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PRESS RELEASES
ATLANTA, May 6 /PRNewswire-FirstCall/ -- Numerex Corp. (Nasdaq: NMRX), a
leading provider of full-service, highly secure machine-to-machine (M2M)
network services and solutions, today announced financial results for the
first quarter of 2008 reporting a net loss of $218,000, or $0.02 per basic and
diluted share. This compares to net earnings of $427,000 or $0.03 per basic
and diluted share for the comparable period in 2007. Net earnings for the
first quarter of 2008 excluding non-cash stock based compensation ("non-GAAP"
earnings) was $75,000 compared to $600,000 for the same quarter in 2007 using
the equivalent non-GAAP earnings measurement. Basic and diluted earnings per
share using non-GAAP earnings would have been $0.01 for the first quarter of
2008. All non-GAAP information is reconciled in the Non-GAAP Condensed
Consolidated Statement of Operations table attached.
Net revenues in the first quarter of 2008 were $20.5 million compared to
$14.2 million reported for the same quarter last year, representing 44% year-
over-year growth. This strong revenue performance was attributable to the
Company's core M2M business, which generated $19.6 million compared to $12.9
million for the first quarter of 2007, representing an increase of 52%. The
Company's wireless security division generated better than expected results
driven primarily by the continued robust activity surrounding a major
transition from analog to digital technology. The M2M Networks and
Technology Group also generated better than expected network connections for
the quarter, a direct result of increased demand for its network services and
radio modules. Wireless M2M comprised over 95% of the Company's total revenues
for the quarter with the balance of the Company's total revenues derived from
its Digital Multimedia and Networking Group.
Key financial results for the first quarter of 2008 and 2007 are as
follows:
Three Months Ended
March 31,
2008 2007
Revenues (millions) $20.5 $14.2
Non-GAAP earnings (millions) $0.1 $0.6
Non-GAAP EPS $0.01 $0.05
Net earnings (loss) (millions) $(0.22) $0.43
Net EPS $(0.02) $0.03
"Our M2M business continues to experience strong organic growth across the
board," said Stratton Nicolaides, Numerex chairperson and CEO. "We are
particularly pleased with the performance of our Network and Technology Group
which, year-over-year, generated 55% growth in network revenue and 63% growth
in connections. We view these two metrics as the cornerstone of our business
model and our performance during the quarter exceeded expectations. We faced
two noteworthy challenges during the quarter which were the continued analog
to digital transition, which went better than expected, and our satellite
division's adapting its solutions to the enterprise markets. What is
particularly impressive is that less than two years ago, we only had a handful
of digital network connections with the overwhelming bulk of our wireless M2M
service revenues generated by customers who used our analog networks. Today,
we have now achieved a complete reversal while doubling our connection base to
over 500,000 digital connections. We expect the growth trends in network
connections and related network services will continue throughout the year."
While the Company's organic M2M business exhibited strong results, the
loss for the first quarter of 2008 is primarily attributable to the recently
acquired satellite solutions business, which recorded a pre-tax loss of over
$750,000. Although existing opportunities in the government and emergency
services sectors have improved, transitioning the satellite solutions business
to enterprise markets has taken longer than expected. The Company is in the
process of analyzing a re-alignment of products, markets and distribution
channels, and evaluating the division's management in order to improve
execution to bring performance back into line with expectations. As a result
of these anticipated actions and the recognition of deferred revenue in later
quarters of the year, the first quarter 2008 satellite solutions loss is not
expected to be indicative of the results for the full year.
Gross margins for the first quarter of 2008 were 31.6% percent compared to
37.9% for the comparable period in 2007 and 35.1% for the fourth quarter of
2007. The year-over-year decline in gross margins is due to the adoption of a
revised pricing model in the wireless security unit to secure network
connections and long term recurring revenues at the expense of short term
hardware margins. As a result, hardware margins declined to less than 11% in
the first quarter of 2008 from 18% in the same quarter last year. The
sequential quarterly decline in gross margins results from the expected
proportional increase in hardware revenues, which has a lower overall gross
margin as a percentage of total revenues.
