Numerex Corp.
May 9, 2017

Numerex Reports First Quarter 2017 Financial Results

New Focused, Cost-Effective Business Model Results in Positive Impact

ATLANTA, Ga., May 09, 2017 (GLOBE NEWSWIRE) -- Numerex Corp (NASDAQ:NMRX), a leading provider of managed enterprise solutions enabling the Internet of Things (IoT), today announced financial results for the first quarter ended March 31, 2017.

"Numerex made strong progress in improving our business model in the first quarter of 2017 resulting in a sequential improvement in operating cash flow and Adjusted EBITDA.  Our more focused strategy resulted in significant advancement of product roadmap and development timelines in our key verticals, while, at the same time, reducing expenses by $4.6 million on an annualized basis versus the first quarter of 2016.  Additionally, we experienced stabilization in our subscriber base as customer churn decreased with the completion of the AT&T 2G sunset. Our sales pipeline continues to remain healthy and with new product releases planned this year, Numerex is poised for growth and margin expansion in the second half of 2017," commented Ken Gayron Interim CEO and CFO. 

Q1 of 2017 Comparisons to Q4 of 2016

Q1 of 2017 Comparisons to Q1 of 2016

Financial Metrics

  Three  Months Ended 
GAAP Measures  March 31,  December 31,  March 31, 
($ in millions, except per share data) 2017 
 2016 
 2016 
Net revenues$16.4  $17.6  $18.1 
Subscription and support revenues$13.5  $13.8  $15.0 
Recurring revenue - subscription and support     
revenues as a percentage of total revenue 82.2%  78.7%  83.0%
Gross margin -- subscription and support revenues 59.4%  58.5%  62.0%
Net loss$(4.0) $(11.2) $(2.3)
Basic and diluted loss per share$(0.21) $(0.57) $(0.12)
      
 Non-GAAP Measures*      
      
Adjusted EBITDA$0.5  $(0.0) $0.9 
Adjusted EBITDA as a percent of total revenue 3.3%  0.0%  4.8%
      
______________     
* 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.
      

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 start time. A live webcast of the call will also be available at http://investor.numerex.com/. The audio replay will be posted two hours after the end of the call under the Investor Relations section of the Company's website or by dialing (855) 859-2056 or (404) 537-3406 if outside the US and Canada and entering the conference ID 18026791. The replay will be available for the next 10 days.

About Numerex
Numerex Corp. (NASDAQ:NMRX) is a leading provider of managed enterprise solutions enabling the Internet of Things (IoT). The Company's solutions produce new revenue streams or create operating efficiencies for its customers. Numerex provides its technology and services through its integrated platforms, which are generally sold on a subscription basis. The Company offers a portfolio of managed end-to-end IoT solutions including smart devices, network connectivity and service applications capable of addressing the needs of a wide spectrum of vertical markets and industrial customers. The Company's mission is to empower enterprise operations with world-class, managed IoT solutions that are simple, innovative, scalable, and secure. 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 capture greater recurring subscription revenues; our ability to efficiently utilize cloud computing to expand our services; the risks that a substantial portion of revenues derived from contracts may be terminated at any time; the risks that our strategic suppliers and/ or wireless network operators materially change or disrupt the flow of products or services; variations in quarterly operating results; delays in the development, introduction, integration and marketing of new products and services; customer acceptance of services; economic conditions resulting in decreased demand for our products and services; the risk that our strategic alliances, partnerships and/or wireless network operators will not yield substantial revenues; changes in financial and capital markets and the inability to raise growth capital on favorable terms, if at all; 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; our ability to meet financial and operating covenants in or otherwise service our debt, and the extent and timing of technological changes.

© 2017 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 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
        
  Three Months Ended 
  March 31, December 31, March 31, 
  2017
 2016
 2016
 
Net revenues:       
Subscription and support revenues $13,470  $13,836  $14,984  
Embedded devices and hardware  2,915   3,741   3,066  
Total net revenues  16,385   17,577   18,050  
Cost of sales       
Subscription and support revenues  5,464   5,744   5,701  
Embedded devices and hardware  3,032   4,004   3,118  
Gross profit  7,889   7,829   9,231  
Operating expenses:       
Sales and marketing  3,142   3,873   2,945  
General and administrative  2,945   2,729   4,129  
Engineering and development  2,215   2,304   2,247  
Depreciation and amortization  1,523   1,549   1,658  
Impairment of goodwill and other intangible assets  -   7,833   -  
Restructuring charges  425   312   -  
Operating loss  (2,361)  (10,771)  (1,748) 
Interest expense  621   502   267  
Loss on extinguishment of debt  228   -   290  
Other expense (income), net  730   (32)  (43) 
Loss before income taxes  (3,940)  (11,241)  (2,262) 
Income tax expense (benefit)  84   (83)  64  
Net loss $(4,024) $(11,158) $(2,326) 
        
