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WIRELESS TELECOM GROUP ANNOUNCES THIRD QUARTER 2021 FINANCIAL RESULTS

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  • WTT

Highlights for the third quarter ended September 30, 2021:

Net revenues of $12.8 million, an increase of 18.0% from the same period last year, and up 6.7% from the 2021 second quarter

Gross profit of $6.5 million, gross profit margin of 51.0%, representing the sixth straight quarter of consolidated gross profit margin greater than 50%

Operating loss of $549,000, which includes a $1.0 million loss on the change in contingent consideration related to the year two Holzworth earn out, compared to an operating loss of $348,000 in the same period last year

Net loss of $187,000, compared to a net loss of $775,000 in the same period last year

Non-GAAP adjusted EBITDA of $1.1 million, an increase of 57.5% from $722,000 in the same period last year

Net Debt of $3.2 million as of September 30, 2021 compared to $5.4 million as of December 31, 2020 due to debt prepayment of $3.7 million on September 28, 2021, or 47% reduction of our term loan.

New customer orders of $12.8 million, representing a book-to-bill ratio of 1:1

Backlog of $12.7 million, an increase of $6.7 million and more than double compared to September 30, 2020, backlog of $6.1 million, and backlog remains at the highest level in over four years

Parsippany, New Jersey, Nov. 10, 2021 (GLOBE NEWSWIRE) -- Wireless Telecom Group, Inc. (NYSE American: WTT) (the “Company”) today announced results for the three months ended September 30, 2021.

Tim Whelan, CEO of Wireless Telecom Group, Inc. stated, “The sequential improvements in quarterly revenue we have experienced throughout 2021 is encouraging. We ended the 2021 third quarter with the highest quarter of revenues since 2019, which reflects the continued success of our acquisitions, investments in organic growth initiatives, and improved market conditions. Long-term investments in 5G solutions, satellite applications, semiconductor test investments, and carrier network densification continue to drive demand for our products. In addition, we experienced strong orders across all our product groups and signed another 5G software contract in the quarter for 5G small cell deployment.”

Mr. Whelan continued, “During the quarter, we also demonstrated our ability to generate improving profitability and cash flow and we prepaid almost half of our outstanding term debt. This is expected to decrease interest expense and improve overall cash flow and profitability going forward.”

“Despite industry-wide supply chain challenges, we expect to achieve another quarter of sequential revenue growth in the fourth quarter. We anticipate incremental investment in the fourth quarter as we continue to expand our team to support our growing backlog and long-term growth opportunities, specifically in our RBS product group for 5G small cell and private network opportunities. As our business recovers, I want to thank our global team members for their hard work and commitment,” concluded Mr. Whelan.

Third Quarter 2021 Operating Results:

Net revenues of $12.8 million, an increase of $2.0 million, or 18.0% over the prior year period primarily due to increased sales at our RF Components (“RFC”) product group due to increased carrier spending and increased sales at our Radio, Baseband and Software (“RBS”) product group due to higher sales of our digital signal processing cards.

Gross profit of $6.5 million, an increase of $886,000, or 15.7% over the prior year period primarily due to higher sales at RFC. Gross profit margin declined marginally from 52% to 51% due to mix primarily at RBS.

Backlog of $12.7 million, an increase of $267,000 from June 30, 2021.

As a percent of revenue, total operating expenses were 55.3%, compared to 55.2% for the same period last year. Operating expenses were $7.1 million, an increase of $1.1 million, or 18.1% from the prior year period primarily due to the recognition of a loss on the change in the fair value of contingent consideration related to the year two Holzworth earn out.

GAAP net loss of $187,000 compared to a net loss of $775,000 in the prior year period primarily due to the loss on change in fair value of contingent consideration in the current year offset by improved gross profit and the recognition of a tax benefit in the current year.

Non-GAAP adjusted EBITDA of $1.1 million compared to $722,000 in the prior year primarily due to higher revenues and gross profit. Non-GAAP adjusted EBITDA is a metric the Company uses to measure our core operations. A reconciliation of non-GAAP adjusted EBITDA to GAAP net income is provided later in this press release.

