TESS - Earnings call transcript Q2 2018 | Tessco Technologies, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2019 TESSCO Technologies Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference, David Calusdian with Sharon Merrill Associates. begin. may you Sir,

David Calusdian

and for everyone, XXXX TESSCO's conference call. thank morning joining you QX Good

are TESSCO's Please Murray Executive today future forward-looking me Joining Wright, results anticipated Aric discussions will and the statements management's about Officer; President Spitulnik, company's that CFO. note prospects. today contain and Chief and

the public cause risks and that found Forward-looking those other concerning Information the the discussed of and like including company's Wright, such difference results XX-K reports be and periodic disclosures, may can a involve TESSCO's statements and turn number Murray? may Murray most recent Exchange Form TESSCO's filed with TESSCO's in CEO. President call today. to factors introduction, Securities over to uncertainties, a With and differ from that Commission. materially I'd

Murray Wright

to growth and quarter growth for managing headline everyone. you David, today. the consistent for this for on profitability. you, good strong joining and call driving Thank us Thank The enhanced that is growth, morning

value in We year that is in execution with during performance. the are solid our we initiatives topline of are put the driving our markets. combined sales past The teams place confident proposition the resonating

achieved X% seventh increase representing the growth QX, year-over-year quarters. revenue past the eight For in we of

this fiscal momentum second expect in half continue XXXX. the We sales to of

While by costs service in we this an earnings public achieved impacted sales X% and and higher the markets. revenue quarter increase retail margin were growth our carrier carrier in lower public

SG&A this customers This expenses. and increased project-based and retail our caused to gross costs serve large freight to lower margins resulted freight quarter. commitment out incur us Our other operational in and higher in,

better customer collaboration We expedite line. made project continue we will with shipments help drive and recognized project-based improved As to we growing our and a line growth level revenue are decisions to us bottom customers our forecasting to needs. meet business

implementing to new operational make are processes happen. this We

will drive market confident enhance and our operational strategy the we in efforts been growth our improvement that well. to have We equally are successful from profitability executing as public carrier

Now like provide on to what markets. in updates is would happening our I each of

driven in revenue XX% strong growth one we the quarter and increase saw a by public was year-over-year MasTec Our customers. from to tier second our results primarily carrier carrier ecosystem, particularly where sales

has market team in is working share. successful been gaining hard Our and sales

is Our which approximately X% grown growth outpacing the revenue believe has market, year. we overall this by

with Our sales working the team company. productivity teams improve is and also order operational well flow to our across

are tailored proposition dynamic understand significantly has have value We needs. for solutions and a over market. outperformed this key our Our become challenges satisfy differentiator reason the critical to our confident provide time. us able the to will and we customers’ of a space we improve profitability I'm

integrator go to new Now me the to TESSCO we Last for year position and future shift let growth. launched market reseller market. gears to strategy the value-added

that final the our to reseller, system through we second government completed market implementation calling the and the are operator, quarter, value of add consolidation market. the strategy During channels go private of what VAR piece we into of integrator and our

seller. opportunities sales one managed by Now these the be in regionalized will TESSCO markets

markets such end-user the training and We cross are will we as team aggressively sales specific matter other experts government subject continue utility, have members. on to sectors all

a coverage and with As better customers created have provided streamlined greater supplier our business, we to our result, alignment partners. the

and integrators job incorporating sales were our Ventev with products OEM better X% of a are infrastructure well systems. up complement offer. total executing are we Overall, Ventev into We Ventev our quarter our where our doing products this

proof This our resonating the spaces. oil Verizon growth mobility and we IoT-based point gas We in are value-added particularly This utility, Verizon IoT are as that TESSCO solutions of Tier the also another mining is capitalizing One on named announced and marketplace. that solution. of week a into initiatives distributor

in contributing accessory pressure to Ventev to retail, the under our X% to sales. increased well iPhone XS executed the customers X% Max get The and also into to and in increase mobile launched team sales growth September launch. device a product year-over-year Turning hands that prior XS, our was of

