ADDvantage Technologies Group, Inc. (NASDAQ:AEY),
today announced its financial results for the fourth quarter and
fiscal year ended September 30, 2017. The twelve month period
includes the financial results for the Company’s asset acquisition
of Triton Miami, Inc. (“Triton Datacom”) from October 14, 2016 to
September 30, 2017.
“We reported strong top line revenue growth in
both the fourth quarter and full fiscal year, driven by the
acquisition of Triton Datacom’s assets which expanded our Telco
offering into the desktop phone segment and broadened our customer
reach,” commented David Humphrey, President and CEO of ADDvantage
Technologies. “We see significant room for further growth in our
Telco segment, specifically at Nave Communications, which reported
a disappointing sales performance in fiscal 2017. We have
identified the challenges faced by Nave and are directing resources
into improving its sales infrastructure to allow it to expand both
its end-user and reseller customer base in order to increase sales.
This strategy is well underway, driven by our new VP of Sales. We
remain confident that Nave has a fundamentally sound business model
and look forward to seeing the impact of our strategy as it takes
hold over the next few quarters.
“Sales from the Cable TV segment were down in
the fourth quarter of fiscal 2017, reflecting fluctuations in
demand that are typical for the industry. However, the Cable TV
segment’s overall performance throughout fiscal 2017 still
generated consistent, positive earnings and remained flat relative
to fiscal year 2016 results. While we are pleased with the
consistent positive cash flows that the Cable TV segment generates,
we are proactively working to continually improve operational
efficiencies and to maximize the profitability of this business,”
continued Mr. Humphrey.
“Looking ahead, we have implemented a plan
focused on improving results in the Telco segment and continue to
implement our strategy to grow the value of our business. We
anticipate that Nave’s sales initiatives will serve to expand its
customer base which, combined with Triton’s diversified offering
and strong sales capabilities, will enable us to achieve stronger
revenue growth as we progress through fiscal 2018. In addition,
although we believe that the Cable TV segment revenues will be down
again next quarter, we are working on consolidating some of our
facilities in order to efficiently manage costs and support
margins,” concluded Mr. Humphrey.
Results for the three months ended
September 30, 2017
Consolidated sales increased 26% before the
impact of intercompany sales to $12.3 million for the three months
ended September 30, 2017 compared with $9.8 million for the three
months ended September 30, 2016. The increase in sales was due to
an increase in the Telco segment of $3.4 million, partially offset
by a decrease in the Cable TV segment of $0.8 million. The decrease
in Cable TV sales was due to a decrease in new equipment sales,
repairs sales and refurbished equipment sales of $0.4 million, $0.2
million and $0.2 respectively. The increase in Telco used equipment
sales was due to Triton Datacom, which offset the continued lower
sales from the remaining portion of this segment. The Company is
continuing to address the lower sales in the Telco segment by
restructuring and expanding its sales force, targeting a broader
end-user customer base, increasing sales to the reseller market and
expanding the capacity of the recycling program.
Consolidated operating, selling, general and
administrative expenses increased $0.5 million, or 17%, to $3.6
million for the three months ended September 30, 2017 from $3.1
million for the same period last year. This increase in expenses
was due to the Telco segment of $0.7 million, while the Cable TV
segment decreased by $0.2 million. The increase for the Telco
segment was due primarily to operating expenses of $0.8 million
from Triton Datacom and Triton Datacom earn-out expenses of $50
thousand.
Net loss for the three months ended September
30, 2017, was $0.3 million, or $0.03 per diluted share, compared
with a net loss of $0.2 million, or $0.02 per diluted share, for
the same period of 2016.
Consolidated Adjusted EBITDA for the three
months ended September 30, 2017 was $0.1 million compared with a
loss of $0.2 million for the same period ended September 30,
2016.
Results for the fiscal year ended
September 30, 2017
Consolidated sales increased 26% before the
impact of intercompany sales to $48.7 million for the fiscal year
ended September 30, 2017 from $38.7 million for the fiscal year
ended September 30, 2016. The increase in sales was due to an
increase in the Telco segment of $10.2 million, partially offset by
a decrease in the Cable TV segment of $0.2 million. The increase in
Telco equipment sales was primarily due to Triton Datacom on
October 14, 2016, which offset the continued lower sales from the
remaining portion of this segment. The decrease in sales for the
Cable TV segment was due to a decrease in refurbished equipment
revenue of $1.1 million, partially offset by an increase in new
equipment sales and repair sales of $0.1 million and $0.8 million,
respectively.
