TESS - Earnings call transcript Q4 2019 | Tessco Technologies, Inc.

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Operator

Good morning, my name is Lisa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the TESSCO Technologies Inc. Q4 2019 Earnings Conference Call. [Operator Instructions] Thank you. Jamie Bernard, you may begin your conference.

Jamie Bernard

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

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

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

Murray Wright

as everyone. year year we and consecutive fourth fourth quarter. second results third year on revenue the years fiscal and Thanks joining earnings Jamie, after ended quarter today. targets us This marks X most well as with quarter call our profitability We you, full losses. good the seasonally on outlined We quarter, of earnings delivered with challenging for the Thank achieved our fourth the we call. our quarter in in line positive growth morning,

Our are and success results setting execution continued demonstrate focus and that strong us growth. customer our strategy, long-term up for

performance I achievements like would segment, to quarter a by past during the our fourth few year. highlight our of reviewing Before briefly

growth of X%, in ecosystem. XX% First, Carrier on perspective, annual fueled primarily the a financial growth by achieved of we Public revenue

$X we our consequently, in in a reduce sales the million by quarter measures from negative deliberate expense SG&A effective, balance of $X.X the of sheet management fourth year. million from we DSO nearly year percentage initiatives through last as cost Our been cash operations And a reducing have X%. up delivered inventory. improved And progressed, to as

the profitability long in be continue nature the to term. revenues our both of ability subject and grow business, Due our to over business, to quarter-to-quarter in We likely are the project-based to to our confident in are results fluctuations.

for few Here highlights additional are year. the

our First, which private in our we force, to with go-to-market completed commercial consolidate enabled sales the revised business. and Integrator operator began of customers, This us providing our greater our government channels with regionalization supplier and our our of the customers. This system our our crucial stronger partners strategy implementation sales scalability to and and alignment VAR is efficiency with with better teams. engagement for

a new businesses. supporting development created recently and we've of Retail business team professionals, Secondly, the Commercial both

are past. and a result these share and expecting we wins market in As have channels new growth we a customer investments, had of in where the markets, significant not

focus with wide completed Third, a several accomplishments to others deeper our expected and tool, increasing on infrastructure; purchasing suppliers. well to growth improving of enabled us our a reducing our technology finally, fewer the purpose most-valued salesforce.com several pricing network we business. And on has gaining conducted set rationalization to up capitalize exciting with and These relationships supplier inventory. simultaneously This opportunities. initiative, near us and thorough we've excess while suppliers SKUs the returns of power, long-term a on range and These or are a cover effect including proprietary starting new positive enhancements our areas, OASIS, to platform. tessco.com; have management our initiated project tool that and enhancements to customer data-driven

our revenues and estimated XX% a up to XX% with market Public Commercial our XX% Now compares our ecosystem. is review with continues the to full QX the increase to the Within Carrier our Public details results, year. of up expanded lead telecom recently way directly attributable starting Carrier our X.X%. we let's us for other our What's segment, relationships growing and we've business exciting proposition. We've contractors. are that reinforces our largest MasTec. winning and programs turf it statements TESSCO's general only with And new market of share, business our This been with spend large with previous and customers, is including CapEx value market Verizon our that to

safety Public public broadband Carrier a was wireless fiscal nationwide driver XXXX. in in network growth key the FirstNet,

see steady FirstNet in to VAR Integrator and fiscal Carrier and XXXX. throughout expect We demand our channel

on X% and a Integrator the market. year and basis. Moving X% full to the Revenues VAR quarter fourth down were in on

but model the regional our of the we to business sales We're As a a model. future. disruptive year, restructuring positions previously growth during business This exciting on in the this for capitalize to beginning and opportunities. leverage this solid Integrator process, mentioned, new completed one VAR that was growth we to

support coverage. sales we're In these our further addition with customers, more efforts to investing in

