TESSCO Reports First Quarter 2017 Financial Results
First-Quarter Highlights:
- Sequential revenue growth in all markets
- Continued challenges in public cellular, oil & gas and transportation
-
Developing new successes from
Internet of Things and Wi-Fi system solution offerings, and enterprise, industrial and government markets -
Net income of
\\$0.1 million , or\\$0.01 per diluted share -
EBITDA* of
\\$1.3 million or\\$0.16 per diluted share - Continued strong balance sheet with no operational debt
-
Quarterly dividend of
\\$0.20 per share declared
First-Quarter Revenue by Market:
|
Year over Year |
Sequential |
|||||
| Public Carrier | (34.1%) | 4.7% | ||||
| Commercial Resellers | (0.2%) | 11.9% | ||||
| Government | 25.0% | 51.7% | ||||
| Private System Operators | (2.3%) | 14.1% | ||||
| Retail | 3.0% | 10.2% | ||||
| Total | (4.3%) | 12.9% |
“We delivered sequential improvement in revenue and earnings and maintained a strong balance sheet, despite a continued difficult environment,” said
Robert Barnhill, Founder, Chairman and CEO. “While not yet reflected in the financial results, we are making progress evolving from a wireless public carrier-, transaction-centric product supplier, to a consultative provider of the end-to-end wireless solutions to deploy network and connectivity systems for private, as well as public, organizations.
“In addition to driving our transformations, the search for a new CEO is progressing well. We have met with a host of outstanding candidates and expect to name a new CEO this fiscal year.
“Going forward, we are aggressively transforming what we sell, and how
we sell and do business digitally,” Barnhill said. “All of us at
First-Quarter Fiscal 2017 Financial Results
|
First Quarter |
First Quarter |
Fourth Quarter |
|||||||
| Revenue | \\$128.9M | \\$134.7M | \\$114.2M | ||||||
| EPS | \\$0.01 | \\$0.20 | \\$(0.24) | ||||||
| Adjusted EPS* | \\$0.01 | \\$0.20 | \\$(0.13) | ||||||
| EBITDA per share* | \\$0.16 | \\$0.48 | \\$(0.24) | ||||||
| Operating margin | 0.1% | 2.1% | (2.8%) | ||||||
| Cash balance | \\$12.6M | \\$6.4M | \\$16.9M | ||||||
| Line of credit balance | \\$0 | \\$0 | \\$0 |
*EBITDA, EBITDA per share, adjusted net income (loss) excluding charge related to non-recurring software licensing fees, and adjusted earnings (loss) per share (EPS) excluding charge related to non-recurring software licensing fees (also referred to in the chart above as “Adjusted EPS” as applicable only to Fourth Quarter FY 2016) are each Non-GAAP financial measures. Because the charge was applicable only to Fourth Quarter FY 2016, there was no adjustment to be made to EPS for First Quarter FY 2017 or First Quarter FY 2016, and “Adjusted EPS” and “EPS” in the chart above are equal for those periods. These Non-GAAP measures are indicated by an asterisk (*) in this press release, as a means to direct the reader to the discussion of Non-GAAP Information below and the reconciliation of Non-GAAP to GAAP results included as an exhibit to this press release.
For the fiscal 2017 first quarter, revenues totaled
Gross profit was
Selling, general and administrative (SG&A) expenses were
Net income and earnings per diluted share were
Cash Dividend
TESSCO’s Board of Directors declared a quarterly cash dividend of
1Non-Recurring Software License Charge
During the fourth quarter of fiscal 2016,
Business Outlook
The Company is not providing earnings guidance at this time for fiscal 2017 due to the uncertainty that persists, primarily in the carrier market. While the Company expects both revenue and earnings to increase sequentially for the second quarter of fiscal 2017 compared with the first quarter of fiscal 2017, those results are expected to be lower than in the second quarter of fiscal 2016, primarily because of continued carrier market pressure, pricing pressure in the retail market and the ongoing investments in our transformations. TESSCO may provide financial guidance later in the fiscal year as visibility improves.
