WIRELESS TELECOM GROUP ANNOUNCES THIRD QUARTER 2022 FINANCIAL RESULTS
11/14/2022 - 04:05 PM
Highlights for the quarter ended September 30, 2022:
Net revenues of $5.3 million , a decrease of 27.7% from the same period last year Gross profit of $2.7 million , gross profit margin of 49.9% , compared to gross profit margin of 54.8% for the same period last year GAAP operating loss of $2.6 million compared to $2.1 million in the same period last year Net loss from continuing operations of $2.3 million , compared to $1.2 million in the same period last year Non-GAAP adjusted EBITDA loss of $1.4 million , compared to a non-GAAP adjusted EBITDA loss of $486,000 in the same period last year New customer contracts of $13.0 million in the third quarter, which includes $11.6 million of bookings and a $1.4 million research grant which will be recognized as an offset to R&D expenses as incurred Backlog of $12.8 million , reflecting a doubling of the $6.4 million backlog at June 30, 2022, and excludes the impact of the $1.4 million research grant Parsippany, New Jersey, Nov. 14, 2022 (GLOBE NEWSWIRE) -- Wireless Telecom Group, Inc. (NYSE American: WTT) (the “Company”) announced today results for the three months ended September 30, 2022. The earnings call previously announced in the Company’s press release dated November 7th, 2022 has been cancelled due to the continuing strategic alternatives process.
Tim Whelan, CEO of Wireless Telecom Group, Inc. stated, “We are focused on our strategic alternatives process and evaluating the return of excess cash to shareholders, and we expect to communicate more about this in the future. With respect to our third quarter, we are exceptionally pleased with the accomplishment of record bookings and contract signatures in the third quarter, which far exceeded initial expectations of $8 t o $10 million , and underscores the long-term health of the business.”
Mr. Whelan continued, “Our third quarter saw a recovery from first half customer order uncertainty, and we realized a record quarter of contract signatures of $13.0 million which included multiple large orders initially projected for close prior to June 30, as well as strong bookings in both of our segments. As a result, we have realized significant increases in our backlog which are expected to lead to improving revenues and gross profits in the quarters ahead.”
Third Quarter 2022 Operating Results:
Net revenues of $5.3 million , a decrease of $2.0 million , or 27.7% over the prior year period primarily due to decreased revenue of $1.9 million in our Test & Measurement (“T&M”) segment. Third quarter revenue reflected lower than expected first half bookings caused by the Ukraine conflict disrupting the timing of military and defense spend, as well as general economic uncertainty impacting the closure of deals in our sales funnel in the second quarter. Gross profit of $2.7 million , a decrease of $1.4 million , or 34.2% over the prior year period due primarily to lower T&M revenues. Gross profit margin declined from 54.8% to 49.9% due primarily to lower absorption of fixed manufacturing costs at T&M. Backlog of $12.8 million , an increase of $6.4 million from June 30, 2022. Operating expenses were $5.2 million , a decrease of $913,000 , or 14.8% from the prior year period, primarily due to the recognition of a $1 million loss on the change in the fair value of contingent consideration of the Holzworth earn out in 2021. GAAP net loss from continuing operations of $2.3 million compared to a net loss from continuing operations of $1.2 in the prior year period due primarily to lower T&M gross profits and a lower tax benefit in 2022, offset by the recognition of a $1 million loss on the change in the fair value of contingent consideration of the Holzworth earn out in 2021. Non-GAAP adjusted EBITDA loss of $1.4 million compared to an Adjusted EBITDA loss of $486,000 in the prior year due primarily to lower revenues and gross profit. Non-GAAP adjusted EBITDA is a metric the Company uses to measure our core operations. A reconciliation of non-GAAP adjusted EBITDA to GAAP net income is provided later in this press release. Cash Flow and Balance Sheet:
Net increase in Cash and Cash Equivalents of $6.2 million , reflecting the sale of the Microlab business in 2022, offset by the extinguishment of debt, share repurchases and higher working capital. Short-term and long-term debt of $0 as of September 30, 2022 compared to $3.7 million as of December 31, 2021. Contact
Michael Kandell
25 Eastmans Road
Parsippany, NJ 07054
Tel: (973) 386-9696
Fax: (973) 386-9191
www.wirelesstelecomgroup.com
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). Management believes, however, that certain non‐GAAP financial measures used in managing the Company’s business may provide users of this financial information with additional meaningful comparisons between current results and prior reported results. Certain of the information set forth herein and certain of the information presented by the Company from time to time may constitute non‐GAAP financial measures within the meaning of Regulation G adopted by the Securities and Exchange Commission. We have presented herein a reconciliation of these measures to the most directly comparable GAAP financial measure. The non‐GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies. The foregoing measures do not serve as a substitute and should not be construed as a substitute for GAAP performance but provide supplemental information concerning our performance that our investors and we find useful.
