ADDvantage Technologies Group, Inc. (NASDAQ: AEY),
today announced its financial results for the three month period
ended December 31, 2018.
“Total revenues for the first fiscal quarter of
2019 declined 8% year over year. This was driven primarily by a 23%
decline in sales in the Cable TV segment, which we recently
announced would be sold to a company controlled by Dave Chymiak,”
Joe Hart, President and CEO of ADDvantage Technologies, said. “We
are pleased to report overall higher sales of 6% in the Telco
segment as both Triton Datacom and Nave Communications entered the
year with continued momentum, demonstrating strong business models
and effective sales strategies.
“During the quarter we made meaningful progress
with our strategic initiatives to improve efficiencies, generate
new revenue streams and achieve sustainable, long term growth at
the Company. We expect that these initiatives will be fully
implemented in our fiscal fourth quarter. Nave is already
benefiting from its new warehousing and operations location at
Palco Telecom, a world-class third-party logistics company, which
will allow it to serve a much wider geographic customer base,
streamline inventory and order fulfillment operations and improve
shipping times across the U.S. Equipment sales at Nave
increased 27% year over year, reflecting the positive momentum
gained from these initiatives. The move to Palco Telecom brought
significant reductions in operating costs, which will be fully
realized upon a final exit from the former facility in Jessup,
MD. Revenues from the recycling program were down $0.5
million when compared to the prior year but were in line with our
expectations for this quarter.
“At Triton, we have initiated plans to move out
of the existing Miami facility during the month of April and into a
newly constructed facility in nearby Pembroke Park, Florida, which
has the additional capacity needed to expand our equipment
refurbishment business, which is our highest margin segment of
Triton, and will support our plans to sell our equipment products
into the telephone carrier market,” continued Mr. Hart.
“In fiscal year 2019, the focus for Nave
Communications is on growing sales and margins from the used
equipment business, introducing repair services as a new product
line and reducing operating expenses as a result of the move to
Palco Telecom. The focus for Triton Datacom in fiscal year 2019 is
on growing sales and margins of both new and refurbished equipment,
expanding the range of products offered within this business and
diversifying its customer base by beginning to sell its products
into the carrier telecommunications market.
“Moreover, following the acquisition of Fulton
Technologies, Inc. and Mill City Communications, Inc., which closed
on January 4, 2019, we have now entered the wireless infrastructure
services market. This business, which operates under the recognized
name Fulton Technologies, is servicing wireless carriers across the
Southwest, Midwest and Northern Plains regions as they continue
with their expansion of their 4G networks and begin grooming the
network for the eventual migration towards 5G services. Fulton has
the capability and credentials to upgrade wireless technologies on
existing macro cell sites, build various models of small cells and
owns a unique capability of provisioning temporary cell sites for
wireless carrier emergencies and special events.
“Fulton Technologies has direct contracts with
the four major U.S. wireless carriers and the major wireless
equipment manufacturers. These existing sales contracts, along with
additional contracts with all of the major wireless
telecommunications integrators, represent meaningful embedded
revenue growth to the Company and are an exciting opportunity for
us to immediately broaden our telecommunications offering and
service new geographies. In advance of closing on this
acquisition, we performed our due diligence and identified several
areas where we can make strategic improvements to further
strengthen this business, which we will focus on in fiscal year
2019. These would include building employee morale, improving
supplier confidence and delivering increased resources to the
blue-chip customer base in the wireless telecommunications
industry.
“The planned sale of the Cable TV segment, which
is anticipated to close in the third fiscal quarter 2019, will
provide further stability to the business and improve our financial
performance by enabling us to remain focused on further expanding
and strengthening the Telco segment. We are excited about our plans
for 2019 and look forward to advancing our strategic growth plan
and building the value of the business,” concluded Mr. Hart.
Results for the three months ended
December 31, 2018
Consolidated sales decreased 8% to $11.3 million
for the three months ended December 31, 2018 compared with $12.3
million for the three months ended December 31, 2017.