Our to government results led sales required any by delayed impacted softer the FCC were fourth shutdown, customers only government approval. to that not quarter also projects but which

to about least resulted FY measure market difficult the impact, the million. at remain lost bullish this While in are of We precise shutdown $X seeing positive for sales 'XX. trends and

adding force our offering, see year are line to IoT market. International, IoT to many industry manufacturer Wireless, already-strong expect Digi the renowned accordingly, We Laird Monnit in including further spending added this IoT in For our featuring Sierra growth Samsung, This top-tier leaders, IoT and and and more recently vendors card. among example, IoT a others. we complements

service the agreement continue DAS fiscal IoT expect we throughout national finally, significant remain a new multibillion secured and And year. spends also distribution provider. from strong, should that We dollar

most continued fiscal to Our access points modems. the Infrastructure LTE Ventev perform support products have and year. well products in the second major of WiFi infra Ventev half

in football were plants. manufacturing large the quarter, complexes stadium Ventev as in infra the solutions and entertainment in During Japan largest automobile and world's large California, a Florida fourth well X used outdoor as

performance readily available have choosing solutions high-quality the in marketplace. innovative products because our differentiated deliver Our and features customers Ventev not are

segment. Turning to Retail our

and the aware supply at are all of Retail you impacted As TESSCO. throughout consolidation significant QX, the Unfortunately, are continuously evolving dynamics multiple chain. levels in we're this seeing

be no primary acquired will our of different was in entity and source. the selected longer One their a customers largest which surviving model business distribution TESSCO has

to relationship at but to them are lower We a entity with products run sell a much strong have the rate. continuing and new

Additionally, recent was significantly weaker the recent iPhone launches. in most launch September than

recently decline X XX%. XXXX years. suffered in And XXXX were period, its down worst sales the the During Apple published iPhone holiday iPhone that quarterly QX sales

the quarter, our our the a fiscal had incremental materialize, we accessory during sales, orders, didn't fourth on third typically the quarter see of level While quarter. resulting launch impact minimally in replenishment in sales lower

the the some chains result mass to product we these number were opportunities, full Despite placement market, factors, CE of in a win As the retail a stores. Retail for down XX% continue revenues including and retail X% year. quarter the for store in and volatility high-end of fourth

share share North aggressively billion nonconsumer X including in also ways: accessory stores, American and We insurance, our $X greater prepaid, gaining are by new stores; existing retail we're services cable categories. we're on of a and with first, introducing our top focused and technology; on market wholesale product and brands new second, greater emerging channels, pursuing customers targeting focused existing are the in retail finally, market we and taking high-end

Mobile During launched the efforts offerings. quarter, our with device Ventev highlight products to innovative growth accessories that unit drive new our

back on now charge For beat also example, the our Ventev that Depot chargers trial XX stores wireless market solutions quick turn over discussion in mobility outlook over with for Home excited for Ventev the on that Aric to that in well. some the Coast, West XXXX. a now offered I'll Aric, are to and competition We're to trial our financial thoughts a capabilities. to the and have provide going fiscal of I'll results, call you. is final be and

Aric Spitulnik

a and the morning, Thank everyone. and year revenue of we us. advantage in QX, did Good take that coming to profitability be business Commercial you, the for for the positioned to in recent would the Murray. Overall, can well we and we is we fourth said believe The profitable challenges technology ahead. and growing what Despite delivered years grew we grow quarter. advancements Retail, in continues Retail do business a profitable

$XXX of me Revenues you year's included down year. from fourth the an prior week. last Let the at Note an give that quarter X% million, fourth quarter. overview extra totaled

So were market percentage basis, lower-margin million, X%. from larger increased profit constituted per-day quarter overall $XX.X actually prior was costs. our Sales for Carrier year the Public higher XX% quarter. of tariffs and Gross our a down the freighting on to revenue a up revenues

for fiscal fourth margins the gross the declined quarter in XX.X% of XX.X% result, from a quarter XXXX. As to

initiatives As last expenses one year. quarter, from cost management the were of and a SG&A down prior week with in the XX% our result

