Numerex Reports First Quarter 2014 Financial Results

Numerex Reports First Quarter 2014 Financial Results

  *Total Revenues of $20.8 million in Q1, up 26% year-over-year
  *Gross Margins improve to 47.4%, up 13% year-over-year
  *Subscription and support revenues up 17% year-over-year to $13.9 million
  *Adjusted EBITDA increases 50% year-over-year to $2.8 million
  *Recorded $1.1 million in GAAP Earnings, or $0.06 per share

ATLANTA, May 7, 2014 (GLOBE NEWSWIRE) -- Numerex Corp (Nasdaq:NMRX), a leading
provider of interactive and on-demand machine-to-machine (M2M) solutions
enabling the Internet of Things (IoT), today announced financial results for
its first quarter ended March 31, 2014.

"The Company posted a solid first quarter financial performance and
significantly advanced its strategy through the acquisition of Omnilink, while
continuing to expand its pipeline of managed service opportunities," stated
Stratton Nicolaides, CEO and chairman of Numerex. "We continue to benefit from
an increase in demand for our integrated solutions, M2M services, and product
lines, as well as our focus on expanding our presence in the supply chain,
asset monitoring, and security markets. This vertically-focused strategy,
supported by our fully integrated network and application platforms, has been
significantly bolstered through the merger. The resultant expansion of our
product lines into offender electronic monitoring, people tracking, and new
asset tracking markets is highly complementary to our overall product
strategy."

Additional Q1Financial Highlights and Year-over-Year Comparisons to Q1 of 2013

  *Gross Margin generated by subscriptions and support revenues was 61.4%
    compared to 56.2%;
  *Gross Profit increased to $9.8 million, up 42.5% from $6.9 million;
  *GAAP income from continuing operations was $1.1 million, compared to $28
    thousand;
  *GAAP income from continuing operations was $0.06 per diluted share
    compared to $0.00;
  *Adjusted EBITDA margin (non-GAAP) was 13.4%, up 19%;
  *Embedded devices and hardware revenues were $6.9 million, up 52.0%

Mr. Nicolaides continued, "We anticipate continued robust revenue growth
across the board, particularly in the Company's subscription and support
revenues for the full year 2014, which we expect will range between $68 and
$70 million for the full year, including the contribution from Omnilink. This
reflects growth of 30% to 34% over the $52 million the Company recorded in the
full year 2013. Also, as a result of a strong first quarter performance, we
continue to expect operating leverage (excluding acquisition related costs) to
improve during 2014. Our subscription base increased to 2.26 million
subscriptions, adding 54,000 during the first quarter with average revenue per
unit (ARPU) increasing slightly over the fourth quarter of last year. We will
record approximately 30,000 Omnilink subscriptions in our next quarter's
cumulative tally. Equally as important, the APRU of this acquired base is over
$25 per unit per month and is consistent with our strategy of focusing on
high-value M2M solutions. We have increased our adjusted EBITDA growth
guidance to an expected range of 36% to 40% over full year 2013, anticipating
a contribution from our newly acquired operations."

Financial Metrics

                                           ThreeMonths Ended
                                            March 31
Non-GAAP Measures*                        2014            2013
                                                            
Adjusted EBITDA ($ in millions)           $2.8            $1.8
Adjusted EBITDA as a percent of total      13.4%             11.2%
revenue
Adjusted EBITDA per diluted share         $0.14           $0.10
Net new subscriptions (units)             54,000           148,000
Total subscriptions (units)               2,263,000        1,872,000
                                                            
* Refer to the section of this press release entitled "Non-GAAP (Adjusted)
Financial Measures" for a discussion of these non-GAAP items and a
reconciliation to the most comparable GAAP measure.
                                                            
GAAP Measures                                              
                                                            
Subscription and support revenues ($ in    $13.9           $11.9
millions)
Gross margin --- subscription and support  61.4%             56.2%
revenues
Income from continuing operations, net of  $1.1            $ --
income taxes($ in millions)
Diluted EPS from continuing operations    $0.06           $0.00

