EX-99.1 CHARTER 3 exhibit99.htm EXHIBIT 99.1 TO AMENDED 8KA FOR Q1 EARNINGS RELEASE Exhibit 99.1 to Amended 8KA for Q1 Earnings Release
Exhibit 99.1
 
Numerex Corp. Contact:
Alan Catherall
770 485-2527

Investor Relations Contact:
Brett Maas
646 536-7331

 
PRESS RELEASE

FOR IMMEDIATE RELEASE

NUMEREX REPORTS FIRST QUARTER 2007 FINANCIAL RESULTS

Pre-tax Earnings Increase 46% on a Net Revenue increase of 20%
 
ATLANTA, May 1, 2007 - Numerex Corp. (NASDAQ: NMRX), a leader in wireless machine-to-machine (M2M) data communications, today announced financial results for the first quarter of 2007 reporting earnings before income taxes of $741,000 compared to $506,000 for the comparable period in 2006. The Company began accruing for income tax expense in the current quarter based on its assessment of the probability of continued future earnings. Consequently, the Company’s tax provision was $314,000 in the current quarter versus $30,000 in the first quarter of 2006. As a result, net earnings reported for the first quarter 2007 were $427,000 in contrast to $477,000 reported for the comparable quarter in 2006.

Key financial results for the first quarter of 2007 and 2006 are as follows. For a reconciliation of our non-GAAP results to our GAAP results, please refer to the tables on the following pages.

 
Three Months Ended
 
 
March 31,
 
 
2007
2006
% Change
Net Revenues (millions)
$ 14.19
$ 11.84
 
20%
Non-GAAP EBITDA
$ 1.56
$ 1.25
25%
Earnings before tax (millions)
$ 0.74
$ 0.51
46%
Net Earnings (millions)
$ 0.43
$ 0.48
(10%)
Non-GAAP EPS
$ 0.05
$ 0.05
-
Reported EPS
$ 0.03
$ 0.04
(15%)
 
Net revenues in the first quarter of 2007 were $14.2 million compared to $11.8 million reported for the same quarter last year, representing 20% year over year growth. Wireless M2M revenues were $12.9 million compared to $10.4 million for the first quarter of 2006, an increase of over 24%. This growth was primarily attributable to record sales for wireless security products and a solid performance in wireless module sales. The wireless M2M product and services business comprised 91% of the Company’s total revenues for the quarter with the balance coming from the digital multimedia and networking business.

The company’s growth in revenues in the first quarter was lower than expected because of reduced sales for the Company’s mobile tracking solution. The decision was made in the first quarter to temporarily stop shipments of this product pending the resolution of activation and billing issues, which surfaced during the quarter. These issues have now been resolved and shipments of the product have resumed and are expected to accelerate over the course of the year.

Gross margins for the first quarter of 2007 were 37.7% compared to 35.5% for the comparable period in 2006, largely attributable to improved wireless M2M product and service and a favorable product mix.

Operating expenses were $4.45 million for the current quarter compared to $3.55 million during the first quarter of 2006. Operating expenses increased year over year primarily due to increased head count, promotional charges, and other sales and marketing expenses incurred in anticipation of increased demand for the Company’s wireless products and services. In addition, the Company will be required by December 31, 2007 to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and incurred approximately $80,000 in related costs during the first quarter in connection with preparation of such compliance. Finally, in accordance with Financial Accounting Standard No. 123 the Company recorded non-cash stock option compensation costs of $173,000 in the first quarter of 2007, an increase of $73,000 over the first quarter of 2006.

“We remain encouraged that the continued strength of our pipeline of business, and believe that, when coupled with our own internal sales and marketing initiatives we will yield sustainable growth and increased profitability,” said Stratton Nicolaides, Chairman and CEO of Numerex. “Operating margins improved over last year and, we are particularly pleased that the Company’s M2M business is consistently showing scalability and improved operating leverage. This performance was achieved despite a period of increased wireless sales and marketing costs.”

The adjusted Days Sales Outstanding was 67 at March 31, 2007 compared to 60 at December 31, 2006. In addition, inventory levels of the mobile tracking product increased by over $1.1 million during the first quarter, which was built to meet the anticipated demand. This increase contributed 70% of the total increase in inventory levels during the first quarter of 2007. While the temporary suspension of mobile tracking product sales hampered the collection of customer receivables and slowed the turnover of inventory during the first quarter, the Company believes it has adequate reserves. The Company’s current ratio was basically unchanged from December 31, 2006 and stood at approximately 3.2:1 at quarter’s end.