        
Basic and diluted loss per share $(0.21) $(0.57) $(0.12) 
Weighted average shares outstanding used       
in computing diluted loss per share  19,524   19,601   19,377  

 

 

NUMEREX CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
 March 31, December 31,
 2017
 2016
ASSETS   
CURRENT ASSETS   
Cash and cash equivalents$8,682  $9,285 
Restricted cash 221   221 
Accounts receivable, less allowance for doubtful accounts of $795 and $767 8,853   9,436 
Financing receivables, current 1,735   1,778 
Inventory, net of reserves 8,287   9,011 
Prepaid expenses and other current assets 1,370   1,421 
TOTAL CURRENT ASSETS 29,148   31,152 
    
Financing receivables, less current portion 1,941   2,227 
Property and equipment, net of accumulated depreciation and amortization   
of $9,984 and $9,225 5,836   6,022 
Software, net of accumulated amortization 6,017   6,530 
Other intangible assets, net of accumulated amortization 11,382   11,519 
Goodwill 33,554   33,554 
Other assets 243   474 
TOTAL ASSETS$88,121  $91,478 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
CURRENT LIABILITIES   
Accounts payable$16,401  $15,894 
Accrued expenses and other current liabilities 3,225   3,209 
Deferred revenues 1,666   1,882 
Current maturities of long-term debt, net of debt issuance costs 3,912   1,275 
Current portion of capital lease 306   291 
TOTAL CURRENT LIABILITIES 25,510   22,551 
    
Long-term debt, net of debt issuance costs, less current maturities 11,946   14,885 
Capital lease, less current portion 735   797 
Deferred tax liabilities, noncurrent 547   468 
Other liabilities 1,422   1,512 
TOTAL LIABILITIES 40,160   40,213 
    
SHAREHOLDERS' EQUITY   
Preferred stock, no par value; 3,000 authorized; none issued -   - 
Class A common stock, no par value; 30,000 authorized;   
20,992 and 20,935 issued; 19,532 and 19,608 outstanding -   - 
Class B common stock, no par value; 5,000 authorized; none issued -   - 
Additional paid-in capital 106,115   105,112 
Treasury stock, at cost, 1,459 and 1,327 shares (5,755)  (5,466)
Accumulated other comprehensive loss (104)  (110)
Accumulated deficit (52,295)  (48,271)
TOTAL SHAREHOLDERS' EQUITY 47,961   51,265 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$88,121  $91,478 



NUMEREX CORP. AND SUBSIDIARIES
NON-GAAP (ADJUSTED) FINANCIAL MEASURES

Earnings before interest, taxes, depreciation and amortization expenses (EBITDA) and Adjusted EBITDA, which are presented below, are non-GAAP measures and do not purport to be alternatives to operating income as a measure of operating performance. We believe EBITDA and Adjusted EBITDA 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:

We use EBITDA and Adjusted EBITDA:

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.

Adjusted EBITDA is calculated by excluding the effect of equity-based compensation and non-operational items from the calculation of EBITDA. Management believes that this measure provides additional relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management's evaluation of business performance.

We believe that excluding depreciation and amortization expenses 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 they are also based on our estimates of remaining useful lives.

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. 

Non-cash and other items include restructuring, recruiting fees, severance, costs related to an internal ERP systems integration upgrade, a network systems evaluation, acquisition related costs, and other costs, such as legal and accounting costs associated with debt refinancing, audit consent fees, rework and setup costs, and costs related to the 2G shutdown. We believe 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.

NUMEREX CORP. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS 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, December 31, March 31,
 2017
 2016
 2016
      
Net loss$(4,024) $(11,158) $(2,326)
Depreciation and amortization expense 1,973   1,960   1,965 
Impairment of goodwill and other assets -   7,833   - 
Interest expense and other non-operating expense, net 1,579   470   514 
Income tax expense (benefit) 84   (83)  64 
EBITDA (non-GAAP) (388)  (978)  217 
Equity-based compensation expense 231   522   621 
Non-cash and other items 693   423   20 
Adjusted EBITDA (non-GAAP)$536  $(33) $858 
      
Net loss per diluted share (GAAP)$(0.21) $(0.57) $(0.12)
      
Weighted average shares outstanding used in     
computing per share amounts: 19,524   19,601   19,377 


As noted above, non-cash and other items include restructuring, recruiting fees, severance, costs related to an internal ERP systems integration upgrade, a network systems evaluation, acquisition related costs, and other costs, such as legal and accounting costs associated with debt refinancing, audit consent fees, rework and setup costs, and costs related to the 2G shutdown. We believe 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.

Numerex Corp. Contact: 
Ken Gayron (770) 615-1410