Additional Q1 Financial Information and Year-over-year comparisons to Q1 of
2013

Total GAAP operating expenses were $9.2 million compared to $6.9 million:

  *Sales and marketing expenses were $3.0 million compared to $1.9 million.
    The increase was primarily due to the addition of sales and marketing
    personnel to drive and to support growth.
  *General and administrative expenses were $3.6 million as compared to $2.9
    million. The increase includes higher non-cash compensation expense and
    merger costs related to Omnilink.
  *Engineering and development costs increased to $1.3 million from $1.0
    million to support new product and project initiatives.
  *Operating expenses include depreciation and amortization charges of $1.3
    million and $1.0 million.

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 4:30 p.m. Eastern Time start time. A live webcast and replay of the
call will also be available at 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 and will remain on the website for at least 30 days.
You can also listen to a replay of the call for the next 30 days by dialing
(855) 859-2056 or (404) 537-3406 if outside the U.S. and Canada and entering
conference ID 32118793.

About Numerex

Numerex Corp. (Nasdaq:NMRX) is a leading provider of interactive and on-demand
machine-to-machine (M2M) enterprise solutions enabling the Internet of Things
(IoT). 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: the
risks and uncertainties related to our ability to successfully integrate the
operations, products and employees of Omnilink; the effect of the merger on
relationships with customers, vendors and lenders; our inability 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's SEC reports identify additional factors that can affect
forward-looking statements.

© 2014 Numerex Corp. All rights reserved. Numerex, the Numerex logo and all
other marks contained herein are trademarks of Numerex Corp. and/or
Numerex-affiliated companies. All other marks contained herein are the
property of their respective owners.

                                                                    
                                                                    
NUMEREX CORP. AND SUBSIDIARIES
UNAUDITED CONSDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
                                                                    
                                          Three Months Ended  Change
                                           March 31,           Q1'14 v Q1'13
                                          2014      2013      $        %
Net sales:                                                           
Subscription and support revenues          $13,886 $11,907 $1,979 16.6%
Embedded devices and hardware              6,887    4,530    2,357   52.0%
Total net sales                            20,773   16,437   4,336   26.4%
Cost of sales, exclusive of a portion of   
depreciation and amortization shown below:
Subscription and support revenues          5,359    5,215    144     2.8%
Embedded devices and hardware              5,574    4,316    1,258   29.1%
Gross profit                               9,840    6,906    2,934   42.5%
Gross margin                               47.4%     42.0%             
Operating expenses:                                                  
Sales and marketing                        2,954    1,943    1,011   52.0%
General and administrative                 3,598    2,865    733     25.6%
Engineering and development                1,278    1,040    238     22.9%
Depreciation and amortization              1,348    1,013    335     33.1%
Operating income                           662      45       617     nm*
Interest expense                           54       92       (38)    -41.3%
Other income, net                          (1,133)  (10)     (1,123) nm*
Income (loss) from continuing operations   1,741    (37)     1,778   nm*
before income taxes
Income tax expense (benefit)               595      (65)     660     nm*
Income from continuing operations, net of  1,146    28       1,118   nm*
income taxes
Loss from discontinued operations, net of  (56)     (17)     (39)    nm*
income taxes
Net income                                 $1,090  $11     $1,079 nm*
                                                                    
Basic earnings per share:                                            
Income from continuing operations          $0.06   $0.00           
Loss from discontinued operations          (0.00)   (0.00)           
Net income                                 $0.06   $0.00           
                                                                    
Diluted earnings per share:                                          
Income from continuing operations          $0.06   $0.00           
Loss from discontinued operations          (0.00)   (0.00)           
Net income                                 $0.06   $0.00           
                                                                    
Weighted average shares outstanding used   
in computing earnings per share:
Basic                                      18,853   17,661           
Diluted                                    19,350   18,353           
                                                                    
* Not meaningful                                                     

                                                                
                                                                
NUMEREX CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                                
                                                      March 31,  December 31,
                                                       2014       2013
                                                                
