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8-K - CURRENT REPORT - TELULAR CORPtelular_8k-050511.htm
Exhibit 99.1
For Immediate Release – May 5, 2011
Telular Corporation Reports Second Quarter 2011 Results
- Total Recurring Service Revenue Up 14% Year-Over-Year
- Company Reports Adjusted Net Income before Non-Cash Items of $2.2 Million
- Company Declares Regular Quarterly Dividend of $0.10 Per Share
- Company Reaffirms Fiscal 2011 Guidance
CHICAGO, IL USA—Telular Corporation (NASDAQ: WRLS), a global leader in connecting businesses and machines over wireless networks, today announced financial results for the second fiscal quarter ended March 31, 2011.  In the second quarter 2011, Telular reported revenue of $12.5 million and pre-tax income of $1.5 million.
For the second quarter of 2011, net income before non-cash items was $2.2 million.  Net income before non-cash items is a non-GAAP measure that adds back depreciation, amortization, stock-based compensation expense, and non-cash deferred tax provision to net income. For further information, see the reconciliation of this measure to net income in accordance with GAAP, on the last page of this press release.
As part of the Company’s current dividend policy, Telular also declared a quarterly dividend of $0.10 per share on its common stock, payable May 23, 2011, to shareholders of record as of the close of business on May 16, 2011.
In the second quarter of 2011, total recurring service revenue from both the Telguard and TankLink lines of business increased 14% over the prior year period to $7.8 million.
Total Telguard sales were $10.0 million in the second quarter. During the quarter, Telular sold 21,300 Telguard units and activated 20,700 new Telguard subscribers.  The total number of Telguard subscribers decreased sequentially from 571,500 to approximately 568,600, while average revenue per unit, or ARPU, increased sequentially from $4.04 to $4.08.  The decline in total subscribers was the effect of a continuing account reconciliation project by a major customer which resulted in the deactivation of a significant number of units.  Importantly, these deactivated units generate a lower ARPU and margin than the overall customer base due to the high volume pricing discounts provided to this significant customer.
Total TankLink sales in the second quarter were up over 189% to $1.5 million from $520,000 in the prior year period.  TankLink service revenues increased 129% over the prior year period from $352,000 to $805,000, and the period ended with 19,900 billable tanks generating an ARPU of $12.45.  The Company sold over 1,300 tank monitoring units, which generated TankLink product revenues of $711,000.

“We are pleased with our second quarter results – posting solid revenue growth and improved profitability,” commented Joe Beatty, president and chief executive officer of Telular Corporation.  “Telguard unit sales are tracking in-line with our sales guidance and we are excited about the growth in our TankLink business, as we are now earning higher recurring revenue and are seeing improved operating cash flow margins.  This quarter, we declared our regular quarterly dividend and are optimistic we can continue to deliver a steady cash flow stream and increasing shareholder value,” concluded Mr. Beatty.
“Our recurring revenue model and strong balance sheet continue to provide us with optimism and clear visibility into our business,” added Jonathan Charak, chief financial officer of Telular Corporation.  “We remain confident in our ability to drive growth and profitability in our Telguard and TankLink businesses, and we are reaffirming our guidance for fiscal 2011 net income before non-cash items of $8.5 - $9.5 million.”
During the quarter, the Company paid shareholders a quarterly dividend of $0.10 per share of common stock. The total amount of cash paid to shareholders was $1.5 million.
Investor Conference Call
Telular’s quarterly conference call will be held today at 4:30 p.m. ET. To participate on the teleconference from the United States and Canada dial 877-941-8631 (International dial 480-629-9821). A replay of the call will be available from May 5, 2011 beginning at 6:30 p.m. ET (5:30 p.m. CT) through May 7, 2011 ending at 11:59 p.m. ET (10:59 p.m. CT) by dialing 800-406-7325 (enter pass code 4434567#) or internationally at: 303-590-3030 (enter pass code 4434567#). The replay will also be available via webcast from the Company's corporate website at
About Telular
Telular Corporation provides remote monitoring solutions for business and residential customers, enabling security systems and industrial applications to exchange actionable information, typically through the use of wireless technology. With over 20 years of experience in the wireless industry, Telular Corporation has developed solutions to deliver remote access for voice and data without significant network investment or disruption. Headquartered in Chicago, Telular Corporation has additional offices in Atlanta and Miami. For more information, please visit
Investor Contact:
The Blueshirt Group
Brinlea Johnson
(212) 331-8424
Media Contact:
Pam Benke
Telular Corporation
(678) 909-4616