Forecasting future results is inherently difficult for any business, and
actual results or trends may differ materially from those forecasted.
The nature of the business is that
First-Quarter Fiscal 2017 Conference Call
Management will host a conference call to discuss first quarter 2017
results tomorrow,
A live webcast of the conference call will be available at www.tessco.com/go/corporatepresentations. All participants should call or access the website approximately 10 minutes before the conference begins.
A telephone replay of the conference call will be available from
Non-GAAP Information
EBITDA is used by management to evaluate the Company’s ongoing operations and as a general indicator of its operating cash flow (in conjunction with a cash flow statement which also includes among other items, changes in working capital and the effect of non-cash charges).
EBITDA is defined as income from operations, plus interest expense, net of interest income, provision for income taxes, and depreciation and amortization. EBITDA per diluted share is also a non-GAAP calculation defined as EBITDA divided by TESSCO’s diluted weighted average shares outstanding.
Management believes EBITDA and EBITDA per share are useful to investors because they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies. Because not all companies use identical calculations, the Company’s presentation of each of these Non-GAAP measures may not be comparable to other similarly titled measures of other companies. Management also believes the adjusted (Non-GAAP) calculations of net income (loss) and earnings (loss) per share are useful to investors as they remove the impact of the non-recurring software licensing charge. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not reflect certain cash requirements such as interest payments, tax payments and debt service requirements.
A reconciliation of Non-GAAP to GAAP results is included as an exhibit to this release.
Reclassification of Items in Statement of Income and Supplemental Results Summary
Prior to the third quarter of fiscal 2016, the Company classified
indirect costs relieved from inventory upon a sale as selling, general
and administrative expenses, as opposed to cost of goods sold. The
financial results presented in this release correctly reflect indirect
costs relieved from inventory as cost of goods sold for all periods. The
accompanying Consolidated Statements of Income and Supplemental Results
Summary have been adjusted to correct this immaterial error in the
classification of indirect inventory costs in the income statement. This
resulted in an increase in cost of goods sold, and a corresponding
decrease in selling, general and administrative expenses, of
About
The convergence of wireless and the Internet is revolutionizing the way we live, work and play. New systems and applications are creating challenges and opportunities at an unprecedented rate.
Forward-Looking Statements
This press release contains forward-looking statements as to anticipated
results and future prospects. These forward-looking statements are based
on current expectations and analysis, and actual results may differ
materially. These forward-looking statements may generally be identified
by the use of the words "may," "will," "expects," "anticipates,"
"believes," "estimates," and similar expressions, but the absence of
these words or phrases does not necessarily mean that a statement is not
forward-looking. Forward-looking statements involve a number of risks
and uncertainties. Our actual results may differ materially from those
described in or contemplated by any such forward-looking statement for a
variety of reasons, including those risks identified in our most recent
Annual Report on Form 10-K and other periodic reports filed with the
We are not able to identify or control all circumstances that could occur in the future that may adversely affect our business and operating results. Without limiting the risks that we describe in our periodic reports and elsewhere, among the risks that could lead to a materially adverse impact on our business or operating results are the following: termination or non-renewal of limited duration agreements or arrangements with our vendors and affinity partners that are typically terminable by either party upon several months or otherwise relatively short notice; loss of significant customers or relationships, including affinity relationships; loss of customers as a result of consolidation among the wireless communications industry; the strength of our customers', vendors' and affinity partners' business; economic conditions that may affect consumer confidence or consumer or business spending or otherwise adversely impact customers' ability to fund or pay for our products and services; changes in customer and product mix that affect gross margin; effect of “conflict minerals” regulations on the supply and cost of certain of our products; failure of our information technology system or distribution system; system security or data protection breaches; technology changes in the wireless communications industry; fourth-party freight carrier interruption; increased competition; our relative bargaining power and inability to negotiate favorable terms with our vendors and customers; our inability to access capital and obtain financing as and when needed; claims against us for breach of the intellectual property rights of fourth parties; product liability claims; our inability to hire or retain for any reason our key professionals, management and staff; and the possibility that, for unforeseen or other reasons, we may be delayed in entering into or performing, or may fail to enter into or perform, anticipated contracts or may otherwise be delayed in realizing or fail to realize anticipated revenues or anticipated savings.