big-box opportunities with to in traction continue and gaining stores develop quarters. to several coming expect are We

airport work market continues also be for Our growth in developing offering that quarters mentioned to our customers. on I continue and previous we services has channel we to capabilities experience in a that our the leverage solutions retail in These the to offer. that focus are successful. the substantial and

our base. data our expertise and for to client costs improve using to broad our and tools consumer retailers, For drive systemic to recommendations, reduce experience productivity supply-chain we the are informed improve

are to services these offering commercial our and offer been similar our customers to retail have beginning We customers. services to

are working manufacturing with in is are highly low channel, effort distribute partnership to making we opportunity progress represents our good developing several as these partners. wholesale a where risk, service This also to We critically partners revenue products. our important manufacturing strategic

Looking for the ahead, well iPhone today. XR launching is we expect replenishment the Max as orders orders iPhone new recently for XS as the that launched and

we robust the where discussion addition, for in going each business Aric, this And typical In I'll activity over back of be to expect the now, turn the holiday you. results. I will markets. Aric over I a quarter. financial a see call of to discuss our to

Aric Spitulnik

you, Thank morning Good Murray. everyone.

prior market. increases the XXX.X X%. X% carriers decline VAR a partially totaled retail and These over second and Public sales up named up were million, the newly XX% quarter. by offset X% are the integrator For year quarter, by in up was revenues from to

portion Ventev primarily increased was XX.X million Gross mentioned, by higher of a mix. customer X% a enhanced the in go-to-market year-ago The our implementation Gross sales carrier margin structure strategy was from due to project to system shipments of that demands. As markets. private of compared well the XX.X% a quarter our in with year-ago. for government the and for margin growth air the product necessary freight meet the higher through opportunities. related increased international help new the of business profit quarter decline expenses primarily VAR, is as revenues. XX.X% to This expenses higher and freight were completed consolidation This due to operator the market, Murray we in will drive as to inventory

As we decline business product revenues. increases. we carrier a have due mix what this the gross with margin carrier the in been That at we is to quarter lower margin increase business carrier saw did as the margin expect lower in XX% saying,

Murray we As gross have our freight improvement of making outside mentioned, plan. progress in been margin

initiatives, focusing us fewer which on in our project. Supplier of quarter, cross incorporating supplier SKUs are means less with mix better focused and both project supplier primarily suppliers price by out lines outside inventory. functional which up power intentionally a We pricing cost the about were product this last systematic carrier six increased variable to management, SG&A growth expenses suppliers, other In rationalization retail on manage, market product million team improving months XXX. Ventev customers. and and by rationalization purchasing to helps freight and better operations have large our XX.X due the and includes lower carrier stock we related reduced XX% excess to to account the

expenses. and product [rate] to of demands, quarter customer mix Our expedited these grew this impacted shipped which meet increased we variable The international shipments more significantly. shipments

cost related In to addition, costs. few to a technology bad additional we higher healthcare instances, expense increased debt business help and had support the isolated

our quarter-to-quarter insured. are we costs fixed increased well. are vary expenses, as Our from expenses these self Despite healthcare managing variable we

last over is compared base year and Our flat with X% up per same period. of our QX is revenue employee that compensation

share As $X.XX a was fiscal a compared XX.X% of year. was XXXX. year-ago. X.X Net million percentage per quarter in for with last income compared second X.X of revenue, Earnings was million revenue of XX.X% second SG&A with the $X.XX the with compared quarter

sheet balance grew the the business. inventory to to Turning in the support carrier increase slightly

also corresponding increase We experienced receivable. in a accounts

organization on and these improving the inherently growth business focused pressure While entire our is on carrier in inventory measures. puts receivables,

a the unaffected been specifically improving has to cash The cash expect touch returns conversion third quarter. on by to tariffs. tariff flow beginning wanted briefly see have our We the are we current products I focus committee established the vast in majority on issue. to fast of distributed and that

on and products, The The mobility the XX% that price to QX by will material most passing rise We on some impact suppliers to been some a related are began in which categories, chain. January. no supply tariff have to from subject had received XX% tariffs product largely area likely tariff these are increases increases has and largely tariffs results. in This September. impacted

We agent determine sourcing international are optimal our sourcing pricing to team, roadmap going with including product currently working our the forward.

