Numerex Reports Second Quarter 2011 Financial Results

ATLANTA, July 28, 2011 /PRNewswire/ -- 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 second quarter ended June 30, 2011.

"Numerex continued with a solid performance in the second quarter, ending the first half of the year well positioned to benefit from the launch of a number of new product lines and the initiation of key client projects," stated Stratton Nicolaides, chairperson and CEO of Numerex. "Our transition to a service model over the past few quarters and our dedicated focus on client services and turnkey solutions has yielded favorable results.  We believe that the Company's services opportunity and sales funnels remain robust with a number of diversified M2M projects, specifically several broadband, medical device, and energy services companies."

Key metrics for the second quarter of 2011 include:

The Company's Financial Highlights include:

• Increased subscriptions by 23% to 1,266,000 at the end of the second quarter of 2011, compared to 1,027,000 recorded at the end of the second quarter of 2010.  During the quarter ended June 30, 2011, the Company added 42,000 net subscriptions, as compared to 50,000 net subscriptions added in the second quarter of 2010.
• Reported M2M revenues of $14.2 million in the second quarter of 2011, compared to $14.4 million in the second quarter of 2010.  During the quarter ended June 30, 2011, the Company reported M2M service revenues of $9.4 million and M2M hardware revenues of $4.7 million compared to $8.1 million in service revenues and $6.3 million in hardware revenues, respectively, during the same period in 2010.
• Consolidated gross margin for the three months ended June 30, 2011 was 43.8% compared to 43.0% during the same period in 2010.
• GAAP net earnings for three and six months ended June 30, 2011 were $340,000 and $570,000 respectively compared to $387,000 and $356,000 for the same periods in 2010.
• Numerex ended the second quarter of 2011 with cash and cash equivalents of $10.5 million compared to $4.1 million at the end of the first quarter of 2011.  The increase in cash and cash equivalents was primarily due to the drawdown of $6.0 million from our credit facility as well as positive cash flow from operations.

Mr. Nicolaides added, "Our focus on services has resulted in an increased demand for use of our M2M platforms. The Company has generated incremental service revenues of $1.3 million in the second quarter and $2.4 million for the six months when compared to the same periods last year. We have discontinued the sale of hardware that did not lead to a recurring subscription and service revenue, which totaled nearly $4 million in the first six months of 2010. As a result, despite the loss of margin from hardware and the costs associated with gearing up our managed services operations, we have generated GAAP earnings of four cents per share for the first six months of the year and have improved our overall gross margins. We believe that our operating leverage remains strong and we expect to drive an improvement in our operating margins as revenues increase."

The Company's Operational Highlights include:

• Announced it is a member of two gold Value Chain Award winning teams recognized during the recent Connected World Conference sponsored by Connected World magazine.  The company won awards in both the Hospitality and Supply Chain and Logistics categories.
• Opened its London office and announced a collaboration with Arkessa Limited, a UK-based M2M wireless service provider to foster Numerex's advance in the European M2M market.
• Announced that the Company's GSM communicators for commercial burglary and fire applications have received Underwriters Laboratory (UL) Listing.
• Continued to actively participate in M2M standards-related activity with major standardization organizations from around the world.

Mr. Nicolaides continued, "While we achieved strong growth in subscriptions from our M2M Business Solutions and Residential and Commercial Security businesses, the combination of a continuing lag in economically sensitive markets, such as sub-prime vehicle tracking and real estate, extended trials of our broadband customers' home automation and security products, and our focus on higher-value vertical markets has lead to a slower growth rate in our subscriptions.  As a result, we are lowering our annual subscription growth guidance to a range of 20% to 25%.  We are re-affirming our previously issued guidance that M2M service revenue will grow in the range of 18% to 23% for 2011."

Quarterly Conference Call

Numerex will discuss its quarterly results via teleconference today at 9:00 a.m. Eastern Time. Please dial (877) 551-8082 or if outside the U.S. and Canada, (904) 520-5770 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 machine-to-machine (M2M) business services, technology, and products used in the development and support of 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.

Reconciliation of Non-GAAP net  earnings

The following table reconciles a non-GAAP financial measure to the most directly comparable financial measure 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 items and litigation related fees" 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 items and litigation related expenses 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 net earnings in the calculation of non-GAAP  net earnings for the periods indicated below:  

SOURCE Numerex Corp