Numerex Reports Third Quarter 2009 Financial Results

Reaffirms 30%-40% Subscription Growth Guidance

• Press Release
• Source: Numerex Corp.
• On 7:10 am EST, Thursday November 5, 2009

ATLANTA, Nov. 5 /PRNewswire-FirstCall/ -- Numerex Corp (Nasdaq: NMRX - News), a leading single source provider of secure machine-to-machine (M2M) products and services, today announced financial results for its third quarter ended September 30, 2009.

"Our strategy of streamlining the M2M deployment process for our customers is gaining traction evidenced by the strong growth in subscriptions and recurring service revenues," said Stratton Nicolaides, chairman and chief executive officer. As a result of recent customer wins, forged carrier alliances, and the positive trends in our business, we provide the following fourth quarter and full year outlook:

• We are re-affirming our guidance of achieving between 30% and 40% growth in our year-over-year digital subscription base, which translates to adding at least 69,000 subscriptions during the fourth quarter of 2009.

• We anticipate total revenue for the fourth quarter of 2009 will range from $13.0 million to $13.5 million which includes service revenues of $8.2 million to $8.5 million.

• We expect to achieve positive net income during the fourth quarter of 2009 excluding any unexpected extraordinary or non-recurring items.

Key financial metrics for the third quarter of 2009 include:

• Subscriptions (recurring M2M network and application service connections) to our network and application platforms continue to increase at a robust pace with total subscriptions, excluding analog, reaching 843,000 at the end of the third quarter. This compares with 652,000 recorded at the end of the third quarter last year, reflecting a 29% growth rate. We added 44,000 net incremental subscriptions during the quarter.

• Total consolidated revenues during the third quarter of 2009 were $11.6 million compared to $19.0 million during the same period last year. The decrease was due to lower hardware revenues as the Company continues to de-emphasize hardware only sales. Numerex's total consolidated service revenues increased to $7.6 million in the third quarter of 2009 from $7.3 million in the same period last year.

• Gross margin during the third quarter of 2009 was 44.2% compared to 35.2% during the same period last year. The improvement was primarily due to the growth of higher margin service revenues.

• During the third quarter of 2009, adjusted EBITDA, excluding stock-based compensation expense and litigation related legal fees, was $0.8 million compared to $1.9 million during the same period last year. The decrease was primarily due to the decline in lower margin hardware revenues. A reconciliation of GAAP to non-GAAP results has been provided in the financial tables included in the press release.

• Numerex ended the quarter with $5.9 million in cash equivalents and $3.9 million in debt. Subsequent to the end of the quarter, the Company has retired all but $500,000 of its remaining structured debt by paying $1.5 million in cash and converting $2.047 million into 440,350 shares of Class A Common Stock. As a result, the Company's net cash position and debt to equity ratio have improved.

Specific accomplishments since our last results press release in early August this year include:

• AT&T agreement extension to provide turnkey services for M2M enterprise markets. The expanded agreement gives Numerex the possibility to offer its M2M solutions to AT&T's business customers as the carrier looks to drive its wireless capabilities into a wide variety of devices beyond traditional handsets for businesses,

• Program expansion with the Federal Emergency Management Agency (FEMA) in partnership with QinetiQ, one of the world's leading defense and security technology companies; which includes the following three revenue components: a technology refresh which replaces all of the existing devices in the field with new hardware; a managed service component which will add to monthly recurring revenue; and a messaging component,

• Wholesale data agreement with Sprint will allow Numerex to offer additional CDMA-based network capabilities to its customer base. The agreement will build on Sprint's recent formation of the Emerging Solutions business unit with a singular focus on accelerating the delivery of M2M and mobile computing solutions to businesses and consumers.

For the quarter ended September 30, 2009, Numerex reported consolidated revenue of $11.6 million compared to $19.0 million in the third quarter of 2008. During the quarter, the Company reported service revenues of $7.6 million and hardware revenues of $4.0 million compared to $7.3 million in service revenues and $11.6 million in hardware revenues, respectively, during the same period last year. The year-over-year decrease in hardware revenues was due primarily to the completion of the analog to digital transition and strategy to de-emphasize hardware only sales.

Gross margin for the three months ended September 30, 2009 was 44.2% compared to 35.2% during the same period last year. The continuing increase in wireless service revenues drives an overall margin improvement since service revenues have a significantly higher gross margin than those achieved through the sale of hardware.

Total operating expenses were $5.5 million during the quarter ended September 30, 2009 compared to $6.2 million during the third quarter of 2008. Excluding litigation related legal fees and non-cash stock option compensation charges, selling, general and administrative expenses were 11% lower during the quarter compared to the same period last year, reflecting reductions in administrative headcount as well as related costs.