We marketplace are closely the as dynamic in we monitoring tariff the forward. move

and Finally, we per November dividend our of record payment with $X.XX XX, a November of date XX. a set have date share at

We revenue XXXX. and continue anticipate in profitability year-over-year in fiscal to growth

relationships. carrier from improvements been of are business the tighter have the the in likely mentioning, expect margin working year-over-year many to carrier gross result the in increase ecosystem. overall of implement the lower growth this operational will nature considerable time same margin project-based ecosystem our these profitability to we carrier of we large given As growth we while At

As we the back fiscal updates additional the XXXX, are remainder future about we I we our the and will results now look business. to progress the providing across good look to to turn on delivering feel forward We of calls. Murray. call

Murray Wright

just CEO. All on you after right. mark my Thank business two give as having the you Aric. thoughts a passed take I wanted moment to my and year

we long-term on our slightly to we long-term XG today when growth new deliver market. tell we single new about channels, place thoughts first as our have the I let anticipate steady the expense I me outpace a I products carrier realignment, value-add, to initiatives we a low-to-mid will will internal profitability and improved you shared with excitement and portfolio. believe new we on share in on control Ventev time rationalization, which see actions on than few and each organizational prospects roll growing focused initiatives expectations markets. have new in that The market our our strategy, see In am the business out. about ecosystem, In that And and company. improvements. digit of introducing our public several the this sector expected more development, high-margin supplier our are the market, FirstNet the growth. launched retail joined I I service continue this focused my overall will you I begins growth, of creating During can growth excited major go-to-market continues have in in technology

of ahead growth TESSCO value the proposition As we overall earlier, discussed share driving is growth. market for our

offering typically Our total differentiating business the This in future. continuing this is this double-digit foreseeable space project for growth us is in and I based see solution chain channel. supply

market to oriented this business. due mentioned, subject have fluctuations this I to nature As of quarterly is the project

market, VAR rapid growth profitability on we and capture in this these execute I we integrator about time, excited challenges. does saw where plans finally same we occasional confident projects. our carrier business bigger are we the efficiency I'm new as some the can and bet As That this operational in At underpenetrated. executing an improve provide opportunity, believe a regionalization quarter, are provide the to significant are growth on And there efforts that multi-tier have can best bumps well. with opportunity. the we capture road to was To to strategy. the includes strategy structure expected us be go market and should excellent I gone

for to near offerings points. recently large with many with who have double you finally, I be future. We will digits team very invested new IoT them like development bring of the professionals, business relationships leave Ventev continue create key us. products product by opportunities to technology I grow we a customers. to want and with new And three believe related in in deep able

are we delivering profitable on First growth. focused

are We interested prosperity. profit-less in not

three mix operational secondly, and productivity We Ventev of by and this are we customers, value-added do improvements growth. our each markets to to suppliers, And are of in services. going our driving support balancing

seven experienced even would we of that impact experience improvements we the initiatives And year-over-year the open five the our call quarters and in driving company. customer like with in have have grown will revenue that to productivity. the third, have I quarters. that the Please that mind and the and intelligently new in to improve keep of resources this last and and we enhance productivity growth six And throughout bring and earnings to last for the also questions. the yet experienced tools we XG in we investments We Because near are of sequential operator, the I know need future. marketplace making positive growth not technology, quarters. in would eight last six operational add strategically

Operator

[Operator comes Nolan Maggie Instructions] Blair. question Your first William from with

open. is line Your

Maggie Nolan

freight to higher the of to there is that markets, drive carrier respect With public doing morning. retail costs? nature some Good down of the things just costs market is something in other this serving are service the or those and you these are

Aric Spitulnik

is It we combination shipping. that the weight is a high high of are both. carrier business, it with items Certainly volume,

what freight trying to so costs on to out does the rushing to and require not it, including the are get door. reduce better our but working we vendors can we it do that customers associated with with more So, forecasting are that orders we

