Earnings call transcript Q3 2023

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David Calusdian

Good morning, everyone, and thank you for joining TESSCO's Q3 fiscal year 2023 conference call.

Joining me today are Sandip Mukerjee, TESSCO's President and Chief Executive Officer; and Aric Spitulnik, Company's CFO.

Please note that the management discussion today will contain forward-looking statements about the anticipated results and future prospects.

Forward-looking statements involve a number of risks and uncertainties, and TESSCO's results may differ materially from those discussed today. Information concerning factors that may cause such a difference can be found in TESSCO's public disclosures, including the company's most recent Form 10-K and other periodic reports filed with the Securities and Exchange Commission. site. company on referencing page the company's Relations the the available of that Investor link, webcast Events Web note will slides be through the Please and Presentations

the With call President that CEO. go please Sandip, like introduction, to and over Sandip Mukerjee, I'd to TESSCO's ahead. turn

Sandip Mukerjee

for successfully quarter you, as for you and we David. on QX today. continue everyone, morning, us Thank execute our TESSCO, strategy. was Good to thank joining another excellent

start the this Before that of specifics by we me shared throughout recapping which let you to fiscal have I get strategy, QX, with year.

vendors, to utilize Our margins revenue. observer, goals gross EBITDA XG TESSCO's launch discipline, have and excellent revenue ERP, and been higher faster grow wireless than revenue and drive by focus adding and our operating opportunities growth TESSCO on operating modern service efficiencies, mix, a operating value, differentiated improve delivering improving to value infrastructure, leverage by product through

be We to do not seek cost the distributor. lowest

efficiencies optimized resources has to savings real loyalty we services our to support full enhanced achieved management with and improved execution, and through leverage customers. these through partnerships Moreover, logistics, gained from generate customers expertise. project led procurement, value-added Our the which our customer

our strategy. increase in in revenue QX the execution EBITDA. contributed a year-over-year achieved business Commercial to successful Our gross segments, double-digit of year-over-year our demonstrate improvements profit, of We of revenue, Both adjusted and Carrier and XX%.

pricing our to strategies, to Our base, of strategy. central a that focus of diversification business our margins continue opportunities on been have improve result as and supplier higher-margin

XX.X%, year-over-year. and This up quarter, X.X was our points gross margin percentage

past will ended still a market. starting sales million. the highlights through our $XX results and of global I lead bookings to and see $X.X Furthermore, was has walk We resulted has improved normal million, you the quarter product year-over-year. of EBITDA quarter, times we Our This continued more strong now the improvements in chain. with $XXX,XXX the supply levels. in backlog returning adjusted Carrier up with

QX, profit said gross XX% with our up revenues a value had to Margin what and our year-over-year, gross We X%, Carrier In earlier, is of sales a and ended consistently million. quarter our $XX profit XX%. customers. Year-to-date our of XX%. result up increased are improvements I strategy up revenue add backlog was are the for

introduced significant general This quarter, wins to we customers solutions recorded and allow new We builds that warehousing both two quarter, manage more our this XG to upgrades. effectively. contractors their related

our these AT&T a will with largest The second year with opportunities customer, Together, is recognized relationship tower and in first $XX turf new contractors. million, exceed is XXXX. largest fiscal the of a the be and project owner one primarily

XX%. now up increased commercial XX%. sales includes We will ended turn revenues a to profit business ecosystem. year-over-year, million. all of outside QX, and $XX our gross XX% quarter is XX%, wireless our the the backlog which gross commercial market our and revenue I Carrier up was with the infrastructure are profit In Year-to-date up

helped continue performance. differentiate reasons and value-added expertise, our be rely on Observer Ventev and why management services, and TESSCO. customers technical our to coverage margin scale, account personalized Our the TESSCO support, program offering, enhanced

on We our end-user continue refocus to customers.

automation our utilities As electric with modernize strong helping and result, strategy our a of overall their market year-over-year. results grew XX% confirm utility grid assist These projects.

resulted Our metering in automated a QX which across in campaign growth infrastructure, initiatives utilities. around investor-owned included development market business multiple Ventev this shipments already has

deploying are in utilities wireless. enclosure see that and to continue broadband are turnkey simple strong Ventev equipment, positioning test solution We universal a demand as for our

we local market, In state X% signed grew market This new the is contracts. now up government have XX% and and year-over-year, year-to-date.

due parks, win for Furthermore, and inventory for and logistical continue for DAS another large awarded public a this our to VAR quarter, theme microwave all major a expertise. opportunities position us, technical large that support service number a safety of including our a sizable had past several to wins We cellular automation business national win company. year-over-year. VAR a we projects large to of to provider mining XX% grew market stocking moved VAR that Our significant and and its us

