AEY - Earnings call transcript Q3 2019 | ADDvantage Technologies Group, Inc.

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Operator

Good day, and welcome to the ADDvantage Technologies’ Third Quarter 2019 Earnings Conference Call. Today’s conference is being recorded. And at this time, I’d like to turn the conference over to Ms. Elizabeth Barker of KCSA Strategic Communications. Please go ahead.

Elizabeth Barker

operator. you, Thank

system Private today’s this begin which like remind include, of to subject XXXX. Act Before forward-looking These call call, may that statements subsidiaries as events, the original relationships strategic and provisions future Harbor conference with the other certain the things, statements, the of Litigation of maintain statements contain you future ADDvantage regarding well ADDvantage Reform to to ability manufacturers of we among Safe operators, and financial performance multiple equipment as the such I’d Technologies as Securities certain are and its Technologies. forward-looking agreements

actual risks these to due events variety statements Form a only most or of may are a These file those as on Exchange factors, report Technologies’ Participants XX-K from Commission. are the and ADDvantage and on forward-looking number contained with future statements recent and cautioned in that of results predictions involve such differ uncertainties. Securities materially

conference future release Financial change. press available with recent Form which call on notes guidance Company’s information to the Technologies’ presented on in and included based in ADDvantage information this anticipated statements XX-Q. call should consolidated limited included on financial the subject regarding currently most considered earlier and results today conjunction issued on is report in be is The this on Technologies, ADDvantage

not necessarily of the only at information, speaks such factors guidance call. year. the change, the and Technologies influencing update guidance of date information any will the may as Such Although during only Company it as points certain provide this will ADDvantage

today, may investors non-GAAP used think about and a is find net GAAP not and such located addition a will and closest our the considered measures. our financial with we at certain for financial These earlier financial GAAP also ratios reconciliation website on measures. which and release and of certain we present financial non-GAAP these relevant. During why measures -GAAP financials measures are measures you in included these should non-GAAP income of the issued of discussion press as are benefit addvantagetechnologies.com, be instead are these measures In tables that with to in the non this financial call,

like nothing I Hart, Officer call turn the further, With please ADDvantage would go President now to, ahead. to Technologies. Chief Joe over Joe, of Executive and

Joe Hart

Thank And third Technologies’ you, everyone quarter to the XXXX welcome call. Elizabeth. ADDvantage fiscal conference

are Empey Telecom Chief Don Kevin With Scott today President Chief Colby Francis, Officer, Brown, Financial me the Segment; Accounting and Wireless of on the of President the Officer; segment. call our Kinison,

milestone a the was EBITDA This quarter strategy July as the segment management for time turned Company and since for of XXXX. of we completed refocusing Cable TV sale first in restructuring the Technologies, team and ADDvantage the our the positive

from our has Company’s years, solutions Board the For telecom, away many diversify thought markets. in original of range of core to and our equipment cable business wireless Directors services expand and the to

Technologies. this market provided and strategy, This beginning significantly to have our additional marking new chapter ADDvantage the evolution of funds in position. expanding sale invest finalized us our the in a are major quarter, segment growth proud TV Cable We solidifying with the to having of of the milestone advances

Company shareholders. excited opens our to opportunities are for greater to investment this up return We the the providing by on grow, a

its discontinued Cable the operations of TV Company’s result segment the in financials. as Company this a As sale, reclassified has

and quarter fiscal of quarter the revenues XXXX second million, XXXX, of a increase fiscal the over of presents For third the same $XX.X increase in XXX% XX% a period reported which XXXX. over we

XXXX. reminder, in As closed transaction Fulton a the of QX

in period growth the large same a represents from inclusion its the So, of XXXX. part

growth improvement in in adjusted previous both including of these driven by quarters in $XXX,XXX the and focus increased segments, XXXX. losses performance We on same EBITDA period Wireless of markets. reflecting also the with the This Telco reported was positive our compared financial

quarter its we year. the reported Xth $X.X in million on XXXX, of of Fulton’s of as following acquisition operations Wireless continue sales January to to Our this segment third ramp integrate up and