Please be advised that some of the information in this release presents the Company’s intentions, beliefs, judgments and expectations of the future and are forward-looking statements.  Statements regarding expectations, including performance assumptions, estimates relating to future cash flows, levels of demand for our products, dividend amounts and capital requirements, as well as other statements that are not historical facts, are forward-looking statements. For example, the statement ”we are reaffirming our guidance for fiscal 2011 net income before non-cash items of $8.5 - $9.5 million” is a forward-looking statements. These statements reflect management’s judgments based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, customer growth and retention, pricing, operating costs and the economic environment.  It is important to note that the Company’s actual results could differ materially from these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company’s SEC filings, including but not limited to the Company’s report on Form 10-K for the fiscal year ended September 30, 2010. Copies of these filings may be obtained by contacting the Company or the SEC.

(Dollars in thousands, except share data)
March 31,
September 30,
Cash and cash equivalents
  $ 9,442     $ 27,678  
Trade receivables, net
    4,784       7,056  
Inventories, net
    4,059       4,821  
Deferred taxes
    272       336  
Prepaid expenses and other current assets
    770       290  
Total current assets
    19,327       40,181  
Property and equipment, net
    2,353       2,169  
Long term deferred taxes
    33,170       34,698  
Other assets
    11,462       4,503  
Total assets
  $ 66,312     $ 81,551  
Current liabilities
  $ 6,779     $ 6,135  
Long-term liabilities
    751       529  
Total stockholders' equity
    58,782       74,887  
Total liabilities and stockholders' equity
  $ 66,312     $ 81,551  
Outstanding shares
    15,054,591       14,871,889  
Six Months Ended March 31,
Net cash provided by (used in):
Operating activities
  $ 2,285     $ 6,146  
Investing activities
    (2,883 )     (397 )
Financing activities
    (17,638 )     121  
Net increase (decrease) in cash and cash equivalents
  $ (18,236 )   $ 5,870  

(Dollars in thousands, except share data)
Three Months Ended March 31,
Six Months Ended March 31,
Net product sales
  $ 4,708     $ 4,556     $ 9,478     $ 11,124  
Service revenue
    7,784       6,800       15,104       13,254  
Total revenue
    12,492       11,356       24,582       24,378  
Cost of Sales
Net product cost of sales
    3,455       3,945       7,120       9,150  
Service cost of sales
    3,037       2,796       5,873       5,397  
Total cost of sales
    6,492       6,741       12,993       14,547  
Gross margin
    6,000       4,615       11,589       9,831  
Operating Expenses
Engineering and development expenses
    1,042       1,254       2,236       2,508  
Selling and marketing expenses
    1,683       1,571       3,481       3,185  
General and administrative expenses
    1,819       1,531       3,905       2,981  
Total operating expenses
    4,544       4,356       9,622       8,674  
Income from operations
    1,456       259       1,967       1,157  
Other income, net
    10       79       131       177  
Net income before income taxes
    1,466       338       2,098       1,334  
Provision for income taxes
    1,355       21       1,597       42  
Net income
  $ 111     $ 317     $ 501     $ 1,292  
Income per common share:
  $ 0.01     $ 0.02     $ 0.03     $ 0.09  
  $ 0.01       0.02     $ 0.03       0.08  
Weighted average number of common shares outstanding:
    15,030,397       14,949,792       14,976,290       14,935,854  
    15,994,650       15,469,497       15,818,086       15,390,715  

Reconciliation of Non-GAAP Measures
We use net income before non-cash items as an additional measure of our operating performance.  This measure is not recognized under generally accepted accounting principles.  The reconciliation below demonstrates how we calculate this measure from our financial statements.
Three Months Ended March 31,
Six Months Ended March 31,
Net income
  $ 111     $ 317     $ 501     $ 1,292  
Non-cash compensation
    327       368       1,012       746  
Depreciation and amortization
    487       277       794       559  
Non-cash deferred tax provision
    1,287       -       1,506       -  
Net income before non-cash items
  $ 2,212     $ 962     $ 3,813     $ 2,597  
Net income before non-cash items should be considered in addition to, but not as a substitute for, other measures of performance reported in accordance with accounting principles generally accepted in the United States.  While we believe that net income before non-cash items, as defined above, is useful within the context described above, it is in fact incomplete and not a measure that should be used to evaluate the full performance of Telular Corporation.  Such evaluation needs to consider all of the complexities associated with our business, including, but not limited to, how past actions are affecting current results and how they may affect future results, how we have chosen to finance the business and how regulations and other aforementioned items affect the final amounts that are or will be available to shareholders as a return on their investment.  Net income determined in accordance with U.S. GAAP is the most complete measure available today to evaluate all elements of our performance.