ADDvantage Technologies Group,
Inc. (NASDAQ: AEY) (“ADDvantage Technologies” or
the “Company”) announced today its financial results for the three
and six month periods ended March 31, 2019.
“Revenues for the second quarter of 2019 were
$17.3 million, which was an increase of 48% as compared to the
second quarter of 2018 and 53% compared to the first quarter of
2019,” said Joe Hart, President and CEO. “This meaningful
improvement in revenues is a reflection of the Company’s pivot to
strategically focus on the telecom industry, as we are in the
process of divesting of our Cable TV segment. The revenue
increase was primarily driven by the acquisition of Fulton in
January 2019, which launches us into the wireless infrastructure
services industry. Fulton contributed $4.2 million in revenue
for the quarter. We are also excited that our
telecommunications segment reported positive EBITDA and an increase
of revenue of $1.7 million, or 24%, compared to the second quarter
of 2018. The Company’s loss from operations for the three
months ended March 31, 2019 was $1.2 million, which included $0.5
million of costs associated with the acquisition, integration and
ramp up of Fulton and the proposed sale of the Cable TV
segment.
“Although Fulton experienced operating losses in
its first quarter with the Company due primarily to integration
costs and seasonality of the business, we believe that it is on the
path to provide a positive contribution to the bottom line during
the third quarter. Fulton has a strong reputation in the
industry as well as existing contractual relationships with the
four major U.S. wireless carriers, the national integrators and the
original equipment manufacturers (“OEMs”) that support these
wireless carriers, which is expected to drive these results.
To ensure continuity in its operations and a smooth integration
into ADDvantage Technologies, we appointed Colby Empey, who
previously served as Chief Operations Officer at Fulton
Technologies, to the new position of President of the Wireless
Infrastructure Services Segment at ADDvantage Technologies,
overseeing Fulton’s operations. We are encouraged by Fulton’s
outlook for the remainder of the fiscal year and expect to see
meaningful growth as 5G is rolled out throughout the U.S. over the
next several years, driving demand for wireless infrastructure
services.
“The telecommunications segment reported sales
of $8.7 million, which is an increase of 24% as compared to second
quarter of 2018 and 27% compared to the first quarter of 2019.
This was driven by strong sales momentum at both Nave
Communications and Triton Datacom. Most notably, Nave
increased revenue by 39% as compared to the first quarter of 2019.
A milestone was reached in the telecommunications segment
this quarter by reporting positive EBITDA of $0.3 million, a vast
improvement over previous quarters, which further solidifies our
growth strategy and demonstrates the success of the operational
improvements in the telecommunications segment,” Mr. Hart
continued.
“Nave’s new warehousing and operations location
at Palco Telecom, our world-class third-party reverse logistics
partner, allows it to serve an expanded geographic customer base,
positioning it for further growth. The new location also enables
Nave to operate more efficiently at reduced operating costs, while
offering a higher quality service to our customers. To drive
additional sales opportunities throughout the remainder of the
year, we are creating an additional business line for repair and
testing services to further increase sales at Nave. Nave’s
performance this quarter exceeded our expectations as they
experienced strong top line growth and reduced operating costs.
“At Triton, we plan to move out of our existing
Miami facility and into a newly constructed facility in nearby
Pembroke Park, Florida in July. Unfortunately, the move was
delayed from our original plan due to an ownership change at the
new facility, hindering Triton’s growth expectations and thus
contributing to the Company’s loss this quarter. The facility move
will give us the additional capacity to expand our equipment
refurbishment operations, which is our highest margin segment of
Triton, by adding additional products and manufacturers. The
expanded capacity will also support our plans to sell our equipment
products into the telephone carrier market. In order to
capture additional market share, we have increased our focus on the
brokerage business and internet sales to secure additional online
distribution channels for our products.
“In the second fiscal quarter of 2019, we made
meaningful progress advancing our plans to divest the Cable TV
segment. In April 2019, we distributed a proxy statement to
our stockholders, which announced a special meeting of stockholders
on May 29, 2019 to vote on the proposed sale of the Cable TV
businesses to Leveling 8 Inc., which is controlled by David
Chymiak. Mr. Chymiak is the Chief Technology Officer,
President of Tulsat, a member of the board of directors of the
Company, and a substantial stockholder of the Company. If the
sale is approved by the stockholders, we anticipate that we will
receive approximately $3.9 million in cash at closing, which
includes the funds received from the Sedalia, Missouri building
sale of $1.35 million, and a $6.4 million promissory note payable
over five years that is personally guaranteed by Mr.
