TESSCO TECHNOLOGIES INCORPORATED (NASDAQ: TESS) today
reported financial results for its fiscal year 2022 first quarter,
ended June 27, 2021.
First Quarter Financial Highlights
- First-quarter, fiscal-year 2022 revenues of $105.0 million, up
9% compared to first quarter of prior fiscal year
- Record revenues in the Carrier market
- Sales bookings for the first quarter up 37% year over year
- Sales backlog at highest level since onset of pandemic
“We believe this quarter’s results are signs of the
post-pandemic recovery and evidence that we are executing well on
our turnaround plan, with a 9% year-over-year increase in revenues
and a 37% increase in bookings,” said Sandip Mukerjee, TESSCO’s
President and Chief Executive Officer. “While industry-wide
supply-chain challenges delayed the conversion of bookings to
shipments in the first quarter, we are confident that we will be
able to ship the vast majority of these open orders later this
fiscal year.
“For the remainder of this fiscal year, we expect stronger
market demand and the continued execution of our turnaround
strategy to lead to significant year-over-year growth in revenues
for both our Carrier and Commercial markets,” added Mukerjee. “At
the same time, we will be vigilant in controlling costs and expect
significant improvement in our overall profitability this fiscal
year compared with fiscal 2021, including positive adjusted
EBITDA.
“We continue to focus on driving growth and efficiency in our
core distribution business, developing our Ventev business into a
leading innovator of products to help customers resolve
infrastructure construction challenges, and developing proprietary
services to support the products our customers deploy in their
networks. While the last 18 months have presented considerable
challenges, I am more confident than ever in our strategy and our
ability to achieve our financial operating plan.”
First Quarter Financial Results
As a result of the sale of the Company’s retail inventory and
other related assets to Voice Comm, LLC during the third quarter of
fiscal year 2021, and the corresponding retail business exit, the
Company now presents earnings both from continuing and discontinued
operations. The following financial results relate only to
continuing operations.
First Quarter FY 2022
First Quarter FY 2021
Revenue
$105.0M
$96.5M
Net loss
($2.2M)
($4.9M)
Loss per share
($0.25)
($0.56)
Adjusted EBITDA1
($1.1M)
($3.5M)
(1)
Adjusted EBITDA (from Continuing
Operations) is a Non-GAAP financial measure. Please see the
discussion of Non-GAAP Information below and the reconciliation of
Non-GAAP to GAAP results included as an exhibit to this press
release.
Revenue by Market
Year over Year Q1 FY 2022 vs.
Q1 FY 2021
Carrier
17.2%
Commercial 1
3.0%
Total
8.8%
1
Previously referred to as “VAR and
Integrator.”
For the fiscal 2022 first quarter, revenues totaled $105.0
million, compared with $96.5 million for the first quarter of
fiscal 2021, as a result of improving macroeconomic conditions and
growing market share, particularly in the Carrier market.
Additionally, both markets were affected by industry-wide
disruptions in the global supply chain that delayed receipt of
inventory from vendors and impacted the Company’s ability to ship
product to customers.
Gross profit was $19.7 million for the first quarter of fiscal
2022, compared with $16.5 million for the same quarter of fiscal
2021. Gross margin was 18.8% of revenue for the first quarter of
fiscal 2021, compared with 17.1% in the first quarter of last year.
The year-over-year increase in gross margin was in part a result of
increased margins in both markets due to changes in customer and
product mix.
First-quarter selling, general and administrative (SG&A)
expenses increased 0.5% from the prior-year quarter to $21.6
million, primarily as a result of increased variable expenses
associated with a 9% increase in revenues. SG&A expenses as a
percent of revenue were 20.9% in the first quarter, down from 22.3%
in the prior-year quarter.
First-quarter, fiscal-2022 net loss was $2.2 million compared
with a net loss of $4.9 million in the first quarter of fiscal
2021.
Adjusted EBITDA and adjusted EBITDA per diluted share from
continuing operations were a loss of $1.1 million and $0.12,
respectively, for the first quarter of fiscal 2022. This compares
with adjusted EBITDA and adjusted EBITDA per diluted share of a
loss of $3.5 million and $0.41, respectively, for the first quarter
of fiscal 2021.
As of June 27, 2021, the outstanding balance under the Company’s
$75 million line of credit was approximately $39.7 million, and the
Company maintained a balance of $2.2 million in cash and cash
equivalents.
