Numerex Reports Third Quarter 2010 Financial Results

Company Records Year over Year M2M Revenue Growth of 34% and M2M Subscription Growth of 31%

Reports Net Earnings of $657,000 and $1.8 Million in Adjusted EBITDA

Oct 28, 2010, 07:10 ET from Numerex Corp

ATLANTA, Oct. 28 /PRNewswire-FirstCall/ -- Numerex Corp (Nasdaq: NMRX), a leading provider of business services, technology, and products for the worldwide machine-to-machine (M2M) market, today announced financial results for its third quarter ended September 30, 2010.

"We are pleased with our significantly improved year-over-year comparative financial performance in both the third quarter and year-to-date," stated Stratton Nicolaides, chairperson and CEO of Numerex. "Our increased profitability comes at a time of our record investment in new M2M technology and business development, which is particularly encouraging."

Key metrics for the third quarter and year-to-date 2010 include:

Three Months Ended

Nine Months Ended

September 30

September 30

2010

2009

Increase

2010

2009

Increase

M2M Revenues ($ millions)

14.9

11.2

34%

42.0

35.6

18%

M2M Service Revenues ($ millions)

8.6

7.3

18%

24.7

21.5

15%

Gross Margin

44.6%

44.2%

-

43.9%

43.7%

-

Earnings/(loss) from Operations ($ millions)

0.8

(0.4)

-

1.2

(2.1)

-

Net earnings/(loss)($ millions)

0.7

(2.2)

-

1.1

(4.7)

-

Net EPS ($)

0.05

(0.15)

-

0.07

(0.33)

-

Non-GAAP Net Earnings before Non-Cash &

        exceptional Items ($ millions)

1.8

0.3

-

4.9

1.5

-

New subscriptions

75,000

44,000

70%

164,000

142,000

15%

Cumulative subscriptions

1,102,000

843,000

31%

1,102,000

843,000

31%

  • GAAP earnings from operations was $751,000 compared to a GAAP loss from operations of $367,000 in the third quarter of 2009. The Company improved its sequential performance by 94% from the second quarter of this year.
  • Non-GAAP net earnings before non-cash charges and certain litigation related legal fees was $1.8 million during the third quarter of 2010 compared to a loss of $1.0 million for the same period last year.  A reconciliation of this measure to GAAP results has been provided in the financial tables included in this press release.
  • Digital subscriptions increased to 1,102,000 at the end of the third quarter of 2010. This compares with 843,000 recorded at the end of the third quarter of 2009, reflecting a 31% growth rate.
  • A year-over-year growth rate of 18% in recurring M2M service revenues.  During the third quarter of 2010, M2M service revenues as a percent of total service revenues were 97%, as compared to the same percentage in the third quarter of 2009.
  • For the quarter ended September 30, 2010, the Company reported consolidated revenue of $15.4 million compared to $11.6 million in the third quarter of 2009, an increase of 32%. During this quarter, the Company reported service revenues of $8.9 million and hardware revenues of $6.5 million compared to $7.6 million in service revenues and $4.0 million in hardware revenues, respectively, during the same period last year.
  • Consolidated gross margin for the three months ended September 30, 2010 was 44.6% compared to 44.2% during the same period last year.

Mr. Nicolaides continued, "Our turn-key and innovative approach to enabling our clients' M2M solutions continues to gain traction in both the enterprise and government markets. Also, over the past several months, new product launches and the continuous enhancements in our service platforms have significantly bolstered our momentum and have expanded our capabilities globally."

Operational Highlights in Q3 include:

  • Launched the AccelaView™ application designed to meet the core needs of the insurance industry and other customers. This scalable and customizable telematics platform enables customers to build their own vehicle monitoring programs.
  • Identified as a project partner for the creation of an affordable broadband network across Colorado that will allow underserved schools, libraries, colleges and communities to have access to high-speed Internet.
  • Introduced Numerex WorldPass™, a suite of cellular-based network services expanding the Company's geographic reach to enable the management of M2M smart devices throughout the United States and in over 200 countries with a variety of flexible network plans and an easy-to-use single SIM (Subscriber Identity Module) interface.
  • Announced the formation of its M2M Business Solutions group that delivers Numerex DNA® (device, network, and application) and integrates these foundational elements of an M2M solution via a single source designed to break down the complexity barriers to solution development and deployment.  

Mr. Nicolaides added, "Our balance sheet improvement was again driven by the Company's consistent ability to generate positive cash flow from operations. We believe that our strategy of focusing on higher-value recurring service revenue growth, improved efficiencies in our business processes, and solid operating leverage will lead to yet again increased profitability in the fourth quarter."

Numerex ended the third quarter of 2010 with cash and cash equivalents of $9.6 million compared to $7.5 million at June 30, 2010.  The increase in cash and cash equivalents was primarily due to $3.1 million in cash flow generated by operations offset by $740,000 spent on capital expenditures and $262,000 on financing activities.

