Wireless Telecom Group Announces Third Quarter 2019 Financial Results

  • Net revenues of $10,812,000 for the quarter
  • Gross Profit of $4,825,000, or 44.6% for the quarter
  • Net loss of $461,000, or ($0.02) per basic and diluted share for the quarter
  • Non-GAAP Adjusted EBITDA of $97,000 for the quarter
  • New customer orders of $10,974,000 in the quarter
  • Company signs definitive agreement to acquire Holzworth Instrumentation Inc.
  • 2019 full year revenue guidance revised to $49-50 million, excluding acquisitions; remains committed to long term growth target of $100 million by 2023

PARSIPPANY, N.J.--()--Wireless Telecom Group, Inc. (NYSE American: WTT) (the “Company”) announced today results for the third quarter ended September 30, 2019.

Tim Whelan, CEO of Wireless Telecom Group, Inc., commented, “Our third quarter performance reflects challenges related to key customers currently experiencing project timing differences from those we anticipated for the second half of the year. Delays in orders for a few large Network Solutions projects, a delay in receipt of Test & Measurement purchase orders under existing government awards, and unexpected lower sales by Embedded Solutions to one of our largest customers combined to reduce top line revenues in the quarter as compared to the year ago period.”

Whelan continued, “We have been focused on strategic account expansion and development partnerships and made some very good progress with these initiatives during the quarter. We have qualified a number of new, large 5G opportunities in connection with our Release 15 compliant stack software for 5G solutions, which we announced to the market on October 31st. These large 5G opportunities include solutions that we expect will include higher margin software sales in our Embedded Solutions segment. We expect contract decisions on these opportunities in 2020. Though we have made meaningful progress qualifying strategic sales pursuits, the expected revenue ramp from new initiatives is not fast enough to offset the delays and pushes in other project timing this late in 2019.”

Signing of Definitive Agreement to acquire Holzworth Instrumentation Inc.

In a separate release this morning, the Company announced the execution of a Definitive Agreement to acquire Holzworth Instrumentation Inc., a Boulder, Colorado based provider of specialty phase noise analyzers and signal generators. Holzworth instruments are used by government labs, the semiconductor industry, and network equipment providers, among others, in research and automated test environments. The Company expects to close this acquisition in the months ahead.

Whelan commented “Acquisitions are an important part of our long-term growth strategy, and we see strong potential in the future pipeline. Holzworth is a perfect addition to our specialty noise generation and high-performance RF measurement solutions. The Holzworth acquisition is aligned with our focus on the growth of test and measurement solutions which will enable the future of wireless technology in radar, satellite communications, and 5G.”

Financial Results

For the quarter ended September 30, 2019, the Company reported consolidated net revenues of $10,812,000, compared to $14,019,000 for the same period in 2018. Network Solutions revenue decreased 14.1% compared to the prior year on fewer large projects, Embedded Solutions revenue decreased 38.8% on lower software and service revenues and lower sales of digital signal processing hardware to one of our largest customers, and Test & Measurement revenue decreased 18.7% on lower government shipments compared to the same quarter last year.

Consolidated gross profit in the third quarter was $4,825,000, or 44.6% of revenue, compared to $6,464,000 or 46.1% of revenue, for the same period in 2018. The slight decrease was primarily due to a decrease in Network Solutions gross profit due to volumes and a competitive pricing environment, which was only partially offset by favorable product mix and cost reduction initiatives in Test & Measurement.

The Company also reported a slight reduction in consolidated operating expenses, decreasing from $5,545,000 in the third quarter of 2018 to $5,503,000 in the current period in 2019. The decrease was primarily related to lower general and administrative costs offset by higher expenses in research and development in the area of 5G roadmap development.

Net loss for the quarter ended September 30, 2019 was $461,000, compared to net income of $558,000 for the same period in 2018.

Non-GAAP Adjusted EBITDA for the quarter ended September 30, 2019 was $97,000, compared to $1,755,000 for the same period in 2018. The Company’s explanation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to net income (loss) are set out below in this press release.

New customer orders for the quarter were $10,974,000 compared to $11,274,000 in the same quarter last year. The Company’s consolidated backlog of firm orders to be shipped in the next twelve months was $7,596,000 at September 30, 2019, compared to the September 30, 2018 backlog of $6,122,000.

Outlook

The Company expects revenue of $49 to $50 million for the full year 2019, excluding the impact of acquisitions, and remains committed to executing against its organic and acquisition growth strategy to accomplish $100 million of revenue in 2023.

