ADDvantage Technologies Group, Inc.
1221 E. Houston
Broken Arrow, Oklahoma 74012
| For further information | KCSA Strategic Communications |
| Company Contact: | Elizabeth Barker |
| Scott Francis (918) 251-9121 | (212) 896-1203 |
ebarker@kcsa.com |
ADDvantage Technologies Announces Financial Results
for the Fiscal Fourth Quarter of 2017
- - -
BROKEN ARROW, Oklahoma, December 14, 2017 – 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 Measures
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 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 | |
| (a) | 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 | |