Ventev Turning than up now to distribution XX% is Ventev, Ventev up business. revenues in are QX, Year-to-date, growing revenue our was XX%. faster year-over-year. our

health, subway have customers, sales wide with a and providing our margins increased in to cruise the including enable Wi-Fi installing a Cisco antennas in solution Ventev antennas an is for antennas inpatient We an laboratories, a a Design-In monitors in a large into scientific for existing upgrade hospital Ventev's a a system, share that for rooms, through XX% increase VAR pioneer Wi-Fi improved and to Program. innovative of DAS line, new with stadium, NFL and vineyard year-over-year have a for solution range in backlog. cable market assemblies tower them the

X% and year-over-year. sell Regarding $X.X direct quarterly channels, in both our achieved sales through continue online revenue of we to tessco.com up QX, million, and,

in tessco.com has part more through transformation, with announced formally our provides capabilities along many features higher new than our which launched initially longer our But planned. are all now non-depreciation has project will ERP we we the very, TESSCO in for as continue new smooth. We're a and foundational This which very expenses. system. taken complex, been Hypercare, launch been capabilities QX, now And place, has ERP of and month, customers. our a As and launched last new much

considerable We're freight including in capabilities. us inventory income ERP expecting in of management Expenses over starting incremental the legacy with will April. EBITDA. which million operating The associated depreciation next but systems, fiscal reduce ERP will efficiencies and improved net significantly not fourth year, approximately new will our provide our impact quarter, with $X.X system

return year, to upcoming investment and a in to a EBITDA. effect We on expect begin positive on our fiscal our strong achieve

Aric? turn to for will I that, review. With the over Aric the financial call

Aric Spitulnik

now retail current the activity Sandip, you, our of XXXX, good results include discontinued as and our everyone. segment significant that year please onset, former the not note fiscal morning, is Thank for Retail from At impact our business.

disclosed still operations. retail years, business prior For the as discontinued is

strong the third the had we our historical for Commercial quarter another Sales million, up totaled Carrier mentioned, revenue $XX totaling of than quarter segments, million, and $XXX.X end levels. combined backlog well Sandip higher XX% year-over-year. As at

bookings advance supply as this declined chain, the due customers they longer book that orders as in last no to far segments which means both in improvements had quarter to Sales year. have the in over

being with expect we quarter of large for million for third maintain that most Gross that, Moreover, to in backlog However, the to a fiscal solid fiscal of continue the part, pipeline $XX.X with XXXX. current strong. ship very and same activity the percentage fourth a $XX.X for customer compared business in our million the quarter remain Ventev. to was profit quarter, XXXX,

growth related and The margin we on to our was to margin revenues throughout to have keep actions, success. including in margin vendor diversification the quarter third to in inflation, focus entire gross mix strategic with compared Gross the year for driven driven up improvements XX.X% our many of Ventev in of XX.X% fiscal gross on pricing have higher-margin by critical gains increased the The are XXXX, selling of quarter this prior to alternatives. year. opportunities, efforts focus sales, been better customer higher-margin third fiscal

service. while to excellent continuing provide with We have our actions taken customer these customers

fiscal This lower-than-normal is 'XX to expenses quarter $XX.X to increase a due administrative primarily prior-year increased million. of selling, in Third expenses general, quarter. amount XX% and the

of of from the as a to XX.X% 'XX, quarter prior-year This the revenue was quarter. expense flat overall essentially is SG&A QX. in XX.X% third quarter's percentage compared fiscal in This SG&A

charges accessorial see quarter's of as freight a third was we as from largely percentage to year's to quarter up This in this charges. variable continue quarter other increase, fuel due SG&A from and X.X% revenue last X.X% surcharges to carriers

expenses roughly Variable XX% in commissions. consist sales primarily remaining and center freight-out expenses XX% distribution and labor in of the

XX.X% which rising a gross on factor Non-variable us margins in Our third and percentage the openings due last mentioned of quarter. to IT SG&A costs, to revenue staffing is as up operational primarily has and are which is freight XX.X%. of teams, had during to discipline pricing increase I full year's enabled This Ventev a significant early. pass the from improved

year-to-date the Additionally, accrual based adjusted last the we bonus year on for time. our results down

is expense the bonus As a $X.X quarter. than million quarter year this higher for result, our prior