Conference Call

As previously announced, Wireless Telecom Group Inc. will host a conference call today at 8:30 a.m. EST in which management will discuss third quarter results and related matters. To participate in the conference call, dial 800-346-7359 or 973-528-0008. The conference identification number is 842269. The call will also be webcast over the internet at the following URL:

https://www.webcaster4.com/Webcast/Page/1690/32223

A replay will be made available on the Wireless Telecom website for a limited period of time following the conference call.

Use of Non-GAAP Financial Measures

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, the one-time non-cash inventory impairment charges, unrealized and realized foreign exchange gains and losses, non-recurring legal fees associated with the Harris arbitration and other non-recurring costs and includes cash received in 2018 related to revenue that would have been recognized in 2018 but for the adoption of ASU Topic 606. A reconciliation of net income to non-GAAP Adjusted EBITDA is included as an attachment to this press release.

The Company views Adjusted EBITDA as an important indicator 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 non-recurring and certain non‐cash items, including items which do not directly correlate to our business operations.

The Company believes that the Adjusted EBITDA metric provides qualitative insight into our current performance and we use this measure to evaluate our results. Additionally, we use Adjusted EBITDA to measure the performance of our management team and management’s entitlement to incentive compensation. 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.

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, statements regarding our expectation that the Holzworth acquisition will close in the months ahead, our expectations relating to certain 5G opportunities, our expectation for full year 2019 revenue of approximately $49-$50 million, and our goal of $100 million of revenues by 2023. 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, among others, the ability of the Company to obtain appropriate debt financing for the transaction on favorable terms or at all; management’s ability to integrate the Holzworth business successfully; the ability of management to successfully implement the Company’s business plan and strategy; the loss of any significant customers of the Company; the impact of competitive products and pricing; as well as other risks and uncertainties set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, as except as required by law.

About Wireless Telecom Group, Inc.

Wireless Telecom Group, Inc., comprised of Boonton Electronics, CommAgility, Microlab and Noisecom, is a global designer and manufacturer of advanced radio frequency 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 analyzers, signal processing modules, LTE PHY and stack software, power splitters and combiners, GPS repeaters, public safety monitors, noise sources, and programmable noise generators, Wireless Telecom Group supports 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.

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

(In thousands, except per share amounts, Unaudited)

 

For the Three Months Ended

For the Nine Months Ended

September 30

September 30

2019

2018

2019

2018

NET REVENUES

$

10,812

 

$

14,019

 

$

37,353

 

$

40,697

 

 

COST OF REVENUES

 

5,987

 

 

7,555

 

 

20,668

 

 

21,794

 

 

GROSS PROFIT

 

4,825

 

 

6,464

 

 

16,685

 

 

18,903

 

 

Operating Expenses

Research and Development

 

1,343

 

 

1,191

 

 

4,556

 

 

3,660

 

Sales and Marketing

 

1,753

 

 

1,795

 

 

5,718

 

 

5,639

 

General and Administrative

 

2,407

 

 

2,559

 

 

7,341

 

 

7,870

 

Loss on Change in Fair Value
of Contingent Consideration

 

-

 

 

-

 

 

-

 

 

213

 

Total Operating Expenses

 

5,503

 

 

5,545

 

 

17,615

 

 

17,382

 

 

Operating Income/(Loss)

 

(678

)

 

919

 

 

(930

)

 

1,521

 

 

Other Income/(Expense)

 

108

 

 

(60

)

 

273

 

 

(73

)

Interest Expense

 

(60

)

 

(115

)

 

(248

)

 

(349

)

 

Income/(Loss) before taxes

 

(630

)

 

744

 

 

(905

)

 

1,099

 

 

Tax Provision/(Benefit)

 

(169

)

 

186

 

 

(256

)

 

347

 

 

Net Income/(Loss)

$

(461

)

$

558

 

$

(649

)

$

752

 

 

Other Comprehensive Income/(Loss):

Foreign Currency Translation
Adjustments

 

(491

)

 

(217

)

 

(566

)

 

(601

)

Comprehensive Income/(Loss)

$

(952

)

$

341

 

$

(1,215

)

$

151

 

 
 

Earnings/(Loss) Per Share:

Basic

$

(0.02

)

$

0.03

 

$

(0.03

)

$

0.04

 

Diluted

$

(0.02

)

$

0.03

 

$

(0.03

)

$

0.03

 

 

Weighted Average Shares
Outstanding:

Basic

 

20,866

 

 

20,972

 

 

20,854

 

 

20,820

 

Diluted

 

20,866

 

 

21,555

 

 

20,854

 

 

21,582

 

In periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation because they are anti-dilutive.