Chymiak.
“Upon completion of the sale of the Cable TV
segment, we will be in an even stronger position to invest in the
long term growth of our telecom and wireless businesses in order to
build a stronger, more efficient foundation to support revenue
growth and financial stability,” concluded Mr. Hart.
Results for the three months ended March
31, 2019
Consolidated sales increased 48% to $17.3
million for the three months ended March 31, 2019 compared with
$11.6 million for the three months ended March 31, 2018. The
increase in sales was in the Wireless segment and Telco segment of
$4.2 million and $1.7 million, respectively, partially offset by a
decrease in the Cable TV segment of $0.2 million.
The increase in sales for the Wireless segment
of $4.2 million was as a result of the acquisition of Fulton and
Mill City which closed on January 4, 2019. The Company did
not report any revenues for the Wireless segment for the same
period in fiscal 2018.
The increase in sales for the Telco segment was
due to an increase in equipment sales and recycling revenue of $1.5
million and $0.2 million, respectively. The increase in Telco
equipment sales was due to Nave Communications of $1.0 million and
Triton Datacom of $0.5 million. The increase in recycling
revenue was due primarily to the timing of recycling shipments.
The decrease in sales for the Cable TV segment
of $0.2 million was due to a decrease in equipment sales and repair
service revenue of $0.1 million each.
Consolidated gross profit increased $0.3 million
due to the Wireless segment and Telco segment, which increased by
$0.1 million and $0.4 million, respectively, and was partially
offset by a decrease in the Cable TV segment of $0.2 million.
Consolidated operating, selling, general and
administrative expenses increased 39% to $4.8 million compared with
$3.4 million for the three months ended March 31, 2018. The
increase primarily consisted of acquisition costs in connection
with the acquisition of Fulton and Mill City as well as integration
expenses.
Equity earnings for the three months ended March
31, 2019 were $0.1 million, compared with equity losses of $0.3
million for the three months ended March 31, 2018. Equity
earnings for the three months ended March 31, 2019 consisted of
payments received from certain YTKG Solutions investment equity
owners related to amounts owed to the Company. The equity
losses for the three months ended March 31, 2018 consisted
primarily of a legal settlement with a subcontractor on the YKTG
Solutions wireless cell tower decommissioning project and the
associated legal expenses.
The Company recorded a provision for income
taxes of $4,000 for the three months ended March 31, 2019, compared
with a benefit for income taxes of $0.1 million for the three
months ended March 31, 2018. The increase in the tax
provision was due primarily to the valuation allowance netting the
deferred tax assets to zero for the three months ended March 31,
2019, offset by income taxes payable to certain tax
jurisdictions.
Net loss for the three months ended March 31,
2019, was $1.2 million, or $0.12 per diluted share, compared with a
net loss of $0.3 million, or $0.03 per diluted share, for the same
period of 2018.
Adjusted EBITDA for the three months ended March
31, 2019 was a loss of $0.8 million compared with income of $0.3
million for the same period ended March 31, 2018.
Results for the six months ended March
31, 2019
Consolidated sales increased 19% to $28.5
million for the six months ended March 31, 2019 compared with $23.9
million for the six months ended March 31, 2018. The increase
in sales was in the Wireless segment and Telco segment of $4.2 and
$2.0 million, respectively, partially offset by a decrease in the
Cable TV segment of $1.6 million.
Revenues for the Wireless segment were $4.2
million for the six months ended March 31, 2019, as a result of the
acquisition of Fulton and Mill City which closed on January 4,
2019. The Company did not report any revenues for the Wireless
segment for the same period last year.
Consolidated gross profit decreased $0.3 million
due to the Telco segment and Cable TV segment of $0.1 million and
$0.3 million, respectively, partially offset by an increase in the
Wireless segment which increased $0.1 million.