Quarterly Conference Call

Numerex will discuss its quarterly results via teleconference today at 9:00 a.m. Eastern Time. Please dial (866) 337-6663 or if outside the U.S., (904) 520-5771 to access the conference call at least five minutes prior to the 9:00 a.m. ET start time. A live webcast and replay of the call will also be available at http://www.numerex.com under the Investor Relations section.  An audio replay will be available via the Numerex web site beginning two hours after the call end.  

About Numerex

Numerex Corp (Nasdaq: NMRX) is a leading provider of business services, technology, and products used in the development and support of machine-to-machine (M2M) solutions for the enterprise and government markets worldwide. The Company offers Numerex DNA® that includes hardware and smart Devices, cellular and satellite Network services, and software Applications that are delivered through Numerex FAST™ (Foundation Application Software Technology). Customers typically subscribe to device management, network, and application services through hosted platforms. Business services enable the development of efficient, reliable, and secure solutions while simplifying and speeding up deployment through streamlined processes and comprehensive integration services. Numerex is ISO 27001 information security-certified. "Machines Trust Us®" represents the Company's focus on M2M data security, service reliability, and round-the-clock support of its customers' M2M solutions. For additional information, please visit www.numerex.com.

This press release contains, and other statements may contain, forward-looking statements with respect to Numerex future financial or business performance, conditions or strategies and other financial and business matters, including expectations regarding growth trends and activities. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intend," "estimate," "assume," "strategy," "plan," "outlook," "outcome," "continue," "remain," "trend," and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may," or similar expressions. Numerex cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. These forward-looking statements speak only as of the date of this press release, and Numerex assumes no duty to update forward-looking statements. Actual results could differ materially from those anticipated in these forward-looking statements and future results could differ materially from historical performance.

The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: our inability to reposition our platform to capture greater recurring service revenues; the risks that a substantial portion of revenues derived from government contracts may be terminated by the government at any time; variations in quarterly operating results; delays in the development, introduction, integration and marketing of new services; customer acceptance of services; economic conditions resulting in decreased demand for our products and services; the risk that our strategic alliances and partnerships 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; changes in interest rates; inflation; the introduction, withdrawal, success and timing of business initiatives and strategies; competitive conditions; the inability to realize revenue enhancements; disruption in key supplier relationships and/or related services; and extent and timing of technological changes. Numerex SEC reports identify additional factors that can affect forward-looking statement.

Numerex Corp.

Condensed Consolidated Statement of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

09/30/10

09/30/09

Change

% Change

09/30/10

09/30/09

Change

% Change

Net sales:

  Hardware

$   6,494

$    3,977

$   2,517

63%

$ 17,778

$  14,557

$    3,221

22%

  Service

8,911

7,572

1,339

18%

25,546

22,259

3,287

15%

Total net sales

15,405

11,549

3,856

33%

43,324

36,816

6,508

18%

Cost of hardware sales

5,113

3,449

1,664

48%

14,215

12,611

1,604

13%

Cost of services

3,426

2,995

431

14%

10,085

8,117

1,968

24%

Gross Profit

6,866

5,105

1,761

34%

19,024

16,088

2,936

18%

44.6%

44.2%

43.9%

43.7%

Sales and marketing expenses

1,691

1,404

287

20%

5,238

4,676

562

12%

General, administrative and legal expenses

2,673

2,503

170

7%

7,586

8,889

(1,303)

(15%)

Engineering and development expenses

888

584

304

52%

2,260

1,743

517

30%

Bad Debt Expense

53

102

(49)

(48%)

219

393

(174)

(44%)

Depreciation and amortization

810

879

(69)

(8%)

2,542

2,516

26

1%

Operating earnings (loss)

751

(367)

1,118

-

1,179

(2,129)

3,308

-

Interest expense

(44)

(1,781)

1,737

-

(62)

(2,471)

2,409

-

Other income

9

-

9

-

(31)

1

(32)

-

Earnings (loss) before tax

716

(2,148)

2,864

-

1,086

(4,599)

5,685

-

Provision (benefit) for income tax

59

31

28

90%

73

96

(23)

(24%)

Net earnings (loss)

$      657

$  (2,179)

$   2,836

-

$   1,013

$  (4,695)

$    5,708

-

Basic earnings (loss) per common share

$     0.04

$    (0.15)

$     0.07

$    (0.33)

Diluted earnings (loss) per common share

$     0.04

$    (0.15)

$     0.07

$    (0.33)

Number of shares used in per share calculation

  Basic

15,078

14,360

15,077

14,228

  Diluted

15,382

14,360

15,295

14,228

Numerex Corp.