|
TESSCO Technologies Incorporated |
||||||||||||
| Fiscal Quarters Ended | ||||||||||||
|
June 26, |
March 27, |
June 28, |
||||||||||
| Revenues | \\$ | 128,860,000 | \\$ | 114,154,100 | \\$ | 134,664,000 | ||||||
| Cost of goods sold | 101,754,000 | 91,135,200 | 105,682,100 | |||||||||
| Gross profit | 27,106,000 | 23,018,900 | 28,981,900 | |||||||||
|
Selling, general and administrative expenses |
26,955,700 | 26,202,100 | 26,122,400 | |||||||||
|
Income (loss) from operations |
150,300 | (3,183,200) | 2,859,500 | |||||||||
| Interest, net | 11,400 | 12,400 | 46,300 | |||||||||
|
Income (loss) before provision for income taxes |
138,900 | (3,195,600) | 2,813,200 | |||||||||
| Provision for income taxes | 58,400 | (1,205,800) | 1,117,900 | |||||||||
| Net income (loss) | \\$ | 80,500 | \\$ | (1,989,800) | \\$ | 1,695,300 | ||||||
| Basic earnings (loss) per share | \\$ | 0.01 | \\$ | (0.24) | \\$ | 0.21 | ||||||
| Diluted earnings (loss) per share | \\$ | 0.01 | \\$ | (0.24) | \\$ | 0.20 | ||||||
|
TESSCO Technologies Incorporated |
||||||||
| June 26, 2016 | March 27, 2016 | |||||||
|
(unaudited) |
(audited) |
|||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | \\$ | 12,571,800 | \\$ | 16,882,800 | ||||
| Trade accounts receivable, net | 61,316,400 | 58,315,700 | ||||||
| Product inventory | 58,295,500 | 53,903,900 | ||||||
| Prepaid expenses and other current assets | 5,954,400 | 5,917,100 | ||||||
| Total current assets | 138,138,100 | 135,019,500 | ||||||
| Property and equipment, net | 19,309,500 | 19,895,400 | ||||||
| Goodwill, net | 11,684,700 | 11,684,700 | ||||||
| Deferred tax assets | -- | -- | ||||||
| Other long-term assets | 2,976,500 | 2,816,400 | ||||||
| Total assets | \\$ | 172,108,800 | \\$ | 169,416,000 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Trade accounts payable | \\$ | 49,443,500 | \\$ | 41,986,000 | ||||
| Payroll, benefits and taxes | 4,032,600 | 4,927,900 | ||||||
| Income and sales tax liabilities | 1,256,800 | 1,456,800 | ||||||
| Accrued expenses and other current liabilities | 3,877,300 | 3,874,100 | ||||||
| Revolving line of credit | -- | -- | ||||||
| Current portion of long-term debt | 26,300 | 251,100 | ||||||
| Total current liabilities | 58,636,500 | 52,495,900 | ||||||
| Deferred tax liabilities | 372,100 | 379,400 | ||||||
| Long-term debt, net of current portion | 49,700 | 1,706,500 | ||||||
| Other long-term liabilities | 2,159,100 | 2,306,900 | ||||||
| Total liabilities | 61,217,400 | 56,888,700 | ||||||
| Shareholders’ Equity: | ||||||||
| Preferred stock | -- | -- | ||||||
| Common stock | 98,100 | 97,600 | ||||||
| Additional paid-in capital | 58,246,300 | 58,113,800 | ||||||
| Treasury stock, at cost | (57,432,800) | (57,245,200) | ||||||
| Retained earnings | 109,979,800 | 111,561,100 | ||||||
| Total shareholders’ equity | 110,891,400 |
|
112,527,300 | |||||