Consolidated operating, selling, general and
administrative expenses increased $1.5 million, or 21%, to $8.6
million for the six months ended March 31, 2019, from $7.1 million
in the same period in the prior year. This increase in expenses was
due to the Wireless segment, Telco segment and Cable TV segment and
included additional advertising and promotion expenses in the Telco
segment as well as costs in connection with the acquisition and
integration of Fulton and Mill City in the Wireless segment.
Equity earnings for the six months ended March
31, 2019 were $0.1 million, compared with equity losses of $0.3
million for the three months ended March 31, 2018. Equity
earnings for the three months ended March 31, 2019 consisted of
payments received from certain YTKG Solutions equity investment
owners related to amounts owed to the Company. The loss from
equity method investment for the six months ended March 31, 2018
consisted primarily of a legal settlement with a subcontractor on
the YKTG Solutions wireless cell tower decommissioning project and
the associated legal expenses.
The provision for income taxes was $0.1 million
for the six months ended March 31, 2019 compared to a provision for
income taxes of $0.2 million for the same period of 2018. The
increase in the tax provision was due primarily to the valuation
allowance netting the deferred tax assets to zero for the six
months ended March 31, 2019, offset by income taxes payable to
certain tax jurisdictions.
Net loss for the six months ended March 31,
2019, was $2.3 million, or $0.22 per diluted share, compared with
net loss of $1.0 million, or $0.09 per diluted share, for the same
period of 2018.Adjusted EBITDA for the six months ended March 31,
2019 was a loss of $1.4 million compared with income of $0.5
million for the same period ended March 31, 2018.
Cash and cash equivalents were $1.4 million as
of March 31, 2019, compared with $3.1 million as of September 30,
2018. As of March 31, 2019, the Company had inventory of
$19.4 million, compared with $18.9 million as of September 30,
2018.
Earnings Conference Call
The Company will host a conference call today, Tuesday, May
14th, at 12:00 p.m. Eastern Time featuring remarks by Joseph Hart,
President and Chief Executive Officer, Dave Chymiak, Chief
Technology Officer, Kevin Brown, Chief Financial Officer, Scott
Francis, Chief Accounting Officer, Don Kinison, President of the
Telecommunications Division, and Colby Empey, President of the
Wireless Services 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: 8383219. 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 May 28, 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: 8383219. 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) is a communications infrastructure services and
equipment provider operating a diversified group of
companies. Through Fulton Technologies, the Company provides
turn-key wireless infrastructure services including the
installation, modification and upgrading of equipment on
communication towers and small cell sites for wireless carriers,
national integrators, tower owners and major equipment
manufacturers. Through its Nave Communications, Triton
Datacom and cable television subsidiaries, ADDvantage sells
equipment and hardware used to acquire, distribute, and protect the
communications signals carried on fiber optic, coaxial cable and
wireless distribution systems, including high-speed data
(Internet), telephony and television programming. Through its
Nave subsidiary, ADDvantage offers repair services focused on
telecommunication equipment and recycles surplus and obsolete
telecommunications equipment. In addition, through its cable
television subsidiaries, ADDvantage operates a national network of
technical repair centers focused primarily on supporting cable
television equipment.
ADDvantage operates through its subsidiaries,
Fulton Technologies, Nave Communications, Triton Datacom, Tulsat,
Tulsat-Atlanta, Tulsat-Texas, NCS Industries and ComTech Services.