Cash Flow and Balance Sheet:

Cash provided by operations of $535,000 compared to cash used by operations of $852,000 in the prior year period, due primarily to an increase in operating income and lower cash used for working capital as compared to the prior year.

Net debt of $3.2 million as of September 30, 2021, compared to $5.4 million as of December 31, 2020.

Outstanding borrowings under the asset-based revolver of $45,000 and availability of $5.1 million after giving effect to borrowing base calculations as of September 30, 2021.

Conference Call

Wireless Telecom Group Inc. will host a conference call on November 11, 2021, at 8:30 a.m. EDT in which management will discuss third quarter 2021 results and related matters. To participate in the conference call, dial 800-346-7359 or 973-528-0008. The conference identification number is 903292. The call will also be webcast over the internet at the following URL:

https://www.webcaster4.com/Webcast/Page/1690/43473

A replay will be made available on the Wireless Telecom website following the conference call.

Contacts:

Mike Kandell 973-386-9696

SM Berger and Company 216-464-6400

Use of Non-GAAP Financial Measures and Key Performance Indicators

The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). Management believes, however, that certain non-GAAP financial measures used in managing the Company’s business may provide users of this financial information with additional meaningful comparisons between current results and prior reported results. Certain of the information set forth herein and certain of the information presented by the Company from time to time may constitute non-GAAP financial measures within the meaning of Regulation G adopted by the Securities and Exchange Commission. We have presented herein a reconciliation of these measures to the most directly comparable GAAP financial measure. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies. The foregoing measures do not serve as a substitute and should not be construed as a substitute for GAAP performance but provide supplemental information concerning our performance that our investors and we find useful.

The Company defines EBITDA as its net earnings before interest, taxes, depreciation, and amortization. “Adjusted EBITDA” is EBITDA excluding our stock compensation expense, restructuring charges, acquisition expenses, integration expenses, unrealized and realized foreign exchange gains and losses, purchase accounting adjustments, non-recurring legal fees associated with the Harris arbitration, goodwill impairment charges, loss on change in fair value of contingent consideration and other non-recurring costs. A reconciliation of net income/(loss) to non-GAAP adjusted EBITDA is included as an attachment to this press release.

The Company defines adjusted EBITDA margin as adjusted EBITDA divided by revenue. The Company does not provide a forward-looking reconciliation of expected adjusted EBITDA margin because the amount and significance of special items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts. These special items could be meaningful.

Book-to-bill ratio is the ratio of orders received to units shipped and billed for a specified period. The Company excludes billable freight from the calculation of units shipped in determining the book-to-bill ratio.

GAAP operating expenses (“GAAP opex”) includes research and development expenses, sales and marketing expenses, general and administrative expenses, non-cash goodwill impairment charges and loss on change in fair value of contingent consideration. The Company defines non-GAAP operating expenses (“Non-GAAP opex”) as GAAP opex excluding stock compensation expense, restructuring charges, acquisition expenses, integration expenses, depreciation and amortization expense, non-recurring legal fees associated with the Harris arbitration, non-cash goodwill impairment charges, loss on change in fair value of contingent consideration and other non-recurring costs and expenses.

The Company views adjusted EBITDA, adjusted EBITDA margin and non-GAAP opex as important indicators of performance, consistent with the manner in which management measures and forecasts the Company’s performance. We believe adjusted EBITDA is an important performance metric because it facilitates the analysis of our results, exclusive of certain non-cash and non-recurring items, including items which do not directly correlate to our business operations.

The Company believes that adjusted EBITDA and non GAAP opex metrics provide qualitative insight into our current performance; we use these measures to evaluate our results, the performance of our management team and our management’s entitlement to incentive compensation; and we believe that making this information available to investors enables them to view our performance the way that we view our performance and thereby gain a meaningful understanding of our core operating results, in general, and from period to period.

The Company believes the book-to-bill ratio is a key performance indicator used in measuring supply and demand in the industries in which we operate as well as measuring how quickly the Company fulfills the demand for its products.

