WTT - Earnings call transcript Q3 2019 | Wireless Telecom Group, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Q3 earnings conference call. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, Mike Kandell. Sir, the floor is yours.

Michael Kandell

Thank you. thank earnings joining call. and third for everyone, XXXX quarter morning, you us for our Good

the could within Before they remind Securities can call. today be everyone expectations statements begin, to Litigation business regarding do current on forward-looking forward-looking events, we I XXXX. future the on the That would or the Form Act identified strictly our performance, and These and company's results. the company's historical by future are not meaning of and the like of management's to economy include current relate Private The facts. statements based circumstances conditions statements and assumptions of and remarks other that fact forecasts

in and uncertainties factors results report any occurrence risks forward-looking include involve not a events Forward-looking reflect in are company's risk to anticipated revise undertake or cause from statements the does number those that otherwise. results. forward-looking factors Important materially its in assumptions update changes performance company's and affect that actual could any company or differ materially XX-K set actual the statements, not guarantees to future on filed could information the The of those annual of forth obligation SEC. with the Form to of

adjusted certain the we to measures. business. or believe additional non-GAAP provides to will We that views non-GAAP point information in out provide addition presenting meaningful Also, reflect relating want investors, how measures which we to GAAP information information, that management to these

X-K this earlier with in SEC. non-GAAP reconciliation are morning our release Detailed with this set issued filed measures Form the reconciliations forth table measures furnished GAAP and the morning a of press to in

over to our turn now Executive Tim Officer. Whelan, will I the Chief call

Timothy Whelan

Mike. Good joining thank you, for morning, Thank us. you and everyone,

than as lower both expected opportunities on large hardware results timing reflecting unexpected as QX XXXX well project pushes were decreases. expectations Our

our are the will guidance, just remaining few adjustments in are only weeks here six in we there these year expand With more given revising in a and mind and minutes. Mike

half second positioning the terrific not company progress some Our reflect of made for have of the do also year the lower the revenues the longer-term future. in we

conviction We revenues accomplishing to exceptionally strategic year, accomplishments drivers of level, throughout a opportunities. XXXX. operational and pleased of $XXX in which remain On will million we with our growth maintain goals future in our our the longer-term be

these R&D in and spend in XG stack conviction last reflect and and software our increases confidence roadmaps, solutions. Our out in our investments XXXX quarter, we the in called

compliance stack announcement since small customers Our of which recent XX software our with current XG a milestone year. the will middle the significant cell been release solutions, enable and we last future XGPP is and one month of have discussing and

bring market to our respect Additionally, allow XG advancement our ecosystem as deployments. and affordable progress will our we platform to plan partnership we XG competitive enhance made network to with positioning of network also private customized for customer needs private have for This solutions, for accelerate solutions.

Our R&D opportunity. translated also to progress has customer

total funnel XX alone, contract some $X which value. of In over four we of have last months reflect new million over the qualified opportunities,

could longer be platform. firms, commitment. to less is We order term larger, the $XXX,XXX are step early NDAs willingness to by be our enter than by expected engagement first highly for encouraged a purchase which win possibly stage order these of reference leveling in a into early by an and development purchase is what the This

these come of a cautionary discussions could conclusion. to long to note, As a period take time

fully fiscal decision in result But would multiple opportunity offset a We margin push are will quarters deliver. timing. shoots, solution to not could higher the and software multiple years front this revenues, or lower-margin on of some cards. lead no These will a we of strategy take our our every and potential declines sales some which could green hardware or success win for and direction to us showing and expect also development even

exceptionally Test the solutions cutting-edge by products. customers environments. and academic Colorado-based development government, analyzers revenues provider base, signal the Holzworth million. serve months are a common They and of commercial partners. specialty on of and a customer research, today Holzworth adjacent Instrumentation. test and pleased of research for of phase Last, we acquire and Boulder, high-technology we with to used to automated common and Holzworth environments signing approximately are announce the generators in September $X.X instruments are of chip in and definitive noise many production a blue to X our ended is XX agreement Holzworth have used channel Measurement

We to are offerings Holzworth, frequency performance of generation our incredibly to product and measurement believe and founders skilled the a their solutions. welcome higher are radio noise thrilled and complement power specialty perfect employees

XG focus The Holzworth which margins radar, solutions, wireless accretive and expected acquisition This growth to Measurement the and will business. of future to acquisition of is Test the the communications, technology in aligned our the on beyond. and profitability drive attractive by growth is future of satellite enable

the this months we which will to time ahead, discuss transaction in at expect We close this further.