As a percentage of basis XX.X%. XXX revenue, to SG&A points expenses decreased

or -- million the compared year and the operating last and $X was share was with X.X% for or ago. million million Net Full and with $X.X Fourth margins of million quarter $X.X $X.X X.X% year year, quarter $X.X for was were $X.X compared income for of year, fourth revenue fiscal $X.XX flat. million that $X.XX operating earnings XXXX, revenue income essentially income compared per margin million both X.X%, with revenue, essentially flat. or year the $X.X in a million diluted up with compared million $X.X from last a profit years. ago. of year was X.X% quarter Our Full net were also was

primarily operating quarter. down $X.XX tax fourth earnings by As this was last decrease caused only larger in in income year's onetime was benefit slightly,

share up rate improvement focus lower of on higher our full and the For as profit a laws. revenues, were year, due earnings tax the tax $X.XX, new to per X% result a

to Now the sheet. balance turning

and As pressure we've inherently Carrier inventory stated puts before, Public receivables. the on growth in ecosystem

to quarter on continue to declined quarter. to ability our balance as of this and generate and the million on cash by $X again have contributed we these We line in million improving of metrics focused from our past the This reduced year fourth we progress operations, credit inventory this $X significantly. make

of the to we're Public making and focus on expect of quarter inventory business continue up quarter. the we at be support to inventory While 'XX, to management the inventory some FY end Carrier in first strategic tight the investments

dividend XX our payment share and of the Finally, May with of we've per of X. record June set date date $X.XX a

on turning Before wanted back tariffs. I call Murray, touch briefly the to to

on mobility the the are the subjected impacted our As XX% a the by tariffs end weekend, this most of a expected at increase week. Ventev reminder, the currently Based TESSCO announcement to and products is XX% to tariff. over products to President's or

China Our new renegotiating tariff suppliers product sourcing without issues. other contracts in team aggressively has in signing been countries and

place, the of -- tariffs affect business do while benefit efforts will mid till not that in initiatives until expect confident materially in year. also meaningful we we While the we are and business our don't these half second tariff our have mitigation to QX,

the we see, with hit market-driven and challenges quarter can this some business you Retail As tariffs.

cover to one growth our Murray quarter momentarily, interruption expect trajectory. we see a earnings in will As

Retail are initiatives me enable growth With fiscal us our will XXXX. place revenue overall turn confident that, let have Commercial businesses in to Murray. it deliver earnings the we and back in we However, in that and to

Murray Wright

overall this our year. in the and through slowly decline profitability part start to believe increased earlier. build We momentum Aric. customer earnings and 'XX growth transition, are line we will a move forecasting and In past you, we our expect as to the top XXXX. strategic efforts in to I Retail year Thank coming discussed lead Due the FY due revenue to segment, we fiscal modest factors Retail for

While be fully we to we we on in execute the confident year. able this to challenges our ability to are in do fiscal new pursuing, business Retail expect initiatives not are offset

technology. our early which for Commercial fiscal new as includes begin capitalize business significant to will Integrator right In make markets, to Carrier in or as as Commercial our which as on the full late results as expect Carrier affect both single-digit drive these the the anticipate our the and growth, in the result trends We to business VAR tightly we to we'll well build-out remain our opportunities. markets. expect include integrated our XXXX, will robust believe as for VAR fiscal and segment. line share having strategy. will new we in year of of investments Turning The that help by project top to wireless Carrier a those Integrator XG we on FY continue in to come. enhanced and be this and business, capitalize high FY growth well proliferates years and 'XX CBRS on marketplace. driven industry and go-to-market us In VAR the We market, and year technology revenue several growth effect development XG, our focus 'XX Integrator To of and exciting technologies, important the market