The Company defines Non-GAAP adjusted operating income/(loss) as GAAP operating income/(loss) excluding non-cash amortization expense of purchased intangible assets, non-recurring expenses associated with acquisition and divestiture activities, expenses associated with our strategic initiatives and non-cash stock compensation expense.
The Company defines Non-GAAP adjusted net income/(loss) from continuing operations as GAAP net income/(loss) from continuing operations excluding non-cash amortization expense of purchased intangible assets, non-recurring expenses associated with acquisition and divestiture activities, expenses associated with our strategic initiatives, non-cash stock compensation expense and the loss on extinguishment of our Muzinich and Bank of America N.A. credit facilities.
The Company defines EBITDA as its net earnings before interest, taxes, depreciation and amortization. “Adjusted EBITDA” is EBITDA excluding our stock compensation expense, restructuring charges, acquisition and divestitures expenses, expenses associated with our strategic initiatives, integration expenses, unrealized and realized foreign exchange gains and losses, purchase accounting adjustments, non-recurring legal fees associated with the Harris arbitration, goodwill and indefinite lived intangible asset impairment charges, (gain)/loss on change in fair value of contingent consideration, gain on extinguishment of our PPP loan, loss on extinguishment of our Muzinich and Bank of America N.A. credit facilities and other non-recurring costs. A reconciliation of net income/(loss) to non-GAAP Adjusted EBITDA is included as an attachment to this press release.
The Company views Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Income/(Loss) and Non-GAAP Adjusted Net Income/(Loss) from Continuing Operations as important indicators of performance, consistent with the manner in which management measures and forecasts the Company’s performance. We believe these Non-GAAP measures are important performance metrics because they facilitate the analysis of our results, exclusive of certain non‐cash and non-recurring items, including items which do not directly correlate to our business operations.
The Company believes that Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Income/(Loss) and Non-GAAP Adjusted Net Income/(Loss) from Continuing Operations metrics provide qualitative insight into our current performance; we use these measures to evaluate our results, the performance of our management team and our management’s entitlement to incentive compensation; and we believe that making this information available to investors enables them to view our performance the way that we view our performance and thereby gain a meaningful understanding of our core operating results, in general, and from period to period.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, such forward-looking statements may be identified by terms such as believe, expect, seek, may, will, intend, project, anticipate, plan, estimate, guidance or similar words. Forward-looking statements include, among others, our expectations with respect to bookings, backlog and strategic alternatives, among other things. Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results, including, among others, the ongoing impact that the conflict in Ukraine and related sanctions have had and may continue to have on our business, supply chain, transportation costs, and our backlog; the impact that the evolving COVID-19 pandemic has had and may continue to have on our supply chain, human capital and the general economy in the future; the impact inflation has had and may continue to have on our business and the economy in general, our dependency on capital spending on data and communication networks by our customers and end users; our dependency on the deployment of 4G LTE and 5G NR private networks and related services to grow our business; the impact of the loss of any significant customers; the ability of our management to successfully implement our evolving business plan; the impact of competitive products and pricing; our abilities to protect our intellectual property rights and our ability to manage risks related to our information technology and cyber security as well as other risks and uncertainties set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, as except as required by law.
About Wireless Telecom Group, Inc.
Wireless Telecom Group, Inc ., comprised of Boonton , CommAgility , Holzworth , and Noisecom , is a global designer and manufacturer of advanced RF and microwave components, modules, systems, and instruments. Serving the wireless, telecommunication, satellite, military, aerospace, and semiconductor industries, Wireless Telecom Group products enable innovation across existing and emerging wireless technologies. With a product portfolio including peak power meters, signal generators, phase noise analyzers, signal processing modules, LTE PHY/stack software, noise sources, and programmable noise generators, Wireless Telecom Group supports the development, testing, and deployment of wireless technologies around the globe. Wireless Telecom Group, Inc.’s website address is wirelesstelecomgroup.com .