pipeline. term, longer part continue an to we acquisitions see of as our see and potential long-term the future strategy, important in and ahead strong we M&A growth Looking

us to With walk to over that, turn going I'm the Mike to through the financials. call

Michael Kandell

morning, everyone. Good Thank you, again, Tim.

impacted ago for by the financial Tim of government which quarter's Consolidated $XX.X XXXX in revenues of the timing by million, As quarter decrease to results were largest customers. were Solutions downturn our mentioned, Embedded XX% of project unexpected a period. one delays, lower certain was year overall third from and orders this sales approximately

from XX.X% of decreased for The the forecast one customers the largest revenue customer unexpectedly changed our the to in calendar of four Solutions demand our hardware of last processing have year. the digital shipments signal declined. as shipments months period, year ago Embedded

to with QX customer more the to in drivers half working of forecast demand currently accurate understand to a changes are and first establish We the the XXXX. for the

a processing our of cards designed digital cards are but testing hardware into that lower their we number station our processing solution. base informed in been have XG We expect that solutions,

We versus forward. XG product the understand demand are attempting to going a to get better of XG mix understanding

shipments These XX.X% as confirmation such purchase cannot lower on timing to multiple Test reflect stadium the are large related which we received, is - revenue carriers, contractors. been to projects. for which or already a Navy Measurement we will orders decreased and agreed, for decreased to contract, revenue to XX.X% integrators received lower Once all ownership, ship of three delays due purchase builds this The due are in we configurations. Solutions And on between award. expected completion we year contracts all delay Network we the stadium general government those designed subject purchase verbal system into have team believe large and have orders products orders and underlying flow. an time record awarded. Until revenue under are

revenue gross cards. for supplier signal increased to million million Our was XX.X% to consolidated favorable QX revenue due down by our gross XXXX of to Solutions' margin price XX.X% third hardware as actions profit mix this compared compared period $X.X $X.X or for XX.X% Breaking processing XX.X% segment, digital of quarter from of and reduction to the Embedded same or for the last as year. profit a more

labor as solutions the flat finally, segment of current in due environment XX%. approximately gross as and period XXXX to fixed overhead. profit the Measurement from Test year in well entire XX.X% to lower pricing at impacting Network and XX.X% absorption profit gross margin industry And competitive QX decreased the was

for approximately APAC basis, and was which Embedded revenue, accounted our consolidated of X% revenues the On while define regional of hardware due South for revenues, in to Canada, an the and X% consolidated decline Solutions and region as the a XX%, accounted EMEA U.S. XXXX. in sell APAC, The to X% respectively. year into consolidated year America, the Americas, XX% compares Americas, we respectively, prior the EMEA period. for from APAC This in XX% and prior the revenues APAC of and

Our expenses operating decreased $XX,XXX period. from consolidated the prior year approximately

$XXX,XXX by favorable expenses General and marketing on Research expenses due expenses. decreased lower roadmap development due to the $XXX,XXX administrative Embedded and foreign commissions, bonus exchange XG offset partially initiatives, product lower specifically headcount primarily Sales $XXX,XXX, on roadmap. headcount impact and related decreased Solutions, slightly period contingent on to expense and external due $XX,XXX on foreign expenses pound. increased decreased on the deployment this to expense gains. increased that year prior in to of expense XX accretion CommAgility prior the consideration Embedded paid Interest the from year was year. the exchange British period and Other XXXX income Solutions liability, from recorded March

compared was by a of and net to result $XXX,XXX The period. Overall, taxes foreign top expense. the $XXX,XXX year result decline lower marginally in gains before a income gross loss interest recorded and line revenue profit taxes of before we ago lower as offset exchange of in

to balance sheet. Turning the

approximately final of price capital XX, compares position due net million million December position This in XXXX. approximately of in We amount a purchase net for debt are investments. the a $X lower to which to $X working was the of in approximately volumes, CommAgility $XXX,XXX, at payments cash

balance remains equity million. Company's $XX.X a of strong X.Xx and ratio sheet current with of shareholders'

turn closing I remarks. to some to would time, this for like At over back it Tim

Timothy Whelan

the revenue acquisitions excluding accomplish of full $XX year and against million growth its million impact to the you, $XXX the Thank XXXX. Mike. XXXX, for revenue $XX company In and of organic committed any expects remains closing, in acquisition of executing to to strategy million

and deployment, common private of trends spend. sector these expansion LTE focused aligned The defense team the and Our increased growth, strategy network and densification on Board goals. and in market shareholders military to remains are network XG management including

believe committed achievement the plans successful now we and strategic positioned to we We our in long-term operational long-term place, are well goals. the are for and of execution of

if questions Thank Paul, open now. you. lines please And for you the could

Operator

Wolford is your [Operator coming question Instructions]. first [ph]. Jennifer from And

Unidentified Analyst

It's Comstock [ph] Jen with Partners. Wolford

XG. in WT lot rollout? into been of year kind could additional And wondering specifically, of thing? give of the fits development the just terms deployment, Over around doing where us I'm any that past perspective you've business you if the a And XG

Timothy Whelan

Sure.

