ADDvantage Technologies Group, Inc. (NASDAQ: AEY) (“ADDvantage
Technologies” or the “Company”) today reported financial results
for the three and six months ended June 30, 2023, the second
quarter of 2023. Effective September 2022, the Company has changed
its fiscal year end from September 30 to December 31, and this
report reflects that adjustment.
“Both segments of our business were impacted by
macro-headwinds during the quarter," commented Joe Hart, Chief
Executive Officer. "Orders for used and refurbished equipment in
our Telco segment have been drastically reduced due to the
overstocking done in 2022 by our customers and we have been forced
to wait for the burn off of that excess inventory by the optical
network providers sometime later this year. Our Wireless segment
was hit late in the second quarter by a sudden downturn in
5G-related build activity by two majors industry customers, and an
overall slowdown in the industry by the national wireless carriers.
Construction is expected to pick back up later in the year and in
2024 as wireless data consumption and network demand continues to
climb at a positive rate.”
“Our efforts to expand our addressable market in
the wireless segment are accelerating, and under the leadership of
Brian Davidson, our new Chief Revenue Officer, we are optimistic
that we can secure additional projects from wireless carriers over
the next few quarters," added Mr. Hart. "We are also very
encouraged by the Federal Government’s funding of the Rural
Broadband Program (BEAD) and the Rural Digital Opportunity Fund
(RDOF). Both programs will provide funding of a few
hundred billion in fiber and fixed wireless network investment over
the next several years. We are aggressively pursuing opportunities
to design and build fiber networks across multiple regions. Our
recently announced strategic partnership with Walker Technical
Solutions (WTS) is also making encouraging progress on a
significant multi-year program in the Wireless space. The program
will aid in a carrier significantly increasing its diversity spend
and create a new source of revenue to Fulton Technologies for many
years to come.”
“Simultaneously, we have been methodically
reducing our Telco inventory levels in light of lower demand and
reducing our overall operating and SG&A expenses to return to
profitability in the coming quarters,” continued Mr. Hart.
Financial Results for the Three Months ended June 30,
2023
Second quarter sales were $12.1 million, a
decrease of $15.7 million, or 57% compared to $27.8 million last
year. The decrease was primarily due to a decrease of $14.8
million, or 72% in Telco revenue, and a decrease of $0.9 million,
or 13% in Wireless revenue.
Gross profit was $3.3 million, or 27% gross
margin, compared to gross profit of $8.1 million, or 29% gross
margin, for the same period last year. Operating expenses decreased
$0.5 million, or 23%, to $2.0 million reflecting the previously
announced cost-reduction initiatives. Consolidated selling, general
and administrative ("SG&A") expenses include overhead, which
consist of personnel, insurance, professional services,
communication, and other cost categories, decreased $0.8 million or
21%, to $3.3 million for the three months ended June 30, 2023 from
$4.1 million for the same period last year.
Net loss for the quarter was $2.8 million, or $0.20 per basic
and diluted share, compared to net income of $0.9 million, or $0.07
per basic and diluted share, for the same quarter last year.
Balance sheet
Cash and cash equivalents were $2.8 million as
of June 30, 2023, compared to $2.6 million at December 31, 2022.
During the quarter, the Company entered into securities purchase
agreements (the “Securities Purchase Agreements”) with Mast Hill
Fund, L.P. (the "Purchaser") for the issuance of 13% senior secured
promissory notes in the aggregate principal amount of up to $3.0
million (collectively the “Notes”) convertible into shares of
common stock of the Company, as well as the issuance of up to
72,000 shares of common stock as a commitment fee and warrants for
the purchase of up to 648,000 shares of common stock of the
Company, raising net proceeds of $2.8 million. As of June 30, 2023,
the Company had net inventories of $8.1 million, down from $8.5
million at March 31, 2023 and $9.6 million at December 31,
2022.
Outstanding debt as of June 30, 2023 was $3.8
million.
As a result of continuing negative operating
results, the Company is exploring obtaining other funding
arrangements to supplement working capital. Our unaudited financial
statements include an explanatory paragraph related to the
Company’s ability to continue as a going concern. See further
discussion in Note 2 to the Company’s financial statements included
in the Company’s Quarterly Report on Form 10-Q for the three and
six months ended June 30, 2023. This announcement does not
represent any change or amendment to the Company’s financial
statements or to its Quarterly Report on Form 10-Q for the three
and six months ended June 30, 2023.
Earnings Conference Call
The Company will host a conference call on
Monday, August 14, 2023 at 5 p.m. Eastern.