Mr. Nicolaides concluded, “We estimate second quarter 2007 revenues will fall within the range of $15.25 million to $16.0 million. We continue to project annual wireless M2M growth between 30% to 40% as initially estimated.”

Conference Call and Web Cast Information
Numerex will conduct a conference call on May 1 at 11:00 A.M., Eastern Daylight Time, accessible by calling (800) 418-7236 in the U.S. and Canada, or (973) 935-8757 for international. A live web cast of the call will also be available via Numerex web site at http://www.nmrx.com, under the Investor Relations section. The web cast may also be accessed at ViaVid's website http://viavid.net. A replay of the conference call will be available via Numerex Web site beginning two hours after the call.

About Numerex
Numerex Corp. (NASDAQ: NMRX) is a wireless network service provider and a leading enabler of fixed and mobile machine-to-machine (M2M) solutions and technology. A single-source for its M2M customers, Numerex delivers real-time wireless data communications for purposes of monitoring, tracking, measuring, and intelligent management of remote assets with solutions tailored to meet the needs of each application, customer, and industry. A few of the vertical markets indirectly served by the Company include alarm security, vehicle location and asset tracking, point of sale, vending, and utility management. Numerex offers its products and services primarily throughout the United States, Canada, and Mexico. The company is headquartered in Atlanta, Georgia. For additional information, visit http://www.nmrx.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: the failure to realize improvements on our digital multimedia and networking business; variations in quarterly operating results, delays in the development, introduction, integration and marketing of new wireless products and services; customer acceptance of products and 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.


 
-continued-

 
 
 


Numerex Corp.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
                
March 31,
                
     
2007
    
2006
    
Change
    
% Change
  
Net sales:
                       
Product
 
$
9,274
  
$
7,598
  
$
1,676
    
22
%
Service
   
4,911
   
4,248
   
663
   
16
%
Total net sales
   
14,185
   
11,846
   
2,339
   
20
%
                           
Cost of product sales (excluding depreciation)
   
7,609
   
6,162
   
1,446
   
23
%
Cost of services (excluding depreciation and amortization)
   
1,203
   
1,436
   
(233
)
  
(16
%)
Depreciation and amortization
   
21
   
44
   
(23
)
  
(52
%)
Gross Profit
   
5,353
   
4,204
   
1,149
   
27
%
     
37.7
%
  
35.5
%
            
Selling, general, and administrative expenses
   
3,613
   
2,798
   
815
   
29
%
Research and development expenses
   
288
   
298
   
(10
)
  
(3
%)
Bad Debt Expense
   
86
   
-
   
86
   
NA
  
Depreciation and amortization
   
469
   
451
   
18
   
4
%
Operating profit earnings
   
896
   
656
   
239
   
36
%
Interest income and (expense), net
   
(146
)
  
(150
)
  
4
   
(3
%)
Other income and (expense), net
   
(9
)
  
0
   
(9
)
  
NA
  
Earnings before taxes
   
741
   
506
   
234
   
46
%
Provision for income taxes
   
314
   
30
   
284
   
NA
  
Net earnings
 
$
427
  
$
477
    
(50
)
  
(10
%)
                           
Basic earnings per common share
 
$
0.03
  
$
0.04
              
Diluted earnings per common share
 
$
0.03
  
$
0.04
              
Number of shares used in per share calculation
                         
Basic
   
13,006
   
12,243
             
Diluted
   
13,608
   
12,858
             


-continued-

 
 
 


Supplemental Sales Information
(in thousands)
                     
 
  
Three Months Ended
March 31, 
      
         
Net Sales:
    
2007
    
2006
    
Change
  
Wireless Data Communications
                   
Product
  
$
8,913
  
$
7,292
  
$
1,622
  
Service
    
3,956
   
3,110
   
846
 
Sub-total
    
12,870
   
10,402
   
2,468
 
Digital Multimedia, Networking and Wireline Security
     
Product
    
361
   
306
   
54
 
Service
    
955
   
1,138
   
(183
)
Sub-total
    
1,316
   
1,444
   
(129
)
Total
                    
Product
   
9,274
   
7,598
   
1,676
 
Service
    
4,911
   
4,248
   
663
 
Total net sales
    
14,185
   
11,846
   
2,339
 


 
-continued-

 
 
 


Numerex Corp.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
       
 
Three Months Ended
    March 31, 2007 
Three Months Ended
March 31, 2006
 
      
 
    
GAAP
          
Non-GAAP
 
 
GAAP
 
 
 
 
 
