Numerex Corp.
Mar 16, 2017

Numerex Reports Fourth Quarter and Full Year 2016 Financial Results

ATLANTA, March 16, 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 its fourth quarter and year ended December 31, 2016.

"As the new senior management team at Numerex, we moved rapidly in the fourth quarter of 2016 to execute a plan to create a more focused IoT company — delivering on both near-term profitability goals and investments in future growth drivers.  To achieve both objectives, we have and will continue to cut costs to make targeted investments in engineering and sales that will deliver-value added, differentiated products in key verticals.  A more focused, ROI-driven approach to serving the needs of our top customers should position Numerex for industry leading profitability and growth," commented Ken Gayron, Numerex's Interim Chief Executive Officer and Chief Financial Officer.   

Q4 of 2016 Comparisons to Q3 of 2016

Q4 of 2016 Comparisons to Q4 of 2015

Fiscal Year 2016 Comparison to Fiscal Year 2015

Financial Metrics

          
  Three  Months Ended   Year Ended 
 GAAP Measures  December 31,   September 30,   December 31,   December 31, 
   2016     2016     2015     2016     2015  
  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
 Subscription and support revenues ($ in millions) $  13.8  $  14.4  $  15.5  $  58.0  $  64.4 
 Recurring revenue - Subscription and support          
 revenues as a percentage of total revenue  78.7%  82.6%  82.5%  82.1%  72.0%
 Gross margin -- subscription and support revenues  58.5%  59.5%  63.3%  60.4%  60.5%
 Loss from operations, net of          
 income taxes  ($ in millions) $  (11.2) $  (2.5) $  (2.4) $  (24.3) $  (19.2)
 Diluted EPS $  (0.57) $  (0.13) $  (0.13) $  (1.25) $  (1.00)
          
 Non-GAAP Measures* (Unaudited)          
          
 Adjusted EBITDA ($ in millions) $  (0.1) $  0.9  $  2.0  $  2.3  $  9.3 
 Adjusted EBITDA as a percent of total revenue  -0.4%  4.9%  10.5%  3.2%  10.4%
 ______________          
 * 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.     
          

Delay in Filing

Numerex Corp. (the "Company") is unable to file its Annual Report on Form 10-K in a timely manner. The delay is principally due to the need to devote additional time and resources to renegotiating or refinancing the Company's outstanding senior indebtedness.  Since early February 2017, management had been in active negotiations to refinance the Company's senior indebtedness.  On March 14, 2017, despite its commitment, the potential lender informed management that it would not fund the loan. 

As of March 17, 2017, the Company will not be in compliance with certain covenants in its current loan agreement, as amended, with Crystal Financial, LLC or as of December 31, 2016, as those covenants currently exist, absent a waiver, amendment or refinancing of such indebtedness. The Company's management is in discussions with existing and potential financing sources to restructure its senior indebtedness, obtain alternative financing or an additional equity infusion or some combination of these measures.

Absent a waiver, amendment or refinancing of its senior indebtedness prior to filing the Form 10-K, the Company will be required to reclassify its long-term debt as a current liability as of December 31, 2016.

Quarterly Conference Call

Numerex will discuss its quarterly and annual 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 of the call will also be available at www.numerex.com under the Investor Relations section. The audio replay will be posted two hours after the end of the call on 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 8652 8844. 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
            
  Three Months Ended Year Ended 
  December 31,  September 30,   December 31,  December 31, 
   2016   2016   2015   2016   2015  
  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) 
Net revenues:           
Subscription and support revenues $  13,836  $  14,388  $  15,497  $  58,019  $  64,371  
Embedded devices and hardware    3,741     3,024     3,288     12,626     25,079  
Total net revenues    17,577     17,412     18,785     70,645     89,450  
Cost of sales, exclusive of a portion of            
depreciation and amortization shown below:           
Subscription and support revenues    5,744     5,828     5,682     22,986     25,410  
Embedded devices and hardware    3,977     3,082     3,148     13,004     22,981  
Inventory reserves    27     27     46     541     1,343  
Impairment of other asset    -     -     -     -     1,275  
Gross profit    7,829     8,475     9,909     34,114     38,441  
Operating expenses:           
Sales and marketing    3,873     3,229     3,310     13,318     12,446  
General and administrative    2,729     3,280     3,690     13,998     15,798  
Engineering and development    2,304     2,229     2,257     9,224     8,952  
Depreciation and amortization    1,549     1,658     1,703     6,540     7,116  
Impairment of goodwill and other intangible assets    7,833     -     1,462     12,005     2,712  
Restructuring charges    312     276     -     1,831     -  
 Operating loss     (10,771)    (2,197)    (2,513)    (22,802)    (8,583) 
 Interest expense     502     469     203     1,698     806  
 Loss on extinguishment of debt     -     -     -     290     -  
 Other income, net     (32)    (33)    (33)    (130)    (134) 
 Loss from operations before income taxes     (11,241)    (2,633)    (2,683)    (24,660)    (9,255) 
 Income tax expense     (83)    (87)    (257)    (340)    9,902  
 Net loss  $  (11,158) $  (2,546) $  (2,426) $  (24,320) $  (19,157) 
            