We fiscal even ERP to the fixed continue on of the us new launch in enable do And focus will expense to 'XX. more reductions. will

share $X.X Third $X.X per of with $X.XX time of net third adjusted $X with income EBITDA $X quarter million share This and Higher per and third income respectively benefit. and was QX of fiscal and 'XX by million for quarter the were $X.XX quarter year FYXX $X.X million year. compared 'XX. quarter tax million in million the EBITDA EBITDA the XXXX. adjusted last net adjusted third Adjusted for respectively income a fiscal EBITDA fiscal of compares was impacted

the inventory was product Turning quarter to million. the essentially balance at second $XX.X from flat sheet,

a quarter. in inventory decreased we inventory our are saw And our $XX in related we to in Accounts in reduction the levels. strategic receivables payable QX. down quarter the to the to third inventory While expect paid Accounts increase we remained on million million $X.X the reducing as almost we decreased million. by see $XX.X working amount overall management, by in second

the receivable of an We million. with $X.X quarter ended income tax

the these All of supply support sales is on increasing filed. amended $XXX and address In our credit December, receipts million IRS dependent to been in to agreement State of million it the variability. timing of $XX the we from associated tax Maryland. payments our of And chain have the returns to growth

I factors discussed as million QX. outstanding As as million line a increased borrowings $XX.X working to of the capital implementation $X.X well the just our cost, credit of end result of the ERP under at

along begin to Therefore, next year. over overall fiscal with to expect improvements related the We next XX in our performance annualized our we ERP EBITDA trend cost down expect in reductions months. borrowings

am continued how to chain, results executing very achieved. have on with significant strategy and the variability in supply quarter. I expect fluctuations our from However, due we quarter we are pleased the we to

and encouraged our sales, sales results, strong We backlog. are by year-to-date

$X million would specifically a are fiscal million to meet $XXX loss $X.X 'XX guidance which to represent 'XX. a revenue loss to which to XX%; $XXX full EBITDA fiscal between million million the net of X% year For million our XXXX, compares in to growth $X to which fiscal million $X.X $X.X to year, adjusted ranges, year $X on net million of a compares and of in we of a of pace million

I will to call back Sandip. the that, With over turn

Sandip Mukerjee

you, Thank Aric.

from I this Before we of highlights quarter. the some to to call questions, open the reiterate want

revenues QX were XX% Our year-over-year. up

ERP and a gross improved revenue Our with our margins. new demand are carrying We million. is we sales live And And we $XX strong. backlog customer of successfully system. our are

We profitability. expect will in result this which improved in turn will our improve further ERP new leverage, operating

will that, the open we now to With call questions.

Operator

first with from Please ahead. go of question Our line Instructions] Blair. the will Maggie William Nolan come [Operator

Maggie Nolan

Hi, the that And quarters? you to on margin this thank mix in impact you. of product Could on how you expect the look quarter? elaborate then, coming

Sandip Mukerjee

preparing flexibility, to have are using say the and we we are Where new engineering question. supplier doing. just spec'd not what giving ourselves products to are so in, and give way the that we introducing more by using are for a we -- products diversification, simple and Thanks margin; we gross for are that single flexibility, Maggie. morning, new good Hey, that products us customers. sourcing, vendors, And most

to continue expect that. We

expect margin So, gross to I this continue. we that have seen improvement

Maggie Nolan

bit then Very on the the you little the of more detail of good. composition could And backlog, give backlog? a

Sandip Mukerjee

So, the much was call, of out, and we much broke during Commercial. how Carrier it it of was how

of $XX with backlog million, million Carrier total Commercial. is So, ecosystem, that and $XX the our for $XX is million is

answered there; stop if me question? your Let see I

Maggie Nolan

segment? going that for forward? you. right to for the third you Yes. of what's segment then about repeatable okay, is going you've And then, this seen that Thank so And VAR in question, a in level be going the could performance segment talk

Sandip Mukerjee

result that pleased performance of our seeing Very, Thank that's sales in it's quarters; we're of very that; put benefits all the one. improvements place we with a focus. over and the several you, Maggie. the have And last

a available. our And the our site sales TESSCO's with to then, this from they working chain ship forecast people mundane, correct and but management they people, people our of perspective, having might seem VARs develop bill Web the the customers supply BOM, helping with proposition am to can not program it's to proposition demand better team very provide whole stocking a driving, sales done, simple doing having being also being VAR. -- Second, it's our has just with with the the time playing well position, do right, trend inventory so on value entire I expect or that this value to I what at able benefit at points materials, solution, logistics, want that able helping customers and about with want, and they our bullish continue. is of complete with

Maggie Nolan

Very Thank you. good.

Sandip Mukerjee

Thanks, Maggie.

