WTT - Earnings call transcript Q4 2019 | Wireless Telecom Group, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Q4 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, Mike Kandell. Sir, the floor is yours.

Michael Kandell

Thanks, Paul. thank earnings joining call. and fourth 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 Reform 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 unanticipated 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

our adjusted certain we to with SEC. morning X-K issued measures. this or believe additional the of this to table non-GAAP provides to forth will non-GAAP We a that non-GAAP GAAP release measures measures with point management information in earlier out provide addition in presenting set meaningful views Also, in reflect furnished related want filed the investors, how the measures Detailed which are we reconciliation morning to and Form reconciliations business. press GAAP information information, that to these

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

Timothy Whelan

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

to and expected the orders realized Network large over expected. T-Mobile awards than know, purchase XXXX bid more largest in hardware Solutions. challenging than to for year Measurement and our uncertainty disruption a you demand Test unexpected from Embedded card from Solutions As due Navy be delays We the projects delayed customer in lower and proved to merger, in

actions also XXXX will to a declines we flow venue for more loose. expecting T-Mobile that and later. light The of have in order news large of we seeing timing driven we QX taken of these our and reduce are were expenses projects These encouraging are discuss We good is the that year Mike was seeing begin more the project issue. shake in pullback last Solutions spend are signs to by Network that

This in XXXX. have Public to and QX our Passives core a of customers this and in Safety success new applications. the underscores product specialized our for sets our strategy launched first capabilities new of release realized we of launching quarter with solutions year, SMART new were win which product customer Further, aligned

applications. applications new are in new forward was to of win one and this represents to going reach as Coupler wireless safety customers for continued customers specifically We’ve our new close This the new designed a the opportunities growth see SMART on successful pursuit projects our these where products, solution public of six-month in-building markets. new also as

segment to XXXX, first an other order for lead customers in unlocked have improved respect in and under the With to Measurement, orders attention being for Navy Test persistence are good to which we this our placed but and our in us growth and XXXX half and POs channels flow XXXX in year. believe indicators expectations this our modest opportunities awarded will XXXX

of specialized throughout expected noise XXXX, and customers orders in our handful solutions designed we repeat we where for to XXXX yield our Noisecom our solutions announced systems. a are expect initiatives their embedded into opportunity are and growth for also design sources noise from Our

regard shipments Solutions, the demand an change our realized outlook. we’ve forecast in hardware which unexpected Finally, customer to Embedded largest in with changed our

Our in terminated volumes card expectation news XXXX. is contract, segment good this not The end a see our is hardware is will in a nor this of decline that the relationship.

closely customer to and year optimistic We to needs changes understand and financially in are while offerings the for their working conservative remain order being their in flow demand to assumptions. cautiously order the with drivers in our continued our ahead, product serve we

XXXX we've we going level, growth will throughout expect On foundations made considerable a forward. strategic for provide which and operational progress

released software our First, October. XG spend R&D which primarily we on our on stack increases in focused in XXXX

parallel, partnerships made Semiconductor this throughout announcing our strategy of partnership our January year. in the and year NXP on executing development our In to XG expand progress we working with NXP

allows which will include This our are together and speaking for private market provide XG deployments, solutions on running to solutions customers to chips. specialized network collaboratively potential to us and go software today to we about NXP stack XG

funnel has of number and increase led ahead. increase the an opportunity this of already total we in As release, in in to noted opportunities the size an our the

decision long-term While come the relationships long meaningful time margin and and these to can a and and the declines offsetting in lower software hardware of increase element card revenue margins, expected solution sales take opportunity delivery, is our to future sales revenues. to are equally

specialty, used in government, on research, environments. phase development and high-technology generators cutting was customers Holzworth research the Holzworth environments, production announced and and analyzers the solutions in test used commercial acquisition noise blue-chip of edge and in academic signal closed also automated includes and We November. which in

technology They perfect radiofrequency many and measurement higher Test our solutions. generation our performance channel to This of is an noise specialty Measurement customers power a products common adjacent and complement partners. with common to are and

enable XG of future our solutions is acquisition radar, Holzworth the Measurement on aligned satellite Test the and The will which and focus and growth wireless of technology to beyond. communications,

drive Test growth our segment. and Measurement future This acquisition expected margins accretive is to and in

customer from by encouraged both excited extremely by customers feedback alike. are and partners the channel quarter-to-date We and bookings received