First Quarter 2022 Conference Call
Management will host a conference call to discuss first-quarter
2022 results and business outlook on Wednesday, July 28, 2021 at
8:30 a.m. ET. To participate in the conference call, please call
877-824-7042 (domestic call-in) or 647-689-6625 (international
call-in).
A live webcast of the conference call will be available on the
Events & Presentations page of the Company’s website. All
participants should call or access the website approximately 10
minutes before the conference begins. An archived version of the
webcast will be available on the Company's website for one
year.
Non-GAAP Information
EBITDA, Adjusted EBITDA, EBITDA per diluted share and Adjusted
EBITDA per diluted share are measures used by management to
evaluate the Company’s ongoing operations, and to provide a general
indicator of the Company's operating cash flow (in conjunction with
a cash flow statement which also includes among other items,
changes in working capital and the effect of non-cash charges).
EBITDA is defined as income from operations, plus interest expense,
net of interest income, provision for income taxes, and
depreciation and amortization. EBITDA per diluted share is defined
as EBITDA divided by TESSCO’s diluted weighted average shares
outstanding. Adjusted EBITDA is EBITDA as defined above, but also
adds stock-based compensation and goodwill impairments.
Management believes these EBITDA measures are useful to
investors because they are frequently used by securities analysts,
investors and other interested parties in the evaluation of
companies. Because not all companies use identical calculations,
the Company’s presentation of these Non-GAAP measures may not be
comparable to other similarly titled measures of other companies.
EBITDA, EBITDA per diluted share, Adjusted EBITDA and Adjusted
EBITDA per share are not recognized terms under GAAP, and EBITDA
and Adjusted EBITDA does not purport to be an alternative to net
income as a measure of operating performance or to cash flows from
operating activities as a measure of liquidity. Additionally,
EBITDA and EBITDA per diluted share, are intended to be measures of
free cash flow for management's discretionary use, as certain cash
requirements, such as interest payments, tax payments and debt
service requirements, are not reflected.
A reconciliation of Non-GAAP to GAAP results is included as an
exhibit to this release.
About TESSCO Technologies Incorporated (NASDAQ: TESS)
TESSCO Technologies, Inc. (NASDAQ: TESS) is a value-added
technology distributor, manufacturer, and solutions provider
serving commercial customers in the wireless infrastructure
ecosystem. The Company was founded more than 30 years ago with a
commitment to deliver industry-leading products, knowledge,
solutions, and customer service. TESSCO supplies products the
industry’s top manufacturers in mobile communications, Wi-Fi,
Internet of Things (“IoT”), wireless backhaul, and more. Tessco is
a single source for outstanding customer experience, expert
knowledge, and complete end-to-end solutions for the wireless
industry. For more information, visit www.tessco.com.
Forward-Looking Statements
This press release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical facts
contained herein, including statements regarding our future results
of operations and financial position, strategy and plans and future
prospects, and our expectations for future operations, are
forward-looking statements. These forward-looking statements are
based on current expectations and analysis, and actual results may
differ materially from those projected. These forward-looking
statements may generally be identified by the use of the words
"may," "will," "expects," "anticipates," “targets,” “goals,”
“projects,” “intends,” “plans,” “seeks,” "believes," "estimates,"
and similar expressions, but the absence of these words or phrases
does not necessarily mean that a statement is not forward-looking.
These forward-looking statements are only predictions and involve a
number of risks, uncertainties and assumptions, many of which are
outside of our control. Our actual results may differ materially
and adversely from those described in or contemplated by any such
forward-looking statement for a variety of reasons, including those
risks identified in our most recent Annual Report on Form 10-K and
other periodic reports filed with the Securities and Exchange
Commission (the “SEC”), under the heading "Risk Factors" and
otherwise. Consequently, the reader is cautioned to consider all
forward-looking statements in light of the risks to which they are
subject. For additional information with respect to risks and other
factors which could occur, see Tessco’s Annual Report on Form 10-K
for the year ended March 28, 2021, including Part I, Item 1A, "Risk
Factors" therein, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and other securities filings with the SEC that are
available at the SEC's website at www.sec.gov and other securities
regulators.