Date: |
Monday, August
14, 2023 |
Time: |
5 p.m. Eastern |
Toll-free Dial-in Number: |
1-877-407-9039 |
International Dial-in Number: |
1-201-689-8470 |
Conference ID: |
13740347 |
Participants can also click this link to have an operator
connect interested parties to the call.
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.
A replay of the conference call will be available through August
28, 2023.
Toll-free
Replay Number: |
1-844-512-2921 |
International Replay Number: |
1-412-317-6671 |
Replay Passcode: |
13740347 |
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 its
Wireless Infrastructure Services and Telecommunications segments.
Through its Wireless segment, Fulton Technologies 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
Telecommunications segment, Nave Communications and Triton Datacom
sell equipment and hardware used to acquire, distribute, and
protect the communications signals carried on fiber optic, coaxial
cable and wireless distribution systems. The Telecommunications
segment also offers repair services focused on telecommunication
equipment and recycling surplus and related obsolete
telecommunications equipment.
ADDvantage operates through its subsidiaries,
Fulton Technologies, Nave Communications, and Triton Datacom. For
more information, please visit the corporate web site at
www.addvantagetechnologies.com/.
Cautions Regarding Forward-Looking
Statements
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.
For further information:Hayden IRBrett Maas(646)
536-7331aey@haydenir.com
-- Tables follow
–ADDvantage Technologies Group,
Inc.Consolidated Balance
Sheets(in thousands, except share
amounts)(Unaudited)
|
June 30,2023 |
|
December 31, 2022 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
2,832 |
|
|
$ |
2,552 |
|
Restricted cash |
|
739 |
|
|
|
1,101 |
|
Accounts receivable, net of allowances of $304 and $262,
respectively |
|
1,385 |
|
|
|
1,682 |
|
Unbilled revenue |
|
1,831 |
|
|
|
5,005 |
|
Income tax receivable |
|
102 |
|
|
|
102 |
|
Inventories, net of allowances of $4,097 and $3,871,
respectively |
|
8,076 |
|
|
|
9,563 |
|
Prepaid expenses and other current assets |
|
1,203 |
|
|
|
1,399 |
|
Total current assets |
|
16,168 |
|
|
|
21,404 |
|
|
|
|
|
Property and equipment, at
cost: |
|
|
|
Machinery and equipment |
|
5,565 |
|
|
|
5,542 |
|
Leasehold improvements |
|
899 |
|
|
|
899 |
|
Total property and equipment,
at cost |
|
6,464 |
|
|
|
6,441 |
|
Less: Accumulated
depreciation |
|
(3,533 |
) |
|
|
(3,057 |
) |
Net property and
equipment |
|
2,931 |
|
|
|
3,384 |
|
Right-of-use lease assets |
|
1,060 |
|
|
|
1,540 |
|
Intangibles, net of
accumulated amortization |
|
549 |
|
|
|
709 |
|
Goodwill |
|
58 |
|
|
|
58 |
|
Other assets |
|
207 |
|
|
|
123 |
|
Total assets |
$ |
20,973 |
|
|
$ |
27,218 |
|
Liabilities and
Shareholders’ Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
$ |
6,151 |
|
|
$ |
9,407 |
|
Accrued expenses |
|
1,428 |
|
|
|
1,445 |
|
Deferred revenue |
|
349 |
|
|
|
148 |
|
Notes payable |
|
2,210 |
|
|
|
— |
|
Right-of-use lease obligations, current |
|
933 |
|
|
|
1,204 |
|
Finance lease obligations, current |
|
640 |
|
|
|
636 |
|
Other current liabilities |
|
589 |
|
|
|
442 |
|
Total current liabilities |
|
12,300 |
|
|
|
13,282 |
|
Right-of-use lease obligations, long-term |
|
288 |
|
|
|
635 |
|
Finance lease obligations, long-term |
|
937 |
|
|
|
1,254 |
|
Total liabilities |
|
13,525 |
|
|
|
15,171 |
|
Shareholders’ equity: |
|
|
|
|
Common stock, $0.01 par value;
30,000,000 shares authorized; 14,942,524 and 14,132,033 shares
issued and outstanding, respectively |
|
149 |
|
|
|
141 |
|
Paid in capital |
|
3,559 |
|
|
|
2,585 |
|
Retained earnings |
|
3,740 |
|
|
|
9,321 |
|
Total shareholders’
equity |
|
7,448 |
|
|
|
12,047 |
