ATLANTA, May 6 /PRNewswire-FirstCall/ -- Numerex Corp. ( NASDAQ:NMRX ) , a leading provider of full-service, highly secure machine-to-machine (M2M) network services and solutions, today announced financial results for the first quarter of 2008 reporting a net loss of $218,000, or $0.02 per basic and diluted share. This compares to net earnings of $427,000 or $0.03 per basic and diluted share for the comparable period in 2007. Net earnings for the first quarter of 2008 excluding non-cash stock based compensation ("non-GAAP" earnings) was $75,000 compared to $600,000 for the same quarter in 2007 using the equivalent non-GAAP earnings measurement. Basic and diluted earnings per share using non-GAAP earnings would have been $0.01 for the first quarter of 2008. All non-GAAP information is reconciled in the Non-GAAP Condensed Consolidated Statement of Operations table attached.

   Net revenues in the first quarter of 2008 were $20.5 million compared to $14.2 million reported for the same quarter last year, representing 44% year- over-year growth. This strong revenue performance was attributable to the Company's core M2M business, which generated $19.6 million compared to $12.9 million for the first quarter of 2007, representing an increase of 52%. The Company's wireless security division generated better than expected results driven primarily by the continued robust activity surrounding a major transition from analog to digital technology. The M2M Networks and Technology Group also generated better than expected network connections for the quarter, a direct result of increased demand for its network services and radio modules. Wireless M2M comprised over 95% of the Company's total revenues for the quarter with the balance of the Company's total revenues derived from its Digital Multimedia and Networking Group.

   Key financial results for the first quarter of 2008 and 2007 are as follows:

                                                   Three Months Ended
                                                        March 31,
                                                  2008             2007

   Revenues (millions)                            $20.5            $14.2
   Non-GAAP earnings (millions)                    $0.1             $0.6
   Non-GAAP EPS                                   $0.01            $0.05
   Net earnings (loss) (millions)                $(0.22)           $0.43
   Net EPS                                       $(0.02)           $0.03

   "Our M2M business continues to experience strong organic growth across the board," said Stratton Nicolaides, Numerex chairperson and CEO. "We are particularly pleased with the performance of our Network and Technology Group which, year-over-year, generated 55% growth in network revenue and 63% growth in connections. We view these two metrics as the cornerstone of our business model and our performance during the quarter exceeded expectations. We faced two noteworthy challenges during the quarter which were the continued analog to digital transition, which went better than expected, and our satellite division's adapting its solutions to the enterprise markets. What is particularly impressive is that less than two years ago, we only had a handful of digital network connections with the overwhelming bulk of our wireless M2M service revenues generated by customers who used our analog networks. Today, we have now achieved a complete reversal while doubling our connection base to over 500,000 digital connections. We expect the growth trends in network connections and related network services will continue throughout the year."

   While the Company's organic M2M business exhibited strong results, the loss for the first quarter of 2008 is primarily attributable to the recently acquired satellite solutions business, which recorded a pre-tax loss of over $750,000. Although existing opportunities in the government and emergency services sectors have improved, transitioning the satellite solutions business to enterprise markets has taken longer than expected. The Company is in the process of analyzing a re-alignment of products, markets and distribution channels, and evaluating the division's management in order to improve execution to bring performance back into line with expectations. As a result of these anticipated actions and the recognition of deferred revenue in later quarters of the year, the first quarter 2008 satellite solutions loss is not expected to be indicative of the results for the full year.

   Gross margins for the first quarter of 2008 were 31.6% percent compared to 37.9% for the comparable period in 2007 and 35.1% for the fourth quarter of 2007. The year-over-year decline in gross margins is due to the adoption of a revised pricing model in the wireless security unit to secure network connections and long term recurring revenues at the expense of short term hardware margins. As a result, hardware margins declined to less than 11% in the first quarter of 2008 from 18% in the same quarter last year. The sequential quarterly decline in gross margins results from the expected proportional increase in hardware revenues, which has a lower overall gross margin as a percentage of total revenues.