Aric Spitulnik

Maggie. Thanks,

Operator

from come ahead. the next Your Capital. of Instructions] line Bill go Tieton will Please [Operator question Dezellem with

Bill Dezellem

Thank you.

reported. in into the over quarter the lead to if the quarter revenues is QX. Looking fourth and at normally seasonality within versus I'm happens are Should you we your math revenue seasonally, would you works, guidance the history, fourth look just be from to flat down or we quarter is stronger-than-normal range? back that guidance, seeing of that that, picking guidance the the be midpoint the And point one reading just that way

Aric Spitulnik

This question. is a good Aric. It's Bill. Hey,

in I optimistic think a quarter as we're we're seeing about here we a as will of here backlog works this lot $XX our that far that shipping the revenues today as right number. of the with very million, projects now, sit be strong revenue quarter, fourth

large last we of And do the midpoint, the we've fairly fourth but a it's and revenues. about quarter So, be I are but optimistic picking a you would I very confident arbitrarily somewhat were we than a we'll believe range. there's combination in situation better quarter, think say

Bill Dezellem

of revenue the that you see part in you the backlog quarter, So, the possibility better-than-seasonal in fourth given have?

Aric Spitulnik

That's right.

Bill Dezellem

strength out the is one better And a into I'm as more. relative the we there economy the of that And many maybe to that are so is recognize, question just I this benefit happening the just trying question data crosscurrents what's normal the which use unfair, to now, as out slightly more to right I'm there? point you bit to there. remove is going part dive seeing actually we to but from remove If were that, if -- to were backlog, -- than

So, are is out normal? backlog the stronger And you trying normal? seasonally than to do to can What the underlying feeling level us activity Is there? pull like components? you help

Sandip Mukerjee

used, to carefully examples we we what thought what to and Bill provide about provide. color So,

So, and diversity we we I things to the when sort of we will diversity talked about customers talked when Carrier, I VARs, about of said, of Ventev, when point you about the right. talked projects, back

the of projects gave in projects think is telehealth, of helping you our net-net so commercial us here, demand is projects projects with cruise of we of diversity scientific that business, strong. examples on if all in is what So, our laboratories, theme the parks, were lines, projects is

utilities on with demand. away can any or more government and customer we expand. big sector we and to So, segment, happy was stable we business that behind have are quarter-to-quarter continuing very one performance. commentary dependent a are diversifying revenue any from And to fluctuate are not That that one have the pools --

Bill Dezellem

you much. Thank very

meters, me the are just kind Let could you of actually lot utility is we in more where how the that jump coming that, component of business the sort doing see replicable on thing solution there. in a and And that, you of meter quarters? mentioned with providing automated the you the

Sandip Mukerjee

many a turnkey we business I that but I'd work sales, So, to we with utilities. of time few enclosures, we ahead like on replicable. of we But that won't things. think ahead team the said, efforts working we get solution to Ventev get the offers We think have before it a what give are We've with it's done solution. development

Bill Dezellem

are for those or water they And meters? electric, gas, enclosures,

Sandip Mukerjee

point. Primarily electric this and gas at

Bill Dezellem

and question, me then, what thank reduction beyond? down system excuse the normal once and the ERP in at is -- will the system June goes And quarter Great, you. new one your the level, expense, expense a old normal, expense be expense a old

Aric Spitulnik

Sandip Yes, mentioned, you quarter. of $X.X so you've depreciation that, which a got approximately two million have different the pieces be that will

offset that costs the negative to net expecting the as related So, last then, better system, to EBITDA. business. achieve that that more over will out, the to specifically ways not calling benefits other both that the but from year. did dollars say we're impact income, next that managing the and million And SG&A and we old charges well freight but lower a We're be quarter, would to several is and efficiencies of number no as it to to be the we're course

Bill Dezellem

of your both Appreciate much. very you thank time. Okay,

Aric Spitulnik

you. Thank

Sandip Mukerjee

Bill. you, Thank

Operator

hand back questions. further management. to no have I'll We this the time, At over conference

Sandip Mukerjee

discussing day. you great the a for you, Thank results Regina. look you May. today. Have We with joining in Thank our forward call everyone year-end to

Operator

that call. you Ladies gentlemen, joining. today's and all for concludes Thank

You disconnect. may now

David Calusdian	Sharon Merrill
Sandip Mukerjee	President and Chief Executive Officer
Aric Spitulnik	Chief Financial Officer
Maggie Nolan	William Blair
Bill Dezellem	Tieton Capital
Hello	and thank you for standing by. My name is Regina - and I will be your conference operator today. At this time - I would like to welcome everyone to the TESSCO Technologies Incorporated Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks - there will be a question-and-answer session. [Operator Instructions]
I would now like to turn the conference over to David Calusdian from Sharon Merrill. Please go ahead.

Tessco (TESS) 8 Feb 232023 Q3 Earnings call transcript