investments make after ensure will to long-term company technology examination will But heard purpose, in rigorous is be future. enough. means tools efficiency in this improvements not You've to but sustainable line only that top contribute we a tangibly a and vibrant speak technology company company every growth, being the a past technology with me be profitability of for and We'll incremental need a to about company. technology a and the today

involve innovative transformation evolve and gain integration as competitive key customer through TESSCO in, We enhance both cloud-based analytics This digital supplier core are and data customer in market the productivity this advantage continuing will e-commerce, technology, our to technology. improve and such our will customers. experience, areas for investments and

and Now anticipate quarter, summarize business be outlook. we the let expect transition XXXX. Due resource expenses related including profitability increased and onetime the in X the growth charge negative. however, first customer earnings FY quarter completed additional revenue to me annual the in Retail the first quarter, We to do, to in reductions

we are momentum, More Accordingly, and double-digit focused only not gain but also several are forecasts importantly, indicate wireless market on of the we own years in many continue to market on cusp share. market this of to growth. our research ecosystem participating

above top are to investments profits faster. even growth the and line position grow for market to efficiencies us initiatives our expect we We provide and making

confident energized, be in customers, initiatives we'll team 'XX long-term productivity proposition, technology value to We for new capitalize FY with opportunities business enhancements questions. profitability. and and that, Our our operator, is continued and we believe on drive sales, increased engagement in in And beyond. plans our will and our are open with

Operator

And line the Blair. William question Maggie of from Nolan from our comes Instructions] [Operator first

Unidentified Analyst

This is for Maggie. Ted on

during much the dig volumes to And could their Retail wanted them you revenue much on mentioned, expect of, it about since from fiscal contribute possibly kind secondly, little I customer. this did So know business in dilution XXXX? acquired then bit year? a lower this How was, we model. changed and how they quarter the I

Aric Spitulnik

a long, so expect majority is million that would $X This have that model revenues, selling of -- but we're new. through quantity. new and our million than but go close so of to still overall to same the in X%, what is and place, we've it's So less $X to X% the are there not be or had customer exactly at what the to information relatively them that vast towards very customers. or they going -- I working time, this significant for in we're

to much that So exactly how it's would year. we go down not definitively we're can of going this something say --

Unidentified Analyst

Understood.

mentioned realignment guys last you do mentioned for so reduction So planned in completed first the to press the on model. ask believe changes transitioning, in and much had of the anticipate We then the regional you you I resource quarter from quarter call release? to about sales you the that wanted resource headwind the this the that How a and full year?

Aric Spitulnik

we're dollar for. looking a that roughly type for about it's answer we're sure So understood from QX. perspective, $X.X not exactly million you're question? I I'm in if or charge that what asking your at -- looking Does

Unidentified Analyst

then for quarterly XXX, Yes. a the that a is And play on then you could then out rate guys? plan quarterly that full is -- for run to year,

Aric Spitulnik

sorry. I'm

cost asking benefit So the you're benefit reduction? year. So is what's the the the $X of about million for cost

QX, $X.X other million so have quarter. $X.X we'll million and in charge So But some a costs. result or of as in severance every roughly it's benefit of

Unidentified Analyst

X Got last share it. was the the count EPS What for then Got And me. quarter? question fourth it. for diluted

Aric Spitulnik

for Let million X.XXX me grab here that you, shares.

Operator

from comes from the question next line Capital. Bill Tieton of Our Dezellem

Bill Dezellem

I have group of a questions here.

mentioned all, of doing trial? you with the is would you them? First think Home going I discuss please was And well. it that you're that that, And Depot what

ultimately that continues yes, favorable, it could mean? what So if

Murray Wright

about So being question. Depot. for door Bill -- works that able Home hi, the it's at Yes, Murray, it thanks open good to

previous stores. As indicated a right It's I we have my on remarks, trial now. XX

it which done can some relationship, is. the potential nationally. think well new Depot a too orders early you very as can honestly, what are I good as just many And to in the it's probably But there, a how it's of determine there guess is and relationship I sign. replenishment So stores we've Home

available. So that's that's takes I'd process. say -- potentially the it just total a -- potential it's It's

that in to the working So it's names would that trials are I not point, is at through similar that that right Retail we're just there today development mode that those have that you kind new just only now. that our this. I pipeline Home think our store Bill, are team, would are way in, can add, are pipeline, And them this recognize. we Depot sales accounts but name of, of one others we