So move the we expedited as forward. shipments I down think certainly go can

are provide some We to providers some also with opportunities working methods our of lower freight cost shipping. for

is business. So, it the somewhat of the nature

standing costs reduce opportunities those not and looking forward. at to are [pat] We are we going certainly

Maggie Nolan

Okay, gears, your switching still traction commercial this understood. services consider seeing to for retail customers then days? you be sort And early of with are kind what of the customers, and you would offering

Murray Wright

way, And the retail the think here. we this you service of Murray. on I the and built believe year. market And fact, quarter into the practice have in started tremendous into glad that needs, I'm early but be TESSCO quarters sales company to forward and of the that the say to practice the them. Hi, in some would good out our the is has groups service we groups starts – I in is clearly this Maggie, a and team several round product for it we unfold Yes, just news support leading charging of some because asked are looking to and next and question four capabilities. to should have we next over intellectual amount that started as that we We capital days

Maggie Nolan

in this your And of is year? for incorporated rest the that outlook

Murray Wright

it we have to have first a services customers pay for to think is this about is to opportunity, a impact. enhancement approach in think much. margin manner. are going that and run material a I you don't so When and Not going crawl, there we the will walk, services validate

Maggie Nolan

for Understood. taking my Thanks question.

Murray Wright

you. Thank

Operator

Bill [Operator Instructions] question you. Tieton comes Capital. from next with Thank The Dezellem

open. Your line is

Bill Dezellem

you. have I Thank questions. of a group

important FirstNet in how all, here third the the growth was of First in carrier quarter?

Aric Spitulnik

definitely to of talked I many our think Yes. It past have to customers significant. the in starting – some starting gain pretty is for about is first that this we contractor – Bill now. right traction

Bill Dezellem

long what are to FirstNet the anticipating it take how And place? out you should build

Aric Spitulnik

year I than half think. over too maybe or least At next the so that Yes. longer and

Bill Dezellem

XG by of What meaningful kind are we doesn't rollout other? still just be [indiscernible] a gap get that is That net is it half or first past time then early. layer say frame, helpful you and and anticipating on the to future the by trying in the year am to go and little that will as and the will of understand that bit be is out too I there a one or top benefit does

Murray Wright

aggressive be that that and across to think year. challenge other thought pick in marketplace expect that will drive up participate implementation into I in the I in to is the country accelerated T-Mobile around think without and to start we happens market rollouts timing I up into and would that in the going help originally of be us the XG and intensity if commentary I probably I but think will to or of think it T-Mobile very for the whole discussion but closes start and it'll I a would think rollout accelerate next kind to XG level will that timeframe pick December that Sprint the discussion really starting will around getting with what but that Bill that

Bill Dezellem

Is that really weather-related Murray?

Aric Spitulnik

get directly a question going I question crossover. that point and the I just to answer a I'm organized that think there's not get – everybody it's mean traction your your so needs is and to for it be but or that good sure rollout getting weather-related to as

we're think be think momentum. and going executing XG start FirstNet on will I gain I to to

FirstNet drop XG into off years. to and the will future continue for four will accelerate

Bill Dezellem

dial are are right year And when bit now? at to referencing, have beginning I you that tightly thinking a early March trying next you but realized I'm XG this the is little quarter

Murray Wright

fiscal. next thinking was I No,

Bill Dezellem

Okay.

Murray Wright

next our of which the of start would see kind Beginning in second some the I QX more think kind to we'll quarter activity of year, timeline. be that fiscal so

Aric Spitulnik

that and few a and after as fully obviously down several the the and going same going drop have continue the and start next it's of the with it's of to to years for slightly until up us projects Yes, projects probably over year to slower XX end. towards months, it's flow start going are complete pick they're we'll bulk XG, flows see I ups we being to go and both probably think but probably off these then then FirstNet

not three somewhat. they're both same peaks curves at overlap the both they're to of going They're to So years at us. and five time and probably for of somewhere between be their going bell kind

it little to up that. So drop to start I bit fairly a of and will kind think pick off will will close XG FirstNet

Bill Dezellem

I that opened appreciate past, T-Mobile and had better sense today it two are to with feel then lot you correct you T-Mobile and you. is one Thank has detail that of do not than number you you extra Murray the that you do have door business in been positioned past? though have a the in been my as the

Murray Wright

For T-mobile?