We in Fulton quarter second this doubling sales pleased fiscal represents note from to a the are XXXX. sales of

saw also in of margin gross at strong a We Fulton improvement increase of this $X.X over QX an million, year.

increase continue million, $X.X million, the period in compared segment, strong XXXX. to $X.X In momentum we Telecommunications addition, see XX% in of to to our or reporting same revenue

segments, Southwest, and you of business. Plains the and technology on infrastructure the These update wireless Beginning two cite new communication and services installation Northern Telecom. cells small construction companies regions. the to Now, Fulton, the services wireless on I’d of XG. our cells currently construction Midwest with services Wireless and like upgrade consist for to across Fulton Company’s provides mainly of

also services looking integration commissioning and and to engineering, months. Fulton’s We’re suite sites introducing such by complementary the over services broaden XX next of acquisition, site additional as cell of

the and during services multiyear contracts, momentum market, which quarter. in sales drove Fulton the has reputation holds a strong

and industry. were the the As part of contractual the of to relationships able U.S. integrators, major four base, wireless Fulton’s we that integration hire and workforce companies the on making OEMs the focus retain allowing seamless employee with to and carriers, existing its majority support national tower the acquisition, executing

we support management improve several the several the services. project Over productivity, To implement quarters, of of also we and Fulton’s efficiency the next and at margins. operations and improvements management suite are talent business, scaling expanding to plan Fulton to

drive opportunities expected and growth as the networks by wireless existing in years. This prepare the of including unfolding Wireless continued densification for carriers see segment over encouraged upcoming the the their we sales their out industry, XG, required of the roll is are to We networks.

Wireless networks as the merger new addition include drivers additional network market to gain the T-Mobile market expands the opportunities share. well and as Other DISH of carrier present of are Sprint a This and industry. will upcoming rationalized to its as

business, processes growth Fulton more market. opportunities to the the the as continue on that we To margins as readiness will our position the believe in advantage growth to both executes as strong for and to current and support growth geographic provide Fulton improved We markets revenue scaling of expansion. in of gradual determine it our new well its we take as opportunities will solidify continue new ones

is revenue [Technical provide several over there from variability Northern at Although and Fulton with to next that operations. growth strong much Difficulty] will and the continue we quarters, Fulton climate gradually still more to seasonal believe improve some margins its

$X.X same last as strong year. months the operational and reported from compared also our ending for revenues We the million three June million Nave with segment, XX, results period our contributed both in Telco improvements of in to XXXX, Triton $X.X

loss the sustained, we third quarter compared million EBITDA XXXX. Telco and in changes positive segment quarter taking margins. of $X.X reported the This the reported $X.X improved to driving Notably, Telco a row adjusted million, encouraged the hold see a made positive of second year and are are operational of the was last at EBITDA, segment that over with Nave in

EBITDA line. benefited efficiencies adjusted to recycling Nave to Nave, enabling our The offer mainly a in its higher location warehousing us a to improved are from partner, service new business driving quality from results nice attributable improved its operations and which and improvement also benefited and customers.

business take to also ramping advantage focus Looking while expanded on line. our to core capabilities business, and ahead, activities repair of up will our new our we continue

Park, segment, move management, primarily sales internal in This Florida, necessary shipping to such move adding enabling and receiving product to segment by its also equipment and and Telco which upcoming systems us also develop Pembroke is to begins facility performance, margin were the additional by our improved to existing higher manufacturers. is the its refurbishment The expect us which we our one, new lines as operations. which improve next and will refurbishment and Triton’s offering, new larger to sales highest facility our with grow than week. Triton’s inventory streamline expand driven processes The enable continue

market expected This, brokerage together Triton results to customers. additional new these with We and share market internet expand, increase that allow is believe sales strategy initiatives grow at share, will and Triton. our to capture develop to business and the

our growth. Telecom to on by and will Wireless long-term recent build encouraged to progress are sustainable continue and businesses achieve We

our Brown. CFO, please Kevin the With that, go Kevin, now ahead. over I’ll turn call to