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 March 31, |
Six Months Ended March 31, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Sales |
$ |
17,273,103 |
|
$ |
11,649,528 |
|
$ |
28,545,389 |
|
$ |
23,934,293 |
|
Cost of sales |
|
13,709,089 |
|
|
8,304,463 |
|
|
22,139,813 |
|
|
17,208,073 |
|
Gross profit |
|
3,564,014 |
|
|
3,345,065 |
|
|
6,405,576 |
|
|
6,726,220 |
|
Operating, selling, general and
administrative expenses |
|
4,767,843 |
|
|
3,429,282 |
|
|
8,564,523 |
|
|
7,076,105 |
|
Loss from operations |
|
(1,203,829 |
) |
|
(84,217 |
) |
|
(2,158,947 |
) |
|
(349,885 |
) |
Other income (expense): |
|
|
|
|
Income (loss) from equity
method investment |
|
55,000 |
|
|
(258,558 |
) |
|
55,000 |
|
|
(258,558 |
) |
Other expense |
|
(43,259 |
) |
|
‒ |
|
|
(43,259 |
) |
|
‒ |
|
Interest expense |
|
(19,775 |
) |
|
(45,922 |
) |
|
(44,638 |
) |
|
(142,016 |
) |
Total other expense, net |
|
(8,034 |
) |
|
(304,480 |
) |
|
(32,897 |
) |
|
(400,574 |
) |
|
|
|
|
|
Loss before income taxes |
|
(1,211,863 |
) |
|
(388,697 |
) |
|
(2,191,844 |
) |
|
(750,459 |
) |
Provision (benefit) for income
taxes |
|
4,000 |
|
|
(129,000 |
) |
|
63,000 |
|
|
216,000 |
|
|
|
|
|
|
Net loss |
$ |
(1,215,863 |
) |
$ |
(259,697 |
) |
$ |
(2,254,844 |
) |
$ |
(966,459 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share: |
|
|
|
|
Basic |
$ |
(0.12 |
) |
$ |
(0.03 |
) |
$ |
(0.22 |
) |
$ |
(0.09 |
) |
Diluted |
$ |
(0.12 |
) |
$ |
(0.03 |
) |
$ |
(0.22 |
) |
$ |
(0.09 |
) |
Shares used in per share
calculation: |
|
|
|
|
Basic |
|
10,361,292 |
|
|
10,252,712 |
|
|
10,361,292 |
|
|
10,239,353 |
|
Diluted |
|
10,361,292 |
|
|
10,252,712 |
|
|
10,361,292 |
|
|
10,239,353 |
|
|
|
Three Months Ended March 31, 2019 |
|
|
|
Wireless |
|
|
Telco |
|
Cable TV |
|
|
Total |
|
Income (loss) from operations |
$ |
(1,114,326 |
) |
$ |
25,977 |
$ |
(115,480 |
) |
$ |
(1,203,829 |
) |
Depreciation |
|
84,333 |
|
|
30,253 |
|
19,723 |
|
|
134,309 |
|
Amortization |
|
6,100 |
|
|
266,775 |
|
‒ |
|
|
272,875 |
|
Adjusted EBITDA
(a) |
$ |
(1,023,893 |
) |
$ |
323,005 |
$ |
(95,757 |
) |
$ |
(796,645 |
) |
(a) The
Wireless segment includes acquisition expenses of $0.2 million
related to the acquisition of Fulton and Mill
City.
|
|
Three Months Ended March 31, 2018 |
|
|
|
Wireless |
|
Telco |
|
|
Cable TV |
|
Total |
|
Income (loss) from operations |
$ |
‒ |
$ |
(380,370 |
) |
$ |
296,153 |
$ |
(84,217 |
) |
Depreciation |
|
‒ |
|
32,549 |
|
|
66,660 |
|
99,209 |
|
Amortization |
|
‒ |
|
313,311 |
|
|
‒ |
|
313,311 |
|
Adjusted
EBITDA |
$ |
‒ |
$ |
(34,510 |
) |
$ |
362,813 |
$ |
328,303 |
|
|
|
Six Months Ended March 31, 2019 |
|
|
|
Wireless |
|
|
Telco |
|
|
Cable TV |
|
|
Total |
|
Loss from operations |
$ |
(1,114,326 |
) |
$ |
(608,760 |
) |
$ |
(435,861 |
) |
$ |
(2,158,947 |
) |
Depreciation |
|
84,333 |
|
|
61,949 |
|
|
99,744 |
|
|
246,026 |
|
Amortization |
|
6,100 |
|
|
533,550 |
|
|
‒ |
|
|
539,650 |
|
Adjusted EBITDA
(a) |
$ |
(1,023,893 |
) |
$ |
(13,261 |
) |
$ |
(336,117 |
) |
$ |
(1,373,271 |
) |
|
|
|
|
|
- The Wireless segment includes acquisition expenses of $0.2
million related to the acquisition of Fulton and Mill City.