The decrease in sales was in the Cable TV
segment of $1.4 million, partially offset by an increase in the
Telco segment of $0.4 million.
The decrease in Cable TV sales was due to a
decrease in equipment sales and repair service revenue of $1.1
million and $0.3 million, respectively.
The increase in sales for the Telco segment was
due to an increase in equipment sales of $0.9 million, partially
offset by a decrease in recycling revenue of $0.5 million.
The increase in Telco equipment sales was due to Nave
Communications of $0.7 million and Triton Datacom of $0.2
million. The decrease in recycling revenue was due primarily
to timing of recycling shipments in the first quarter compared to
the prior year.
Consolidated gross profit decreased $0.5 million
due primarily to lower gross profit realized from recycling revenue
as a result of lower revenue in the first quarter of 2019.
Consolidated operating, selling, general and
administrative expenses increased 4% to $3.8 million compared with
$3.6 million for the three months ended December 31, 2017. The
increase primarily consisted of additional audit and legal expenses
associated with the Fulton Technologies asset acquisition and
pending sale of the Cable TV segment.
The Company recorded a provision for income
taxes of $0.1 million for the three months ended December 31, 2018,
compared with $0.3 million for the three months ended December 31,
2017.
Net loss for the three months ended December 31,
2018, was $1.0 million, or $0.10 per diluted share, compared with a
net loss of $0.7 million, or $0.07 per diluted share, for the same
period of 2017.
Adjusted EBITDA for the three months ended
December 31, 2018 was a loss of $0.6 million compared with income
of $0.1 million for the same period ended December 31, 2017.
Cash and cash equivalents were $2.8 million as
of December 31, 2018, compared with $3.1 million as of September
30, 2018. As of December 31, 2018, the Company had inventory
of $18.6 million, compared with $18.9 million as of September 30,
2018.
In October and November 2018, the Company paid
off its outstanding term loans and line of credit totaling $2.6
million with its primary financial lender. Therefore, the
Company is no longer under its forbearance agreement.
In December 2018, the Company entered into
another credit agreement with a different financial lender.
This credit agreement contains a $2.5 million revolving line of
credit and matures on December 17, 2019.
The Company also made a $500,000 deposit on
December 27, 2018 in connection with the net asset acquisition of
Fulton Technologies, Inc. and Mill City Communications,
Inc.
Earnings Conference Call
The Company will host a conference call on Tuesday, February
12th, at 12:00 p.m. Eastern Time featuring remarks by Joseph Hart,
President and Chief Executive Officer, Dave Chymiak, Chief
Technology Officer, Scott Francis, Chief Financial Officer, and Don
Kinison, President of the Telecommunications Division.
The conference call will be available via webcast and can be
accessed through the Investor Relations section of ADDvantage's
website, www.addvantagetechnologies.com. Please allow extra
time prior to the call to visit the site and download any necessary
software to listen to the Internet broadcast. The dial-in number
for the conference call is 1-888-394-8218 (domestic) or
1-323-701-0225 (international). All dial-in participants must use
the following code to access the call: 9871921. Please call at
least five minutes before the scheduled start time.
For interested individuals unable to join the conference call, a
replay of the call will be available through February 26, 2019 at
1-844-512-2921 (domestic) or 1-412-317-6671 (international).
Participants must use the following code to access the replay of
the call: 9871921. An online archive of the webcast will be
available on the Company's website for 30 days following the
call.
About ADDvantage Technologies Group, Inc.
ADDvantage Technologies Group, Inc.
(NASDAQ: AEY) supplies the cable television (Cable TV) and
telecommunications industries with a comprehensive line of new and
used system-critical network equipment and hardware from a broad
range of leading manufacturers. The equipment and hardware
ADDvantage distributes is used to acquire, distribute, and protect
the communications signals carried on fiber optic, coaxial cable
and wireless distribution systems, including television
programming, high-speed data (Internet) and telephony. Through the
acquisition of Fulton, the Company will provide turn-key wireless
infrastructure services, such as the installation and
decommissioning of equipment on cell sites, for wireless carriers,
national integrators, and equipment manufacturers supporting the
wireless carriers. In addition, ADDvantage operates a
national network of technical repair centers focused primarily on
Cable TV equipment and recycles surplus and obsolete Cable TV and
telecommunications equipment.ADDvantage operates through its
subsidiaries, Tulsat, Tulsat-Atlanta, Tulsat-Texas, NCS Industries,
ComTech Services, Nave Communications, Triton Datacom, and Fulton
Technologies. For more information, please visit the corporate web
site at www.addvantagetechnologies.com.