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

Michael Kandell

the Consolidated decrease Thank you, a XX.X again, fourth million, revenues for XXXX quarter were quarter was XXXX. from which approximately X.X% of Tim. Good the morning, of fourth everyone.

as year X.X% historically of of and quarter third increased in period XX.X%, Solutions fiscal shipments Network the occurred the that the and and from year. Test respectively, we bookings each and Measurement experienced prior surge revenue

This in which processing XX.X% and cards million services. software Embedded Solutions was however, lower or $X.X hardware signal offset, due sales decrease LTE of of revenue digital by to was licenses and a shipments our lower

XXXX which to in X.X and Test in fourth driven Consolidated the margin fourth million quarter. profit compared or gross quarter XX.X% by to revenue The revenue profit for drove which and our of were ago quarter costs. favorable XX% with the absorption profit labor of was was the in XX.X% Embedded margin and higher X.X gross margins or of product gross due overhead increase better mix fourth Solutions million profit Solutions the gross year had Measurement segment, and period. a fix volumes flat of XXXX Network

operating of were Fourth fourth XXX,XXX approximately quarter XXX,XXX and XXXX expenses including administrative Consolidated expenses in includes for of general expenses, and expenses. X.X the prior non-recurring compared year certain as million to period. related XXXX restructuring million to acquisitions quarter the X expenses approximately

the starting reduction initiated the Our in non-GAAP third prior decreased expense of in as the quarter some we benefit to fourth the operating we’re period of year XXX,XXX from actions XXXX quarter XXXX. by of expenses see

fourth CommAgility. quarter in as at a and Net and fourth million research XXXX primarily tax activities benefit of income includes net development related UK a was XXX,XXX. fourth our The net of XXX,XXX in to for a compared deduction XG the tax XXXX XXXX quarter to for loss quarter the $X.X income LTE the

the Non-GAAP fourth EBITDA XXXX the adjusted approximately for increase some fourth improvement XXXX XXX,XXX quarter due to expenses. reduction an in the profit in and XXX,XXX, gross approximately operating quarter our from margin was of of a

to or prior which million signal sales the digital ended Embedded our year due offset LTE decrease by results. of customer. of prior processing this lower XXXX by were decreased to hardware full Consolidated X.X revenues Solutions X.X increased XXXX Breaking the largest to XX.X sales or approximately a year X.X% revenue down software of services turning year. and the compared segment; from for partially only Now, to licenses year were XX% million the million,

fact and away We believe software in XG projects. sales are considering now network to a and decrease we transition the XG customers private the that due potential was in their period from many for LTE services are

year Network pricing industry. Solutions Test projects. XXX,XXX and or revenue X% XXXX XXX,XXX from decreased and is X.X% projects the for the competitive from entire large XXXX impacting large revenue to or government a orders fewer Measurement decreased environment which highly due fewer due to XXXX in

XXXX. million XX.X% down gross revenue revenue of XX.X% XXXX. to revenue decreased profit from or to XXXX Embedded gross profit in prior XX.X in of million was from compared XXXX Solutions as XX.X of XX.X% the of revenue million Consolidated or in year, XX.X% X.X in

sales Solutions declined well and product margin and Embedded software declined overhead gross as labor lower margin as fix in as volumes profit resulting lower mix year-over-year charges. absorption on higher of services

Measurement higher and generation XXXX profit Test due Noisecom, prior XXXX. favorable to product margin revenues. XX.X% period XX% the on XXX,XXX increase as margin gross sensors. in mix company from Gross to The devices profit was from increased lower power in the increased sold and noise Boonton

from prior Network lower profit resulting the profit margin lower labor entire environment competitive with highly as XXX,XXX XX.X% year. due from overhead. fix Solutions industry Gross XX.X% volumes the pricing decreased the as decreased to in well XXXX absorption gross impacting and to

an increase specifically XX.X million XX.X Solutions roadmap of to increased deployment roadmap. XXX,XXX. development Research as product Consolidated on XXXX, operating expenses expenses headcount were approximately primarily the in XG million in compared X million XXXX to Embedded due and initiatives,