Network I'll the in in their this of passive the is address each spectrum of set our solutions, early is in we're seeing deployments. and comments we're demand rollout, what for that now the expanding ultra-wideband each Within we stages for whereby to with is So using the segments. of said carriers past, solution RF Solutions, the XG XG

product The into set spectrums We they're demands. of towards the And being feel demand build-outs. of components XG. their required their advance configuration is meeting our We're those responsive those in XG very design for customers moving agile. densification is and current on the the to both and

Solutions the certainly number which enthusiasm for that as have I specifically and Within higher mentioned higher is seeing, segment, opportunities, emerged, total value. a well customer of of we which opportunities as the funnel the level of a both contract very are Embedded we has

what see no we to set, a to come - a in see in XXXX, the have In to which solution they to decision which XG attributed fact, XXXX. did emerges that we wait customers preference segment in and -

we enthusiastic make about them So willing wait that, very and before those commitments. to they they're see XXXX to

Within somewhat to Measurement the test requirement research Test in that Test within in testing to and We're market millimeter stage. a terms of design, robust and the for level the Measurement, of talked again, we've segment. of of higher seeing activity the from about automatic entirety prototype

So each seeing of segment, are energy each It's are but we three the and those in each across different it we of XG slightly segments. spend early segments. in seeing

Operator

The from Rebotsky. is next question coming Sam

Sam Rebotsky

Or sales previous to Management. the up expect lost Yes. and quarter, made $XX to was you this they them to you're quarter? the the year in you $XX SER be for up I million the subsequently? next projection all projecting, be million guess made Asset the do what will that that

Timothy Whelan

Yes.

Our in low- revenue the expectation last of to of mid-single-digit percentages year's guidance was on previous growth an approximately...

Michael Kandell

million. $XX

Timothy Whelan

$XX million.

So reflects pushes. both this project down timing revision

hardware what factors in cards, the So contributing change going reduction Mike is we're like sure to that to of outlook. look the not XXXX. three mentioned volume The in

begin are see say once I'm Measurement, And that that, lost I up. Network not and the opportunities. Solutions as level, flow. we've with that's those to the confirmed personally these been going too We've design don't place into in something will and contracts at going the solutions. POs those So to with Certainly, Test made been higher firm confirmed. that's designed we

believe award. Coming projects those Test purchase half. expect XXXX. specifically to the won over Within those the to So flow Measurement, years award. have out the the Mike Navy second we and year, in to that a we on very we of three award. that orders called fact will have into that some in They do revenue purchase come also We've

yet. orders purchase We have seen not those

a So we think it's prudent with in to six only year. guidance left revise weeks

in also that and business We will order in to potentially early believe that come XXXX us XXXX. and

Sam Rebotsky

place going we basis? do profitable reached be what's in on of you're that the we far have quarter-to-quarter of as now we with we forward on could a And profitable? basis significantly expectation projecting a on? on sales, as million future the numbers a handle expect that the profitability where And as have improvement Do $XXX going we quarter-to-quarter more

Timothy Whelan

expect bit more need we acceptance shipment, operating of and leverage when as upon to certainly the little they conclusion difficult always challenge they timing we shipment, think customer. full projects, and Yes, based come when a The when the by quarter-to-quarter year. profitability projects greater about the expect is to

that's So for bit profitability. we drive operating expense our the we revenue, a certainly, little our drive challenging are way to higher prepared positioned But well more higher we us. structure, model, as have

Sam Rebotsky

expectation Or your operate they And this in or be will the you there? staff integrated? have of acquisition, products? any sales cross-sell to same will relative they would And operating the they're do facility sort

Timothy Whelan

maintain There's place. corporate is company, structure. expect most much to facility small physical but a do expect fully Boulder, Absolutely. important we an in and integrated. to We be think of the Colorado. the do of the country, maintain There's framework to a corporate expect Absolutely. it's presence. that Yes. fully we integration This infrastructure terrific the in of and that presence in We out part government customer

able and now. set. very to it channels sales same we're to Our bring be teams talking sales this the immediately will to implement customers And product

terrific to This exceptionally we're excited model this drops to company position contribution line. very about So the and today. people. where is profitability in from drive ability margin with very the to this revenue a thrilled And excited leveragability about this we're skilled incremental right the revenue be of the and

Sam Rebotsky

Good forward wireless previously. profitability the luck that achieving going and has achieved

Timothy Whelan

Sam. you, Thank

Michael Kandell

Thanks.

