ADDvantage Technologies Group, Inc. (NASDAQ:
AEY) today announced its financial results for the three and
nine month periods ended June 30, 2018.
Joe Hart, interim President and CEO of
ADDvantage Technologies, commented, “We are pleased with our
top-line results for the fiscal third quarter. Nave Communications’
new sales strategy continued to drive sales growth for the second
consecutive quarter, contributing to our improved Telco segment
results. Triton Datacom’s performance was in line with our internal
expectations once again, and we believe there is room to grow its
customer base and further diversify its product lines to help drive
additional solid revenue generation at Triton going forward.
“The Cable TV segment reported an overall
decline in sales as compared to last year due primarily to the loss
of a large repair customer earlier in 2018. We performed a
goodwill impairment assessment on the Cable TV segment due to the
lower operating results reported this quarter, lower projected
results and management discussions surrounding various strategic
alternatives for this segment given the lower operating
performance. As a result of this assessment, we recognized a
non-cash impairment charge of $1.2 million for the three months
ended June 30, 2018,” continued Mr. Hart.
“During the quarter, we reported approximately
$900,000 of non-recurring or non-cash expenses which increased our
operating loss, despite the solid top-line results. These items
include inventory reserve expenses of $500,000 in the Cable TV
segment, market valuation adjustment for inventory of $200,000 in
the Telco segment, and a severance package related to the
resignation of our former chief executive officer,” continued Mr.
Hart.
“It is a key corporate objective for ADDvantage
Technologies to leverage its current operational and financial
platform to grow its position in the telecommunications market, and
I am excited to join the Company and lead this growth strategy. To
kick start our strategic plan, we are undertaking a comprehensive
review of our business units to identify opportunities to grow and
diversify our revenue, streamline our operating costs and to make
possible recommendations for divestitures of assets to help finance
and drive our growth strategy. Although it has only been a
few weeks since I was appointed CEO, I am encouraged by the
opportunities in the telecommunications market, and I look forward
to advancing our strategy to build an efficient and sustainable
business throughout the remainder of fiscal 2018 and beyond,”
concluded Mr. Hart.
Results for the three months ended June
30, 2018
Consolidated sales decreased 3% to $12.6 million
for the three months ended June 30, 2018 compared with $13.0
million for the three months ended June 30, 2017. The
decrease in sales was in the Cable TV segment of $1.1 million,
partially offset by an increase in sales in the Telco segment of
$0.7 million. The decrease in Cable TV sales was due to a decrease
in repair service revenue and in refurbished equipment sales of
$0.8 million and $0.4 million, respectively, partially offset by an
increase in new equipment revenue of $0.1 million. The increase in
sales for the Telco segment was due to an increase in equipment
sales and recycling revenue of $0.5 million and $0.2 million,
respectively.
Consolidated operating, selling, general and
administrative expenses decreased 3% to $3.6 million, compared with
$3.8 million for the same period last year. This was due to a
decrease in expenses in the Cable TV segment of $0.3 million,
partially offset by an increase in the Telco segment of $0.1
million.
The Company recorded a goodwill impairment
charge of $1.2 million for the three months ended June 30, 2018,
which represented the carrying value of goodwill for the Cable TV
segment. The charge was recorded as a result of a goodwill
impairment analysis performed by the Company on the Cable TV
segment. The goodwill impairment analysis was performed due
to lower operating results from the Cable TV segment compared to
the prior year, lower projected results and management discussions
surrounding various strategic alternatives for the Cable TV segment
given its operating performance.
Net loss for the three months ended June 30,
2018, was $1.5 million, or $0.15 per diluted share, compared with a
net loss of $0.1 million, or $0.01 per diluted share, for the same
period of 2017.
Adjusted EBITDA for the three months ended June
30, 2018 was a loss of $0.2 million compared with income of $0.4
million for the same period ended June 30, 2017.
Results for the nine months ended June
30, 2018
Consolidated sales were $36.5 million for the
nine months ended June 30, 2018, compared with $36.4 million for
the nine months ended June 30, 2017. The increase in sales
was in the Telco segment of $2.3 million, partially offset by a
decrease in the Cable TV segment of $2.2 million.
