Highlights for the quarter ended June 30,
2019:
- Net revenues of $13,508,000, an increase of 1% over the
prior year period
- Gross Profit of $6,133,000, or 45.4%
- Net income of $156,000
- Non-GAAP Adjusted EBITDA of $1,127,000, an increase of 5%
over the prior year period
- New Customer orders of $13,084,000 and strong proposal
activity
- Strategic investments in 5G-focused R&D to drive future
growth
- Reiterates 2019 and 2023 targets
Wireless Telecom Group, Inc. (NYSE American: WTT) (the
“Company”) announced today results for the second quarter ended
June 30, 2019.
Tim Whelan, CEO of Wireless Telecom Group, Inc., commented, “Our
second quarter financial results met our expectations resulting in
improved operating income and net income over last year. We are
excited about our new product introductions, customer wins, and
partner collaborations across all segments of our business this
year, further enhancing our positioning to benefit from growth in
defense spending, network densification and 5G testing and
deployment.”
Whelan continued, “We remain optimistic about the topline
momentum for the remainder of 2019 and are confident that specific
projects in our sales funnel will be drivers of second half
performance. Beyond 2019, our funnel of large opportunities,
strategic partnerships, and market tailwinds strengthen our
conviction in our 2023 targets.”
For the quarter ended June 30, 2019, the Company reported
consolidated net revenues of $13,508,000, compared to $13,414,000
for the same period in 2018, an increase of 0.7%. Network Solutions
revenue was flat compared to the prior year. Embedded Solutions
revenue increased 11.7% on higher sales of digital signal
processing hardware, somewhat offset by a decrease of 9.7% in Test
and Measurement revenue on lower government shipments compared to
the same quarter last year. The Company expects government
shipments to increase in the second half of the year.
Consolidated gross profit in the second quarter was $6,133,000,
or 45.4% of revenue, compared to $6,170,000 or 46.0% of revenue,
for the same period in 2018. The slight decrease was primarily due
to a decrease in high margin software and service revenue in
Embedded Solutions, partially offset by favorable product mix and
cost reduction initiatives in Test and Measurement.
The Company also reported a $150,000 reduction in consolidated
operating expenses from $6,137,000 in the second quarter of 2018 to
$5,987,000 in the same period in 2019. The decrease was primarily
related to lower G&A costs and contingent consideration
associated with the CommAgility transaction, offset by higher
headcount deployment in research and development in the area of 5G
roadmap development.
Net income for the quarter ended June 30, 2019 was $156,000,
compared to a net loss of $180,000 for the same period in 2018.
Non-GAAP Adjusted EBITDA for the quarter ended June 30, 2019 was
$1,127,000, compared to $1,076,000 for the same period in 2018. The
Company’s explanation of Adjusted EBITDA and the reconciliation of
Adjusted EBITDA to net income (loss) are set out below in this
press release.
New customer orders for the quarter increased 10% to $13,084,000
compared to $11,871,000 in the same quarter last year. The
Company’s consolidated backlog of firm orders to be shipped in the
next twelve months was $7,215,000 at June 30, 2019, compared to the
June 30, 2018 backlog of $8,800,000.
Outlook
The Company continues to expect full year 2019 revenue growth in
the low to mid-single digits, comparable gross margins to 2018, and
improved operating profitability.
Beyond 2019, the Company reaffirms its expectation to grow
revenues organically between 10% and 12% over the next four years
based on the long term trends of network densification and 5G
deployment, private LTE network expansion and increased military
spend. The Company also expects strong organic growth to be driven
by multiple internal initiatives including the continuation of new
product introductions, channel expansion, and operational
excellence. The Company’s 2023 targets include annual revenues of
$100 million, inclusive of strategic acquisitions, gross profit
margins between 47% and 49%, and Adjusted EBITDA margins of
approximately 15%. The Company defines Adjusted EBITDA margins as
Adjusted EBITDA divided by revenue (see use of Non-GAAP Financial
Measures below).
Conference Call
As previously announced, Wireless Telecom Group Inc. will host a
conference call today at 8:30 a.m. ET in which management will
discuss second quarter results and related matters. To participate
in the conference call, dial 800-346-7359 or 973-528-0008. The
conference identification number is 710451. The call will also be
webcast over the internet at the following URL:
https://www.webcaster4.com/Webcast/Page/1690/31233
A replay will be made available on the Wireless Telecom website
for a limited period of time following the conference call.