 Basic earnings per share:            
 Net loss  $  (0.57) $  (0.13) $  (0.13) $  (1.25) $  (1.00) 
            
 Diluted earnings per share:            
 Net loss  $  (0.57) $  (0.13) $  (0.13) $  (1.25) $  (1.00) 
            
 Weighted average shares outstanding used            
 in computing earnings per share:            
 Basic     19,601     19,542     19,305     19,493     19,117  
 Diluted     19,601     19,542     19,305     19,493     19,117  
            


NUMEREX CORP. AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS 
(In thousands) 
(Unaudited) 
 December 31, December 31, 
  2016   2015  
 (Unaudited) (Unaudited) 
ASSETS    
CURRENT ASSETS    
Cash and cash equivalents$  9,285  $  16,237  
Restricted cash   221     -   
Accounts receivable, less allowance for doubtful accounts of $767 and $618   9,436     9,237  
Financing receivables, current   1,778     1,780  
Inventory, net of reserve for obsolescence of $2,446 and $2,706   9,011     7,617  
Prepaid expenses and other current assets   1,421     1,887  
Deferred tax assets, current   -      603  
TOTAL CURRENT ASSETS   31,152     37,361  
     
Financing receivables, less current portion   2,227     2,330  
Property and equipment, net of accumulated depreciation     
and amortization of $9,225 and $6,632   6,022     4,795  
Software, net of accumulated amortization of $12,807 and $9,503   6,530     7,146  
Other intangible assets, net of accumulated amortization of $19,185 and $17,184   11,519     15,722  
Goodwill   33,554     43,424  
Deferred tax assets, less current portion   -      -   
Other assets   474     409  
TOTAL ASSETS$  91,478  $  111,187  
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
CURRENT LIABILITIES    
Accounts payable$  15,894  $  11,390  
Accrued expenses and other current liabilities   3,209     2,864  
Deferred revenues   1,882     1,942  
Current portion of long-term debt   1,275     3,600  
Obligations under capital lease   291     -   
TOTAL CURRENT LIABILITIES   22,551     19,796  
     
Long-term debt, less current portion   14,885     15,309  
Capital lease   797     -   
Deferred tax liabilities, noncurrent   468     1,595  
Other liabilities   1,512     1,891  
TOTAL LIABILITIES   40,213     38,591  
     
COMMITMENTS AND CONTINGENCIES    
     
SHAREHOLDERS' EQUITY    
Preferred stock, no par value; 3,000 authorized; none issued   -      -   
Class A common stock, no par value; 30,000 authorized;    
20,935 and 20,652 issued; 19,608 and 19,177 outstanding   -      -   
Class B common stock, no par value; 5,000 authorized; none issued   -      -   
Additional paid-in capital   105,112     102,108  
Treasury stock, at cost; 1,327 and 1,316 shares   (5,466)    (5,444) 
Accumulated other comprehensive loss   (110)    (117) 
Accumulated deficit   (48,271)    (23,951) 
TOTAL SHAREHOLDERS' EQUITY   51,265     72,596  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$  91,478  $  111,187  
     
* Absent a waiver, amendment or refinancing of its senior indebtedness prior to filing the Form 10-K, the Company will  
 be required to reclassify its long-term debt as a current liability as of December 31, 2016. 
  


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, 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:

We use EBITDA, Adjusted EBITDA and Adjusted EBITDA per diluted share:

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.

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 excludes non-cash and other items including reserve for inventory, restructuring, recruiting fees, costs related to an internal ERP systems integration upgrade, a network systems evaluation study and acquisition related costs. 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.

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 Year Ended
 December 31, September 30, December 31, December 31,
  2016   2016   2015   2016   2015 
 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
EBITDA and Adjusted EBITDA (non-GAAP) (Unaudited)         
Net Loss (GAAP)$  (11,158) $  (2,546) $  (2,426) $  (24,320) $  (19,157)
Depreciation and amortization expense   1,960     2,029     2,054     7,958     8,217 
Impairment of goodwill and other assets   7,833     -      1,462     12,005     3,987 
Interest expense and loss on extinguishment of debt, net   470     436     170     1,858     672 
Income tax (benefit) expense   (83)    (87)    (257)    (340)    9,902 
EBITDA (non-GAAP)   (978)    (168)    1,003     (2,840)    3,621 
Equity-based compensation expense   522     751     354     2,725     2,673 
Non-cash and other items   423     276     608     2,425     3,027 
Adjusted EBITDA (non-GAAP)$  (33) $  859  $  1,965  $  2,310  $  9,321 
          
Loss from operations, net of income          
taxes, per diluted share (GAAP)$  (0.57) $  (0.13) $  (0.13) $  (1.25) $  (1.00)
          
Weighted average shares outstanding used in          
computing diluted per share amounts   19,601     19,542     19,305     19,493     19,117 
       


Adjusted EBITDA excludes non-cash and other items including reserve for inventory, restructuring, recruiting fees, costs related to an internal ERP systems integration upgrade, a network systems evaluation study and acquisition related costs. 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.

Numerex Corp. Contact: 
Ken Gayron
770 615-1410