GAAP loss from operations and pre-tax net loss were $367,000 and $862,000, respectively, which included $290,000 as a result of the early extinguishment of debt compared to a GAAP income from operations of $528,000 and a pre-tax net income of $202,000 in the third quarter of 2008. GAAP pre-tax basic/diluted loss per share was ($0.06) for the quarter ended September 30, 2009, compared with earnings per share of $0.01 in the same period last year.

For the quarter ended September 30, 2009, adjusted EBITDA, which excludes stock-based compensation expense and legal fees associated with litigation, was $0.8 million compared to $1.9 million in the same period last year. Non-GAAP basic/diluted loss per share was ($0.02) for the quarter ended September 30, 2009 compared to net income per share of $0.05 in the same period last year. A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release.

Numerex ended the third quarter of 2009 with cash and equivalents balance of $5.9 million compared to $10.0 million in the second quarter of 2009. The decrease in the cash balance was due primarily to debt repayment and an increase in inventory during the quarter. Days sales outstanding (DSO) improved to 36 days from 40 days during the third quarter of 2009.

Mr. Nicolaides concluded, "The execution of our strategy is on track. We are in a sound financial and technical position to take advantage of the growing and diverse M2M market needs. We have built a robust sales pipeline, which we anticipate will lead to increased subscriptions and subsequent growth in recurring service revenues."

Quarterly Conference Call

Numerex will discuss its quarterly results via teleconference today at 9:00 a.m. Eastern Time. Please dial (866) 792-1873 or if outside the U.S., (904) 520-5760, to access the conference call at least five minutes prior to the 9:00 a.m. ET start time. A live webcast and replay of the call will also be available at http://www.numerex.com under the Investor Relations section. An audio replay will be available via the Numerex web site beginning two hours after the call end.

About Numerex

Numerex Corp. (NASDAQ: NMRX - News) is the single source machine-to-machine (M2M) product and service provider to some of the world's largest organizations delivering the foundational components of device, network, and application, used by its customers in the development of their M2M solutions. Customers typically subscribe to Numerex network and application services that are delivered through its hosted platforms. The Company's offerings and expertise enable its customers to efficiently build reliable and secure solutions that are used to monitor and manage assets remotely whenever and wherever needed, while simplifying and speeding up development and deployment. Numerex DNA(TM) offerings include hardware Devices, Network services, and software Applications that are delivered through its Numerex FAST(TM) (Foundation Application Software Technology) platform. Numerex is the first M2M service provider in North America to carry the ISO 27001 information security certification. "Machines Trust Us(TM)" 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.

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; 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 resulting in decreased demand for our products and services; the risk that our strategic alliances and partnerships will not yield substantial revenues; 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:
    Seth Potter
    646 277-1230

    Condensed Consolidated Statement of Operations
    (In thousands, except per share data)
    (Unaudited)

                                     Three Months Ended
                                        September 30,              %
                                        2009     2008    Change  Change
    Net sales:
       Hardware                       $3,977  $11,632   $(7,655)    -66%
       Service                         7,572    7,345       227       3%
    Total net sales                   11,549   18,977    (7,428)    -39%
    Cost of hardware sales             3,449    9,663    (6,214)    -64%
    Cost of services                   2,995    2,634       361      14%
    Gross Profit                       5,105    6,680    (1,575)    -24%
    Selling, general, and
     administrative expenses           3,907    4,697      (790)    -17%
    Research and development
     expenses                            584      473       111      23%
    Bad Debt Expense                     102      209      (107)    -51%
    Depreciation and
     amortization                        879      773       106      14%
    Operating earnings
     (loss)                             (367)     528      (895)   -170%
    Interest expense                    (495)    (331)     (164)     50%
    Other income                           -        5        (5)   -100%
    Earnings (loss) before tax          (862)     202    (1,064)   -527%
    Provision (benefit) for
     income tax                           31      125       (94)    -75%
    Net earnings (loss)                $(893)     $77     $(970)  -1260%

    Basic earnings (loss)
     per common share                 $(0.06)   $0.01
    Diluted earnings (loss)
     per common share                 $(0.06)   $0.01
    Number of shares used in per
     share calculation
       Basic                          14,360   13,742
       Diluted                        14,360   13,986