ASSETS                                                           
CURRENT ASSETS                                                   
Cash and cash equivalents                              $25,386  $25,603
Accounts receivable, less allowance for doubtful       10,695    9,385
accounts of $865 and $674
Financing receivables, current                         1,303     1,223
Inventory, net of reserve for obsolescence of $1,240   8,627     8,315
and $1,110
Prepaid expenses and other current assets              1,982     1,833
Deferred tax assets, current                           2,742     2,742
Assets of discontinued operations                      745       840
TOTAL CURRENT ASSETS                                   51,480    49,941
                                                                
Financing receivables, less current portion            3,061     3,029
Property and equipment, net of accumulated             3,228     3,125
depreciation and amortization of $2,203 and $1,879
Software, net of accumulated amortization of $4,362    4,999     5,130
and $3,706
Other intangibles, net of accumulated amortization of  6,869     6,868
$13,574 and $13,189
Goodwill                                               26,941    26,941
Deferred tax assets, less current portion              3,510     3,958
Other assets                                           2,077     2,298
TOTAL ASSETS                                           $102,165 $101,290
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY                             
CURRENT LIABILITIES                                              
Accounts payable                                       $9,086   $9,953
Accrued expenses and other current liabilities         2,252     2,004
Deferred revenues                                      1,974     1,894
Current portion of long-term debt                      686       633
Obligations under capital leases                       326       306
Liabilities of discontinued operations                 197       207
TOTAL CURRENT LIABILITIES                              14,521    14,997
                                                                
Notes payable, less current portion                    317       475
Obligations under capital leases, less current portion 59        148
Other liabilities                                      1,574     1,693
TOTAL LIABILITIES                                      16,471    17,313
                                                                
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;
20,117 and 20,069 issued; 18,876 and 18,828            --        --
outstanding
Class B common stock, no par value; authorized 5,000;  --        --
none issued
Additional paid-in-capital                             96,408    95,777
Treasury stock, at cost, 1,241 shares                  (5,238)   (5,238)
Accumulated other comprehensive loss                   (28)      (24)
Accumulated deficit                                    (5,448)   (6,538)
TOTAL SHAREHOLDERS' EQUITY                             85,694    83,977
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             $102,165 $101,290

                        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 taxes. 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 taxes, plus
    depreciation and amortization, interest and other non-operating expenses
    and income tax expense. Any other non-operating income, net of income
    taxes is subtracted from income from continuing operations, net of income
    taxes.
  *Adjusted EBITDA is EBITDA less non-cash equity-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 equity-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 equity-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 equity-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.

Equity-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 income from
continuing operations, excluding the effect of equity-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
acquisition-related expenses, and temporarily higher carrier fees. We believe
that these are costs that we will not incur 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
    equity-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.

Adjusted EBITDA is also a component of our loan covenant calculations.
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

      TAXES, 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
                                                            March 31,
                                                           2014      2013
Income from continuing operations, net of income taxes      $1,146  $28
(GAAP)
Depreciation and amortization                               1,419    1,047
Interest expense and other non-operating (income) expense,  (1,079)  82
net
Income tax expense (benefit)                                595      (65)
EBITDA (non-GAAP)                                           2,081    1,092
Equity-based compensation expense                           555      322
Infrequent or unusual items                                 139      432
Adjusted EBITDA (non-GAAP)                                  $2,775  $1,846
                                                                    
Income from continuing operations, net of income taxes, per $0.06   $0.00
diluted share (GAAP)
EBITDA per diluted share (non-GAAP)                         0.11     0.06
Adjusted EBITDA per diluted share (non-GAAP)                0.14     0.10
                                                                    
Weighted average shares outstanding in computing diluted    19,350   18,353
earnings per share

Infrequent or unusual items include gain on sale of cost method investment and
acquisition-related expenses in 2014 and temporarily higher carrier fees and
acquisition-related expense in 2013.

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

Numerex Corp logo
 
Press spacebar to pause and continue. Press esc to stop.