Kevin Brown

Thank you, Joe.

mentioned, Inc., a to he the closing until TV is XXXX, on meeting, shareholder a voted special of is in substantial Company David the favor at and David company director Joe X, controlled by LLC Chief XXth of As segments shareholders’ on the selling shareholders Cable the and Company’s formally Chymiak. Technology May Leveling which Tulsat sale a XX, was the company, of June Chymiak President year. of and this Officer the of

sale, has segment this TV operations the in ADDvantage reclassified As result financials. Company’s Cable of the as a discontinued

of the was The Wireless XXXX, quarter of respectively. million million, increased The For closed was and of increase million increase Technologies, the Fulton of total Telco $X.X period $X.X result segment million our $X.X acquisition of a the million $X.X January sales $XX.X same on XXX% and segment X, XXXX. from Wireless segment to fiscal sales in for last year. which the of sales in third

The did not for revenue XXX%. Wireless over $X.X increased million, Wireless sales fiscal for period growth same the a any the representing segment’s report Company of segment revenues XXXX. The in quarter-over-quarter

to $X respectively. $X.X period Sales an the the $X.X three Telco sales $X.X in was for million of for to XXXX for increase million increased recycling months Telco million sales segment $X.X June last million, and equipment the The same from year. revenue XX, and segment ended in increase for due the million

at sales recycling Datacom increase timing was $X recycling equipment in Triton increase shipments. was million. primarily increased of of due to revenue The Telco primarily The to the in due

$X.X months of Wireless percentage to XX, This profit slightly at period $X margin, from $X.X XX% increased XX%. due consolidated XX%. Our to overall gross is million from gross inclusion year. the three segment Gross our XX% XXXX while increased to the ended of the the for profit June million margin same Telco segment for decreased last million to

general million segment to QX Consolidated compared in $X.X $X.X offset third were increase XXXX, administrative million. expenses due with a of was in of addition decrease the fiscal of segment of $X.X Wireless The and $X the Telco operating, by XXXX. quarter the and the million partially expenses in million, in

for Equity compared amounts months to months to ended three Solutions partners Company. for earnings for XX, the consisted the June XX, earnings related were with XX, owed XXXX three XXXX, from the the former June Equity ended XXXX. payments three YKTG ended months received June $XX,XXX, of zero

million XX, months for compared ended for three $X.X XXXX, Our was the months for ended June XX, three income XXXX. with benefit June the taxes $XX,XXX

from that diluted breakeven for operations same the $X.X of share, a Loss period or XXXX months per $X.XX with or was loss in XXXX. million compared three XX, June share continuing $XX,XXX diluted of roughly per for the

loss of tax last year. period was operations, This a Cable of on to is Cable This million sale ended prior for discontinued of of $X.X XXXX. operations June a three to included of the three $X.X segment XX, June its million XXXX. activity compared from same the XX, the recognized the loss Loss $X.X months XXXX. TV for months the June on for segment ended net the sale XX, million the We TV

segment recognized million charge for $X.XX XX, for June TV XXXX. months ended a was period the diluted per XXXX, three the of The with same compared goodwill share or $X.XX includes operations Cable Net also ended million a of impairment $X.X loss which for share, for discontinued net million loss three June $X.X months XX, the XXXX. per diluted $X.X of

Adjusted compared the June loss XXXX. period ended same was of for million XX, EBITDA for months a $X.X June XX, with three the in XXXX $X.X million,

XX, compared XXXX. as September equivalents cash as $X.X and XXXX, million June of XX, Cash with were of million $X.X

inventory million of XX, September the $X.X $X.X XXXX. XX, million, As had Company of June compared XXXX, as of with