Forward-Looking Statements

This press release contains “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. In some cases, such forward-looking statements may be identified by terms such as believe, expect, seek, may, will, intend, project, anticipate, plan, estimate, guidance, or similar words. Forward-looking statements include, among others, our expectation to decrease interest expense and improve overall cash flow and profitability going forward and that our fourth quarter will include another quarter of sequential growth along with cost increases related to continued investments in our people and expansion for growth in our backlog. Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results, including but not limited to, the impact that the evolving COVID-19 pandemic may have on our business, our supply chain, freight costs and the economy in the future, our ability to hire and retain key personnel with appropriate technical abilities, our dependency on capital spending on data and communication networks by our customers and end users, our dependency on the deployment of 4G LTE and 5G NR private networks and related services to grow our business, the impact of the loss of any significant customers, the ability of our management to successfully implement our business plan and strategy, our ability to raise additional capital to fund our operations given our degree of leverage, product demand and development of competitive technologies in our market sector, the impact of competitive products and pricing, our abilities to protect our intellectual property rights, our ability to manage risks related to our information technology and cyber security, among others. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. These risks and uncertainties are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, as supplemented and revised by the risks and uncertainties set forth in the Company’s subsequent reports filed with the SEC. The Company’s forward-looking statements speak only as of the date of this release. The Company undertakes no obligation to publicly update or review any forward-looking statements whether as a result of new information, future developments or otherwise, as except as required by law.

About Wireless Telecom Group, Inc.

Wireless Telecom Group, Inc., comprised of Boonton, CommAgility, Holzworth, Microlab and Noisecom, is a global designer and manufacturer of advanced RF and microwave components, modules, systems, and instruments. Serving the wireless, telecommunication, satellite, military, aerospace, semiconductor and medical industries, Wireless Telecom Group products enable innovation across a wide range of traditional and emerging wireless technologies. With a unique set of high-performance products including peak power meters, signal generators, phase noise analyzers, signal processing modules, LTE PHY/stack software, power splitters and combiners, GPS repeaters, public safety components, noise sources, and programmable noise generators, Wireless Telecom Group enables the development, testing, and deployment of wireless technologies around the globe. Wireless Telecom Group is headquartered in Parsippany, New Jersey, in the New York City metropolitan area, and maintains a global network of Sales and Service offices for excellent product service and support. Wireless Telecom Group’s website address is http://www.wirelesstelecomgroup.com.

Wireless Telecom Group Inc.
25 Eastmans Road
Parsippany, NJ 07054
Tel: (973) 386-9696
Fax: (973) 402-4042

Wireless Telecom Group INC.

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)
(UNAUDITED)
(In thousands, except per share amounts)

For the Three Months Ended

For the Nine Months Ended

September 30

September 30

2021

2020

2021

2020

Net revenues

$

12,824

$

10,868

$

36,168

$

31,404

Cost of revenues

6,284

5,214

17,549

15,655

Gross profit

6,540

5,654

18,619

15,749

Operating expenses

Research and development

1,435

1,826

4,281

5,080

Sales and marketing

1,854

1,732

5,266

5,111

General and administrative

2,800

2,444

8,469

7,322

Loss on change in contingent consideration

1,000

-

1,000

-

Total operating expenses

7,089

6,002

19,016

17,513

Operating income/(loss)

(549

)

(348

)

(397

)

(1,764

)

Extinguishment of PPP Loan

-

-

2,045

-

Other income/(expense)

20

(43

)

29

252

Interest expense

(365

)

(256

)

(947

)

(727

)

Income/(Loss) before taxes

(894

)

(647

)

730

(2,239

)

Tax provision/(benefit)

(707

)

128

(386

)

352

Net income/(loss)

$

(187

)

$

(775

)

$

1,116

$

(2,591

)

Other comprehensive income/(loss):

Foreign currency translation adjustments

(152

)

565

(64

)

(406

)

Comprehensive Income/(Loss)

$

(339

)

$

(210

)

$

1,052

$

(2,997

)

Loss per share:

Basic

$

(0.01

)

$

(0.04

)

$

0.05

$

(0.12

)

Diluted

$

(0.01

)

$

(0.04

)

$

0.05

$

(0.12

)

Weighted average shares outstanding:

Basic

22,234

21,703

21,900

21,643

Diluted

22,234

21,703

24,219

21,643

CONSOLIDATED BALANCE SHEET
(In thousands, except number of shares and par value)

(unaudited)

