growth.
    *General and administrative expenses in the third quarter increased to
      $3.2 million as compared to $2.5 million in the third quarter of
      2012.The increase includes higher non-cash compensation costs.
    *During the third quarter of 2013, engineering and development costs
      increased to $1.3 million from $0.8 million during the same period last
      year to support our growing customer base and to strengthen our service
      offerings.
    *Operating expenses include depreciation and amortization charges of $1.2
      million and $0.8 million in the third quarters of 2013 and 2012,
      respectively.The increase includes the 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.

  *The Company reported GAAP income from continuing operations, net of income
    tax benefit, for the third quarter of 2013 of $0.6 million compared to
    $5.7 million for the same period in the prior year.GAAP net income during
    the third quarter of 2012 included a $4.8 million tax benefit related to
    the release of the Company's valuation allowance against certain deferred
    tax assets.
  *Adjusted EBITDA for the third quarter of 2013 was $2.5 million or $0.13
    per share based on 19.0 million diluted shares outstanding compared to
    $2.2 million or $0.14 per share based on 16.1 million diluted shares
    outstanding during the same period last year.

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 (404) 537-3406 if outside the U.S. and
Canada and entering code number 89424562.

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's SEC
reports identify additional factors that can affect forward-looking
statements.

NUMEREX CORP AND SUBSIDIARIES
UNAUDITED CONSDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                                                                                       
                        Three Months Ended  Change             Nine Months Ended   Change
                        September 30,       Q3'13 v Q3'12      September 30,       Q3'13 v Q3'12
                        2013      2012      $          %       2013      2012      $          %
Net sales                                                                               
Subscription and support $13,482 $11,078 $2,404   21.7%   $37,932 $31,426 $6,506   20.7%
revenue
Embedded devices and     8,469    6,100    2,369     38.8%   17,727   15,807   1,920     12.1%
hardware
Total net sales          21,951   17,178   4,773     27.8%   55,659   47,233   8,426     17.8%
Cost of sales, exclusive
of depreciationand                                                                     
amortization shown
below:
Subscription and support 5,622    4,687    935       19.9%   16,531   13,076   3,455     26.4%
revenue
Embedded devices and     7,348    5,403    1,945     36.0%   16,575   13,495   3,080     22.8%
hardware
Gross profit             8,981    7,088    1,893     26.7%   22,553   20,662   1,891     9.2%
                        40.9%     41.3%                      40.5%     43.7%               
Operating expense                                                                       
Sales and marketing      2,636    2,032    604       29.7%   6,907    6,248    659       10.5%
General and              3,174    2,498    676       27.1%   9,828    7,562    2,266     30.0%
administrative
Engineering and          1,317    792      525       66.3%   3,626    2,401    1,225     51.0%
development
Depreciation and         1,209    804      405       50.4%   3,485    2,361    1,124     47.6%
amortization
Operating income (loss)  645      962      (317)     -33.0%  (1,293)  2,090    (3,383)   -161.9%
Interest expense         75       57       18        31.6%   220      204      16        7.8%
Other expense (income),  30       (4)      34        nm*     25       1        24        nm*
net
Income (loss) from
continuingoperations    540      909      (369)     -40.6%  (1,538)  1,885    (3,423)   -181.6%
before income taxes
Income tax benefit       (35)     (4,786)  4,751     -99.3%  (2,549)  (4,775)  2,226     -46.6%
Income from continuing
operations,net of       575      5,695    (5,120)   -89.9%  1,011    6,660    (5,649)   -84.8%
income tax benefit
Income (loss) from
discontinuedoperations, --       (159)    159       -100.0% (1,437)  (106)    (1,331)   nm*
net of income taxes
Net income (loss)        $575    $5,536  $(4,961) -89.6%  $(426)  $6,554  $(6,980) -106.5%
                                                                                       
Basic earnings (loss)                                                                   
per share:
Income from continuing   $0.03   $0.37                    $0.06   $0.43             
operations
Income (loss) from       0.00     (0.01)                    (0.08)   (0.00)             
discontinued operations
Net income (loss)        $0.03   $0.36                    $(0.02) $0.43             
                                                                                       
Diluted earnings (loss)                                                                 
per share:
Income from continuing   $0.03   $0.35                    $0.05   $0.42             
operations
Income (loss) from       0.00     (0.01)                    (0.07)   (0.01)             
discontinued operations
Net income (loss)       $0.03   $0.34                    $(0.02) $0.41             
                                                                                       
Weighted average shares
outstanding used                                                                        
incomputing earnings
(loss) per share:
Basic                    18,565   15,487                    18,193   15,357             
Diluted                  19,014   16,061                    18,746   15,939             
                                                                                       
