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
CallNumerex 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 NumerexNumerex 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
SUBSIDIARIESNON-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
SUBSIDIARIESRECONCILIATION 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.
Numerex Corp. Contact:
Ken Gayron (770) 615-1410
Numerex Corp. - Class A (MM) (NASDAQ:NMRX)
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