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8-K - NUMEREX CORP /PA/ | form8k-05092017_050501.htm |
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Numerex Corp. Contact:
Ken
Gayron (770)
615-1410
For Immediate Release
Numerex Reports First Quarter 2017 Financial Results
New Focused, Cost-Effective Business Model Results in Positive
Impact
ATLANTA, GA, May 9, 2017—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
●
Net revenues in Q1
of 2017 were $16.4 million compared to $17.6 million in Q4 of 2016
with the 7% sequential decline primarily due to a decrease in
hardware revenue.
●
Subscription and
Support revenues were $13.5 million in Q1 of 2017 compared to $13.8
million in Q4 of 2016.
●
Recurring Revenue
as a percentage of Total Revenue of 82.2% in Q1 of 2017 compared to
78.7% in Q4 of 2016.
●
Gross Margin of
59.4% on Subscription and Support Revenue in Q1 of 2017 compared to
58.5% in Q4 of 2016.
●
Net loss was $4.0
million in Q1 of 2017 compared to a net loss of $11.2 million in Q4
of 2016.
●
Adjusted EBITDA (a
non-GAAP measure) in Q1 of 2017 was $0.5 million compared to $(0.0)
million in Q4 of 2016.
Q1 of 2017 Comparisons to Q1 of 2016
●
Net revenues in Q1
of 2017 were $16.4 million compared to $18.1 million in Q1 of
2016.
●
Subscription and
Support revenues were $13.5 million in Q1 of 2017 compared to $15.0
million in Q1 of 2016.
●
Recurring Revenue
as a percentage of Total Revenue of 82.2% in Q1 of 2017 compared to
83.0% in Q1 of 2016.
●
Gross Margin of
59.4% on Subscription and Support Revenue in Q1 of 2017 compared to
62.0% in Q1 of 2016.
●
Net loss was $4.0
million in Q1 of 2017 compared to net loss of $2.3 million in Q1 of
2016.
●
Adjusted EBITDA (a
non-GAAP measure) in Q1 of 2017 was $0.5 million compared to $0.9
million in Q1 of 2016.
Financial Metrics
|
Three Months
Ended
|
||
GAAP Measures
|
March 31,
|
December 31,
|
March 31,
|
($ 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:
●
EBITDA is widely
used by investors to measure a company’s operating
performance without regard to items such as interest, income tax,
and depreciation and amortization expenses, which can vary
substantially from company-to-company depending upon accounting
methods and book value of assets, capital structure and the method
by which assets were acquired; and
●
Investors commonly
adjust EBITDA information to eliminate the effect of equity-based
compensation and other unusual or infrequently occurring items
which vary widely from company-to-company and impair
comparability.
We use
EBITDA and Adjusted EBITDA:
●
as a measure of
operating performance to assist in comparing performance from
period-to-period on a consistent basis
●
as a measure for
planning and forecasting overall expectations and for evaluating
actual results against such expectations; and
●
in communications
with the board of directors, analysts and investors concerning our
financial performance.
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.
###