Operating expenses were $6.4 million for the current quarter compared to
$4.5 million during the first quarter of 2007 and $6.2 million for the fourth
quarter of 2007. Operating expenses increased year-over-year primarily due to
both the acquisition of the satellite business as well as increases in head
count and marketing costs. The satellite M2M unit operating expenses were $1.2
million the first quarter of 2008, which include legal fees associated with an
action filed by the division's former manager, more fully described in the
Company's SEC filings. Organic operating expenses increased by $651,000 when
comparing the first quarter of 2008 with the same quarter last year. Six of
the seven net new hires during this quarter were sales or marketing employees
and part of the increase reflects higher salary and commission payments. In
addition, the Company finished a complete re-branding and promotional exercise
in the first quarter of 2008 resulting in additional marketing expenses.
Finally, in accordance with Financial Accounting Standard No. 123, the Company
recorded non-cash stock option compensation costs of $293, 000 in the first
quarter of 2008 compared to $173,000 in the same quarter in 2007.
Excluding the satellite M2M unit, operating expenses for the first quarter
of 2008 were almost $200,000 lower than the fourth quarter of 2007. These
savings primarily resulted from lower Sarbanes-Oxley and tax compliance costs
partially offset by higher marketing expenses. Satellite M2M unit operating
expenses increased $459,000 compared to the prior sequential quarter mainly
driven by higher than expected legal expenses.
The Company's balance sheet remains strong with $6.8 million in cash and
$17.9 million in working capital. The current ratio as of March 31, 2008 was
1.9 to 1. Shareholder's equity increased to $48.7 million compared to $46.9 as
of December 31, 2007.
Mr. Nicolaides concluded, "We will continue to trade off hardware margin
in our quest to increase our network connections and related recurring service
revenue. Currently, in spite of a difficult economy, we see a strong pipeline
of business that we expect will translate into continued future growth. As a
result, we continue to support our initial wireless M2M revenue growth
guidance of 30 to 40 percent for the full year."
Conference Call and Web cast Information
Numerex will conduct a conference call on May 6th at 11:00 A.M., Eastern
Daylight Time, accessible by calling (866) 548-2699 in the U.S. and Canada, or
(904) 596-2360 for international. A live web cast of the call will also be
available via Numerex web site at http://www.numerex.com, under the Investor
Relations section. A replay of the conference call will be available on
Numerex web site beginning two hours after the call.
About Numerex
Numerex Corp. (NASDAQ: NMRX) offers the broadest choice of secure
machine-to-machine (M2M) network services and solutions. Numerex delivers a
depth of expertise and excellence through its M2M service platforms - Networx,
Techworx, and Flexworx - that leading companies choose to power their M2M
solutions. Numerex is the first M2M Company in North American to carry ISO/IEC
27001:2005 certification - ISO's highest information security benchmark to
ensure data integrity and security. The Company offers its M2M products and
services through a variety brands including Uplink and Orbit One. Numerex is
headquartered in Atlanta, Georgia. For additional information, visit
http://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 in the
wireless data business. 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, difficulties associated with integrating Orbit One's business, the
risks that a substantial portion of Orbit One's revenues are derived from
government contracts that may be terminated by the government at any time,
variations in quarterly operating results, delays in the development,
introduction, integration and marketing of new wireless services; customer
acceptance of services; economic conditions; changes in financial and capital
markets; the inability to attain revenue and earnings growth in our wireless
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 SEC reports identify
additional factors that can affect forward-looking statements.
Numerex Corp. Contact:
Alan Catherall
770 485-2527
Investor Relations Contact:
Brett Maas
646 536-7331
Numerex Corp.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2008 2007 Change % Change
Net sales:
Hardware $13,624 $9,274 $4,350 47%
Service 6,832 4,911 1,921 39%
Total net sales 20,456 14,185 6,271 44%
Cost of hardware sales 12,162 7,609 4,553 60%
Cost of services 1,839 1,204 615 50%
Gross Profit 6,455 5,372 1,103 21%
31.6% 37.9%
Selling, general, and
administrative expenses 5,015 3,613 1,402 39%
Research and development expenses 530 288 242 84%
Bad Debt Expense 138 86 52 60%
Depreciation and amortization 751 489 282 60%
Operating earnings 21 896 (875) -98%
Interest expense (403) (146) (257) nm
Other income (2) (9) 7 nm
Earnings (loss) before tax (384) 741 (1,125) nm
Provision (benefit) for income tax (166) 314 (480) nm
Net earnings (loss) $(218) $427 $(645) -151%
Basic earnings per common share $(0.02) $0.03
Diluted earnings per common share $(0.02) $0.03
Number of shares used in per share
calculation
Basic 13,725 13,006
Diluted 13,725 13,608
Numerex Corp.