Consolidated operating, selling, general and
administrative expenses increased 21% to $14.7 million for the
fiscal year ended September 30, 2017 from $12.1 million for the
same period last year. This increase was primarily due to increased
expenses of the Telco segment of $3.0 million, partially offset by
a decrease in Cable TV segment expenses of $0.4 million.
Net loss for the fiscal year ended September 30,
2017 was $0.1 million, or $0.01 per diluted share, compared with a
profit of $0.3 million, or $0.03 per diluted share, for the fiscal
year ended September 30, 2016.
Consolidated Adjusted EBITDA for the fiscal year
ended September 30, 2017 was $1.9 million compared with $1.6
million for the fiscal year ended September 30, 2016.
Cash and cash equivalents were $4.0 million as
of September 30, 2017, compared with $4.5 million as of September
30, 2016. The Company generated $2.9 million of cash from
operations for the fiscal year ended September 30, 2017. As of
September 30, 2017, the Company had inventory of $22.3 million
compared with $21.5 million as of September 30, 2016.
The Company was not in compliance with one of
its financial covenants at September 30, 2017. The Company notified
its primary financial lender of the covenant violation, and on
December 1, 2017, the primary financial lender granted a waiver of
the covenant violation. Subsequent to September 30, 2017, the
Company elected to extinguish one of its term loans in December
2017 by paying the term loan’s outstanding balance of $2.5 million
as part of the Company’s overall plan to become compliant with its
financial covenants. As a result, the Company believes it will be
in compliance with its financial covenants at December 31,
2017.
Earnings Conference Call
The Company will host a conference call on
Thursday, December 14th, at 12:00 p.m. Eastern Time featuring
remarks by David Humphrey, President and Chief Executive Officer,
Dave Chymiak, Chief Technology Officer, Scott Francis, Chief
Financial Officer, and Don Kinison, Vice President of
Sales.
The conference call will be available via
webcast and can be accessed through the Investor Relations section
of ADDvantage's website, www.addvantagetechnologies.com. Please
allow extra time prior to the call to visit the site and download
any necessary software to listen to the Internet broadcast. The
dial-in number for the conference call is 800-281-7973 (domestic)
or 323-794-2093 (international). All dial-in participants must use
the following code to access the call: 5305971. Please call at
least five minutes before the scheduled start time.
For interested individuals unable to join the
conference call, a replay of the call will be available through
December 28, 2017 at 844-512-2921 (domestic) or 412-317-6671
(international). Participants must use the following code to access
the replay of the call: 5305971. 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)
supplies the cable television (Cable TV) and telecommunications
industries with a comprehensive line of new and used
system-critical network equipment and hardware from a broad range
of leading manufacturers. The equipment and hardware ADDvantage
distributes is used to acquire, distribute, and protect the
communications signals carried on fiber optic, coaxial cable and
wireless distribution systems, including television programming,
high-speed data (Internet) and telephony. In addition, ADDvantage
operates a national network of technical repair centers focused
primarily on Cable TV equipment and recycles surplus and obsolete
Cable TV and telecommunications equipment.
ADDvantage operates through its subsidiaries,
Tulsat, Tulsat-Atlanta, Tulsat-Tennessee, Tulsat-Texas, NCS
Industries, ComTech Services, Nave Communications and Triton
Datacom. For more information, please visit the corporate web site
at www.addvantagetechnologies.com.
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.
Non-GAAP Financial
MeasuresAdjusted 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 excludes other income, interest income and
income from equity method investment. Management believes providing
Adjusted EBITDA in this release is useful to investors’
understanding and assessment of the Company’s ongoing continuing
operations and prospects for the future and it is a used by the
financial community to evaluate 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, as calculated in the table below, 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.