Bill Dezellem

I'm is make to that account correctly, on you and just where registers? cell cases are this other sure phone they understanding bank accessories And would hang this their providing and cash that at

Murray Wright

power. In the case, cables Home in and power, of the Depot, it's primarily instance

Bill Dezellem

very is helpful. That Excellent.

Murray Wright

Nevertheless, it's, yes, accessories, yes.

Bill Dezellem

I essentially I'm your in ultimately you Would you're there? what place us shift, detail give sales teams. that just that referring And to opening of resources to to remark, helpful could And may. going if made In put you are some to help then reference terms more being Great. be? new your in Right. how

Murray Wright

Are you comments development referring business to around resources? the

Bill Dezellem

Yes, that's right. exactly

Murray Wright

Yes.

Okay.

that the of what one value where do we recognize proposition things not. focus resonating current our is So is places customers, we that really is our with we're on wanted to and

service So for pick been business, discussing we've instance, and the a providers, national NSPs, up Commercial people. you of set we've team the the if

So strong you some as and get then TESSCO the ourselves we way have have our know, to go to value into the accounts value people, you Bill, a to we, higher of prop. understand find proposition. into to usually think these have if And this, be culture ingrained about we our with they

is that because we've And teams, so our for get shareholders recognize value that TESSCO on resonate, will a that that we both development is is, will investment proposition this and and we our think, these business set Retail in is making that our up which, I an team there Commercial believe investment. team, to return

of some There's it's some that and about point here, excited potential could us too the early like We're gives that wins now. right at a we're certainly here. excitement could small little the bit lot to that of early tell. I around what a stage look future the but to that's developments So

Bill Dezellem

the or Or, So people I'm that bit sorry, Maybe I conjunction am take offline, [indiscernible] little in of with confused. team? these are okay? advance sales work in a

Murray Wright

Yes. marketplace some it's and then frankly sales into brought gone with company than the organization. to moved, had that from in the have additional past. And additional we directly have bit engaged the different It's some perspective It's profiles little people though. of selling resources both technical a are we a the resources that engage, and what are

of It's track. here. bit right the different there there and on you're support it, are resources just resources are a little So selling resources,

Bill Dezellem

I'm Depot circle if your name back, only you, to that and going to the brand then And could, actually that store I Great. are trialing. comment the was Home trial this not you

those are still the in So you are trials many middle are other And of? ongoing? -- how

Murray Wright

In department the X-ish. named say some of I'd stores,

Bill Dezellem

And to that that trial? Okay. not in want other are to add anything you're else you department stores

Murray Wright

retail think playing our right control well. those that's and people today. are, resonating value our Bill, call, we for I But and And -- working indirect circumstances looking still where channel mean, destiny to I know I in Well, big are very the think the own we're our think, that's opportunities to there one news the the it's customers, scenarios footprint expand of we on we simultaneously. on dynamics of because our referenced we're where that that is proposition we now. the what in is opportunity need here, dealer of

Bill Dezellem

Integrator would year. like is -- that jump, extra this really I an your to think emphasis some where on Great. and I to And you put like may, VAR area fiscal growth of is then the would if coming in kind I to

strategy VAR would Integrator So important results guess, in go-forward, about the would improved that I initiatives be you drive most to factor what and market? or or talk

Murray Wright

last and of our quarters selling we're now the in in all, that disruptive a -- And navigate accounts, that that Bill, VAR mean results. year. direct year QX. team we introduced that trying confident first that the into the through of VAR side we of changes made disruption And we're throughout I in our our Integrator in start to reps, and market year. be new we've way on and new think, commented their Integrator we've new trying And to very result previous other changes this the several new to territories. that last sellers the still TESSCO factor materialize out I growth balance new the whilst to will place, of market will deliver got

Bill Dezellem

and Would in Public market see Integrator in you expect will in than you larger 'XX fiscal Carrier growth the market? the VAR

Murray Wright

for think it, I it the planning we're it's to about same. like, -- be

Bill Dezellem

in I you're And assume percentages, talking not dollars?