   Operating expenses were $6.4 million for the current quarter compared to $4.5 million during the first quarter of 2007 and $6.2 million for the fourth quarter of 2007. Operating expenses increased year-over-year primarily due to both the acquisition of the satellite business as well as increases in head count and marketing costs. The satellite M2M unit operating expenses were $1.2 million the first quarter of 2008, which include legal fees associated with an action filed by the division's former manager, more fully described in the Company's SEC filings. Organic operating expenses increased by $651,000 when comparing the first quarter of 2008 with the same quarter last year. Six of the seven net new hires during this quarter were sales or marketing employees and part of the increase reflects higher salary and commission payments. In addition, the Company finished a complete re-branding and promotional exercise in the first quarter of 2008 resulting in additional marketing expenses. Finally, in accordance with Financial Accounting Standard No. 123, the Company recorded non-cash stock option compensation costs of $293, 000 in the first quarter of 2008 compared to $173,000 in the same quarter in 2007.

   Excluding the satellite M2M unit, operating expenses for the first quarter of 2008 were almost $200,000 lower than the fourth quarter of 2007. These savings primarily resulted from lower Sarbanes-Oxley and tax compliance costs partially offset by higher marketing expenses. Satellite M2M unit operating expenses increased $459,000 compared to the prior sequential quarter mainly driven by higher than expected legal expenses.

   The Company's balance sheet remains strong with $6.8 million in cash and $17.9 million in working capital. The current ratio as of March 31, 2008 was 1.9 to 1. Shareholder's equity increased to $48.7 million compared to $46.9 as of December 31, 2007.

   Mr. Nicolaides concluded, "We will continue to trade off hardware margin in our quest to increase our network connections and related recurring service revenue. Currently, in spite of a difficult economy, we see a strong pipeline of business that we expect will translate into continued future growth. As a result, we continue to support our initial wireless M2M revenue growth guidance of 30 to 40 percent for the full year."

About Numerex

Numerex Corp. ( NASDAQ:NMRX ) offers the broadest choice of secure machine-to-machine (M2M) network services and solutions. Numerex delivers a depth of expertise and excellence through its M2M service platforms - Networx, Techworx, and Flexworx - that leading companies choose to power their M2M solutions. Numerex is the first M2M Company in North American to carry ISO/IEC 27001:2005 certification - ISO's highest information security benchmark to ensure data integrity and security. The Company offers its M2M products and services through a variety brands including Uplink and Orbit One. Numerex is headquartered in Atlanta, Georgia. For additional information, visit http://www.numerex.com/


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

                                       Three Months Ended
                                           March 31,
                                        2008       2007     Change  % Change
  Net sales:
    Hardware                          $13,624     $9,274    $4,350      47%
    Service                             6,832      4,911     1,921      39%
  Total net sales                      20,456     14,185     6,271      44%
  Cost of hardware sales               12,162      7,609     4,553      60%
  Cost of services                      1,839      1,204       615      50%
  Gross Profit                          6,455      5,372     1,103      21%
                                         31.6%      37.9%
  Selling, general, and
   administrative expenses              5,015      3,613     1,402      39%
  Research and development expenses       530        288       242      84%
  Bad Debt Expense                        138         86        52      60%
  Depreciation and amortization           751        489       282      60%
  Operating earnings                       21        896      (875)    -98%
  Interest expense                       (403)      (146)     (257)     nm
  Other income                             (2)        (9)        7      nm
  Earnings (loss) before tax             (384)       741    (1,125)     nm
  Provision (benefit) for income tax     (166)       314      (480)     nm
  Net earnings (loss)                   $(218)      $427     $(645)   -151%

  Basic earnings per common share      $(0.02)     $0.03
  Diluted earnings per common share    $(0.02)     $0.03
  Number of shares used in per share
   calculation
    Basic                              13,725     13,006
    Diluted                            13,725     13,608



                                Numerex Corp.
                        Supplemental Sales Information
                                (in thousands)
                                 (Unaudited)

                                             Three Months Ended
                                                  March 31,
  Net Sales:                                  2008        2007      Change

  Wireless Data Communications
      Hardware                              $13,421      $8,913     $4,508
      Service                                 6,133       3,956      2,177
        Subtotal                             19,554      12,869      6,685
  Digital Multimedia, Networking and
   Wireline Security
      Hardware                                  202         361       (159)
      Service                                   700         955       (255)
        Subtotal                                902       1,316       (414)
  Total
      Hardware                               13,623       9,274      4,349
      Service                                 6,833       4,911      1,921
        Total net sales                      20,456      14,185      6,271