CONSOLIDATED BALANCE SHEETS

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

September 30 2019

December 31 2018

(Unaudited)

CURRENT ASSETS

Cash & Cash Equivalents

$

2,735

 

$

5,015

 

Accounts Receivable - net of reserves of $64 and $44, respectively

 

8,023

 

 

8,638

 

Inventories - net of reserves of $998 and $1,910, respectively

 

8,309

 

 

6,884

 

Prepaid Expenses and Other Current Assets

 

890

 

 

1,689

 

TOTAL CURRENT ASSETS

 

19,957

 

 

22,226

 

 

PROPERTY PLANT AND EQUIPMENT - NET

 

2,260

 

 

2,578

 

 

OTHER ASSETS

Goodwill

 

9,482

 

 

9,778

 

Acquired Intangible Assets, net

 

2,325

 

 

3,206

 

Deferred Income Taxes

 

5,901

 

 

5,592

 

Right Of Use Assets

 

1,548

 

 

-

 

Other

 

621

 

 

787

 

TOTAL OTHER ASSETS

 

19,877

 

 

19,363

 

 

TOTAL ASSETS

$

42,094

 

$

44,167

 

 

CURRENT LIABILITIES

Short Term Debt

$

2,977

 

$

2,016

 

Accounts Payable

 

2,634

 

 

3,252

 

Short Term Leases

 

441

 

 

-

 

Accrued Expenses and Other Current Liabilities

 

2,804

 

 

6,083

 

Deferred Revenue

 

110

 

 

103

 

TOTAL CURRENT LIABILITIES

 

8,966

 

 

11,454

 

 

LONG TERM LIABILITIES

Long Term Leases

 

1,124

 

 

-

 

Other Long Term Liabilities

 

83

 

 

115

 

Deferred Tax Liability

 

594

 

 

616

 

TOTAL LONG TERM LIABILITIES

 

1,801

 

 

731

 

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, 34,488,252 and
34,393,252

shares issued, 21,300,252 and 21,205,251 shares outstanding

 

345

 

 

344

 

Additional Paid in Capital

 

49,038

 

 

48,479

 

Retained Earnings

 

6,907

 

 

7,556

 

Treasury Stock at Cost, 13,188,000 shares

 

(24,509

)

 

(24,509

)

Accumulated Other Comprehensive Income/(Loss)

 

(454

)

 

112

 

TOTAL SHAREHOLDERS' EQUITY

 

31,327

 

 

31,982

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

42,094

 

$

44,167

 

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands, unaudited)

 

 

For the Nine Months

 

Ended September 30

 

2019

2018

CASH FLOWS PROVIDED/(USED) BY OPERATING ACTIVITIES

 

 

Net Income/(Loss)

$

(649

)

$

752

 

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

 

 

Depreciation and Amortization

 

1,671

 

 

1,773

 

Amortization of Debt Issuance Fees

 

47

 

 

59

 

Share-based Compensation Expense

 

560

 

 

505

 

Deferred Rent

 

(18

)

 

9

 

Deferred Income Taxes

 

(309

)

 

34

 

Provision for Doubtful Accounts

 

20

 

 

23

 

Inventory Reserves

 

139

 

 

204

 

Changes in Assets and Liabilities:

 

 

Accounts Receivable

 

520

 

 

(2,552

)

Inventories

 

(1,627

)

 

(1,154

)

Prepaid Expenses and Other Assets

 

993

 

 

(99

)

Accounts Payable

 

(567

)

 

(487

)

Payment of Contingent Consideration

 

(772

)

 

-

 

Accrued Expenses and Other Current Liabilities

 

(1,635

)

 

2,284

 

Net Cash Provided/(Used) by Operating Activities

 

(1,627

)

 

1,351

 

 

 

 

CASH FLOWS USED BY INVESTING ACTIVITIES

 

 

Capital Expenditures

 

(339

)

 

(633

)

Acquisition of Business

 

(426

)

 

(805

)

Net Cash Used by Investing Activities

 

(765

)

 

(1,438

)

 

 

 

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

Revolver Borrowings

 

27,408

 

 

29,046

 

Revolver Repayments

 

(26,333

)

 

(27,681

)

Term Loan Repayments

 

(114

)

 

(114

)

Payment of Contingent Consideration

 

(782

)

 

-

 

Proceeds from Exercise of Stock Options

 

-

 

 

288

 

Net Cash Provided by Financing Activities

 

179

 

 

1,539

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

(67

)

 

(136

)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

 

(2,280

)

 

1,316

 

 

 

 

Cash and Cash Equivalents, at Beginning of Period

 

5,015

 

 

2,458

 

 

 

 

CASH AND CASH EQUIVALENTS, AT END OF PERIOD

$

2,735

 

$

3,774

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

Cash Paid During the Period for Interest

$

143

 

$

128

 

Cash Paid During the Period for Income Taxes

$

69

 

$

33

 

NET REVENUE AND GROSS PROFIT BY SEGMENT

(In thousands, Unaudited)

 

 

Three months ended September 30

 

Revenue

% of Revenue

 

Change

 

2019

2018

2019

2018

 

Amount

 

Pct.