September 30
2021

December 31
2020

CURRENT ASSETS

Cash & cash equivalents

$

1,283

$

4,910

Accounts receivable - net of reserves of $216 and $143, respectively

7,420

5,520

Inventories - net of reserves of $1,241 and $1,129, respectively

9,655

8,796

Prepaid expenses and other current assets

2,058

2,172

TOTAL CURRENT ASSETS

20,416

21,398

PROPERTY PLANT AND EQUIPMENT - NET

1,629

1,824

OTHER ASSETS

Goodwill

11,461

11,512

Acquired intangible assets, net

4,249

5,242

Deferred income taxes, net

6,162

5,701

Right of use assets

1,282

1,680

Other

548

561

TOTAL OTHER ASSETS

23,702

24,696

TOTAL ASSETS

$

45,747

$

47,918

CURRENT LIABILITIES

Short term debt

$

150

$

512

Accounts payable

2,205

1,546

Short term leases

572

534

Accrued expenses and other current liabilities

7,656

7,997

Deferred revenue

691

924

TOTAL CURRENT LIABILITIES

11,274

11,513

LONG TERM LIABILITIES

Long term debt

3,578

8,895

Long term leases

766

1,200

Other long term liabilities

1,678

82

Deferred tax liability

444

377

TOTAL LONG TERM LIABILITIES

6,466

10,554

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY

Preferred Stock, $.01 par value, 2,000,000 shares authorized, none issued

-

-

Common Stock, $.01 par value, 75,000,000 shares authorized
35,550,342 and 34,888,904 shares issued, 22,310,889 and 21,669,361 shares outstanding

355

349

Additional paid in capital

51,305

50,163

Retained earnings/(deficit)

171

(946

)

Treasury stock at cost, 13,239,453 and 13,219,543 shares

(24,600

)

(24,556

)

Accumulated other comprehensive income

776

841

TOTAL SHAREHOLDERS’ EQUITY

28,007

25,851

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

45,747

$

47,918

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)

For the Nine Months

Ended September 30,

2021

2020

CASH FLOWS PROVIDED/(USED) BY OPERATING ACTIVITIES

Net income/(loss)

$

1,116

$

(2,591

)

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

Depreciation and amortization

1,604

1,631

Extinguishment of PPP Loan

(2,045

)

-

Amortization of debt issuance fees

217

215

Share-based compensation expense

301

360

Deferred rent

(22

)

(22

)

Deferred income taxes

(387

)

1,057

Provision for doubtful accounts

72

(28

)

Inventory reserves

115

119

Changes in assets and liabilities, net of acquisition:

Accounts receivable

(1,998

)

(1,343

)

Inventories

(993

)

(461

)

Prepaid expenses and other assets

459

(226

)

Accounts payable

728

(451

)

Accrued expenses and other liabilities

1,368

888

Net cash provided/(used) by operating activities

535

(852

)

CASH FLOWS PROVIDED/(USED) BY INVESTING ACTIVITIES

Capital expenditures

(417

)

(228

)

Acquisition of business, net of cash acquired

(200

)

(7,189

)

Net cash provided/(used) by investing activities

(617

)

(7,417

)

CASH FLOWS PROVIDED/(USED) BY FINANCING ACTIVITIES

Revolver borrowings

50,220

27,432

Revolver repayments

(50,175

)

(29,786

)

Term loan borrowings

345

8,400

Term loan repayments

(4,191

)

(405

)

Debt issuance fees

-

(1,305

)

Paycheck Protection Program loan

-

2,045

Payment of contingent consideration

(460

)

-

Proceeds from exercise of stock options

209

15

Tax withholding payments for vested equity awards

(44

)

(31

)

ATM Shares Sold

565

-

Net cash provided/(used) by financing activities

(3,531

)

6,365

Effect of exchange rate changes on cash and cash equivalents

(14

)

(138

)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

(3,627

)

(2,042

)

Cash and cash equivalents, at beginning of period

4,910

4,245

CASH AND CASH EQUIVALENTS, AT END OF PERIOD

$

1,283

$

2,203

SUPPLEMENTAL INFORMATION:

Cash paid during the period for interest

$

698

$

527

Cash paid during the period for income taxes

$

150

$

53

NET REVENUE AND GROSS PROFIT BY PRODUCT GROUP
(In thousands, unaudited)

Three months ended September 30

Revenue

% of Revenue

Change

2021

2020

2021

2020

Amount

Pct.