The information in this announcement may include
forward-looking statements. All statements, other than
statements of historical facts, which address activities, events or
developments that the Company expects or anticipates will or may
occur in the future, are forward-looking statements. These
statements are subject to risks and uncertainties, which could
cause actual results and developments to differ materially from
these statements. A complete discussion of these risks and
uncertainties is contained in the Company’s reports and documents
filed from time to time with the Securities and Exchange
Commission.
Non-GAAP Financial
MeasuresAdjusted EBITDA is a supplemental, non-GAAP
financial measure. EBITDA is defined as earnings before
interest expense, income taxes, depreciation and
amortization. Adjusted EBITDA as presented also excludes
restructuring and impairment charges, other income, interest income
and income from equity method investment. Management believes
providing Adjusted EBITDA in this release is useful to investors’
understanding and assessment of the Company’s ongoing continuing
operations and prospects for the future and it is a used by the
financial community to evaluate the market value of companies
considered to be in similar businesses. Since Adjusted EBITDA
is not a measure of performance calculated in accordance with GAAP,
it should not be considered in isolation of, or as a substitute
for, net earnings as an indicator of operating performance.
Adjusted EBITDA, as calculated in the table below, may not be
comparable to similarly titled measures employed by other
companies. In addition, Adjusted EBITDA is not necessarily a
measure of our ability to fund our cash needs.
(Tables follow)
ADDVANTAGE TECHNOLOGIES GROUP, INC.CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS(UNAUDITED)
|
Three Months Ended December 31, |
|
|
2018 |
|
|
|
2017 |
|
Sales |
$ |
11,272,286 |
|
|
$ |
12,284,765 |
|
Cost of sales |
|
8,430,724 |
|
|
|
8,903,610 |
|
Gross profit |
|
2,841,562 |
|
|
|
3,381,155 |
|
Operating, selling,
general and administrative expenses |
|
3,796,680 |
|
|
|
3,646,823 |
|
Loss from
operations |
|
(955,118 |
) |
|
|
(265,668 |
) |
Interest expense |
|
24,863 |
|
|
|
96,094 |
|
Loss before income
taxes |
|
(979,981 |
) |
|
|
(361,762 |
) |
Provision for income
taxes |
|
59,000 |
|
|
|
345,000 |
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(1,038,981 |
) |
|
$ |
(706,762 |
) |
|
|
|
|
|
|
|
|
Loss per share: |
|
|
Basic |
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
Diluted |
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
Shares used in per
share calculation: |
|
|
Basic |
|
10,361,292 |
|
|
|
10,225,995 |
|
Diluted |
|
10,361,292 |
|
|
|
10,225,995 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2018 |
|
Three Months Ended December 31, 2017 |
|
Cable TV |
|
Telco |
|
Total |
|
Cable TV |
|
Telco |
|
Total |
Loss from
operations |
$ |
(320,381 |
) |
|
$ |
(634,737 |
) |
|
$ |
(955,118 |
) |
|
$ |
(188,500 |
) |
|
$ |
(77,168 |
) |
|
$ |
(265,668 |
) |
Depreciation |
|
80,020 |
|
|
|
31,697 |
|
|
|
111,717 |