(Tables follow)
|
ADDVANTAGE TECHNOLOGIES GROUP, INC. |
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS |
(UNAUDITED) |
|
|
|
|
Three Months Ended September 30, |
Twelve Months Ended September 30, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Sales |
|
12,333,174 |
|
|
9,766,167 |
|
|
48,713,746 |
|
|
38,663,264 |
|
Cost of sales |
|
9,066,590 |
|
|
7,141,427 |
|
|
33,903,153 |
|
|
26,222,381 |
|
Gross profit |
|
3,266,584 |
|
|
2,624,740 |
|
|
14,810,593 |
|
|
12,440,883 |
|
Operating, selling,
general and administrative expenses |
|
3,633,711 |
|
|
3,109,706 |
|
|
14,664,987 |
|
|
12,097,022 |
|
Income (loss) from
operations |
|
(367,127 |
) |
|
(484,966 |
) |
|
145,606 |
|
|
343,861 |
|
Other income
(expense): |
|
|
|
|
Other
income |
|
– |
|
|
279,565 |
|
|
– |
|
|
459,636 |
|
Interest
income |
|
– |
|
|
59,564 |
|
|
– |
|
|
90,686 |
|
Loss from
equity method investee |
|
– |
|
|
(107,975 |
) |
|
– |
|
|
(184,996 |
) |
Interest
expense |
|
(109,958 |
) |
|
(51,735 |
) |
|
(389,722 |
) |
|
(236,024 |
) |
Total other income
(expense), net |
|
(109,958 |
) |
|
179,419 |
|
|
(389,722 |
) |
|
129,302 |
|
|
|
|
|
|
Income (loss) before
income taxes |
|
(477,085 |
) |
|
(305,547 |
) |
|
(244,116 |
) |
|
473,163 |
|
Provision (benefit) for
income taxes |
|
(218,000 |
) |
|
(114,000 |
) |
|
(146,000 |
) |
|
179,000 |
|
|
|
|
|
|
Net income (loss) |
$ |
(259,085 |
) |
$ |
(191,547 |
) |
$ |
(98,116 |
) |
$ |
294,163 |
|
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
|
Basic |
$ |
(0.03 |
) |
$ |
(0.02 |
) |
$ |
(0.01 |
) |
$ |
0.03 |
|
Diluted |
$ |
(0.03 |
) |
$ |
(0.02 |
) |
$ |
(0.01 |
) |
$ |
0.03 |
|
Shares used in per
share calculation: |
|
|
|
|
Basic |
|
10,225,995 |
|
|
10,134,235 |
|
|
10,201,825 |
|
|
10,107,483 |
|
Diluted |
|
10,225,995 |
|
|
10,136,986 |
|
|
10,201,825 |
|
|
10,111,545 |
|
|
Three Months Ended September 30, 2017 |
Three Months Ended September 30, 2016 |
|
Cable TV |
Telco |
Total |
Cable TV |
Telco |
Total |
|
|
|
|
|
|
|
Operating income
(loss) |
$ |
248,471 |
$ |
(615,598 |
) |
$ |
(367,127 |
) |
$ |
496,905 |
$ |
(981,871 |
) |
$ |
(484,966 |
) |
Depreciation |
|
78,318 |
|
39,843 |
|
|
118,161 |
|
|
84,659 |
|
24,889 |
|
|
109,548 |
|
Amortization |
|
− |
|
313,311 |
|
|
313,311 |
|
|
− |
|
206,451 |
|
|
206,451 |
|
Adjusted
EBITDA |
$ |
326,789 |
$ |
(262,444 |
) |
$ |
64,345 |
|
$ |
581,564 |
$ |
(750,531 |
) |
$ |
(168,967 |
) |
|
Year Ended September 30, 2017 |
Year Ended September 30, 2016 |
|
Cable TV |
Telco |
Total |
Cable TV |
Telco |
Total |
|
|
|
|
|
|
|
Operating income
(loss) |
$ |
1,834,484 |
$ |
(1,688,878 |
) |
$ |
145,606 |
$ |
1,478,676 |
$ |
(1,134,815 |
) |
$ |
343,861 |
Depreciation |
|
303,571 |
|
143,263 |
|
|
446,834 |
|
322,076 |
|
99,874 |
|
|
421,950 |
Amortization |
|
− |
|
1,267,182 |
|
|
1,267,182 |
|
− |
|
825,804 |
|
|
825,804 |
Adjusted
EBITDA (a) |
$ |
2,138,055 |
$ |
(278,433 |
) |
$ |
1,859,622 |
$ |
1,800,752 |
$ |
(209,137 |
) |
$ |
1,591,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- The Telco segment includes earn-out expenses of $0.2 million
for each of the years ended September 30, 2017 and 2016, related to
the acquisition of Triton Miami and Nave Communications.