                                     Nine Months Ended
                                       September 30,                   %
                                      2009       2008     Change     Change
                                     --------------------------------------
    Net sales:
       Hardware                      $14,557  $35,745   $(21,188)    -59%
       Service                        22,259   21,112      1,147       5%
    Total net sales                   36,816   56,857    (20,041)    -35%
    Cost of hardware sales            12,611   30,838    (18,227)    -59%
    Cost of services                   8,117    6,755      1,362      20%
    Gross Profit                      16,088   19,264     (3,176)    -16%
    Selling, general, and
     administrative expenses          13,565   14,672     (1,107)     -8%
    Research and development
     expenses                          1,743    1,488        255      17%
    Bad Debt Expense                     393      420        (27)     -6%
    Depreciation and
     amortization                      2,516    2,289        227      10%
    Operating earnings (loss)         (2,129)     395     (2,524)   -639%
    Interest expense                  (1,184)  (1,141)       (43)      4%
    Other income                           1        2         (1)    -50%
    Earnings (loss) before tax        (3,312)    (744)    (2,568)    345%
    Provision (benefit) for
     income tax                           96     (421)       517    -123%
    Net earnings (loss)              $(3,408)   $(323)   $(3,085)    955%

    Basic earnings (loss)
      per common share                $(0.24)  $(0.02)
    Diluted earnings (loss)
     per common share                 $(0.24)  $(0.02)
    Number of shares used in per
     share calculation
       Basic                          14,228   13,735
       Diluted                        14,228   13,735



                                   Numerex Corp.
                        Supplemental Sales Information
                                  (in thousands)

                         Three Months Ended            Nine Months Ended
                           September 30,                 September 30,
    Net Sales:        2009      2008   Change       2009      2008    Change
    Wireless Data
     Communications
      Hardware      $3,793   $10,235  $(6,442)   $14,075   $33,098  $(19,023)
      Service        7,002     6,486      516     20,144    18,831     1,313
        Sub-total   10,795    16,721   (5,926)    34,219    51,929   (17,710)

    Digital
     Multimedia,
     Networking and
     Wireline Security
      Hardware         184     1,397   (1,213)       482     2,647    (2,165)
      Service          570       859     (289)     2,115     2,281      (166)
        Sub-total      754     2,256   (1,502)     2,597     4,928    (2,331)
    Total
      Hardware       3,977    11,632   (7,655)    14,557    35,745   (21,188)
      Service        7,572     7,345      227     22,259    21,112     1,147
        Total net
         sales      11,549    18,977   (7,428)    36,816    56,857   (20,041)





                                     Numerex Corp.
                      Condensed Consolidated Statement of Operations
                            (In thousands, except per share data)
                                       (Unaudited)

                          Three Months Ended           Nine Months Ended
                          September 30, 2009           September 30, 2009
                     GAAP               Non-GAAP   GAAP              Non-GAAP
                    Results Adjustments  Results  Results Adjustments Results
     Net sales:
       Hardware    $ 3,977             $ 3,977   $14,557             $14,557
       Service       7,572               7,572    22,259              22,259
     Total net
      sales         11,549              11,549    36,816              36,816
     Cost of hardware
      sales          3,449               3,449    12,611              12,611
     Cost of
      Services       2,995               2,995     8,117               8,117
     Gross Profit    5,105        -      5,105    16,088       -      16,088
                     44.2%                44.2%     43.7%               43.7%
     Selling, general,
      and
      administrative
      expenses       3,907     (278)     3,629    13,565   (2,411)    11,154
     Research and
      development
      expenses         584                 584     1,743               1,743
     Bad debt expense  102                 102       393                 393
     Earnings (loss)
      before interest,
      depreciation and
      amortization     512       278       790       387     2,411     2,798
     Depreciation and
      amortization     879         -       879     2,516         -     2,516
     Operating earnings
      (loss)          (367)      278       (89)   (2,129)    2,411       282
     Interest expense (495)      290      (205)   (1,184)      290      (894)
     Other income        -                   -         1                   1
     Earnings (loss)
      before tax      (862)      568      (294)   (3,312)    2,701      (611)
     Provision for
      income tax        31         -        31        96         -        96
     Net earnings
      (loss)         $(893)     $568     $(325)  $(3,408)    $2,701    $(707)

     Basic earnings
      (loss) per
      common
      share         $(0.06)              $(0.02)  $(0.24)             $(0.05)
     Diluted
      earnings
      (loss) per
      common share  $(0.06)              $(0.02)  $(0.24)             $(0.05)
     Number of shares
      used in per
      share
      calculation
       Basic        14,360                14,360   14,228             14,228
       Diluted      14,360                14,360   14,228             14,228


    (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 basis consolidated
         Statement of Operations exclude stock option expense,  legal fees
         associated with litigation and non-cash costs associated with debt
         extinguishment.