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with
generally accepted accounting principles (“GAAP”). Management
believes, however, that certain non‐GAAP financial measures used in
managing the Company’s business may provide users of this financial
information with additional meaningful comparisons between current
results and prior reported results. Certain of the information set
forth herein and certain of the information presented by the
Company from time to time may constitute non‐GAAP financial
measures within the meaning of Regulation G adopted by the
Securities and Exchange Commission. We have presented herein a
reconciliation of these measures to the most directly comparable
GAAP financial measure. The non‐GAAP measures presented herein may
not be comparable to similarly titled measures presented by other
companies. The foregoing measures do not serve as a substitute and
should not be construed as a substitute for GAAP performance, but
provide supplemental information concerning our performance that
our investors and we find useful.
The Company defines EBITDA as its net earnings before interest,
taxes, depreciation and amortization. “Adjusted EBITDA” is EBITDA
excluding our stock compensation expense, restructuring charges,
acquisition expenses, integration expenses, the one-time non-cash
inventory impairment charges, unrealized and realized foreign
exchange gains and losses, non-recurring legal fees associated with
the Harris arbitration and other non-recurring costs and includes
cash received in 2018 related to revenue that would have been
recognized in 2018 but for the adoption of ASU Topic 606. A
reconciliation of net income to non-GAAP Adjusted EBITDA is
included as an attachment to this press release.
The Company defines Adjusted EBITDA margin as Adjusted EBITDA
divided by revenue. The Company does not provide a forward-looking
reconciliation of expected Adjusted EBITDA Margin as the amount and
significance of special items required to develop meaningful
comparable GAAP financial measures cannot be estimated at this time
without unreasonable efforts. These special items could be
meaningful.
The Company views Adjusted EBITDA and Adjusted EBITDA margin as
important indicators of performance, consistent with the manner in
which management measures and forecasts the Company’s performance.
We believe Adjusted EBITDA and Adjusted EBITDA margin are important
performance metrics because they facilitate the analysis of our
results, exclusive of certain non‐cash items, including items which
do not directly correlate to our business operations.
The Company believes that Adjusted EBITDA and Adjusted EBITDA
margin metrics provide qualitative insight into our current
performance and we use these measures to evaluate our results.
Additionally, we use Adjusted EBITDA to measure the performance of
our management team and management’s entitlement to incentive
compensation. We believe that making this information available to
investors enables them to view our performance the way that we view
our performance and thereby gain a meaningful understanding of our
core operating results, in general, and from period to period.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. In some cases, such forward-looking statements may be
identified by terms such as believe, expect, seek, may, will,
intend, project, anticipate, plan, estimate, guidance or similar
words. Forward-looking statements include, among others, statements
regarding expectations for increased government shipments in the
fourth quarter of 2019; full year 2019 revenue growth in the low to
mid-single digits, comparable gross margins to 2018, and improved
operating profitability; that the Company will grow revenues
organically between 10 and 12% over the next four years based on
the long term trends of network densification and 5G deployment,
private LTE network expansion, and increased military spend; that
there will be strong organic growth driven by multiple internal
initiatives including the continuation of new product
introductions, channel expansion, and operational excellence; for
the Company’s 2023 targets to include annual revenues of $100
million, inclusive of strategic acquisitions, gross profit margins
between 47% and 49%, and Adjusted EBITDA margins of approximately
15%. Investors are cautioned that such forward-looking statements
are not guarantees of future performance and involve a number of
risks and uncertainties that could materially affect actual
results, including, among others, the ability of management to
successfully implement the Company’s business plan and strategy;
the loss of any significant customers of the Company; the Company’s
ability to acquire accretive businesses and successfully integrate
acquired businesses; product demand and development of competitive
technologies in the Company’s market sector; the impact of
competitive products and pricing; as well as other risks and
uncertainties set forth in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2018. These forward-looking
statements speak only as of the date of this release and the
Company does not undertake any obligation to update or revise any
forward-looking information to reflect changes in assumptions, the
occurrence of unanticipated events, or otherwise, as except as
required by law.
About Wireless Telecom Group, Inc.
Wireless Telecom Group, Inc., comprised of Boonton
Electronics, CommAgility, Microlab and Noisecom, is a global
designer and manufacturer of advanced radio frequency and microwave
components, modules, systems and instruments. Serving the wireless,
telecommunication, satellite, military, aerospace, semiconductor
and medical industries, Wireless Telecom Group products enable
innovation across a wide range of traditional and emerging wireless
technologies. With a unique set of high-performance products
including peak power meters, signal analyzers, signal processing
modules, LTE PHY and stack software, power splitters and combiners,
GPS repeaters, public safety monitors, noise sources, and
programmable noise generators, Wireless Telecom Group supports the
development, testing, and deployment of wireless technologies
around the globe. Wireless Telecom Group is headquartered in
Parsippany, New Jersey, in the New York City metropolitan area, and
maintains a global network of Sales and Service offices for
excellent product service and support. Wireless Telecom Group’s
website address is http://www.wirelesstelecomgroup.com.
CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME/(LOSS) (In thousands, except per share
amounts, Unaudited)
For the Three Months
Ended
For the Six Months
Ended
June 30
June 30
2019
2018
2019
2018
NET REVENUES
$
13,508
$
13,414
$
26,540
$
26,678
COST OF REVENUES
7,375
7,244
14,681
14,239
GROSS PROFIT
6,133
6,170
11,859
12,439
Operating Expenses
Research and Development
1,499
1,313
3,213
2,469
Sales and Marketing
2,027
1,933
3,964
3,844
General and Administrative
2,461
2,678
4,933
5,311
Loss on Change in Fair Value of Contingent
Consideration
-
213
-
213
Total Operating Expenses
5,987
6,137
12,110
11,837
Operating Income/(Loss)
146
33
(251)
602
Other Income/(Expense)
135
33
165
(13)
Interest Expense
(73)
(141)
(188)
(234)
Income/(Loss) before taxes
208
(75)
(274)
355
Tax Provision/(Benefit)
52
105
(86)
161
Net Income/(Loss)
$
156
$
(180)
$
(188)
$
194
Other Comprehensive Income/(Loss):
Foreign Currency Translation
Adjustments
(380)
(963)
(75)
(383)
Comprehensive Income/(Loss)
$
(224)
$
(1,143)
$
(263)
$
(189)
Earnings/(Loss) Per Share:
Basic
$
0.01
$
(0.01)
$
(0.01)
$
0.01
Diluted
$
0.01
$
(0.01)
$
(0.01)
$
0.01
Weighted Average Shares Outstanding:
Basic
20,973
20,864
20,973
20,755
Diluted
21,593
20,864
20,973
21,511
In periods with a net loss, the basic loss per
share equals the diluted loss per share as all common stock
equivalents are excluded from the per share calculation because
they are anti-dilutive.
CONSOLIDATED BALANCE SHEETS (In thousands,
except number of shares and par value)
June 30
December 31
2019
2018
(Unaudited)
CURRENT ASSETS
Cash & Cash Equivalents
$
4,407
$
5,015
Accounts Receivable - net of reserves of
$63 and $44, respectively
9,565
8,638
Inventories - net of reserves of $1,919
and $1,910, respectively
8,490
6,884
Prepaid Expenses and Other Current
Assets
973
1,689
TOTAL CURRENT ASSETS
23,435
22,226
PROPERTY PLANT AND EQUIPMENT -
NET
2,411
2,578
OTHER ASSETS
Goodwill
9,751
9,778
Acquired Intangible Assets, net
2,667
3,206
Deferred Income Taxes
5,737
5,592
Right Of Use Assets
1,657
-
Other
577
787
TOTAL OTHER ASSETS
20,389
19,363
TOTAL ASSETS
$
46,235
$
44,167
CURRENT LIABILITIES
Short Term Debt
$
2,892
$
2,016
Accounts Payable
5,266
3,252
Short Term Leases
432
-
Accrued Expenses and Other Current
Liabilities
3,264
6,083
Deferred Revenue
321
103
TOTAL CURRENT LIABILITIES
12,175
11,454
LONG TERM LIABILITIES
Long Term Leases
1,238
-
Other Long Term Liabilities
89
115
Deferred Tax Liability
614
616
TOTAL LONG TERM LIABILITIES
1,941
731
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value, 2,000,000
shares authorized, none issued
-
-
Common Stock, $.01 par value, 75,000,000
shares authorized, 34,488,252 and 34,393,252
shares issued, 21,300,252 and 21,205,251
shares outstanding
345
344
Additional Paid in Capital
48,878
48,479
Retained Earnings
7,368
7,556
Treasury Stock at Cost, 13,188,601 and
13,188,601 shares, respectively
(24,509)
(24,509)
Accumulated Other Comprehensive Income
37
112
TOTAL SHAREHOLDERS' EQUITY
32,119
31,982
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
46,235
$
44,167
CONSOLIDATED STATEMENT OF CASH FLOWS (In
thousands, unaudited)
For the Six Months
Ended June 30
2019
2018
CASH FLOWS PROVIDED/(USED) BY OPERATING
ACTIVITIES
Net Income/(Loss)
$
(188)
$
194
Adjustments to reconcile net income/(loss)
to net cash provided/(used) by operating activities:
Depreciation and Amortization
1,196
1,237
Amortization of Debt Issuance Fees
31
39
Share-based Compensation Expense
400
348
Deferred Rent
(12)
7
Deferred Income Taxes