|
ADDVANTAGE TECHNOLOGIES GROUP, INC. |
CONSOLIDATED CONDENSED BALANCE SHEETS |
(UNAUDITED) |
|
|
|
September 30, |
|
|
2017 |
|
|
2016 |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash
equivalents |
$ |
3,972,723 |
|
$ |
4,508,126 |
|
Accounts
receivable, net of allowance for doubtful accounts of
$150,000 and $250,000, respectively |
|
5,567,005 |
|
|
4,278,855 |
|
Income tax
receivable |
|
247,186 |
|
|
464,837 |
|
Inventories, net
of allowance for excess and obsolete |
|
|
inventory of $2,939,289 and $2,570,868, respectively |
|
22,333,820 |
|
|
21,524,919 |
|
Prepaid
expenses |
|
298,152 |
|
|
323,289 |
|
Total current
assets |
|
32,418,886 |
|
|
31,100,026 |
|
|
|
|
Property and equipment,
at cost: |
|
|
Land and
buildings |
|
7,218,678 |
|
|
7,218,678 |
|
Machinery and
equipment |
|
3,995,668 |
|
|
3,833,230 |
|
Leasehold
improvements |
|
202,017 |
|
|
151,957 |
|
Total property and
equipment, at cost |
|
11,416,363 |
|
|
11,203,865 |
|
Less: Accumulated
depreciation |
|
(5,395,791 |
) |
|
(4,993,102 |
) |
Net property and
equipment |
|
6,020,572 |
|
|
6,210,763 |
|
|
|
|
Investment in and loans
to equity method investee |
|
98,704 |
|
|
2,588,624 |
|
Intangibles, net of
accumulated amortization |
|
8,547,487 |
|
|
4,973,669 |
|
Goodwill |
|
5,970,244 |
|
|
3,910,089 |
|
Deferred income
taxes |
|
1,653,000 |
|
|
1,349,000 |
|
Other assets |
|
138,712 |
|
|
135,988 |
|
|
|
|
Total assets |
$ |
54,847,605 |
|
$ |
50,268,159 |
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
Current
liabilities: |
|
|
Accounts
payable |
$ |
3,392,725 |
|
$ |
1,857,953 |
|
Accrued
expenses |
|
1,406,722 |
|
|
1,324,652 |
|
Notes payable –
current portion |
|
4,189,605 |
|
|
899,603 |
|
Other current
liabilities |
|
664,325 |
|
|
963,127 |
|
Total current
liabilities |
|
9,653,377 |
|
|
5,045,335 |
|
|
|
|
Notes payable,
less current portion |
|
2,094,246 |
|
|
3,466,358 |
|
Other
liabilities |
|
1,401,799 |
|
|
131,410 |
|
Total liabilities |
|
13,149,422 |
|
|
8,643,103 |
|
|
|
|
Shareholders’
equity: |
|
|
Common stock,
$.01 par value; 30,000,000 shares authorized;
10,726,653 and 10,634,893 shares issued, respectively;
10,225,995 and 10,134,235 shares outstanding,
respectively |
|
107,267 |
|
|
106,349 |
|
Paid in
capital |
|
(4,746,466 |
) |
|
(4,916,791 |
) |
Retained
earnings |
|
47,337,396 |
|
|
47,435,512 |
|
Total
shareholders’ equity before treasury stock |
|
42,698,197 |
|
|
42,625,070 |
|
|
|
|
Less: Treasury
stock, 500,658 shares, at cost |
|
(1,000,014 |
) |
|
(1,000,014 |
) |
Total shareholders’
equity |
|
41,698,183 |
|
|
41,625,056 |
|
|
|
|
Total liabilities and
shareholders’ equity |
$ |
54,847,605 |
|
$ |
50,268,159 |
|
For further information |
KCSA Strategic Communications |
Company Contact: |
Elizabeth Barker |
Scott Francis (918) 251-9121 |
(212) 896-1203 |
ebarker@kcsa.com |
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