RF components

$

5,448

$

4,418

42.5

%

40.7

%

$

1,030

23.3

%

Test and measurement

5,931

5,797

46.2

%

53.3

%

134

2.3

%

Radio, baseband, software

1,445

653

11.3

%

6.0

%

792

121.3

%

Total net revenues

$

12,824

$

10,868

100.0

%

100.0

%

$

1,956

18.0

%


Three months ended September 30

Gross Profit

Gross Profit %

Change

2021

2020

2021

2020

Amount

Pct.

RF components

$

2,497

$

1,927

45.8

%

43.6

%

$

570

29.6

%

Test and measurement

3,367

3,182

56.8

%

54.9

%

185

5.8

%

Radio, baseband, software

676

545

46.8

%

83.5

%

131

24.0

%

Total gross profit

$

6,540

$

5,654

51.0

%

52.0

%

$

886

15.7

%


Nine months ended September 30

Revenue

% of Revenue

Change

2021

2020

2021

2020

Amount

Pct.

RF components

$

12,820

$

14,555

35.4

%

46.4

%

$

(1,735

)

-11.9

%

Test and measurement

16,779

14,013

46.4

%

44.6

%

2,766

19.7

%

Radio, baseband, software

6,569

2,836

18.2

%

9.0

%

3,733

131.6

%

Total net revenues

$

36,168

$

31,404

100.0

%

100.0

%

$

4,764

15.2

%


Nine months ended September 30

Gross Profit

Gross Profit %

Change

2021

2020

2021

2020

Amount

Pct.

RF components

$

5,345

$

6,576

41.7

%

45.2

%

$

(1,231

)

-18.7

%

Test and measurement

9,690

7,451

57.8

%

53.2

%

2,239

30.0

%

Radio, baseband, software

3,584

1,722

54.6

%

60.7

%

1,862

108.1

%

Total gross profit

$

18,619

$

15,749

51.5

%

50.1

%

$

2,870

18.2

%

RECONCILIATION OF NET INCOME TO NON-GAAP EBITDA AND NON-GAAP ADJUSTED EBITDA
(In thousands, unaudited)

Three Months Ended

Nine Months Ended

September 30

September 30

2021

2020

2021

2020

GAAP net income/(loss), as reported

$

(187

)

$

(775

)

$

1,116

$

(2,591

)

Tax provision/(benefit)

(707

)

128

(386

)

352

Depreciation and amortization expense

539

579

1,604

1,631

Interest expense

365

256

947

727

Non-GAAP EBITDA

10

188

3,281

119

Stock compensation

98

151

301

360

Merger and acquisition/integration

43

15

114

243

Restructuring costs

-

46

36

119

Inventory impairment recovery

-

(14

)

-

(29

)

US GAAP purchase accounting

-

258

-

548

Change in fair value of contingent consideration

1,000

-

1,000

-

FX (gain)/loss

(14

)

95

(19

)

(140

)

PPP Loan forgiveness

-

-

(2,045

)

-

Non recurring arbitration legal costs

-

(17

)

4

(14

)

Non-GAAP Adjusted EBITDA

$

1,137

$

722

$

2,672

$

1,206

RECONCILIATION OF OPEX TO NON-GAAP OPEX
(In thousands, unaudited)

Three Months Ended

Nine Months Ended

September 30

September 30

2021

2020

2021

2020

GAAP Opex

$

7,089

$

6,002

$

19,016

$

17,513

Stock compensation

(98

)

(151

)

(301

)

(360

)

Merger and acquisition/integration

(43

)

(15

)

(114

)

(243

)

Restructuring costs

-

(46

)

(36

)

(119

)

US GAAP purchase accounting

-

-

-

(100

)

Depreciation & amortization (ex. COGS)

(456

)

(478

)

(1,354

)

(1,356

)

Change in fair value of contingent consideration

(1,000

)

-

(1,000

)

-

Non recurring arbitration legal costs

-

17

(4

)

14

Non GAAP Opex

$

5,492

$

5,329

$

16,207

$

15,349