Supplemental Sales Information

(in thousands)

Three Months Ended

Nine Months Ended

Sept 30,

Sept 30,

Net Sales:

2010

2009

change

% change

2010

2009

change

% change

M2M Services

Hardware

$          6,300

$         3,810

$      2,490

65.4%

$       17,360

$       14,154

$        3,206

22.7%

           Service

8,648

7,349

1,299

17.7%

24,686

21,474

3,212

15.0%

       Sub-total

14,948

11,159

3,789

34.0%

42,046

35,628

6,418

18.0%

       Other Services

Hardware

194

167

27

16.2%

418

403

16

4.0%

           Service

263

223

40

17.9%

860

785

74

9.4%

               Sub-total

457

390

67

17.2%

1,278

1,188

90

7.6%

Total

Hardware

6,494

3,977

2,517

63.3%

17,778

14,557

3,222

22.1%

           Service

8,911

7,572

1,339

17.7%

25,546

22,259

3,286

14.8%

            Total net sales

15,405

11,549

3,856

33.4%

43,324

36,816

6,508

17.7%

Reconciliation of Non-GAAP net earnings (Adjusted EBITDA)

The accompanying press release dated October 28, 2010 contains non-GAAP financial measures. The following table reconciles the non-GAAP financial measures in the press release to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP). These non-GAAP financials use net earnings before non-cash and exceptional items as an additional measure of our operating performance.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, GAAP financial measures, which should be considered as the primary financial metrics for evaluating our financial performance. Significantly, non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. Instead, they are based on subjective determinations by management designed to supplement our GAAP financial measures. They are subject to a number of important limitations and should be considered only in conjunction with our consolidated financial statements prepared in accordance with GAAP.  Accordingly, investors should exercise caution when evaluating our non-GAAP financial measures.

Despite these limitations, we believe our non-GAAP financial measures provide meaningful supplemental information about our operating results, primarily because they exclude non-cash and exceptional items that we do not believe are indicative of the ongoing operating performance of our business. Although these items should properly be considered in our GAAP financial measures, we believe they should be excluded when evaluating our current operating performance.

The following table reconciles the specific items excluded from GAAP in the calculation of non-GAAP net earnings for the periods indicated below:

Reconciliation of Non-GAAP Measures

to GAAP Measure

(in thousands)

Three Months Ended

Nine Month Ended

September 30,

September 30,

2010

2009

2010

2009

(unaudited)

(unaudited)

GAAP Net Earnings/(Loss)

$         657

$    (2,179)

$  1,013

$(4,695)

Non-cash compensation

263

228

751

774

Exceptional litigation expenses

83

50

613

1,637

Depreciation and amortization

810

879

2,542

2,516

Debt conversion inducement charge

-

1,286

-

1,286

Non-GAAP Net earnings before non-cash items

$       1,813

$         264

$   4,919

$   1,518

NUMEREX CORP.

Consolidated Balance Sheet

(In thousands)

Sept 30,

December 31,

2010

2009

(unaudited)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$                     9,647

$                    5,306

Accounts receivable, less allowance for doubtful accounts of $425

at September 30, 2010 and $548 at December 31, 2009:

7,328

6,341

Inventory

4,317

6,290

Prepaid expenses and other current assets

1,866

1,569

TOTAL CURRENT ASSETS

23,158

19,506

Property and equipment, net

1,521

1,603

Goodwill, net

23,787

23,787

Other intangibles, net

5,416

4,985

Software, net

2,758

2,747

Other assets - long term

411

119

TOTAL ASSETS

$                   57,051

$                   52,747

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$                     7,164

$                     5,888

Other current liabilities

2,360

2,555

Note payable

-

493

Deferred revenues

2,157

1,261

Obligations under capital leases

442

24

TOTAL CURRENT LIABILITIES

12,123

10,221

LONG TERM LIABILITIES

Obligations under capital leases and other long-term liabilities

795

335

Deferred income taxes

408

154

TOTAL LONG TERM LIABILITIES

1,203

489

COMMITMENTS AND CONTIGENCIES

SHAREHOLDERS' EQUITY

Preferred stock - no par value; authorized 3,000,000; none issued

-

-

Class A common stock - no par value, authorized 30,000,000, issued 16,604,854

shares at September 30, 2010 and 16,307,963 shares at December 31, 2009;

outstanding 15,080,270 shares at September 30, 2010 and 15,082,154 shares

at December 31, 2009

57,488

57,430

Class B common stock – no par value; authorized 5,000,000; none issued

-

-

Additional paid-in-capital

6,333

5,582

Treasury stock, at cost, 1,524,584 shares on September 30, 2010 and

1,225,809 shares on December 31, 2009

(5,355)

(5,213)

Accumulated other comprehensive earnings

8

-

Retained deficit

(14,749)

(15,762)

TOTAL SHAREHOLDERS' EQUITY

43,725

42,037

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$                   57,051

$                   52,747

Numerex Corp. Contact:

Alan Catherall

770 485-2527

Investor Relations Contact:

Seth Potter

646 277-1230

SOURCE Numerex Corp



RELATED LINKS

http://www.numerex.com