Murray Wright

Percentages, correct.

Bill Dezellem

we have do ask to time And additional Right. me for question? then one

Murray Wright

sure. Sure,

Bill Dezellem

is one So a that is clear looking statement the when of of income lot there's that at leverage. things your

place. about that this, makes of and million are earnings down were has $X I me indicative also the on at also upside. some this when business is this I declined or the changes revenues recognize look XX%. So But do that took margin leverage think that And also there wonder, it

some of in you happen then growth largest you modest Public if the up really market, of your sort market, end stores, on So meaningful be big start growth, if the some revenue some in but with earnings would see of quickly would Retail growth very Carrier what to solid have start is which growth. considered might to otherwise revenue you the these showing larger some start wins and/or and Integrator VAR department

Murray Wright

you're through some with, question markets ourselves positioned we the an account, that initially. answer we're that upside amount the fight a in opportunity we that a you one can Like curve your referenced And the it the is the there every you're get of $X.X think, then ways to of look of And in either on almost gone Yes. of scenario million some for $X I with we learning But growth us, when tremendous have your is gone, things that share. at a is expecting, if is directly, correct. very have large acquisition. $X.XX happens customer, good point. secure I in Usually, you we mean, $X.XX. I absolutely way the leverage. million And way it Retail think could could that $XXX,XXX these

Operator

the question Tim And Paul from line of from today Management. our Capital comes final

Tim Paul

growing the say orders what than Or receivable was wondering accounts of what I shipments? those of that due is? timing and that faster to would you

Murray Wright

correct. a XXX% March. pretty Yes, We that's strong had

So the timing back-loaded. the were of receivables definitely

Our actually XX days ago. than it better aging is was

it's the of the So it's issue, about all not timing collection a sales.

Tim Paul

you to seasonality? through? due timing the just the Or went as quarter stronger did Is get

Murray Wright

Yes.

quarter perspective. a challenging from is quarter Our our a is January timing always worse always fourth month. almost

Just from post-holiday getting then the budgets weather season outside, line. in and the people

So pick to January always forward. gets kind and us where very then to to starts starts slow. February up would expect of we back going March be kind of

So for it's a fourth of kind always similar the rate quarter. run here

Tim Paul

steps hard handle how Mentioned But several proactive costs competitors those taking it end tariffs the to would so Why I to with pass is issue. customer? through you're and the to your the that. same have assume

Murray Wright

We increases tariffs, have as some to don't trying a that the side. we're on it's finding Most around of doing, particularly actually though, of tariffs. what in but find a minor the manufacture. many mobile manufacturer products maybe around is the competition device And the ways in accessory ways is done bit we doing prices, our the

because just bit a think I more little competitive. it's

middle an us will So as think by the third the said, end won't thing. we issue the a same here, quarter X And of for the issue but of the I quarter, for are be all. X.X currently I this second at us doing to be tariffs quarter, second,

Operator

I'll no back call questions. We remarks. have turn Thank presenters to the for further you. the closing

Murray Wright

as work to a members I for We team great dedication. Have like support your us everyone to day today. their and And our thank joining would Lisa, TESSCO. for appreciate and their you, always, everyone. thanks continued of hard Thank

Operator

call. concludes This conference today's

may now disconnect. You

Tessco (TESS) 11 May 192019 Q4 Earnings call transcript