ADDvantage Technologies Group, Inc. (NASDAQ: AEY)
(“ADDvantage Technologies” or the “Company”) today reported record
financial results for the three and six months ended March 31,
2022, the second fiscal quarter of 2022.
“We generated record revenue in both segments of our business,
as our efforts to position Fulton as a key partner for 5G tower
work led to rapid growth, and our Telco segment continues to
benefit from supply chain challenges for new equipment and the
growing remote workforce movement,” commented Joe Hart, Chief
Executive Officer. “During the quarter, we initiated significant
cost-reduction initiatives, which included operational
efficiencies, reallocating resources to meet near-term demand and
streamlining our back-office infrastructure. We expect these
changes to materially improve third fiscal quarter margins and
enable us to minimize our cash burn. We are executing on all
cylinders at this point, and demand for tower work continues to
grow. The third quarter is typically our seasonally strongest
quarter, and we are well-positioned to deliver continued top line
performance and significant bottom-line improvements.”
“The 5G build-out represents a significant, secular, multi-year
opportunity, and ADDvantage Technologies is strategically and
regionally situated as a valued partner for our carrier customers,”
added Mr. Hart. “We maintain long-term relationships with wireless
carriers and we are being awarded key markets on a regular
basis.”
“Simultaneously, our Telco segment, continues to deliver
improved results due to strong demand for refurbished telecom
equipment, increasing sales 92% compared to the same quarter last
year and 38% compared to the previous quarter. Both Nave
Communications and Triton Datacom have experienced a significant
uptick in revenue the last quarter due to global supply chain
issues and chip shortages,” continued Mr. Hart.
Financial Results for the Three Months ended March 31,
2022
Fiscal second quarter sales were a record $23.8 million, an
increase of $11.1 million, or 88% compared to $12.7 million last
year and a sequential increase of 27% compared to the first fiscal
quarter. The increase was primarily due to a $3.4 million increase
in Wireless revenue related to 5G tower work, and an increase of
$7.7 million in Telco revenue due to increased demand for
refurbished telecommunications equipment sold by the Telco
segment.
Gross profit was $5.8 million, or 24% gross margin, compared to
gross profit of $3.2 million, or 25% gross margin, for the same
period last year. The net changes in gross profit were due to
higher overall sales in both the Wireless and Telco segments, and
the decrease in gross margin as a percent of sales was costs
incurred in deploying to new markets and related startup costs.
During the quarter, the Company started a significant
cost-reduction initiative, designed to improve operational
efficiency and reduce costs following the initial ramp-up to meet
the growing demand for 5-G and related tower work, and we withdrew
from a couple of non-profitable markets which were due to lower
volume commitments from some customers.. Management expects the
benefit of these actions to reduce fixed costs by approximately
$2.4 million on an annual basis, with the benefits of the
reductions evident in the third fiscal quarter of 2022, the period
ending June 30, 2022.
Operating expenses increased $0.6 million to $2.8 million from
$2.2 million the same period last year as the Wireless group ramped
up to meet the increased demand and deploy teams to additional new
markets. Consolidated selling, general and administrative
("SG&A") expenses include overhead, which consist of personnel,
insurance, professional services, communication, and other cost
categories, increased $0.1 million, or 2%, to $3.9 million for the
three months ended March 31, 2022 from $3.8 million for the same
period last year. The increase in SG&A relates primarily to
increased selling and commissions expenses to support higher
revenues.
Net loss for the quarter narrowed by $1.7 million to $1.4
million, or $0.11 per diluted share, compared with a net loss of
$3.1 million, or a loss of $0.25 per diluted share for the same
quarter last year, and narrowed by $0.6 million from $2.0 million,
or $0.16 per diluted share, from the first quarter of the fiscal
year.
Financial Results for the Six Months ended March 31,
2022
Year-to-date sales were a record $42.4 million, an increase 67%
compared to $25.4 million last year. Wireless segment revenue
increased 55% to $14.9 million and Telco segment revenue increased
74% to $27.5 million.
Gross profit was $10.4 million, or 24% gross margin, compared to
gross profit of $6.8 million, or 27% gross margin, for the same
period last year. Operating expenses increased $1.1 million to $5.3
million from $4.2 million the same period last year. Year-to-date
net loss narrowed by $1.6 million to $3.4 million, or $0.27 per
diluted share, compared with a net loss of $5.0 million, or a loss
of $0.41 per diluted share last year.