in Sales volumes. increased expense that and Solutions offset by lower Measurement, due marketing on headcount in slightly but Solutions Test increased segment expenses and Embedded the Network to lower was and commission

and General acquisition due full offset bonus to from year and decreased stock expenses. year was lower prior administrative compensation the by the expense expense, for XXX,XXX legal expenses which

the of March expense decreased from decreased expense in lower CommAgility XXXX year the expenses the period because XXXX on contingent this XXX,XXX unrealized prior on losses. year. that prior year Interest on foreign recorded in the Other and from consideration was liability accretion XX of realized paid exchange XXX,XXX

benefit tax received deduction in XXXX of in expense primarily million prior We compares and recorded of the a research in X.X the the due XX,XXX year. to tax This development UK. to we

recognition operating loss Overall, as was a net due we lower attributable partially of gross higher which adjusted compared XXXX. The and XX,XXX and revenue Non-GAAP profit were million in tax recorded profit. to in million year-over-year expense only in for decrease income of interest XXXX benefit. and the the lower in XXXX to to compared XXX,XXX by EBITDA consolidated expenses, X.X X.X of to and net XXXX gross offset was decline a is

balance to the sheet. Turning

deferred million of net in purchase decrease price loss XX, cash December to of of million in the cash offset of net CommAgility compares and partially X related X.X attributable as XXXX. earn-outs of by is cash net As acquisition, our The to lower and XX, net the we which XXXX, had XXXX December payment to CapEx.

The As by Inc. noted of million the our acquisition new Instrumentation QX completed acquisition of in year. acquisition. Holzworth of our term from the subsequent financed in of the was will loan Holzworth with February included footnote XX-K, be financials date XXXX this event results Muzinich in in company The $X.X the Holzworth our BDC.

in February, of XXXX extended accounts XX, March both added us of borrowing the revolver in Holzworth receivable Bank our calculation. and date Additionally base with the maturity our allow asset-based borrowers utilize agreement which CommAgility to and under we will the we as subsidiaries America to of

expected our like segments. in discretionary operating million and as of to approximately actions restructuring across initiated and reduce early X.X third-party These and areas. include expense reductions also reductions, other spend costs revenues are cost would and note to XXXX, that headcount cost compared of XXXX actions fiscal and expenses all we to I

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

Timothy Whelan

Thank you, Mike.

key the noted With operations we we press our what the are that company impact currently is points on release, the and a the few said, coronavirus of seeing. outbreak As in on evaluating outlook.

impact or of not company's we operations reduction on from on no as purchase a seen outbreak our any the have today, supply customers. expected on and As UK-based result the U.S. coronavirus flows chain, of significant impact no

our positively will impact we operating Looking and cost lower believe into margins our actions expenses. XXXX, reduction

Solutions and and Network the we feedback in bookings offerings seeing Test We we and our customer flow discussions. are healthy software segments Embedded are Measurement XG from and in QX to seeing exceed XXXX, in XG customers by and interest as and in that expect QX are encouraged increasing compared quarter-to-date order and Solutions to

the coronavirus situation outbreak developments impact As unfolding outbreak coronavirus we its information and once company understood as what to volatile. unfold. situation could situation the know the the stabilizes. to The better is the The expects is provide daily, from related additional financial of change is outlook regarding

The profitability. growth common our aligned management with team and the Board improve shareholders for are on and goals

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

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

Operator

Certainly. open Ladies do questions Instructions]. and for in. gentlemen, come the have floor a we And couple [Operator is questions. of now

announce The first Potter. Michael, question your your Michael is affiliation question. and please coming from pose

Michael Potter

Group. and Capital I Mike, $XXX,XXX. acquisition answer you questions couple merger for Tim, Monarch Hi. of could me. had know we of a expenses hoping

break I’d it. can for me, that out you If appreciate

Michael Kandell

joining Good morning, Michael. earnings and professionals say that as both that tax well of those us Thanks amount I quality as that are the assessment. for engaged for today. are fees related of most professional would attorneys engaged to

Michael Potter

out you Can Okay. break it specifically please?