Network Solutions

$

5,185

 

$

6,034

48.0

%

43.0

%

 

$

(849

)

 

-14.1

%

Test and Measurement

 

2,996

 

 

3,683

27.7

%

26.3

%

 

 

(687

)

 

-18.7

%

Embedded Solutions

 

2,631

 

 

4,302

24.3

%

30.7

%

 

 

(1,671

)

 

-38.8

%

Total Net Revenues

$

10,812

 

$

14,019

100.0

%

100.0

%

 

$

(3,207

)

 

-22.9

%

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30

 

Gross Profit

Gross Profit %

 

Change

 

2019

2018

2019

2018

 

Amount

 

Pct.

Network Solutions

$

2,104

 

$

2,640

40.6

%

43.8

%

 

$

(536

)

 

-20.3

%

Test and Measurement

 

1,497

 

 

1,850

50.0

%

50.2

%

 

 

(353

)

 

-19.1

%

Embedded Solutions

 

1,224

 

 

1,974

46.5

%

45.9

%

 

 

(750

)

 

-38.0

%

Total Gross Profit

$

4,825

 

$

6,464

44.6

%

46.1

%

 

$

(1,639

)

 

-25.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30

 

Revenue

% of Revenue

 

Change

 

2019

2018

2019

2018

 

Amount

 

Pct.

Network Solutions

$

16,518

 

$

17,181

44.2

%

42.2

%

 

$

(663

)

 

-3.9

%

Test and Measurement

 

9,219

 

 

10,980

24.7

%

27.0

%

 

 

(1,761

)

 

-16.0

%

Embedded Solutions

 

11,616

 

 

12,536

31.1

%

30.8

%

 

 

(920

)

 

-7.3

%

Total Net Revenues

$

37,353

 

$

40,697

100.0

%

100.0

%

 

$

(3,344

)

 

-8.2

%

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30

 

Gross Profit

Gross Profit %

 

Change

 

2019

2018

2019

2018

 

Amount

 

Pct.

Network Solutions

$

6,893

 

$

7,552

41.7

%

44.0

%

 

$

(659

)

 

-8.7

%

Test and Measurement

 

4,843

 

 

5,509

52.5

%

50.2

%

 

 

(666

)

 

-12.1

%

Embedded Solutions

 

4,949

 

 

5,842

42.6

%

46.6

%

 

 

(893

)

 

-15.3

%

Total Gross Profit

$

16,685

 

$

18,903

44.7

%

46.4

%

 

$

(2,218

)

 

-11.7

%

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

 

2019

2018

 

2019

2018

 

 

 

 

 

 

GAAP Net Income/(Loss), as reported

$

(461

)

$

558

 

 

$

(649

)

$

752

 

Tax Provision/(Benefit)

 

(169

)

 

186

 

 

 

(256

)

 

347

 

Depreciation and Amortization Expense

 

474

 

 

537

 

 

 

1,671

 

 

1,773

 

Interest Expense

 

60

 

 

115

 

 

 

248

 

 

349

 

Non-GAAP EBITDA

 

(96

)

 

1,396

 

 

 

1,014

 

 

3,221

 

Stock Compensation Expense

 

160

 

 

157

 

 

 

560

 

 

505

 

ASC 606 Adjustment

 

-

 

 

158

 

 

 

-

 

 

345

 

Integration Expenses

 

-

 

 

-

 

 

 

-

 

 

60

 

Restructuring Costs

 

123

 

 

-

 

 

 

123

 

 

-

 

Inventory Recovery

 

(13

)

 

(9

)

 

 

(18

)

 

(23

)

FX (Gain)/Loss

 

(108

)

 

53

 

 

 

(257

)

 

57

 

US GAAP Purchase Accounting

 

-

 

 

-

 

 

 

-

 

 

64

 

Change in Fair Value of Contingent
Consideration

 

-

 

 

-

 

 

 

-

 

 

213

 

Non Recurring Arbitration Legal Costs

 

31

 

 

-

 

 

 

156

 

 

-

 

Non-GAAP Adjusted EBITDA

$

97

 

$

1,755

 

 

$

1,578

 

$

4,442

 

 

Contacts

Mike Kandell
(973) 386-9696
Or
John Nesbett or Jen Belodeau
(203) 972 9200

Contacts

Mike Kandell
(973) 386-9696
Or
John Nesbett or Jen Belodeau
(203) 972 9200