Non-GAAP
 
 
 
 
Results
 
 
Adjustments
 
 
Results
    
Results
 
 
Adjustments
 
 
Results
  
Net sales:
                               
Product
 
$
9,274
      
$
9,274
  
$
7,598
        
$
7,598
  
Service
   
4,911
       
4,911
   
4,248
          
4,248
  
Total net sales
   
14,185
       
14,185
   
11,846
          
11,846
  
Cost of product sales (excluding depreciation)
   
7,609
       
7,609
   
6,162
          
6,,162
  
Cost of services (excluding depreciation and amortization)
   
1,203
       
1,203
   
1,436
          
1,436
  
Depreciation and amortization
   
21
   
(21
)
  
-
   
44
    
(44
)
  
-
  
Gross Profit
   
5,353
   
21
   
5,373
   
4,204
    
44
    
4,248
  
 
    
37.7
%
      
37.9
%
  
35.5
%
            
Selling, general, and administrative expenses
   
3,613
   
(173
)
  
3,440
   
2,798
    
(100
)
  
2,698
  
Research and development expenses
   
288
       
288
   
298
    
--
    
298
  
Bad debt expense
   
86
       
86
   
-
          
-
  
Earnings before income taxes, depreciation and amortization
   
1,365
   
194
   
1,559
   
1,108
    
144
    
1,252
  
Depreciation and amortization
   
469
   
21
   
490
   
451
    
44
    
495
  
Operating earnings
   
896
   
173
   
1,069
   
656
    
100
    
756
  
Interest expense, net
   
(146
)
      
(146
)
  
(150
)
  
-
    
(150
)
Other expense, net
   
(9
)
      
(9
)
  
-
    
-
    
-
  
Earnings before income taxes
   
741
   
173
   
914
   
506
    
100
    
606
  
Provision for income taxes
   
314
       
314
   
30
    
-
    
30
  
Net earnings
 
$
427
  
$
173
  
$
600
    
477
    
100
    
577
  
Basic earnings per common share
                               
Diluted earnings per common share
 
$
0.03
      
$
0.05
  
$
0.04
        
$
0.05
  
Number of shares used in per share calculation
 
$
0.03
      
$
0.04
  
$
0.04
        
$
0.04
  
Basic
                               
Diluted
   
13,006
       
13,006
   
12,243
          
12,243
  
 
    
13,608
       
13,608
   
12,858
          
12,858
  

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 basis Consolidated Statements of Operations exclude stock option expense and the reclassification of cost of sales depreciation and amortization.


 
-continued-

 
 
 


NUMEREX CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share information)
 
March 31,
December 31,
 
2007
2006
 
(unaudited)
 
ASSETS
 
 
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 10,642
$ 20,384
Short-term investments
8,054
-
Accounts receivable, less allowance for doubtful accounts of $753 at March 31, 2007 and $933 at December 31, 2006:
13,012
11,844
Inventory
4,311
2,755
Prepaid expenses and other current assets
2,348
1,677
Deferred tax asset - current
831
1,113
TOTAL CURRENT ASSETS
39,198
37,773
 
 
 
Property and Equipment, Net
1,229
1,287
Goodwill, Net
15,967
15,967
Other Intangibles, Net
6,605
6,734
Software, Net
2,041
1,815
Other Assets
694
747
Deferred tax asset - LT
2,070
2,070
TOTAL ASSETS
$ 67,803
$ 66,393
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
CURRENT LIABILITIES
 
 
Accounts payable
$ 8,437
$ 7,651
Other current liabilities
1,587
2,270
Note payable, current
1,853
1,139
Deferred revenues
1,001
715
Obligations under capital leases, current portion
81
96
TOTAL CURRENT LIABILITIES
12,958
11,871
 
 
 
LONG TERM LIABILITIES
 
 
Obligations under capital leases and other long term liabilities
329
339
Note Payable
12,121
12,763
TOTAL LONG TERM LIABILITIES
12,450
13,102
 
 
 
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 14,536,924 shares at March 31, 2007 and 14,445,234 shares at December 31, 2006
43,507
43,133
Additional paid-in-capital
2,660
2,486
Treasury stock, at cost, 1,184,900 shares on March 31, 2007 and December 31, 2006
(5,053)
(5,053)
Class B common stock - no par value; authorized 5,000,000; none issued
-
-
Accumulated other comprehensive income
3
2
Accumulated earnings
1,278
852
TOTAL SHAREHOLDERS' EQUITY
42,394
41,420
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$ 67,803
$ 66,393



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