Wireless Telecom Group Inc. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS) (UNAUDITED) (In thousands, except per share amounts)
For the Three Months Ended For the Nine Months Ended September 30 September 30 2022 2021 2022 2021 Net revenues $ 5,330 $ 7,376 $ 18,994 $ 23,348 Cost of revenues 2,672 3,334 8,566 10,074 Gross profit 2,658 4,042 10,428 13,274 Operating expenses Research and development 1,068 1,210 3,352 3,610 Sales and marketing 1,100 1,201 3,620 3,540 General and administrative 3,071 2,741 9,169 8,379 Loss on change in contingent consideration - 1,000 - 1,000 Total operating expenses 5,239 6,152 16,141 16,529 Operating loss (2,581 ) (2,110 ) (5,713 ) (3,255 ) Gain/(loss) on extinguishment of debt - - (792 ) 2,045 Other income/(expense) (46 ) 20 87 29 Interest income/(expense) 18 (365 ) (159 ) (947 ) Income/(loss) before taxes (2,609 ) (2,455 ) (6,577 ) (2,128 ) Tax benefit (341 ) (1,255 ) (1,540 ) (1.390 ) Net income/(loss) from continuing operations $ (2,268 ) $ (1,200 ) $ (5,037 ) $ (738 ) Net income from discontinued operations, net of taxes 87 1,013 11,695 1,854 Net income/(loss) $ (2,181 ) $ (187 ) $ 6,658 $ 1,116 Other comprehensive income/(loss): Foreign currency translation adjustments (244 ) (152 ) (761 ) (64 ) Comprehensive income/(loss) $ (2,425 ) $ (339 ) $ 5,897 $ 1,052 Income/(loss) per share from continuing operations: Basic $ (0.11 ) $ (0.05 ) $ (0.23 ) $ (0.03 ) Diluted $ (0.11 ) $ (0.05 ) $ (0.23 ) $ (0.03 ) Income per share from discontinued operations: Basic $ 0.00 $ 0.05 $ 0.53 $ 0.08 Diluted $ 0.00 $ 0.05 $ 0.53 $ 0.08 Income/(loss) per share: Basic $ (0.10 ) $ 0.00 $ 0.30 $ 0.05 Diluted $ (0.10 ) $ 0.00 $ 0.30 $ 0.05 Weighted average shares outstanding: Basic 21,134 22,234 21,886 21,900 Diluted 21,134 22,234 21,886 21,900
CONSOLIDATED BALANCE SHEETS (In thousands, except number of shares and par value)
(Unaudited) September 30 2022 December 31 2021 CURRENT ASSETS Cash & cash equivalents $ 10,726 $ 4,472 Accounts receivable - net of reserves of $183 and $196 , respectively 4,329 2,407 Inventories - net of reserves of $686 and $681 , respectively 5,685 5,088 Prepaid expenses and other current assets 2,196 1,689 Current assets of discontinued operations - 6,869 TOTAL CURRENT ASSETS 22,936 20,525 PROPERTY PLANT AND EQUIPMENT - NET 1,162 1,110 OTHER ASSETS Goodwill 9,405 10,108 Acquired intangible assets, net 3,070 3,661 Deferred income taxes 2,412 5,580 Right of use assets 724 1,146 Other assets 253 284 Non current assets of discontinued operations - 1,937 TOTAL OTHER ASSETS 15,864 22,716 TOTAL ASSETS $ 39,962 $ 44,351 CURRENT LIABILITIES Short term debt $ - $ 126 Accounts payable 1,527 1,481 Short term leases 369 585 Accrued expenses and other current liabilities 4,307 6,676 Deferred revenue 92 408 Current liabilities of discontinued operations - 1,965 TOTAL CURRENT LIABILITIES 6,295 11,241 LONG TERM LIABILITIES Long term debt - 3,595 Long term leases 397 615 Other long term liabilities 30 52 Deferred tax liability 189 228 TOTAL LONG TERM LIABILITIES 616 4,490 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued - - Common stock, $.01 par value, 75,000,000 shares authorized 36,535,636 and 35,915,636 shares issued, 21,570,439 and 22,666,072 shares outstanding 366 359 Additional paid in capital 52,635 51,555 Retained earnings 7,210 554 Treasury stock at cost, 14,965,197 and 13,249,564 shares (27,170 ) (24,619 ) Accumulated other comprehensive income 10 771 TOTAL SHAREHOLDERS' EQUITY 33,051 28,620 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 39,962 $ 44,351