|
Total liabilities and
shareholders’ equity |
$ |
20,973 |
|
|
$ |
27,218 |
|
ADDvantage Technologies Group,
Inc.Consolidated Statements of
Operations(in thousands, except share and per
share amounts)(Unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Sales |
$ |
12,088 |
|
|
$ |
27,789 |
|
|
$ |
26,807 |
|
|
$ |
51,548 |
|
Cost of sales |
|
8,816 |
|
|
|
19,642 |
|
|
|
20,118 |
|
|
|
37,643 |
|
Gross profit |
|
3,272 |
|
|
|
8,147 |
|
|
|
6,689 |
|
|
|
13,905 |
|
Operating expenses |
|
1,967 |
|
|
|
2,544 |
|
|
|
4,014 |
|
|
|
5,296 |
|
Selling, general and
administrative expenses |
|
3,288 |
|
|
|
4,145 |
|
|
|
6,894 |
|
|
|
7,996 |
|
Depreciation and amortization
expense |
|
317 |
|
|
|
313 |
|
|
|
634 |
|
|
|
630 |
|
Loss on disposal of
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Income (loss) from
operations |
|
(2,300 |
) |
|
|
1,145 |
|
|
|
(4,853 |
) |
|
|
(19 |
) |
Other income (expense): |
|
|
|
|
|
|
|
Other income (expense) |
|
(184 |
) |
|
|
(233 |
) |
|
|
(333 |
) |
|
|
(401 |
) |
Interest expense |
|
(334 |
) |
|
|
(37 |
) |
|
|
(379 |
) |
|
|
(99 |
) |
Other income (expense), net |
|
(518 |
) |
|
|
(270 |
) |
|
|
(712 |
) |
|
|
(500 |
) |
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
(2,818 |
) |
|
|
875 |
|
|
|
(5,565 |
) |
|
|
(519 |
) |
Income tax provision |
|
16 |
|
|
|
— |
|
|
|
16 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(2,834 |
) |
|
$ |
875 |
|
|
$ |
(5,581 |
) |
|
$ |
(519 |
) |
|
|
|
|
|
|
|
|
Income (loss) per share: |
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.20 |
) |
|
$ |
0.07 |
|
|
$ |
(0.41 |
) |
|
$ |
(0.04 |
) |
Shares used in per share
calculation: |
|
|
|
|
|
|
|
Basic and diluted |
|
13,999,816 |
|
|
|
13,191,792 |
|
|
|
13,638,538 |
|
|
|
13,131,754 |
|
Non-GAAP Financial Measure
Adjusted 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 impairment charges for
operating lease right-of-use assets and intangible assets including
goodwill, stock compensation expense, other income, other expense,
interest income and income from equity method investment. Adjusted
EBITDA is presented below because this metric is used by the
financial community as a method of measuring our financial
performance and of evaluating 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 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.
The following table provides a reconciliation by
segment of loss from operations to Adjusted EBITDA for the three
and six month periods ended June 30, 2023 and 2022, in
thousands:
|
Three Months Ended June 30, 2023 |
|
Three Months Ended June 30, 2022 |
|
Wireless |
|
Telco |
|
Total |
|
Wireless |
|
Telco |
|
Total |
Income (loss) from operations |
$ |
(1,676 |
) |
|
$ |
(624 |
) |
|
$ |
(2,300 |
) |
|
$ |
(1,461 |
) |
|
$ |
2,606 |
|
$ |
1,145 |
|
Depreciation and amortization
expense |
|
197 |
|
|
|
120 |
|
|
|
317 |
|
|
|
192 |
|
|
|
121 |
|
|
313 |
|
Stock compensation expense |
|
108 |
|
|
|
91 |
|
|
|
199 |
|
|
|
44 |
|
|
|
59 |
|
|
103 |
|
Adjusted
EBITDA |
$ |
(1,371 |
) |
|
$ |
(413 |
) |
|
$ |
(1,784 |
) |
|
$ |
(1,225 |
) |
|
$ |
2,786 |
|
$ |
1,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2023 |
|
Six Months Ended June 30, 2022 |
|
Wireless |
|
Telco |
|
Total |
|
Wireless |
|
Telco |
|
Total |
Income (loss) from
operations |
$ |
(3,780 |
) |
|
$ |
(1,073 |
) |
|
$ |
(4,853 |
) |
|
$ |
(3,659 |
) |
|
$ |
3,640 |
|
$ |
(19 |
) |
Depreciation and amortization
expense |
|
394 |
|
|
|
240 |
|
|
|
634 |
|
|
|
388 |
|
|
|
242 |
|
|
630 |
|
Stock compensation expense |
|
302 |
|
|
|
296 |
|
|
|
598 |
|
|
|
145 |
|
|
|
205 |
|
|
350 |
|
Adjusted
EBITDA |
$ |
(3,084 |
) |
|
$ |
(537 |
) |
|
$ |
(3,621 |
) |
|
$ |
(3,126 |
) |
|
$ |
4,087 |
|
$ |
961 |
|
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