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ADDvantage Technologies Reports Financial Results for the First Quarter Fiscal 2021

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ADDvantage Technologies Group, Inc.
·10 min read
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CARROLLTON, Texas, Feb. 11, 2021 (GLOBE NEWSWIRE) -- ADDvantage Technologies Group, Inc. (NASDAQ: AEY) (“ADDvantage Technologies” or the “Company”) today reported its financial results for the three months ended December 31, 2020.

“The first fiscal quarter was impacted by the typical seasonality in our wireless segment, as the winter weather, the holidays and the lack of specialty work impacted revenue and margins,” commented Joe Hart, Chief Executive Officer. “While revenue was down $1.2 million year over year, gross margins were improved and we generated the same $3.6 million in gross profit as in the prior year even at lower revenue levels, reflecting the improved operational efficiency of our business. This was accomplished in spite of the impact to our Triton Datacom office products business of office shut-downs across the US, sporadic wireless crew quarantines as a result of the pandemic, and work slowdowns during the transition between the end of 4G and the construction buildup for 5G.”

“The approximate $500,000 sequential improvement in wireless revenues over Q4 is encouraging,” added Hart. “Our sales and bid activity are picking up as we continue to see accelerating demand in anticipation of the 5G roll-out, though the velocity has yet to reach desired levels. We are prudently ramping our crew capacity in anticipation of expected demand, an initiative we undertook based on a high level of confidence that we will win projects to effectively utilize this capacity. We currently expect the second half of calendar 2021 to benefit from the higher volumes, and our business is scaled to drive improvements in profitability based on these expected levels.”

“The recent FCC C-Band Auction raised over $81 billion as both existing Wireless and Broadband Carriers pursued the additional 3.7-3.98GHZ spectrum made available to help facilitate the expected 5G growth and network capacity needs. We have multi-year service agreements in place with all of the major players in this auction and are well positioned to assist them in their growth plans throughout the Southwest and Midwest.”

“The Company is encouraged by reports that DISH, the newly approved fourth Wireless Carrier, has secured leases on over 20,000 existing tower sites owned by Crown Castle and gained access to over 300,000 sites owned by Vertical Bridge,” continued Hart. “According to Fierce Wireless reports, Dish has committed to build a cloud-native, 5G, nationwide wireless network and has committed to build at least 15,000 sites to meet its minimum requirement to cover 70% of the U.S. population by mid-2023.”

“At the same time, the hard work of last year to rationalize the structure of our Telco business has delivered the desired results. Telco revenue is up approximately 5% year over year, and has increased slightly quarter over quarter, even under the continuing pandemic conditions affecting the workforce,” continued Mr. Hart. “We have confidence in our plan as we move through 2021 with an improved balance sheet, an experienced management team, and are strategically well-positioned to capture a meaningful share of the 5G infrastructure buildout that is expected to be realized this year.”

Financial Results for the Three Months Ended December 31, 2020 Compared to Prior Year

First quarter sales were $12.7 million for three months ended December 31, 2020, a decrease of $1.2 million, or 9% compared to $14.0 million for the same period last year. The decrease in sales was due to declines in sales in the Wireless segment of $1.6 million, partially offset by an increase in Telco sales of $0.3 million.

Gross profit increased $0.04 million to $3.63 million for three months ended December 31, 2020 compared to $3.59 million for the same period last year. The changes in gross profit were due to an increase in the Telco segment of $0.30 million, offset by a Wireless segment decrease of $0.26 million.

Operating expenses decreased $0.08 million, or 4%, to $2.0 million for the three months ended December 31, 2020 from $2.1 million the same period last year. The decrease in operating expenses was due to the Wireless segment decrease of $0.23 million, partially offset by increases in the Telco segment of $0.15 million.

SG&A expense increased $0.44 million, or 16%, to $3.2 million for the three months ended December 31, 2020 from $2.8 million for the same period last year. The increase in SG&A expense relates to increased sales costs of $0.18 million and increased non-cash stock compensation of approximately $0.26 million.

Net loss for the three months ended December 31, 2020 was $2.0 million, or a loss of $0.16 per diluted share, an increase of $0.2 million compared with a net loss of $1.7 million, or a loss of $0.17 per diluted share for the same quarter last year.

Adjusted EBITDA loss for the three months ended December 31 2020 was $1.3 million compared with an Adjusted EBITDA loss of $1.3 million for the same quarter last year.

Balance sheet

Cash and cash equivalents were $5.7 million as of December 31, 2020, compared with $8.4 million as of September 30, 2020. As of December 31, 2020, the Company had net inventories of $6.2 million, compared with $5.6 million as of September 30, 2020.