Balance sheet
Cash and cash equivalents were $3.9 million as of March 31,
2022, compared with $1.8 million at December 31, 2021. As of March
31, 2022, the Company had net inventories of $5.8 million.
Outstanding debt as of March 31, 2022 was $2.2 million, which is
comprised of financing leases. The Company paid down $2.1 million
and closed its line of credit during the quarter ended March 31,
2022. The line of credit was replaced with an accounts receivable
purchase facility, which when combined with a similar facility
already in place in the Wireless segment will provide a total
capacity of $19.0 million, which gives the Company increased
funding flexibility across the three subsidiaries as the business
flexes up and down.
Earnings Conference Call
The Company will host a conference call on Thursday, May 12,
2022 at 9 a.m. Eastern. Date: Thursday, May 12, 2022Time: 9 a.m.
EasternToll-free Dial-in Number: 1-800-289-0438International
Dial-in Number: 1-323-794-2423Conference ID: 4551098
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 May
26, 2022.
Toll-free Replay Number: 1-844-512-2921International Replay
Number: 1-412-317-6671Replay Passcode: 4551098
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.
-- Tables follow –
ADDvantage Technologies Group,
Inc.Consolidated Balance
Sheets(in thousands, except share
amounts)(Unaudited)
|
March 31, 2022 |
|
September 30, 2021 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
3,934 |
|
|
$ |
2,608 |
|
Restricted cash |
|
1,912 |
|
|
|
334 |
|
Accounts receivable, net of allowances of $250, respectively |
|
369 |
|
|
|
7,013 |
|
Unbilled revenue |
|
3,177 |
|
|
|
2,488 |
|
Inventories, net of allowances of $3,647 and $3,476,
respectively |
|
5,808 |
|
|
|
5,922 |
|
Prepaid expenses and other assets |
|
1,682 |
|
|
|
1,431 |
|
Total current assets |
|
16,882 |
|
|
|
19,796 |
|
|
|
|
|
Property and equipment, at
cost: |
|
|
|
Machinery and equipment |
|
5,386 |
|
|
|
4,973 |
|
Leasehold improvements |
|
899 |
|
|
|
813 |
|
Total property and equipment,
at cost |
|
6,285 |
|
|
|
5,786 |
|
Less: Accumulated
depreciation |
|
(2,670 |
) |
|
|
(2,293 |
) |
Net property and
equipment |
|
3,615 |
|
|
|
3,493 |
|
Right-of-use lease assets |
|
2,239 |
|
|
|
2,730 |
|
Intangibles, net of
accumulated amortization |
|
948 |
|
|
|
1,107 |
|
Goodwill |
|
58 |
|
|
|
58 |
|
Other assets |
|
130 |
|
|
|
128 |
|
Total assets |
$ |
23,872 |
|
|
$ |
27,312 |
|
Liabilities and
Shareholders’ Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
$ |
8,093 |
|
|
$ |
7,044 |
|
Accrued expenses |
|
1,449 |
|
|
|
1,581 |
|
Deferred revenue |
|
225 |
|
|
|
168 |
|
Bank line of credit |
|
— |
|
|
|
2,050 |
|
Right-of-use lease obligations, current |
|
1,196 |
|
|
|
1,198 |
|
Finance lease obligations, current |
|
698 |
|
|
|
582 |
|
Other current liabilities |
|
843 |
|
|
|
692 |
|
Total current liabilities |
|
12,504 |
|
|
|
13,315 |
|
Right-of-use lease obligations, long-term |
|
1,533 |
|
|
|
2,141 |
|
Finance lease obligations, long-term |
|
1,499 |
|
|
|
1,429 |
|
Total liabilities |
|
15,536 |
|
|
|
16,885 |
|
Shareholders’ equity: |
|
|
|
|
Common stock, $0.01 par value; 30,000,000 shares authorized;
13,189,112 and 12,610,229 shares issued and outstanding,
respectively |
|
132 |
|
|
|
126 |
|
Paid in capital |
|
748 |
|
|
|
(578 |
) |
Retained earnings |
|
7,456 |
|
|
|
10,879 |
|
Total shareholders’
equity |