Supplemental Sales Information
(in thousands)
(Unaudited)
Three Months Ended
March 31,
Net Sales: 2008 2007 Change
Wireless Data Communications
Hardware $13,421 $8,913 $4,508
Service 6,133 3,956 2,177
Subtotal 19,554 12,869 6,685
Digital Multimedia, Networking and
Wireline Security
Hardware 202 361 (159)
Service 700 955 (255)
Subtotal 902 1,316 (414)
Total
Hardware 13,623 9,274 4,349
Service 6,833 4,911 1,921
Total net sales 20,456 14,185 6,271
Numerex Corp.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
March 31, 2008 March 31, 2007
GAAP Adjust- Non-GAAP GAAP Adjust- Non-GAAP
Results ments Results Results ments Results
Net sales:
Hardware $13,624 $13,624 $9,274 $9,274
Service 6,832 6,832 4,911 4,911
Total net sales 20,456 20,456 14,185 14,185
Cost of hardware
sales 12,162 12,162 7,609 7,609
Cost of services 1,839 1,839 1,204 1,203
Gross Profit 6,455 - 6,455 5,372 - 5,373
31.6% 31.6% 37.9% 37.9%
Selling, general, and
administrative
expenses 5,015 (293) 4,722 3,613 (173) 3,440
Research and
development expenses 530 530 288 288
Bad debt expense 138 138 86 86
Earnings before
interest,
depreciation and
amortization 772 293 1,065 1,385 173 1,559
Depreciation and
amortization 751 751 489 490
Operating earnings 21 293 314 896 173 1,069
Interest expense (403) (403) (146) (146)
Other income (2) (2) (9) (9)
Earnings (loss)
before income tax (384) 293 (91) 741 173 914
Provision (benefit)
for income tax (166) (166) 314 314
Net earnings (loss) $(218) $293 $75 $427 $173 $600
Basic earnings (loss)
per common share $(0.02) $0.01 $0.03 $0.05
Diluted earnings
(loss) per common
share $(0.02) $0.01 $0.03 $0.04
Number of shares used
in per share
calculation
Basic 13,725 13,725 13,006 13,006
Diluted 13,725 13,725 13,608 13,608
(a) These Unaudited non-GAAP Consolidated Statements of Operations are for
informational purposes only and are not presented in accordance with
GAAP. The adjustments necessary to provide a direct reconciliation of
the non-GAAP to the GAAP Statement of Operations exclude stock option
expense.
NUMEREX CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share information)
March 31, December 31,
2008 2007
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $6,788 $7,425
Accounts receivable, less allowance for doubtful
accounts of $1,239 at March 31, 2008 and $1,282
at December 31, 2007: 17,158 16,396
Inventory 10,406 10,059
Prepaid expenses and other current assets 2,591 1,885
Deferred tax asset - current 770 770
TOTAL CURRENT ASSETS 37,713 36,535
Property and Equipment, Net 2,007 2,003
Goodwill, Net 26,065 22,603
Other Intangibles, Net 6,733 6,940
Software, Net 3,435 3,486
Other Assets - long term 465 526
Deferred tax asset - long term 2,162 2,005
TOTAL ASSETS $78,580 $74,098
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $11,763 $10,299
Other current liabilities 2,071 2,312
Note payable, current 2,568 2,568
Deferred revenues 3,390 1,328
Obligations under capital leases, current portion 45 44
TOTAL CURRENT LIABILITIES 19,837 16,550
LONG TERM LIABILITIES
Obligations under capital leases and other long
term liabilities 464 486
Note Payable 9,554 10,197
TOTAL LONG TERM LIABILITIES 10,018 10,683
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 14,917,305 shares at March 31,
2008 and 14,706,101 shares at December 31, 2007 49,229 47,455
Additional paid-in-capital 3,721 3,427
Treasury stock, at cost, 1,184,900 shares on
March 31, 2008 and December 31, 2007 (5,053) (5,053)
Class B common stock - no par value; authorized
5,000,000; none issued - -
Accumulated other comprehensive income (loss) 4 (6)
Accumulated earnings 824 1,042
TOTAL SHAREHOLDERS' EQUITY 48,725 46,865
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $78,580 $74,098
SOURCE Numerex Corp.
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