|
|
Six months ended March 31, 2018 |
|
|
|
Wireless |
|
Telco |
|
|
Cable TV |
|
Total |
|
Income (loss) from operations |
$ |
‒ |
$ |
(457,538 |
) |
$ |
107,653 |
$ |
(349,885 |
) |
Depreciation |
|
‒ |
|
63,745 |
|
|
133,607 |
|
197,352 |
|
Amortization |
|
‒ |
|
626,622 |
|
|
‒ |
|
626,622 |
|
Adjusted
EBITDA |
$ |
‒ |
$ |
232,829 |
|
$ |
241,260 |
$ |
474,089 |
|
ADDVANTAGE TECHNOLOGIES GROUP, INC.CONSOLIDATED
CONDENSED BALANCE SHEETS(UNAUDITED)
|
March 31,2019 |
|
September 30,2018 |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ |
1,371,501 |
|
|
$ |
3,129,280 |
|
Restricted cash |
|
106,447 |
|
|
|
‒ |
|
Accounts receivable,
net of allowance for doubtful accounts of
$150,000 |
|
6,727,126 |
|
|
|
4,400,868 |
|
Unbilled
revenue |
|
1,414,992 |
|
|
|
‒ |
|
Income tax
receivable |
|
108,746 |
|
|
|
178,766 |
|
Inventories, net of
allowance for excess and obsolete |
|
|
inventory of
$4,850,000 and $4,965,000, respectively |
|
19,404,567 |
|
|
|
18,888,042 |
|
Prepaid
expenses |
|
772,621 |
|
|
|
264,757 |
|
Other current
assets |
|
258,209 |
|
|
|
‒ |
|
Assets held for
sale |
|
‒ |
|
|
|
3,666,753 |
|
Total current assets |
|
30,164,209 |
|
|
|
30,528,466 |
|
|
|
|
Property and equipment, at
cost |
|
6,456,855 |
|
|
|
6,294,152 |
|
Less: Accumulated
depreciation |
|
(3,992,053 |
) |
|
|
(4,276,024 |
) |
Net property and equipment |
|
2,464,802 |
|
|
|
2,018,128 |
|
|
|
|
Investment in and loans to equity
method investee |
|
‒ |
|
|
|
49,000 |
|
Intangibles, net of accumulated
amortization |
|
6,548,748 |
|
|
|
6,844,398 |
|
Goodwill |
|
4,836,472 |
|
|
|
4,820,185 |
|
Other assets |
|
217,461 |
|
|
|
134,443 |
|
|
|
|
Total assets |
$ |
44,231,692 |
|
|
$ |
44,394,620 |
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ |
6,612,708 |
|
|
$ |
4,657,188 |
|
Accrued expenses |
|
1,596,386 |
|
|
|
1,150,010 |
|
Notes payable – current
portion |
|
750,000 |
|
|
|
2,594,185 |
|
Deferred gain – current
portion |
|
194,152 |
|
|
|
‒ |
|
Other current
liabilities |
|
739,887 |
|
|
|
664,374 |
|
Total current liabilities |
|
9,893,133 |
|
|
|
9,065,757 |
|
|
|
|
Deferred gain, less
current portion |
|
1,701,243 |
|
|
|
‒ |
|
Other liabilities |
|
228,820 |
|
|
|
801,612 |
|
Total liabilities |
|
11,823,196 |
|
|
|
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 |
|
(4,462,806 |
) |
|
|
(4,598,343 |
) |
Retained
earnings |
|
37,762,696 |
|
|
|
40,017,540 |
|
Total shareholders’
equity before treasury stock |
|
33,408,510 |
|
|
|
35,527,265 |
|
|
|
|
Less: Treasury
stock, 500,658 shares, at cost |
|
(1,000,014 |
) |
|
|
(1,000,014 |
) |
Total shareholders’ equity |
|
32,408,496 |
|
|
|
34,527,251 |
|
|
|
|
Total liabilities and
shareholders’ equity |
$ |
44,231,692 |
|
|
$ |
44,394,620 |
|
For further information |
KCSA Strategic Communications |
Company Contact: |
Elizabeth Barker |
Scott Francis |
(212) 896-1203 |
(918) 251-9121 |
ebarker@kcsa.com |
ADDvantage Technologies (NASDAQ:AEY)
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ADDvantage Technologies (NASDAQ:AEY)
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