We are not able to identify or control all circumstances that
could occur in the future that may materially and adversely affect
our business and operating results. Without limiting the risks that
we describe in our periodic reports and elsewhere, among the risks
that could lead to a materially adverse impact on our business or
operating results are the following: the impact and results of any
new or continued activism activities by activist investors;
termination or non-renewal of limited duration agreements or
arrangements with our suppliers and affinity partners, which are
typically terminable by either party upon several months or
otherwise relatively short notice; loss of significant customers or
relationships, including affinity relationships; loss of customers
or suppliers either directly or indirectly as a result of
consolidation among large wireless services carriers and others
within the wireless communications industry; the strength of our
customers', suppliers' and affinity partners' business; negative or
adverse economic conditions, including those adversely affecting
consumer confidence or consumer or business spending or otherwise
adversely impacting our suppliers or customers, including their
access to capital or liquidity, or our customers' demand for, or
ability to fund or pay for, the purchase of our products and
services; our dependence on a relatively small number of suppliers
, which could hamper our ability to maintain appropriate inventory
levels and meet customer demand; changes in customer and product
mix that affect gross margin; effect of “conflict minerals”
regulations on the supply and cost of certain of our products;
failure of our information technology system or distribution
system; our inability to maintain or upgrade our technology or
telecommunication systems without undue cost, incident or delay;
system security or data protection breaches and exposure to
cyber-attacks, and the cost associated with ongoing efforts to
maintain cyber-security measures and to meet applicable compliance
standards; damage or destruction of our distribution or other
facilities; prolonged or otherwise unusual quality or performance
control problems; technology changes in the wireless communications
industry or technological failures, which could lead to significant
inventory obsolescence or devaluation and/or our inability to offer
key products that our customers demand; third-party freight carrier
interruption; increased competition from competitors, including
manufacturers or national and regional distributors of the products
we sell and the absence of significant barriers to entry which
could result in pricing and other pressures on profitability and
market share; our relative bargaining power and inability to
negotiate favorable terms with our suppliers and customers; our
inability to access capital and obtain financing as and when
needed; transitional and other risks associated with acquisitions
of companies that we may undertake in an effort to expand our
business; claims against us for breach of the intellectual property
rights of third parties; product liability claims; our inability to
protect certain intellectual property, including systems and
technologies on which we rely; our inability to hire or retain for
any reason our key professionals, management and staff; health
epidemics or pandemics or other outbreaks or events, or national or
world events or disasters beyond our control; changes in political
and regulatory conditions, including tax and trade policies; and
the possibility that, for unforeseen or other reasons, we may be
delayed in entering into or performing, or may fail to enter into
or perform, anticipated contracts or may otherwise be delayed in
realizing or fail to realize anticipated revenues or anticipated
savings.
The above list should not be construed as exhaustive and should
be read in conjunction with our other disclosures, including but
not limited to the risk factors described in our most recent Annual
Report on Form 10-K and other periodic reports filed with the
Securities and Exchange Commission (the “SEC”), under the heading
"Risk Factors" and otherwise. Other risks may be described from
time to time in our filings made under the securities laws. New
risks emerge from time to time. It is not possible for our
management to predict all risks.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, level of activity, performance or achievements. In
addition, neither we nor any other person assumes responsibility
for the accuracy and completeness of any of these forward-looking
statements. Any forward-looking statement made by us in this press
release speaks only as of the date on which it is made. We disclaim
any duty to update any of these forward-looking statements after
the date of this press release to confirm these statements to
actual results or revised expectations.