* Not meaningful                                                                        


NUMEREX CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                   September 30, December 31,
                                                   2013          2012
                                                   (Unaudited)   
ASSETS                                                           
CURRENT ASSETS                                                   
Cash and cash equivalents                           $25,817     $4,948
Accounts receivable, less allowance for doubtful    9,377        8,466
accounts of $732 and $367
Financing receivables, current                      939          512
Inventory, net of reserve for obsolescence of       7,759        7,363
$1,036 and $332
Prepaid expense and other current assets            1,775        1,464
Assets of discontinued operations                   1,130        2,284
TOTAL CURRENT ASSETS                                46,797       25,037
                                                                
Property and equipment, net of accumulated          2,543        2,449
depreciation and amortization of$1,750 and $1,184
Software, net of accumulated amortization of $3,060 6,337        4,499
and $1,815
Other intangibles, net of accumulated amortization  5,131        6,154
of $12,771 and $11,679
Financing receivables, non-current                  2,562        1,329
Deferred tax assets                                 7,045        4,572
Goodwill                                            25,418       25,418
Other assets, non-current                           2,524        2,689
TOTAL ASSETS                                        $98,357     $72,147
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                             
CURRENT LIABILITIES                                              
Accounts payable                                    $7,919      $7,673
Accrued expense and other current liabilities       1,648        685
Current portion of long-term debt                   686          2,286
Deferred revenues                                   2,799        1,823
Obligations under capital leases                    285          --
Liabilities of discontinued operations              354          188
TOTAL CURRENT LIABILITIES                           13,691       12,655
                                                                
Notes payable, non-current                          633          6,008
Obligations under capital leases, non-current       233          --
Other non-current liabilities                       1,290        679
TOTAL LIABILITIES                                   15,847       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; 19,857 and 17,171issued; 18,616 and 15,609 --           --
outstanding
Class B common stock, no par value; authorized      --           --
5,000; none issued
Additional paid-in-capital                          95,319       68,072
Treasury stock, at cost, 1,241 and 1,562 shares     (5,239)      (8,136)
Accumulated other comprehensive loss                (21)         (8)
Accumulated deficit                                 (7,549)      (7,123)
TOTAL STOCKHOLDERS' EQUITY                          82,510       52,805
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $98,357     $72,147

                        NUMEREX CORP AND SUBSIDIARIES
                    NON-GAAP (ADJUSTED) FINANCIAL 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 income
from continuing operations, net of income tax benefit.The most directly
comparable GAAP equivalent to EBITDA and Adjusted EBITDA per diluted share is
diluted earnings per share from continuing operations.

  *EBITDA is income from continuing operations, net of income tax benefit,
    plus depreciation and amortization, interest and other non-operating
    expense and income tax expense. Any other non-operating income and income
    tax benefit is subtracted from income from continuing operations, net of
    income tax benefit.
  *Adjusted EBITDA is EBITDA less non-cash stock-based compensation and
    infrequent or unusual items further described below.
  *EBITDA and Adjusted EBITDA per diluted share is EBITDA and Adjusted EBITDA
    divided by weighted average diluted shares outstanding.

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 income from continuing operations by providing normalized
income from continuing operations, 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 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 performance across 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 AND SUBSIDIARIES
      RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS, NET OF INCOME
   TAX BENEFIT, 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 Nine Months Ended
                                         September 30,      September 30,
                                         2013      2012     2013     2012
Income from continuing operations, net of $575    $5,695 $1,011 $6,660
income tax benefit (GAAP)
Depreciation and amortization             1,280    896     3,716   2,624
Interest expense and other non-operating  105      53      245     205
expense, net
Income tax benefit                        (35)     (4,786) (2,549) (4,775)
EBITDA (non-GAAP)                         1,925    1,858   2,423   4,714
Non-cash compensation                     589      336     1,323   1,083
Infrequent or unusual items               --       --      1,775   --
Adjusted EBITDA (non-GAAP)                $2,514  $2,194 $5,521 $5,797
                                                                  
Income from continuing operations, net of
income tax benefit, per diluted share     $0.03   $0.35  $0.05  $0.42
(GAAP)
EBITDA per diluted share (non-GAAP)       0.10     0.12    0.13    0.30
Adjusted EBITDA per diluted share         0.13     0.14    0.29    0.36
(non-GAAP)
                                                                  
Weighted average shares outstanding in    19,014   16,061  18,746  15,939
computing diluted earnings per share

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 of our executive team and asset write-downs.

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

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