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

                            Three Months Ended        Three Months Ended
                              March 31, 2008            March 31, 2007
                        GAAP     Adjust- Non-GAAP  GAAP     Adjust- Non-GAAP
                        Results  ments   Results   Results  ments   Results

  Net sales:
    Hardware            $13,624          $13,624   $9,274           $9,274
    Service               6,832            6,832    4,911            4,911
  Total net sales        20,456           20,456   14,185           14,185
  Cost of hardware
   sales                 12,162           12,162    7,609            7,609
  Cost of services        1,839            1,839    1,204            1,203
  Gross Profit            6,455       -    6,455    5,372       -    5,373
                           31.6%            31.6%    37.9%            37.9%
  Selling, general, and
   administrative
   expenses               5,015    (293)   4,722    3,613    (173)   3,440
  Research and
   development expenses     530              530      288              288
  Bad debt expense          138              138       86               86
  Earnings before
   interest,
   depreciation and
   amortization             772     293    1,065    1,385     173    1,559
  Depreciation and
   amortization             751              751      489              490
  Operating earnings         21     293      314      896     173    1,069
  Interest expense         (403)            (403)    (146)            (146)
  Other income               (2)              (2)      (9)              (9)
  Earnings (loss)
   before income tax       (384)    293      (91)     741     173      914
  Provision (benefit)
   for income tax          (166)            (166)     314              314
  Net earnings (loss)     $(218)   $293      $75     $427    $173     $600

  Basic earnings (loss)
   per common share      $(0.02)           $0.01    $0.03            $0.05
  Diluted earnings
   (loss) per common
   share                 $(0.02)           $0.01    $0.03            $0.04
  Number of shares used
   in per share
   calculation
    Basic                13,725           13,725   13,006           13,006
    Diluted              13,725           13,725   13,608           13,608

  (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 Statement of Operations exclude stock option
      expense.



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

                                                      March 31, December 31,
                                                        2008        2007
                                                     (unaudited)
  ASSETS
  CURRENT ASSETS
  Cash and cash equivalents                             $6,788      $7,425
  Accounts receivable, less allowance for doubtful
   accounts of $1,239 at March 31, 2008 and $1,282
   at December 31, 2007:                                17,158      16,396
  Inventory                                             10,406      10,059
  Prepaid expenses and other current assets              2,591       1,885
  Deferred tax asset - current                             770         770
  TOTAL CURRENT ASSETS                                  37,713      36,535

  Property and Equipment, Net                            2,007       2,003
  Goodwill, Net                                         26,065      22,603
  Other Intangibles, Net                                 6,733       6,940
  Software, Net                                          3,435       3,486
  Other Assets - long term                                 465         526
  Deferred tax asset - long term                         2,162       2,005
  TOTAL ASSETS                                         $78,580     $74,098

  LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES
  Accounts payable                                     $11,763     $10,299
  Other current liabilities                              2,071       2,312
  Note payable, current                                  2,568       2,568
  Deferred revenues                                      3,390       1,328
  Obligations under capital leases, current portion         45          44
  TOTAL CURRENT LIABILITIES                             19,837      16,550

  LONG TERM LIABILITIES
  Obligations under capital leases and other long
   term liabilities                                        464         486
  Note Payable                                           9,554      10,197
  TOTAL LONG TERM LIABILITIES                           10,018      10,683

  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 14,917,305 shares at March 31,
   2008 and 14,706,101 shares at December 31, 2007      49,229      47,455
  Additional paid-in-capital                             3,721       3,427
  Treasury stock, at cost, 1,184,900 shares on
   March 31, 2008 and December 31, 2007                 (5,053)     (5,053)
  Class B common stock - no par value; authorized
   5,000,000; none issued                                    -           -
  Accumulated other comprehensive income (loss)              4          (6)
  Accumulated earnings                                     824       1,042
  TOTAL SHAREHOLDERS' EQUITY                            48,725      46,865
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           $78,580     $74,098

Source: Numerex Corp.