Michael Kandell

Michael. now, don’t a breakout I specific have right

Michael Potter

on a You breakout specific on small don’t $XXX,XXX of M&A expenses acquisition. of have a

Michael Kandell

and of fees, legal. professional those are XX% that XX% almost say would are Michael, I two-thirds

Michael Potter

Okay.

Operator

from Please Sam, coming and your affiliation Rebotsky. is pose your Sam question is next announce the your live. line question. And

Sam Rebotsky

Asset SER Management. Yes.

sort – know last your you not the their to kind did acquisition, able and year? current they Holzworth but last us Now I of give – profitability year? of sales what what the your was sales expectations year, could you’re produce for

Timothy Whelan

a can our bit talk expectations. Yes, about little we actually

We of are margins X expect gross revenues their approximately greater than they’ll and generate XX%. million that

Sam Rebotsky

of That they we open, know are any you at view know very I don’t Right good. closed when because sounds now our might coronavirus, at the are locations? all? you closed but

Timothy Whelan

all. We are not at closed

the that’s people home working around We all we’re and the of that, in are exercising believe of measurements our highly world. I are effective locations from in home work Measuring policies. from the who

Within the those can people being from And the by work Boulder site home. caution receiving. Parsippany and are coming on home exercising the are fully but state, directed we operations, have shipping do in and who working guidelines and the we from operational,

Sam Rebotsky

previously bidding in because And time. expectation you million is of in the on of backlog, I sense period significant more of know revenue that in work are the spoke reduction certain XXX the you a

a the and So working what full are reduced? been one on more the about of What work shift, projects? expectations lot need your having and you backlog you do workability? your with bidding Are to are backlog you

Timothy Whelan

Yes.

drop is the to cards. Our demand hardware for backlog principally reduction related in the

And there’s We will a the I as periodically overtime our in have mentioned, are we shift. is We active. one capacity working surge and when that backlog, exercise and on that funnel so full stronger our have and year XXXX of three last Solutions to potentially we than Network QX and in compared well. expect two QX Test greater and of to segments; as Measurement QX bookings as

to by So sequentially quarterly funnel the activity date. year-over-year of bookings we’re the quite encouraged and

Sam Rebotsky

we acquisitions, your profitability the two year it expectations? think was in what’s the Do expect do that and growth to current that million with you $XXX plan or I had, achieve with years, expect in you

Timothy Whelan

Yes.

weeks that’s I the the like believe could think months be right couple assessing that we’re how year of occur still With to vision coronavirus. our now is still expectations. in targets. to just million, I need of just to aspirational to that going another terms our of regard vision with year volatility a accomplishing current world understand impact the is or and the couple to fully XXX rest that potentially we going full our of our

$XXX have point We the not million the and return evaluate we we’ve as that carefully with as whether place organic M&A. determine will accomplishable and well growth completed manage have without to at just in or the or the to acquisition debt is

say terms that I in robust M&A managing that a and of making environment. to look and completed now sure delever right prior respectful profitably very We’re to more we’ve we acquisition successfully the and grow would

Sam Rebotsky

capital to at go forward? is we time. this And don’t to our need raise Presumptively, sufficient capital

Timothy Whelan

not. do We

daily given at a disciplined our closely liquidity applying environment are current obviously very on very in with given managing world going it and approach the what’s coronavirus We and looking the the today.

Sam Rebotsky

period Good Wireless it luck. going has a you had. time. the should forward very right. luck and success been All over Hopefully that successful of achieve once Good

Timothy Whelan

Very good. Thank us. for you joining

Operator

Michael, your coming live. follow-up Michael we from is you. a have And Potter. Thank line

Michael Potter

guys. Sorry,

must we have think cutoff. I gotten

if on Is So the in that correctly legal $XXX,XXX XXX, do fees. math the that’s correct? I

Michael Kandell

approximately, It’s Michael.

Michael Potter

Can that it. anyway. but --? be I’m hopefully That will seems more into look sure Okay, got Board you the awfully high specific

Timothy Whelan

transaction. it’s have to did for banker M&A the us fees note advice Michael, in were the on were fees advisory no fees We advisory giving the But acquisition. debt. on important no bankers there necessary

Michael Potter

know to was acquisition brought wasn’t a Well, this you small that a This of. banker. you by

Timothy Whelan

Correct.

Michael Potter

Okay.