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
For the Nine Months Ended September 30 2022 2021 CASH FLOWS PROVIDED/(USED) BY OPERATING ACTIVITIES Net income $ 6,658 $ 1,116 Adjustments to reconcile net loss to net cash provided/(used) by operating activities: Depreciation and amortization 1,081 1,604 Extinguishment of PPP loan - (2,045 ) Loss on extinguishment of term debt 792 - Gain on sale of Microlab (16,490 ) - Amortization of debt issuance fees 55 217 Share-based compensation expense 950 302 Deferred rent (22 ) (22 ) Deferred income taxes 3,169 (387 ) Provision for doubtful accounts (13 ) 72 Inventory reserves 35 115 Changes in assets and liabilities, net of divestiture: Accounts receivable (2,052 ) (1,998 ) Inventories (960 ) (993 ) Prepaid expenses and other assets (88 ) 459 Accounts payable 506 728 Deferred revenue (285 ) (225 ) Accrued expenses and other liabilities (1,034 ) 1,592 Net cash provided/(used) by operating activities (7,698 ) 535 CASH FLOWS PROVIDED/(USED) BY INVESTING ACTIVITIES Capital expenditures (582 ) (417 ) Deferred purchase price payment (250 ) (200 ) Divestiture of Microlab, net 22,969 - Net cash provided/(used) by investing activities 22,137 (617 ) CASH FLOWS USED BY FINANCING ACTIVITIES Revolver borrowings/(repayments), net - 45 Term loan borrowings - 345 Term loan repayments (4,422 ) (4,191 ) Acquisition of treasury stock (2,525 ) - Payment of contingent consideration (1,097 ) (460 ) Proceeds from exercise of stock options 137 209 Shares withheld for employee taxes (26 ) (44 ) ATM share sold - 565 Net cash used by financing activities (7,933 ) (3,531 ) Effect of Exchange Rate Changes on Cash and Cash Equivalents (252 ) (14 ) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 6,254 (3,627 ) Cash and Cash Equivalents, at Beginning of Period 4,472 4,910 CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 10,726 $ 1,283 SUPPLEMENTAL INFORMATION: Cash paid during the period for interest $ 122 $ 698 Cash paid during the period for income taxes $ 957 $ 150
NET REVENUE AND GROSS PROFIT BY SEGMENT (In thousands) Unaudited
Three months ended September 30 Revenue % of Revenue Change 2022 2021 2022 2021 Amount Pct. Test and measurement 4,080 5,931 76.5 % 80.4 % (1,851 ) -31.2 % Radio, baseband, software 1,250 1,445 23.5 % 19.6 % (195 ) -13.5 % Total net revenues $ 5,330 $ 7,376 100.0 % 100.0 % $ (2,046 ) -27.7 %
Three months ended September 30 Gross Profit Gross Profit % Change 2022 2021 2022 2021 Amount Pct. Test and measurement 2,132 3,367 52.3 % 56.8 % (1,235 ) -36.7 % Radio, baseband, software 526 675 42.1 % 46.7 % (149 ) -22.1 % Total gross profit $ 2,658 $ 4,042 49.9 % 54.8 % $ (1,384 ) -34.2 %
Nine months ended September 30 Revenue % of Revenue Change 2022 2021 2022 2021 Amount Pct. Test and measurement 15,628 16,779 82.3 % 71.9 % (1,151 ) -6.9 % Radio, baseband, software 3,366 6,569 17.7 % 28.1 % (3,203 ) -48.8 % Total net revenues $ 18,994 $ 23,348 100.0 % 100.0 % $ (4,354 ) -18.6 %
Nine months ended September 30 Gross Profit Gross Profit % Change 2022 2021 2022 2021 Amount Pct. Test and measurement 8,811 9,690 56.4 % 57.8 % (879 ) -9.1 % Radio, baseband, software 1,617 3,584 48.0 % 54.6 % (1,967 ) -54.9 % Total gross profit $ 10,428 $ 13,274 54.9 % 56.9 % $ (2,846 ) -21.4 %
SEGMENT FINANCIAL STATEMENTS (In thousands, unaudited)