|
|
|
66,948 |
|
|
|
31,195 |
|
|
|
98,143 |
|
Amortization |
|
− |
|
|
|
266,775 |
|
|
|
266,775 |
|
|
|
− |
|
|
|
313,311 |
|
|
|
313,311 |
|
Adjusted
EBITDA |
$ |
(240,361 |
) |
|
$ |
(336,265 |
) |
|
$ |
(576,626 |
) |
|
$ |
(121,552 |
) |
|
$ |
267,338 |
|
|
$ |
145,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDVANTAGE TECHNOLOGIES GROUP, INC.CONSOLIDATED
CONDENSED BALANCE SHEETS(UNAUDITED)
|
December 31, 2018 |
|
September 30, 2018 |
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
Cash and
cash equivalents |
$ |
2,779,289 |
|
|
$ |
3,129,280 |
|
Accounts
receivable, net of allowance for doubtful accounts
of $150,000 |
|
5,010,736 |
|
|
|
4,400,868 |
|
Income
tax receivable |
|
116,256 |
|
|
|
178,766 |
|
Inventories, net of allowance for excess and obsolete |
|
|
inventory
of $4,993,000 and $4,965,000, respectively |
|
18,572,493 |
|
|
|
18,888,042 |
|
Prepaid
expenses |
|
386,789 |
|
|
|
264,757 |
|
Assets
held for sale |
|
‒ |
|
|
|
3,666,753 |
|
Total current
assets |
|
26,865,563 |
|
|
|
30,528,466 |
|
|
|
|
Property and equipment,
at cost |
|
6,292,171 |
|
|
|
6,294,152 |
|
Less: Accumulated
depreciation |
|
(4,324,319 |
) |
|
|
(4,276,024 |
) |
Net property and
equipment |
|
1,967,852 |
|
|
|
2,018,128 |
|
|
|
|
Investment in and loans
to equity method investee |
|
12,000 |
|
|
|
49,000 |
|
Intangibles, net of
accumulated amortization |
|
6,577,623 |
|
|
|
6,844,398 |
|
Goodwill |
|
4,820,185 |
|
|
|
4,820,185 |
|
Other assets |
|
683,418 |
|
|
|
134,443 |
|
|
|
|
|
|
|
|
|
Total assets |
$ |
40,926,641 |
|
|
$ |
44,394,620 |
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
Current
liabilities: |
|
|
Accounts
payable |
$ |
3,876,056 |
|
|
$ |
4,657,188 |
|
Accrued
expenses |
|
1,277,431 |
|
|
|
1,150,010 |
|
Notes
payable – current portion |
|
‒ |
|
|
|
2,594,185 |
|
Deferred
gain – current portion |
|
138,380 |
|
|
|
‒ |
|
Other
current liabilities |
|
643,559 |
|
|
|
664,374 |
|
Total current
liabilities |
|
5,935,426 |
|
|
|
9,065,757 |
|
|
|
|
Deferred
gain, less current portion |
|
1,233,883 |
|
|
|
‒ |
|
Other
liabilities |
|
165,992 |
|
|
|
801,612 |
|
Total liabilities |
|
7,335,301 |
|
|
|
9,867,369 |
|
|
|
|
Shareholders’
equity: |
|
|
Common
stock, $.01 par value; 30,000,000 shares authorized;
10,861,950 and 10,806,803 shares issued, respectively;
10,361,292 and 10,306,145 shares outstanding, respectively |
|
108,620 |
|
|
|
108,068 |
|
Paid in
capital |
|
(4,495,825 |
) |
|
|
(4,598,343 |
) |
Retained
earnings |
|
38,978,559 |
|
|
|
40,017,540 |
|
Total
shareholders’ equity before treasury stock |
|
34,591,354 |
|
|
|
35,527,265 |
|
|
|
|
Less: Treasury stock, 500,658 shares, at cost |
|
(1,000,014 |
) |
|
|
(1,000,014 |
) |
Total shareholders’
equity |
|
33,591,340 |
|
|
|
34,527,251 |
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders’ equity |
$ |
40,926,641 |
|
|
$ |
44,394,620 |
|
|
|
|
|
|
|
|
|
For further information |
KCSA Strategic Communications |
Company Contact: |
Elizabeth Barker |
Scott Francis (918) 251-9121 |
(212) 896-1203 |
ebarker@kcsa.com |
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