Outstanding debt decreased by $1.3 million to $6.7 million as of December 31, 2020, comprised of $2.8 million on a revolving line of credit, $2.9 million of notes payable under our Payroll Protection Program (PPP) loan, and $1.0 million in financing leases, compared with $8.0 million at September 30, 2020. The Company has applied for forgiveness of the PPP loan.

During the first quarter, the Company renewed its revolving bank line of credit for one year to a maturity date of December 17, 2021. As part of this renewal, capacity on the revolving bank line of credit remained $4.0 million, or the sum of 80% of eligible accounts receivable and 60% of eligible inventory, as defined in the loan agreement. As of December 31, 2020, $2.8 million has been drawn on the revolving bank line.

Earnings Conference Call

The Company will host a conference call on Friday, February 12th, at 9 a.m. Eastern Time.

Webcast:

www.addvantagetechnologies.com

Toll-free Dial-in Number:

1-855-327-6837

International Dial-in Number:

1-631-891-4304

Conference ID:

10012908

Replay number:

1-844-512-2921 (domestic) or 1-412-317-6671 (international)

Available through:

February 26, 2021

Access code:

10012908

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)

December 31,
2020

September 30,
2020

Assets

Current assets:

Cash and cash equivalents

$

5,401

$

8,265

Restricted cash

265

108

Accounts receivable, net of allowances of $250, respectively

4,810

3,968

Unbilled revenue

1,151

590

Promissory note, current

1,400

Income tax receivable

1,248

1,283

Inventories, net of allowances of $3,054, respectively

6,202

5,576

Prepaid expenses and other current assets

1,011

884

Total current assets

20,088

22,074

Property and equipment, at cost

4,311

4,220

Less: Accumulated depreciation

(1,785

)

(1,586

)

Net property and equipment

2,525

2,634

Right-of-use assets

3,505

3,758

Promissory note, long-term

2,270

2,375

Intangibles, net of accumulated amortization

1,346

1,425

Goodwill

58

58

Other assets

179

179

Total assets

$

29,971

$

32,503


Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$

3,528

$

3,472

Accrued expenses

1,070

1,319

Deferred revenue

126

113

Bank line of credit

2,800

2,800

Notes payable, current

2,178

1,709

Right-of-use obligations, current

1,263

1,275

Finance lease obligations, current

272

285

Other current liabilities

56

41

Total current liabilities

11,293

11,014

Note payable

751

2,440

Right-of-use obligations

3,016

3,310

Finance lease obligations

737

791

Other liabilities

15

Total liabilities

15,797

17,570

Shareholders’ equity:

Common stock, $0.01 par value; 30,000,000 shares authorized; 12,366,593 shares issued and outstanding, and 11,822,009 shares issued and outstanding, respectively

124

118

Paid in capital

(1,379

)

(2,567

)

Retained earnings

15,429

17,382

Total shareholders’ equity

14,174

$

14,933

Total liabilities and shareholders’ equity

$

29,971

$

32,503

See notes to unaudited consolidated financial statements.


ADDvantage Technologies Group, Inc.
Consolidated Statement of Operations
(in thousands, except share and per share amounts)
(Unaudited)

Three Months Ended
December 31,

2020

2019

Sales

$

12,749

$

13,962

Cost of sales

9,120

10,370

Gross profit

3,629

3,592

Operating expenses

2,047

2,131

Selling, general and administrative expenses

3,215

2,776

Depreciation and amortization expense

281

448

Loss from operations

(1,914

)

(1,763

)

Other income (expense):

Interest income

48

89

Income from equity method investment

22

Other expense

(19

)

(57

)

Interest expense

(68

)

(24

)

Total other income (expense), net

(39

)

30

Loss before income taxes

(1,953

)

(1,733

)

Benefit for income taxes

(15

)

Net loss

$

(1,953

)

$

(1,718

)

Basic and diluted loss per share:

Net loss

$

(0.16

)

$

(0.17

)

Shares used in per share calculation:

Basic and diluted

12,149,778

10,361,292

See notes to unaudited consolidated financial statements.

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 restructuring charge, 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 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.

A reconciliation by segment of loss from operations to Adjusted EBITDA follows:

Three Months Ended
December 31, 2020

Three Months Ended
December 31, 2019

Wireless

Telco

Total

Wireless

Telco

Total

Loss from operations

$

(1,105

)

$

(809

)

$

(1,914

)

$

(782

)

$

(981

)

$

(1,763

)

Depreciation and amortization expense

152

129

281

146

301

447

Stock compensation expense

140

175

315

9

9

18

Adjusted EBITDA

$

(813

)

$

(505

)

$

(1,318

)

$

(627

)

$

(671

)

$

(1,298

)