$XXX,XXX its the of proceeds XXXX, on of which revolving paid is June on credit with XX, off drown line Company cable since The transaction. the had it

the million and which million. processes the note to-date closing five the XXXX Cable $X.X receive cash segment proceeds $X.X in a of paid of These David Chymiak paid in million receivable TV consist facility of Inc. of June sales level, on three years. be to XX, of we $XX.X As promissory Cable $X.X segment X, the facilities will which Leveling LLC, the of result TV sales, to July a from over closed was of received sale million after to total and immediately

segment financial will I concludes our overview of over questions. the to the turn operator This now the remarks. for call

Operator

is who [Operator Instructions] Gaspar private And we’ll hear investor. [ph] first from George a

Unidentified Analyst

revenue In over quarter. units? delve transitionalizing $X morning is transition could past or were -- other was place to believe due you January you double install you Good in words, on elaborate you It Can if getting the to I actual how and service stream the congratulations it. you produced stream versus the here. that fact revenue like on outline wouldn’t, tower million equipment in that Yes the and you that quarter. that Fulton can other first the related? much this did the what if I’d into taken quarter, number in June Fulton say cell was this you But,

Joe Hart

Hi, stages George. This in far of the, I’ll transition. Fulton Hart. say, the Joe the so is It’s formative

We’re adding Many south. Indianapolis so sites. Northern We at cell cell it’s started existing called and we’re race, special a on them wheels. north additional But, moment, XXX that. are do of also cell frequencies technologies tower and few temporary mobile the festivals music we the based exclusively cell in installation, so of towers, big to related things in both and do of towers. Chicago, like services to lot in construction COWs upgrading our the a performing like all And events affectionately specialty for up either tower towers. news build a or lot We’ve operation,

add I winter We that due months paid the We the And were through lot credibility we stabilized crews. we north. as reestablished crews, more past our in-house in crews, the prior would up characterize the headcount to were the employee as really really a subcontract the off in And got owner. QX, well and QX, then, growth marketplace. base. we from able as both bills Fulton’s

probably X.XXx, but were of X.Xx quarter. factor we this workforce using now a that So, we by something about that, in that like grew current continuing the

rebuilt footing, So, and we’ve got the it north solid really and south. on both business

Unidentified Analyst

on I I’m activity. had Fulton but have that’s crew crews maybe in sure in many further something like if now recall, variable, have crews six and acquired, a you and work how to that many do. was or you the do use in-house just you And came the Okay. that. How you you that depending on actually outside? Fulton upon When do

Joe Hart

and probably the the to of And crews probably -- of wildly. X doubled count number is in-house we in-house That’s started north have south. is. But we’ve since our we ratio It crews crew doesn’t in-house -- both X. to subcontract

like that so we So, overinvested subcontractors, we’re of a have to buffer crews. in-house not always strong in

Unidentified Analyst

I see.

And to right. like what to forward accomplish All Okay. would looking now. you

of and in out it and And the are you You’re many operating the -- Southwest. facilities Texas that one you in got organized? how concentrated Midwest Midwest, one say how the is in

Joe Hart

Yes.

We have the two the facilities of that were acquisition. part

Roselle, work suburban in depending Chicago, upon current in facilities two and that’s facilities. in Oklahoma city set proper temporary Dallas the of then, probably Minneapolis, up or our in or we’ll So, the migrates, And Indiana. how

get that months, we work, additional can the months on just some into You of locations the if markets. nature small to X it you XX et and migratory can adjacent pursue rent for depends cetera, want

Unidentified Analyst

another I permitted here? Am to Okay. ask question

Joe Hart

are. As I’m as you concerned, far

Unidentified Analyst

Okay. All right.

