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TESSCO Reports First-Quarter Fiscal 2022 Financial Results

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HUNT VALLEY, Md., July 27, 2021--(BUSINESS WIRE)--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/

Contacts

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