(146)
88
Provision for Doubtful Accounts
18
22
Inventory Reserves
137
45
Changes in Assets and Liabilities:
Accounts Receivable
(968)
(2,090)
Inventories
(1,776)
(1,101)
Prepaid Expenses and Other Assets
899
(154)
Accounts Payable
2,046
(50)
Accrued Expenses and Other Liabilities
(883)
1,611
Payment of Contingent Consideration
(772)
-
Net Cash Provided/(Used) by Operating
Activities
(18)
196
CASH FLOWS USED BY INVESTING
ACTIVITIES
Capital Expenditures
(261)
(583)
Acquisition of Business
(426)
(811)
Net Cash Used by Investing
Activities
(687)
(1,394)
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES
Revolver Borrowings
18,594
19,721
Revolver Repayments
(17,642)
(18,473)
Term Loan Repayments
(76)
(76)
Payment of Contingent Consideration
(782)
-
Proceeds from Exercise of Stock
Options
-
288
Net Cash Provided by Financing
Activities
94
1,460
Effect of Exchange Rate Changes on Cash
and Cash Equivalents
3
(85)
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS
(608)
177
Cash and Cash Equivalents, at Beginning of
Period
5,015
2,458
CASH AND CASH EQUIVALENTS, AT END OF
PERIOD
$
4,407
$
2,635
SUPPLEMENTAL INFORMATION:
Cash Paid During the Period for
Interest
$
97
$
78
Cash Paid During the Period for Income
Taxes
$
53
$
24
NET REVENUE AND GROSS PROFIT BY SEGMENT (In
thousands, Unaudited)
Three months ended June
30
Revenue
% of Revenue
Change
2019
2018
2019
2018
Amount
Pct.
Network Solutions
$
5,575
$
5,636
41.3%
42.0%
$
(61)
-1.1%
Test and Measurement
3,192
3,534
23.6%
26.4%
(342)
-9.7%
Embedded Solutions
4,741
4,244
35.1%
31.6%
497
11.7%
Total Net Revenues
$
13,508
$
13,414
100.0%
100.0%
$
94
0.7%
Three months ended June
30
Gross Profit
Gross Profit %
Change
2019
2018
2019
2018
Amount
Pct.
Network Solutions
$
2,402
$
2,468
43.1%
43.8%
$
(66)
-2.7%
Test and Measurement
1,775
1,815
55.6%
51.4%
(40)
-2.2%
Embedded Solutions
1,956
1,887
41.3%
44.5%
69
3.7%
Total Gross Profit
$
6,133
$
6,170
45.4%
46.0%
$
(37)
-0.6%
Six months ended June
30
Revenue
% of Revenue
Change
2019
2018
2019
2018
Amount
Pct.
Network Solutions
$
11,333
$
11,147
42.7%
41.8%
$
186
1.7%
Test and Measurement
6,222
7,297
23.4%
27.3%
(1,075)
-14.7%
Embedded Solutions
8,985
8,234
33.9%
30.9%
751
9.1%
Total Net Revenues
$
26,540
$
26,678
100.0%
100.0%
$
(138)
-0.5%
Six months ended June
30
Gross Profit
Gross Profit %
Change
2019
2018
2019
2018
Amount
Pct.
Network Solutions
$
4,790
$
4,911
42.3%
44.1%
$
(121)
-2.5%
Test and Measurement
3,343
3,660
53.7%
50.2%
(317)
-8.7%
Embedded Solutions
3,726
3,868
41.5%
47.0%
(142)
-3.7%
Total Gross Profit
$
11,859
$
12,439
44.7%
46.6%
$
(580)
-4.7%
RECONCILIATION OF NET INCOME TO NON-GAAP
EBITDA AND NON-GAAP ADJUSTED EBITDA (In thousands,
Unaudited)
Three Months Ended
Six Months Ended
June 30
June 30
2019
2018
2019
2018
GAAP Net Income/(Loss), as
reported
$
156
$
(180)
$
(188)
$
194
Tax Provision/(Benefit)
52
105
(86)
161
Depreciation and Amortization Expense
647
611
1,196
1,237
Interest Expense
73
141
188
234
Non-GAAP EBITDA
928
677
1,110
1,826
Stock Compensation Expense
191
160
400
348
Integration Expenses
-
11
-
60
Inventory Recovery
(2)
(6)
(4)
(14)
FX (Gain)/Loss
(114)
(43)
(149)
4
US GAAP Purchase Accounting
-
64
-
64
Change in Fair Value of Contingent
Consideration
-
213
-
213
Non Recurring Arbitration Legal Costs
124
-
124
-
Non-GAAP Adjusted EBITDA
$
1,127
$
1,076
$
1,481
$
2,689
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Mike Kandell (973) 386-9696 Or John Nesbett or Jen Belodeau
(203) 972 9200
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