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Numerex Reports Second Quarter 2011 Financial Results

Numerex Reports Second Quarter 2011 Financial Results

Company Posts 23% Subscription Growth, GAAP Profitable, Reaffirms Service Guidance

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:

Three Months Ended

June 30

Six Months Ended

June 30

2011 2010 2011 2010
M2M Service Revenues ($ millions) 9.4 8.1 18.4 16.0
M2M Hardware Revenues ($ millions) 4.7 6.3 9.2 11.1
Gross Margin 43.8% 43.0% 44.0% 43.5%
GAAP Net Earnings ($ thousands) 340 387 570 356
Earnings per share ($) 0.02 0.03 0.04 0.02
New subscriptions 42,000 50,000 95,000 90,000
Cumulative subscriptions 1,266,000 1,027,000 1,266,000 1,027,000

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.

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.

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