|
8,336 |
|
|
|
10,427 |
|
Total liabilities and
shareholders’ equity |
$ |
23,872 |
|
|
$ |
27,312 |
|
ADDvantage Technologies Group,
Inc.Consolidated Statement of
Operations(in thousands, except share and per
share amounts)(Unaudited)
|
Three Months Ended March 31, |
|
Six Months Ended March 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Sales |
$ |
23,759 |
|
|
$ |
12,667 |
|
|
$ |
42,449 |
|
|
$ |
25,416 |
|
Cost of sales |
|
18,001 |
|
|
|
9,486 |
|
|
|
32,060 |
|
|
|
18,606 |
|
Gross profit |
|
5,758 |
|
|
|
3,181 |
|
|
|
10,389 |
|
|
|
6,810 |
|
Operating expenses |
|
2,753 |
|
|
|
2,167 |
|
|
|
5,253 |
|
|
|
4,224 |
|
Selling, general and
administrative expenses |
|
3,850 |
|
|
|
3,757 |
|
|
|
7,538 |
|
|
|
6,972 |
|
Depreciation and amortization
expense |
|
318 |
|
|
|
304 |
|
|
|
662 |
|
|
|
585 |
|
Loss (gain) on disposal of
assets |
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
(10 |
) |
Loss from operations |
|
(1,165 |
) |
|
|
(3,047 |
) |
|
|
(3,066 |
) |
|
|
(4,961 |
) |
Other income (expense): |
|
|
|
|
|
|
|
Interest income |
|
— |
|
|
|
33 |
|
|
|
— |
|
|
|
81 |
|
Other expense, net |
|
(168 |
) |
|
|
(8 |
) |
|
|
(240 |
) |
|
|
(27 |
) |
Interest expense |
|
(61 |
) |
|
|
(42 |
) |
|
|
(116 |
) |
|
|
(110 |
) |
Other income (expense), net |
|
(229 |
) |
|
|
(17 |
) |
|
|
(356 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
|
|
Loss before income taxes |
|
(1,394 |
) |
|
|
(3,064 |
) |
|
|
(3,422 |
) |
|
|
(5,017 |
) |
Income tax expense |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(1,394 |
) |
|
$ |
(3,064 |
) |
|
$ |
(3,422 |
) |
|
$ |
(5,017 |
) |
|
|
|
|
|
|
|
|
Loss per share: |
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.11 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.41 |
) |
Shares used in per share
calculation: |
|
|
|
|
|
|
|
Basic and diluted |
|
13,071,053 |
|
|
|
12,416,594 |
|
|
|
12,875,055 |
|
|
|
12,281,721 |
|
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 March 31, 2022 and 2021, in thousands:
|
Three Months Ended March 31, 2022 |
|
Three Months Ended March 31, 2021 |
|
Wireless |
|
Telco |
|
Total |
|
Wireless |
|
Telco |
|
Total |
Income (loss) from operations |
$ |
(2,203 |
) |
|
$ |
1,038 |
|
$ |
(1,165 |
) |
|
$ |
(1,537 |
) |
|
$ |
(1,510 |
) |
|
$ |
(3,047 |
) |
Depreciation and amortization
expense |
|
197 |
|
|
|
121 |
|
|
318 |
|
|
|
176 |
|
|
|
128 |
|
|
|
304 |
|
Stock compensation expense |
|
114 |
|
|
|
133 |
|
|
247 |
|
|
|
107 |
|
|
|
139 |
|
|
|
246 |
|
Adjusted
EBITDA |
$ |
(1,892 |
) |
|
$ |
1,292 |
|
$ |
(600 |
) |
|
$ |
(1,254 |
) |
|
$ |
(1,243 |
) |
|
$ |
(2,497 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended March 31, 2022 |
|
Six Months Ended March 31, 2021 |
|
Wireless |
|
Telco |
|
Total |
|
Wireless |
|
Telco |
|
Total |
Income (loss) from
operations |
$ |
(4,528 |
) |
|
$ |
1,462 |
|
$ |
(3,066 |
) |
|
$ |
(2,642 |
) |
|
$ |
(2,319 |
) |
|
$ |
(4,961 |
) |
Depreciation and amortization
expense |
|
416 |
|
|
|
246 |
|
|
662 |
|
|
|
328 |
|
|
|
257 |
|
|
|
585 |
|
Stock compensation expense |
|
257 |
|
|
|
271 |
|
|
528 |
|
|
|
247 |
|
|
|
314 |
|
|
|
561 |
|
Adjusted
EBITDA |
$ |
(3,855 |
) |
|
$ |
1,979 |
|
$ |
(1,876 |
) |
|
$ |
(2,067 |
) |
|
$ |
(1,748 |
) |
|
$ |
(3,815 |
) |
For further information:Hayden IRBrett Maas(646)
536-7331aey@haydenir.com
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