Consolidated operating, selling, general and
administrative expenses decreased 3% to $10.7 million for the nine
months ended June 30, 2018 from $11.0 million for the same period
last year. This decrease in expenses was due to the Cable
segment of $0.5 million, partially offset by an increase in the
Telco segment of $0.2 million
The Company recorded a goodwill impairment
charge of $1.2 million for the nine months ended June 30, 2018,
which represented the carrying value of goodwill for the Cable TV
segment. The charge was recorded as a result of the goodwill
impairment analysis performed by the Company on the Cable TV
segment.
The loss from equity method investment for the
nine months ended June 30, 2018 of $0.3 million consisted primarily
of a legal settlement with a subcontractor on the YKTG Solutions
wireless cell tower decommissioning project and the associated
legal expenses.
Net loss for the nine month period ended June
30, 2018 was $2.5 million, or a loss of $0.24 per diluted share,
compared with net income of $0.2 million, or $0.02 per diluted
share, for the same period of 2017.
Adjusted EBITDA for the nine months ended June
30, 2018 was $0.3 million compared with $1.8 million for the same
period ended June 30, 2017.
Cash and cash equivalents were $2.1 million as
of June 30, 2018, compared with $4.0 million as of September 30,
2017. The decrease in cash was due primarily to the
extinguishment of one of the Company’s term loans in December 2017
by paying the outstanding balance of $2.7 million and the first
annual guaranteed payment of $0.7 million related to the
acquisition of Triton Miami, Inc. As of June 30, 2018, the
Company had inventory of $20.0 million, compared with $22.3 million
as of September 30, 2017.
Earnings Conference Call
The Company will host a conference call on
Tuesday, August 14th, at 12:00 p.m. Eastern Time featuring remarks
by Joseph Hart, interim President and Chief Executive Officer, Dave
Chymiak, Chief Technology Officer, Scott Francis, Chief Financial
Officer, and Don Kinison, Vice President of Sales.
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
1-800-239-9838 (domestic) or 1-323-794-2551 (international). All
dial-in participants must use the following code to access the
call: 6757538. 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
August 28, 2018 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: 6757538. 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. 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 and Triton Datacom. 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. In addition, Adjusted EBITDA as
presented excludes 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 June 30, |
Nine Months Ended June 30, |
| |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
| Sales |
$ |
12,573,899 |
|
$ |
12,989,990 |
|
$ |
36,508,192 |
|
$ |
36,380,572 |
|
| Cost of sales |
|
9,490,966 |
|
|
9,234,039 |
|
|
26,699,039 |
|
|
24,836,563 |
|
| Gross profit |
|
3,082,933 |
|
|
3,755,951 |
|
|
9,809,153 |
|
|
11,544,009 |
|
| Operating, selling,
general and administrative expenses |
|
3,641,434 |
|
|
3,757,027 |
|
|
10,717,539 |
|
|
11,031,276 |
|
| Goodwill impairment
charge |
|
1,150,059 |
|
|
– |
|
|
1,150,059 |
|