                                      Numerex Corp.
                     Condensed Consolidated Statement of Operations
                         (In thousands, except per share data)
                                          (Unaudited)

                        Three Months Ended            Nine Months Ended
                        September 30, 2008           September 30, 2008
                    GAAP               Non-GAAP   GAAP               Non-GAAP
                  Results Adjustments  Results   Results Adjustments  Results
     Net sales:
     Hardware      $11,632             $11,632   $35,745             $35,745
     Service         7,345               7,345    21,112              21,112
     Total net
      sales         18,977              18,977    56,857              56,857
     Cost of
      hardware sales 9,663               9,663    30,838              30,838
     Cost of
      Services       2,634               2,634     6,755               6,755
     Gross Profit    6,680         -     6,680    19,264        -     19,264
                      35.2%               35.2%     33.9%               33.9%
     Selling, general,
      and
      administrative
      expenses       4,697      (600)    4,097    14,672   (1,715)    12,957
     Research and
      development
      expenses         473                 473     1,488               1,488
     Bad debt expense  209                 209       420                 420
     Earnings before
      interest,
      depreciation
      and
      amortization   1,301       600     1,901     2,684     1,715     4,399
     Depreciation
      and
      amortization     773                 773     2,289               2,289
     Operating
      earnings
      (loss)           528       600     1,128       395     1,715     2,110
     Interest expense (331)               (331)   (1,141)             (1,141)
     Other income        5                   5         2                   2
     Earnings (loss)
      before tax       202       600       802     (744)     1,715       971
     Provision
      (benefit)
      for income tax   125                 125     (421)       546       125
     Net earnings
     (loss)            $77      $600      $677    $(323)    $1,169      $846

     Basic earnings
      (loss) per
      common
      share          $0.01               $0.05   $(0.02)               $0.06
     Diluted earnings
      (loss) per
      common
      share          $0.01               $0.05   $(0.02)               $0.06
     Number of
     shares used
     in per share
     calculation
       Basic        13,742              13,742   13,735               13,735
       Diluted      13,742              13,742   13,735               13,735


    (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 basis consolidated
         Statement of Operations exclude stock option expense and legal fees
         Associated with litigation.




                                  NUMEREX CORP.
                         CONDENSED CONSOLIDATED BALANCE SHEET
                       (In thousands, except share information)

                                                September 30,  December 31,
                                                      2009         2008
                                                  (unaudited)
    ASSETS
    CURRENT ASSETS
    Cash and cash equivalents                          $5,876       $8,917
    Short term investments                                  -            -
    Accounts receivable, less allowance for
     doubtful accounts of $393 at September 30,
     2009 and $1,010 at December 31, 2008:              5,280        9,159
    Inventory                                           7,034        8,506
    Prepaid expenses and other current assets           1,683        1,508
    Deferred tax asset current                              -            -
                                                            -            -
    TOTAL CURRENT ASSETS                               19,873       28,090

    Property and equipment, net                         1,749        1,765
    Goodwill, net                                      23,787       23,771
    Other intangibles, net                              5,161        5,796
    Software, net                                       2,813        2,796
    Other assets                                          189          288
    Deferred tax asset long term                            -            -
                                                            -            -
    TOTAL ASSETS                                      $53,572      $62,506

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
    Accounts payable                                   $5,653       $7,289
    Other current liabilities                           2,097        2,943
    Note payable, current                               3,072        2,568
    Deferred revenues                                   1,765        1,134
    Obligations under capital leases, current
     portion                                               23           29
    TOTAL CURRENT LIABILITIES                          12,610       13,963

    LONG TERM LIABILITIES
    Note payable                                          834        7,629
    Obligations under capital leases and other
     long term liabilities                                420          520
    TOTAL LONG TERM LIABILITIES                         1,254        8,149

    COMMITMENTS AND CONTINGENCIES                           -            -

    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 15,856,090
     shares at September 30, 2009 and 15,349,327
     shares at December 31, 2008, outstanding
     14,630,281 shares at September 30, 2009 and
     14,163,518 shares at December 31, 2008            52,901       50,801
    Additional paid-in-capital                          5,361        4,587
    Treasury stock, at cost, 1,225,809 shares on
     September 30, 2009 and 1,185,809 on December
     31, 2008                                          (5,213)      (5,053)
    Class B common stock - no par value;
     authorized 5,000,000; none issued                      -            -
    Accumulated other comprehensive loss                    -           (8)
    Retained deficit                                  (13,341)      (9,933)
    TOTAL SHAREHOLDERS' EQUITY                         39,708       40,394
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $53,572      $62,506

    Numerex Corp. Contact:
    Alan Catherall
    770 485-2527

    Investor Relations Contact:
    Seth Potter
    646 277-1230

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