Operator

from is [Operator Instructions]. The next question coming Michael Potter.

Michael Potter

Michael It's Potter Capital Group. Monarch from

you guess three the our segments I - we what on on year? the budget for anticipate months? were And nine on for three segments, first operations, the in below Just all

Timothy Whelan

loading year were believe say there I some expectations. some below commentary in we've made in was the came necessarily to. wouldn't of the I the first our We back-end into believing we year half this that on And past.

did late The these expectation change Navy. really the course, volume So in in timing And change of come yes, customers. large terms of of the projects. in our the timing about what the for were from largest QX

in I So half of year that first change QX. characterize the would the happened expected, where we being and as the really late all

Michael Potter

Test Embedded across and I in understand Network But the that. is no, No, board Measurement it Solutions, and Solutions?

Timothy Whelan

Correct.

Michael Potter

Okay, understood. The acquisitions.

know guess, closed since a I us hard current The accretive for deal give I you've to acquisition another immediately hopefully CommAgility First, this time, working congratulations. this a - structure? very the its sense can get soon. is been and long under - deal you - it is closes

Timothy Whelan

It will be accretive. immediately

Michael Potter

our it And Boonton and fits lines? Okay. Com with business Noise

Timothy Whelan

segment. It's alignment Measurement correct. and a direct That's our into Test

Michael Potter

Okay. it doesn't in But manner? them any cannibalize

Timothy Whelan

insertion combined more in as product excited No. product their with No, think do forward. in fact, potentially our much next about get we longer-term two the product over think that the How bigger with. set set. into set a much we years, with play longer-term to of a to gives technology could the That's we going our just product customers go channels, But us we that roadmap. set the immediate

Michael Potter

I the guess, earnout, it's million? And with $XX Okay. -

Timothy Whelan

the The is cash $XXX,XXX, $X.X price million. $X component purchase is equity deferred is million,

So there. get the you to million $XX

$X.XX below see callback is million, have in about sellers there the actually a threshold where that million. element a You'll the X-K, agreed $X.XX the of details

than And a believe so there's you drive would confidence that. to have higher level to

math $X multiple we a it. be think million, $X.X $X.XX at million million EBITDA as purchase price reflects you $X earnout. EBITDA of we and drive $X As per about That at million EBITDA, look would above to from pretty XX.X on favorable of profitability $X.X a million earnout the could the if the

Michael Potter

Okay.

that you realm, XX run just or What revenue trailing us for what give - sense EBITDA is - the rate on run what the a can So months? is? revenue and rate, the the Holzworth? And for

Timothy Whelan

Yes.

$X.X September, million. called ending, X-K they're the unaudited that at we've So out for months the nine in

Michael Potter

In revenue?

Timothy Whelan

In revenue.

We to immediately segment. it's and profitability do accretive the metrics. have the specific Measurement Test not that I mention disclosed

of where So we on profitability. with which of the you gross you we of some Measurement the some indication to should think accretive top and Test expect margins about margins, that, be how them see give

Michael Potter

Okay.

we a aspect Okay. a me - some seems nice this hopefully, we're rest there, look? deals It How bolt-on. but of deal doesn't it additional pipeline really that give get - progressing Larger? small can very The with the at obviously, of business? of but of a is Can kind information. the acquisition our And sense get we you're like are how does similar looking little size? you us how

Timothy Whelan

pipeline. potential I we're future in M&A about Yes. the the that mentioned excited

an I've strategy. as it's said on our So before, of part the call active

very are active. We

as in are is two a The the buyer well. discussions, team we've our deal others, two well years. discussions as we'll the driving part of optimistic And on are that company seller with there on of be range. and been but we're size but I been this making characterize years. certainty benefit We And smaller to to in acquisition for the for that of would meeting getting no very fact, know we've over timing. in Holzworth there's good both progress

Operator

this from were lines questions And there no at further the time.

Timothy Whelan

our joining the in Thank a good speaking looking near you future. And everyone, to to today. Have you, Okay. day. again call for forward we're

Operator

conference Thank you, and call. ladies gentlemen, today's does this conclude

may You participation. Thank day. have your this phone your for disconnect at time, you lines wonderful and a

Wireless Telecom (WTT) 14 Nov 192019 Q3 Earnings call transcript