Bill Dezellem

Yes.

Murray Wright

a yes sense? doing those Sprint are which our account the some mean make significant support we done customer marketplace the customer there build that have contractor indirectly we've done participate us business also Does and is outs XXX%. for T-Mobile in a we that T-Mobile and there's Yes base current in for supporting are pretty primarily and and we I that so

Bill Dezellem

hurdle anticipating your And that? make over December six that earnings believe you the last five is you $X.XX, I that grown remarks have next That opening referenced also of Thank growing had quarters, the you. sense. quarter quarter does are Yes. your in

Aric Spitulnik

the and now. grow year last right that. say no on the least than year being certainly better didn't to we just talked than are we for yes or better We that's entire more where at about we think be need the year to entire I to table

the into business but we're not that's to QX of confident so project again whether related, or going quarter both exactly of month both that this detail period yes point. difficult this fourth to the it's QX the to is whether that's So this whether level timing or or with say us quarter, yes going for grow getting the business we're being carrier third over six at we're be that

Murray Wright

right. to would bit you and The trajectory little but pile this. Bill, the very line into we that a a be that we're to don't can is have love that going have the a want I marketplace line will I are trajectory I'd I that's of like viewing strong and to opportunities way that to how the what understanding on up very business of goes go. straight flat the effectively because nice think commit

So the that that setting say is I little seeing business what be ourselves in we're of up some and absolutely want in in going we're to we're few for future think bit to project-based reshaping we're because speed growth a reluctant this to to as the related happen. hit to bumps success and the business markets we what's a going here's

However, continue as the is improve. profitability the we're to from perspective both overall to months revenue the trajectory XX a to X Eric next said going confident of that over business very and

Bill Dezellem

multiple now trajectory carriers are Great. and mean with you smooth in are when Thank it's drivers shouldn't actually as some and that [indiscernible] you're and of group on down. up project, the XG as having note called, I that multiple you multiple up and and working end some build-out even doesn't out itself that integrator begins

Murray Wright

there them the felt to the bit better to the was a that the excited balance we traction order success gain is for your In in needed was as point to are when thousands little that though really that us of effectively foreign we do the reposition helps there. I'm can business marketplace. about so that and market integrator and it reorganize talking my company when we point so Well, because I about reason

now attracted very just that final So think company we've reorganization the the this in just that finished, the the happened the we we've is exciting I finished talent it's quarter. I feel for that like stages we, moves it made, with to right of but the team, second

deliver it's to we've changes been would I to the you make and marketplace. growth still it's expectations to like difficult as internally tell positioning made and all and to trying disruptive been of and these these So meet changes

get before There's have solutions with We're attracted along tweaks had to we've third predictable So on talked me going if called traction to we're but what I more be this so haven't about but on I'm on a more we I for us the that. couple some in finished early referenced some never need this business and then mean this piece a with in the that you do in them going company. it's and talent pretty we're accounts some should I'd hammer and can and are way the market be team to several development going predictable before it's listen to say we IoT really of them business in the quarters exciting that that calling we quarter we've so and and you're that probably great to market. times, calling to

Bill Dezellem

questions. step have and a couple either I is helpful in queue, more really That I back can

– which just prefer? would You you

Murray Wright

Go ahead. Yes.