TESSCO Technologies
Incorporated
Consolidated Statements of
Loss (Unaudited)
Fiscal Quarters Ended
June 27, 2021
June 28, 2020
March 28, 2021
Revenues
$
104,956,100
$
96,477,600
$
88,733,100
Cost of goods sold
85,269,900
80,024,900
71,907,100
Gross profit
19,686,200
16,452,700
16,826,000
Selling, general and
administrative expenses
21,646,800
21,532,500
19,580,000
Operating loss
(1,960,600
)
(5,079,800
)
(2,754,000
)
Interest expense, net
213,700
110,700
58,500
Loss from continuing operations
before benefit from income tax
(2,174,300
)
(5,190,500
)
(2,812,500
)
Provision for (benefit from)
income taxes
38,500
(321,800
)
(1,958,000
)
Net loss from continuing
operations
$
(2,212,800
)
$
(4,868,700
)
$
(854,500
)
(Loss) income from discontinued
operations, net of taxes
495,500
237,300
(2,075,700
)
Net loss
$
(1,717,300
)
$
(4,631,400
)
$
(2,930,200
)
Basic and diluted (loss) income
per share
Continuing operations
$
(0.25
)
$
(0.56
)
$
(0.10
)
Discontinued operations
$
0.06
$
0.03
$
(0.24
)
Consolidated operations
$
(0.19
)
$
(0.54
)
$
(0.33
)
Basic and diluted
weighted-average common shares outstanding
8,864,704
8,617,803
8,814,859
TESSCO Technologies
Incorporated
Consolidated Balance
Sheets
June 27,
March 28,
2021
2021
(unaudited)
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
2,207,500
$
1,110,000
Trade accounts receivable,
net
71,251,900
70,045,700
Product inventory, net
69,017,500
53,060,000
Income taxes receivable
10,462,700
10,432,500
Prepaid expenses and other
current assets
5,410,900
3,980,900
Current portion of assets held
for sale
1,042,600
1,196,900
Total current assets
159,393,100
139,826,000
Property and equipment, net
12,245,300
12,571,600
Intangible assets, net
21,285,700
19,136,500
Deferred tax assets
—
—
Lease asset - right of use
10,634,500
11,285,800
Other long-term assets
6,722,500
6,258,000
Total assets
$
210,281,100
$
189,077,900
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
74,297,900
$
59,415,600
Payroll, benefits and taxes
7,004,200
6,279,800
Income and sales tax
liabilities
752,900
803,900
Accrued expenses and other
current liabilities
1,448,300
2,912,300
Lease liability, current
2,547,600
2,573,500
Total current liabilities
86,050,900
71,985,100
Deferred tax liabilities
26,500
26,500
Revolving line of credit
39,729,100
30,583,200
Non-current lease liability
8,321,800
8,923,500
Other non-current liabilities
793,500
809,400
Total liabilities
134,921,800
112,327,700
Shareholders’ equity:
Preferred stock
—
—
Common stock
104,800
104,200
Additional paid-in capital
67,595,700
67,227,700
Treasury stock
(105,000
)
(62,800
)
Retained earnings
7,763,800
9,481,100
Total shareholders’ equity
75,359,300
76,750,200
Total liabilities and
shareholders’ equity
$
210,281,100
$
189,077,900
TESSCO Technologies
Incorporated
Reconciliation of Net Loss to
Earnings Before Interest, Taxes and Depreciation and Amortization
(EBITDA)
(Unaudited)
Fiscal Quarters Ended
June 27, 2021
June 28, 2020
March 28, 2021
Net loss from continuing
operations
$
(2,212,800
)
$
(4,868,700
)
$
(854,500
)
Add:
Provision for (benefit from)
income taxes
38,500
(321,800
)
(1,958,000
)
Interest expense, net
213,700
110,700
58,500
Depreciation and amortization
607,700
1,228,000
609,400
EBITDA
$
(1,352,900
)
$
(3,851,800
)
$
(2,144,600
)
Add:
Stock based compensation
254,900
311,900
251,400
Adjusted EBITDA
$
(1,098,000
)
$
(3,539,900
)
$
(1,893,200
)
EBITDA per diluted
share
$
(0.15
)
$
(0.45
)
$
(0.24
)
Adjusted EBITDA per diluted
share
$
(0.12
)
$
(0.41
)
$
(0.21
)
TESSCO Technologies
Incorporated
Supplemental Results Summary
(in thousands) (Unaudited)
Three Months Ended
Growth Rates Compared
to
June 27, 2021
June 28, 2020
March 28, 2021
Prior Year Period
Prior Period
Market Revenues
Public carrier
$
46,020
$
39,255
$
35,015
17.2
%
31.4
%
Commercial *
58,936
57,223
53,718
3.0
%
9.7
%
Total revenues
$
104,956
$
96,478
$
88,733
8.8
%
18.3
%
Market Gross Profit
Public carrier
$
5,322
$
3,728
$
4,507
42.8
%
18.1
%
Commercial *
14,365
12,725
12,319
12.9
%
16.6
%
Total gross profit
$
19,687
$
16,453
$
16,826
19.7
%
17.0
%
% of revenues
18.8
%
17.1
%
19.0
%
*
Formerly referred to as VAR &
Integrator
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210727006112/en/
TESSCO Technologies Incorporated Aric Spitulnik Chief Financial
Officer 410-229-1419 spitulnik@tessco.com
David Calusdian Sharon Merrill Associates, Inc. 617-542-5300
TESS@investorrelations.com
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