So it needed been and have a out banker would silly pay there transaction. to go if wasn’t a the for banker

Timothy Whelan

we’re that save I’m and that making on to able the just that. point do

Michael Potter

legal of seems excessive to me. $XXX,XXX the But Okay. fees

out from pushed I you that forward in we’re them – were were move XXXX lose you they XXXX. think but us We projects? that that out status mentioned didn’t nine that give just would hoping in had those you to projects the on Can pushed they XXXX.

Timothy Whelan

locations difficult to equipment are of distributor identified distribution that through, a and it’s mentioned more very but them, individual not it’s number is nine Michael. tracking I for when The number those fluid. project. for each order The it’s of and changing. understand difficult because and reason very, comes we we are It’s there of a track ability anymore locations through these is us when projects I And that as there the then where coming quotes we’re track aggregated staged, these on orders a and are we are which orders are large to taking take to the that are us some ultimately more say locations. nine much are – tracking through that

to towards our flow – started way. we’re order So we’re come moving the has optimistic that

right dollars in those measuring We’re now.

Michael Potter

Okay.

granular or not, to point if it at we is see from? can’t project which level this So coming any where

Timothy Whelan

at out detail environment. the is the the of and very order months, quotes coming of more much terms there. then how individual designs are through times Those we I And that’s a bill many orders you distributors give over for redesigns come and done. QX period QX. aggregated in fluid through to staged flow we a Quotes able about situation many, location. comes being think quotes those particular in into be material those – Again, in be coming of close We’ll through think can No. as

but know break and of So for originally are then we the being down end projects we that for equipment hard application those locations and quoted, to understand actually which are which us that not. that the that are completed it’s

Michael Potter

that are stands, break currently it down division? as backlog The you able to Okay. by

Timothy Whelan

We the that We Michael. done past, in have do do internally. not that

Michael Potter

Okay.

break will by it division? down So you

Timothy Whelan

a have it’s for need that of number takeaway we’ll We certainly and but things we’ll consider to a that, through. think something

Michael Potter

Embedded detailed XG right. you little give can Solutions, product assuming turnaround a the a to bit have more largest turnaround than I’m waiting a we us All plan? plan other detail customer our more available? for on have

Timothy Whelan

Right.

So product, a significant not failing declined concentration or remember, The a failing because It’s Michael. declined failing of it’s unexpectedly. not hardware execution. the product sales customer

on years two over now roadmap. XG working the been have We

the within that been still created have These We of customers our working we our are funnel Instrument-based solution. relationship. better a the traction interested on two for the said, which and Texas the quite coming have solution bit That NXP year customers interested a XG TI, of is part solution. XG has in together in

XG where did released, sales becoming the XG is real decrease they’re Some considering more and inflection the they being pause I were industry had not where that plans. in because offset believe and hardware of that and is reconsidering point Embedded XXXX where in of sales overcome in the Solutions and software

it a pause within believe industry. So was the really I

NXP time. as quite and long large are sales on XG the of the complex now XG are pursuits solution take We’re and moving These pursuits as both some of encouraged that forward. period the a platform well

Michael Potter

be Okay. cash regards QX? cash positive to flow positive, flow being in you In will

Timothy Whelan

provided Michael. haven’t guidance, that We forward

seen quite of the on eye we’re coronavirus. as that. flow all impact our But with of And noted, and of we into Mike the an as cash optimistic and encouraged go any keeping impact just liquidity We’re date to year. confident coming metrics, we extra that haven’t through this

supply impact of chain. seen operations, a monitoring seen an employees, impact the softening we our on customers, haven’t carefully an seen haven’t from We demand our we haven’t on

offshore our and shipping. of open vendors are All

revenue our So right now flow liquidity. and we profitability, feel cash good about

Michael Potter

get the in Thanks. Okay. queue. back I’ll

Timothy Whelan

Very good. Michael. Thank you,

Operator

no this Thank time. from you. are lines there And at questions more the

Timothy Whelan

Okay, with us look we great. Thank soon. to speaking again you you everyone forward and for joining

Operator

gentlemen, Thank and you. today’s this Ladies conference conclude call. does

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

Wireless Telecom (WTT) 19 Mar 202019 Q4 Earnings call transcript