|
– |
|
| Income (loss) from
operations |
|
(1,708,560 |
) |
|
(1,076 |
) |
|
(2,058,445 |
) |
|
512,733 |
|
| Other income
(expense): |
|
|
|
|
| Loss from
equity method investment |
|
– |
|
|
– |
|
|
(258,558 |
) |
|
– |
|
| Interest
expense |
|
(45,139 |
) |
|
(85,787 |
) |
|
(187,155 |
) |
|
(279,764 |
) |
| Total other expense,
net |
|
(45,139 |
) |
|
(85,787 |
) |
|
(445,713 |
) |
|
(279,764 |
) |
| |
|
|
|
|
| Income (loss) before
income taxes |
|
(1,753,699 |
) |
|
(86,863 |
) |
|
(2,504,158 |
) |
|
232,969 |
|
| Provision (benefit) for
income taxes |
|
(247,000 |
) |
|
(20,000 |
) |
|
(31,000 |
) |
|
72,000 |
|
| |
|
|
|
|
| Net income (loss) |
$ |
(1,506,699 |
) |
$ |
(66,863 |
) |
$ |
(2,473,158 |
) |
$ |
160,969 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) per
share: |
|
|
|
|
|
Basic |
$ |
(0.15 |
) |
$ |
(0.01 |
) |
$ |
(0.24 |
) |
$ |
0.02 |
|
|
Diluted |
$ |
(0.15 |
) |
$ |
(0.01 |
) |
$ |
(0.24 |
) |
$ |
0.02 |
|
| Shares used in per
share calculation: |
|
|
|
|
|
Basic |
|
10,306,145 |
|
|
10,192,244 |
|
|
10,261,617 |
|
|
10,160,017 |
|
|
Diluted |
|
10,306,145 |
|
|
10,192,244 |
|
|
10,261,617 |
|
|
10,160,582 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three Months Ended June 30, 2018 |
|
|
Three Months Ended June 30, 2017 |
|
| |
|
Cable TV |
|
|
Telco |
|
|
Total |
|
|
|
Cable TV |
|
|
Telco |
|
|
Total |
|
| Income (loss) from
operations |
$ |
(1,355,387 |
) |
$ |
(353,173 |
) |
$ |
(1,708,560 |
) |
|
$ |
414,383 |
|
$ |
(415,459 |
) |
$ |
(1,076 |
) |
| Goodwill impairment
charge |
|
1,150,059 |
|
|
– |
|
|
1,150,059 |
|
|
|
– |
|
|
– |
|
|
– |
|
| Depreciation |
|
59,169 |
|
|
32,583 |
|
|
91,752 |
|
|
|
77,114 |
|
|
33,673 |
|
|
110,787 |
|
| Amortization |
|
− |
|
|
313,311 |
|
|
313,311 |
|
|
|
− |
|
|
313,311 |
|
|
313,311 |
|
| Adjusted
EBITDA (a) |
$ |
(146,159 |
) |
$ |
(7,279 |
) |
$ |
(153,438 |
) |
|
$ |
491,497 |
|
$ |
(68,475 |
) |
$ |
423,022 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- The Telco segment includes earn-out expenses of zero and $0.1
million for the three months ended June 30, 2018 and 2017,
respectively, related to the acquisition of Triton Miami, Inc.
| |
Nine Months Ended June 30, 2018 |
|
|
Nine Months Ended June 30, 2017 |
| |
|
Cable TV |
|
|
Telco |
|
|
Total |
|
|
|
Cable TV |
|
|
Telco |
|
|
Total |
| Income (loss) from
operations |
$ |
(1,247,733 |
) |
$ |
(810,712 |
) |
$ |
(2,058,445 |
) |
|
$ |
1,586,013 |
|
$ |
(1,073,280 |
) |
$ |
512,733 |
| Goodwill impairment
charge |
|
1,150,059 |
|
|
– |
|
|
1,150,059 |
|
|
|
– |
|
|
– |
|
|
– |
| Depreciation |
|
192,776 |
|
|
96,328 |
|
|
289,104 |
|
|
|
225,253 |
|
|
103,420 |
|
|
328,673 |
| Amortization |
|
− |
|
|
939,933 |
|
|
939,933 |
|
|
|
− |
|
|
953,871 |
|
|
953,871 |
| Adjusted
EBITDA (a) |
$ |
95,102 |
|
$ |
225,549 |
|
$ |
320,651 |
|
|
$ |
1,811,266 |
|
$ |
(15,989 |
) |
$ |
1,795,277 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- The Telco segment includes earn-out expenses of zero and $0.2
million for the nine months ended June 30, 2018 and 2017,
respectively, related to the acquisition of Triton Miami, Inc.
The Telco segment for the nine months ended June 30, 2017
includes acquisition related costs of $0.2 million.