Three months ended Three months ended Nine months ended Nine months ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 T&M RBS Total T&M RBS Total T&M RBS Total T&M RBS Total Net revenues $ 4,080 $ 1,250 $ 5,330 $ 5,931 $ 1,445 $ 7,376 $ 15,628 $ 3,366 $ 18,994 $ 16,779 $ 6,569 $ 23,348 Cost of revenues 1,948 724 2,672 2,564 770 3,334 6,817 1,749 8,566 7,089 2,985 10,074 Gross profit 2,132 526 2,658 3,367 675 4,042 8,811 1,617 10,428 9,690 3,584 13,274 Operating expenses 1,787 1,418 3,205 1,858 1,684 3,542 5,645 4,456 10,101 5,338 5,307 10,645 Segment profitability 345 (892 ) (547 ) 1,509 (1,009 ) 500 3,166 (2,839 ) 327 4,352 (1,723 ) 2,629 Corporate expenses 2,034 2,610 6,040 5,884 Operating loss (2,581 ) (2,110 ) (5,713 ) (3,255 ) Other income/(expense) (46 ) 20 (705 ) 2,074 Interest expense 18 (365 ) (159 ) (947 ) Income/(loss) before taxes (2,609 ) (2,455 ) (6,577 ) (2,128 ) Tax provision/(benefit) (341 ) (1,255 ) (1,540 ) (1,390 ) Net income/(loss) from continuing operations (2,268 ) (1,200 ) (5,037 ) (738 ) Net income from discontinued operations, net of tax 87 1,013 11,695 1,854 Net income/(loss) $ (2,181 ) $ (187 ) $ 6,658 $ 1,116 Depreciation and Amortization $ 260 $ 70 $ 330 $ 225 $ 249 $ 474 $ 794 $ 287 $ 1,081 $ 676 $ 742 $ 1,418
RECONCILIATION OF NON GAAP MEASURES (In thousands, unaudited)
Three Months Ended Nine Months Ended September 30 September 30 Unaudited Unaudited 2022 2021 2022 2021 Net Income/(loss) from continuing operations $ (2,268 ) $ (1,200 ) $ (5,037 ) $ (738 ) Tax Benefit (341 ) (1,255 ) (1,540 ) (1,390 ) Depreciation and amortization expense 330 476 1,081 1,418 Interest (income)/expense (18 ) 365 159 947 Non-GAAP EBITDA (2,297 ) (1,614 ) (5,337 ) 237 Stock compensation expense 300 98 950 301 Divestiture and strategic initiative expenses 388 44 1,131 114 Restructuring Costs - - - 36 Change in Fair Value of Contingent Consideration - 1,000 - 1,000 FX (Gain)/Loss 135 (14 ) 145 (19 ) PPP Loan Forgiveness - - - (2,045 ) Loss on Extinguishment of Debt - - 792 - Non recurring HR costs 100 - 100 - Non Recurring Arbitration Legal Costs - - - 4 Non-GAAP Adjusted EBITDA $ (1,374 ) $ (486 ) $ (2,219 ) $ (371 ) GAAP Operating Income/(Loss), as reported $ (2,581 ) $ (2,110 ) $ (5,713 ) $ (3,255 ) Adjustments: Amortization of acquired intangible assets 143 329 521 990 Divestiture and strategic initiative expenses 388 44 1,131 114 Stock Compensation Expense 300 98 950 302 Restructuring costs and contingent consideration - 1,000 - 1,025 Total Adjustments to operating income/(loss) 831 1,471 2,602 2,431 Non-GAAP Adjusted Operating Income/(Loss) $ (1,750 ) $ (639 ) $ (3,111 ) $ (824 ) Net Income/(loss) from continuing operations, as reported $ (2,268 ) $ (1,200 ) $ (5,037 ) $ (738 ) Adjustments: Total pretax adjustments to operating income/(loss) 831 1,471 2,602 2,431 Loss/(Gain) on Extinguishment of Debt - - 792 (2,045 ) Total Adjustments to Net loss from continuing operations 831 1,471 3,394 386 Tax effects of adjustments 244 516 995 135 Non-GAAP Adjusted Net Income/(loss) from continuing operations $ (1,681 ) $ (245 ) $ (2,638 ) $ (487 ) Basic EPS, as reported $ (0.11 ) $ (0.05 ) $ (0.23 ) $ (0.03 ) Diluted EPS, as reported $ (0.11 ) $ (0.05 ) $ (0.23 ) $ (0.03 ) Non-GAAP Adjusted Basic EPS $ (0.08 ) $ (0.01 ) $ (0.12 ) $ (0.02 ) Non-GAAP Adjusted Diluted EPS $ (0.08 ) $ (0.01 ) $ (0.12 ) $ (0.02 ) Basic Shares 21,134 22,234 21,886 21,900 Diluted Shares 21,134 22,234 21,886 21,900