Bill Dezellem

in a one, the referenced of please. of past of talk little that person we if go-to-market is the standpoint then three you experts the now that change you're more complete you have as easier region to of go-to-market doesn't is term, you matter the before stride. a go-forward Number basis system bit the truly accomplish able the hammer a you Can growth your changer about salesperson I'll for deliver each the talk changing just or in been through as your you've integration you a strategy the let's and throughout subject growth having how able and language strategy on to using having your driving all different and road coverage. you a So expertise one go-to-market of of tire hit fun for now regional talk that you strategy that couple even and VAR since thought from government, down those private business make the in would but who types so having process

different couple a So there. questions in

Murray Wright

I try picture Spokane the that me sip let representative a territory in So TESSCO. and as yourself a and a think but Bill through bit seller little from or

aligns of that the territorial so of are partners vendor market? team Do city and aligned market in and with Spokane? our utility government Now up also you you need have and out understands so that responsibility of TESSCO vendor wanted our run we for into that VAR that require so marketplace they of at be wanted the what marketplace the feel could in or from think level geographic way fact RFP need can the coming oftentimes an the support there of for that And all expertise. was a and sellers help somebody completely all experts somebody they who somebody them that by our about you opportunities fill misaligned. help ownership you knows and from their oil we their ownership us having so I PSO them and who way that background skills Do we are that our would gas? you is, some government partners to all that some some need to Do and when like to from get

say people different business how accounts our initiative all we here partners and I to regionalization. think got by are perspective our place; put still They're couldn't sellers they that still and tier to are in on market level, introducing dynamics take one the the we all cover and accounts; an with a going us new let's those and coverage that win it's they've some are to So this to on but time work here. need geographic segmented the training going

I and appreciate as we've job. that I done good mentioned done comment a So we have pretty I the think

final finalizing all accounts. step was have. in the we and This the significant the of pretty regionalization think I of

to of more and once So our just be we're that names, I team to are that's I predictable should themselves, work the through as getting is the starting kind learning new you and anticipating. mentioned it through well, stats curves think get we introducing as

I optimistic feel really feel about marketplace. we're with that's I and where So this why good headed

Bill Dezellem

have people, for you've all step How then costly you great mentioned brought this. on has from an I'm getting we absorbed of good a that been that ground. perspective? under how a Murray unproductive color just grasp expense expense to incremental that number you Thank their on the been talent of as you done they're trying has feet have really and because that further had much that taking

Murray Wright

this No, costs other it’s in business things to move really places able new non incremental. some We to generation reduce invest were not around and in talent.

net of the overall So cost adjustment is not any significance.

Bill Dezellem

this where market just and have end you FirstNet the that inflection place, you these the you of cost you your point found up be expenses about my carrier you there more really start you're market gross Is particularly it’s and point of kind little create gross programs see your lower to that opportunity these bit robust stick? actually and with your margin of really XG that point now a talking profit have discussing with in and when initiatives carrier in approaching have and an or the all in hockey the tied are settled in margin dollars the Great. growth a there as an some has That's kind gross and this expertise with that of new soon last helpful and then between inflection earnings will question. believe I the you're

Murray Wright

future see to through sometime I but working The lot possible to the date investors to the I'd as company. we our it's love that like that come to our in all and it they we're a in reason say way. investors If as dynamics positive be is don't I together understand working a potential that transparent going specific want would that be really I want of that.

opportunities and that in lot put two think coming let's how are and we the going end last the out the fiscal that say. into managing it's changes we that out growth of of years though think do FirstNet I think place those I XG next to and of Bill I and the other we're go TESSCO in process. of we're that the is growth a the year midst in gain to traction as figuring manage going

Bill Dezellem

you the Thank time. Great. both for

Murray Wright

you Thank for Thank your you Bill. questions.

Operator

I'm for to this over time. questions Wright back no I'd closing like you. call the showing And Murray Thank further remarks. to at turn

Murray Wright

us at the your to like Great. to we and for day in Thank on November today. team all you Ideas the thanking see support the presenting call you of be we'll many December appreciate Heather we where really where Micro LD would Conference We and the end dedication. of members of everyone. hope work on thanks Southwest XX, Conference joining to and for Dallas the our TESSCO, at hard by continued be their great I X. presenting Have will a everyone

Operator

a Ladies and may This and have disconnect. gentlemen conclude participating day. all program the does Everyone thank wonderful today's in you for you conference.

Tessco (TESS) 26 Oct 182018 Q2 Earnings call transcript