-- manner. an new in Nave to could on out, service and on you you that’s amounts some in give me Just these operations, break that. and repair Triton, what information to sales? If appropriate can question additional appreciate that if ask I

Joe Hart

as this year think, move every down to what been has breathes amount got made this to I one because this The services Kinison small Huntsville. Don Palco I’m Telecom Nave in is to lives repair day. But, Don and pass we’ve Yes. of over transition the

So, the Don, don’t rough you on give to I splits splits new if versus want refurb. know on --

Don Kinison

the amount amount So, terms generally versus that of of as of well Triton versus speaking is split similar both as George, we the of both kind of new saw refurb, organizations, of in Triton Nave. new the in refurb.

as into the ramping growth revenue relates Nave’s division, But, services today. segment relatively we a to higher in up small future. we that As anticipate start ramping it’s repair percentage it

Unidentified Analyst

this Triton, more I still starting if about next concentration to The are Florida or transition could from just of the there? going of XX,XXX. recall, graphically, a beyond feet to you’re XX,XXX square that basically it in for you you little terms In week bit is it’s extending now, effort accomplish, describe -- if area that

Don Kinison

United we our in geographically, entire the So, of today service base. States terms customer

Miami the stuck geographically, are location. not So, to we

our in always of in, we’re to with nature things utilizing shipping and Now, our other looking that that improve an facilities Alabama. operate being by we example, that at facility said, as of ways currently goods cost

at that to and Miami and the we’re refurbishing So, looking down our widen reselling expand line the always of we’re to to going the platforms expansion facility at primarily equipment refurbishing be is of that. the But, community.

Unidentified Analyst

and that that emergence And okay. I’m see, are or kept of right… asking Nave they be connectiveness the ADDvantage the h I of two Triton, Technologies is of into as maybe going companies -- to in terms separate, part not

Joe Hart

again, George. Joe This is

I at both, think ADDvantage. just Fulton, start our brand we’re Nave, the looking very that Triton, at for

look all We’re taking new at of that. fresh a

prediction. name, early here quarters. a hard couple in of where make pickup the a say, And And those makes and moment, would of kind and not excitement the as it. we’re there’s evolve too any we it so, to some we’ll I’d economic plan around provide way at sense taking brand at But, the look But, some next make direction. changes, firm either it’s

Unidentified Analyst

on to and Kinison And when completed transition your be what thing, -- to is the Triton, maybe week two? what this in going now one go back to there. or it has the the is in But employment last next is

Don Kinison

efficiencies, and more much same, stay efficient more operate standpoint. really improving to into we getting going the that nature. an from procedures space It’s systems a things It’s and with the George, where can employment about of

Unidentified Analyst

see. I

Okay.

Joe Hart

efficient or a moved fourth a and or third been a able they jam-packed up set it’s very were cramped -- out started to it the so company, a they, each and little about workflow. X,XXX something, about grow. feet what square been and down, up Don? small a And from just one it designed of went then, suite. professional Because as second, -- But professionally And haven’t Triton of way suite into that

-- thing margins. workflow driven as headcount to not It’s moving We so professionally lead and said, we’ll a grow into much we’re as space efficient. not the better Don believe with the So, new space. to designed be

Unidentified Analyst

up Very situation Joe on out exciting. could well considering overview, move good. that all there, shares opportunity you. Thank very cable is it going it areas it’s revenue to to AEY. exciting that XX.X be this goes that the and And that forward all very of various you operating only And million the an the here hope with and entirely, approximately you’re have in at you. picture now have I for that the you stream emerging

Joe Hart

you, Thank George.

Operator

And our Mr. call for to Joe Hart I’ll session. with over question-and-answer that remarks. closing that turn the back conclude does

Joe Hart

Thank that you, on operator, and thanks to call today. us everyone joined the

you can and the efficient think the I TV excited both and Cable Telecom. growth. stronger of segment Company. turning has And now to growth point more of hear the in opportunity sale by Wireless voices, bottom but we’re it to capitalize on the our in long-term for line and a top investing foundation ADDvantage marks the the support

and have room infrastructure to share leaves to Triton major significant these in led opportunity wireless us at well-positioned services already you, grow businesses. for in market, results, the growth combined for in sales Fulton Our This, and the shareholders. with initiatives Nave we market expanding see growth can build of value improve both our to

back close that, call the Thank down the to call. to turn With you. I’ll operator the

Operator

for your Thank may your gentlemen, conference disconnect. will for ladies And And and participation. you now you this conclude today.

ADDvantage Technologies (AEYGQ) 13 Aug 192019 Q3 Earnings call transcript