ADDVANTAGE TECHNOLOGIES GROUP, INC.CONSOLIDATED
CONDENSED BALANCE
SHEETS(UNAUDITED)
|
|
|
June 30,2018 |
|
|
September 30,2017 |
|
|
Assets |
|
|
|
|
|
|
| Current assets: |
|
|
| Cash and
cash equivalents |
$ |
2,141,434 |
|
$ |
3,972,723 |
|
| Accounts
receivable, net of allowance for doubtful accounts
of $150,000 |
|
5,078,143 |
|
|
5,567,005 |
|
| Income
tax receivable |
|
197,418 |
|
|
247,186 |
|
|
Inventories, net of allowance for excess and obsolete inventory of
$3,500,000 and $2,939,289, respectively |
|
20,045,232 |
|
|
22,333,820 |
|
| Prepaid
expenses |
|
274,605 |
|
|
298,152 |
|
| Total current
assets |
|
27,736,832 |
|
|
32,418,886 |
|
| |
|
|
| Property and equipment,
at cost: |
|
|
| Land and
buildings |
|
7,211,190 |
|
|
7,218,678 |
|
| Machinery
and equipment |
|
3,792,933 |
|
|
3,995,668 |
|
| Leasehold
improvements |
|
200,617 |
|
|
202,017 |
|
| Total property and
equipment, at cost |
|
11,204,740 |
|
|
11,416,363 |
|
| Less: Accumulated
depreciation |
|
(5,522,693 |
) |
|
(5,395,791 |
) |
| Net property and
equipment |
|
5,682,047 |
|
|
6,020,572 |
|
| |
|
|
| Investment in and loans
to equity method investee |
|
89,500 |
|
|
98,704 |
|
| Intangibles, net of
accumulated amortization |
|
7,607,554 |
|
|
8,547,487 |
|
| Goodwill |
|
4,820,185 |
|
|
5,970,244 |
|
| Deferred income
taxes |
|
1,731,000 |
|
|
1,653,000 |
|
| Other assets |
|
134,443 |
|
|
138,712 |
|
| |
|
|
|
|
|
|
| Total assets |
$ |
47,801,561 |
|
$ |
54,847,605 |
|
| |
|
|
|
|
|
|
|
|
|
June 30,2018 |
|
|
September 30,2017 |
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
| Current
liabilities: |
|
|
| Accounts
payable |
$ |
2,665,043 |
|
$ |
3,392,725 |
|
| Accrued
expenses |
|
1,346,663 |
|
|
1,406,722 |
|
| Notes
payable – current portion |
|
2,976,044 |
|
|
4,189,605 |
|
| Other
current liabilities |
|
657,498 |
|
|
664,325 |
|
| Total current
liabilities |
|
7,645,248 |
|
|
9,653,377 |
|
| |
|
|
| Notes
payable, less current portion |
|
– |
|
|
2,094,246 |
|
| Other
liabilities |
|
792,896 |
|
|
1,401,799 |
|
| Total liabilities |
|
8,438,144 |
|
|
13,149,422 |
|
| |
|
|
| Shareholders’
equity: |
|
|
| Common
stock, $.01 par value; 30,000,000 shares authorized;
10,806,803 and 10,726,653 shares issued, respectively;
10,306,145 and 10,225,995 shares outstanding, respectively |
|
108,068 |
|
|
107,267 |
|
| Paid in
capital |
|
(4,608,875 |
) |
|
(4,746,466 |
) |
| Retained
earnings |
|
44,864,238 |
|
|
47,337,396 |
|
| Total
shareholders’ equity before treasury stock |
|
40,363,431 |
|
|
42,698,197 |
|
| |
|
|
| Less:
Treasury stock, 500,658 shares, at cost |
|
(1,000,014 |
) |
|
(1,000,014 |
) |
| Total shareholders’
equity |
|
39,363,417 |
|
|
41,698,183 |
|
| |
|
|
|
|
|
|
| Total liabilities and
shareholders’ equity |
$ |
47,801,561 |
|
$ |
54,847,605 |
|
| |
|
|
|
|
|
|
|
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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