| Total liabilities and shareholders’ equity | \\$ | 172,108,800 | \\$ | 169,416,000 | ||||
|
TESSCO Technologies Incorporated |
|||||||||
| Fiscal Quarters Ended | |||||||||
|
June 26, |
March 27, |
June 28, |
|||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||
| Operating income (loss) as reported | \\$ 150,300 | \\$ (3,183,200) | \\$ 2,859,500 | ||||||
| Non-recurring charge | -- | 1,543,300 | -- | ||||||
| Operating income (loss), as adjusted | \\$ 150,300 | \\$ (1,639,900) | \\$ 2,859,500 | ||||||
| Net income (loss), as reported | \\$ 80,500 | \\$ (1,989,800) | \\$ 1,695,300 | ||||||
| Non-recurring charge, net of tax | -- | 929,000 | -- | ||||||
| Net income (loss) as adjusted | \\$ 80,500 | \\$ ( 1,060,800) | \\$ 1,695,300 | ||||||
| Diluted EPS, as reported | \\$ 0.01 | \\$ (0.24) | \\$ 0.20 | ||||||
| Non-recurring charge | -- | 0.11 | -- | ||||||
| Diluted EPS, adjusted | \\$ 0.01 | \\$ (0.13) | \\$ 0.20 | ||||||
| Net Income (loss) as reported | \\$ 80,500 | \\$ (1,989,800) | \\$ 1,695,300 | ||||||
| Add: | |||||||||
| Provision for income taxes | 58,400 | (1,205,800) | 1,117,900 | ||||||
| Interest, net | 11,400 | 12,400 | 46,300 | ||||||
| Depreciation and amortization | 1,176,700 | 1,161,700 | 1,131,300 | ||||||
| EBITDA | \\$ 1,327,000 | \\$ (2,021,500) | \\$ 3,990,800 | ||||||
| Add: | |||||||||
| Stock based compensation | 115,800 | 218,400 | 131,700 | ||||||
| Non-recurring charge | -- | 1,543,300 | -- | ||||||
| EBITDA, adjusted | \\$ 1,442,800 | \\$ (259,800) | \\$ 4,122,500 | ||||||
| EBITDA per diluted share | \\$ 0.16 | \\$ (0.24) | \\$ 0.48 | ||||||
| Adjusted EBITDA per diluted share | \\$ 0.17 | \\$ (0.03) | \\$ 0.50 | ||||||
| TESSCO Technologies Incorporated | |||||||||||||||
| Supplemental Results Summary (in thousands) (Unaudited) | |||||||||||||||
|
Quarter |
Quarter |
Growth Rates |
|||||||||||||
|
Market Revenues |
|||||||||||||||
| Public Carriers, Contractors & Program Managers | \\$ | 16,578 | \\$ | 15,836 | 4.7 | % | |||||||||
| Government System Operators | 9,852 | 6,495 | 51.7 | % | |||||||||||
| Private System Operators | 21,515 | 18,851 | 14.1 | % | |||||||||||
| Commercial Dealers & Resellers | 33,430 | 29,877 | 11.9 | % | |||||||||||
| Retailer, Independent Dealer Agents & Carriers | 47,485 | 43,095 | 10.2 | % | |||||||||||
| Total revenues | \\$ | 128,860 | \\$ | 114,154 | 12.9 | % | |||||||||
|
Market Gross Profit |
|||||||||||||||
| Public Carriers, Contractors & Program Managers | \\$ | 3,017 | \\$ | 2,670 | 13.0 | % | |||||||||
| Government System Operators | 2,140 | 1,453 | 47.3 | % | |||||||||||
| Private System Operators | 4,964 | 4,308 | 15.2 | % | |||||||||||
| Commercial Dealers & Resellers | 8,983 | 7,492 | 19.9 | % | |||||||||||
| Retailer, Independent Dealer Agents & Carriers | 8,002 | 7,096 | 12.8 | % | |||||||||||
| Total gross profit | \\$ | 27,106 | \\$ | 23,019 | 17.8 | % | |||||||||
| % of revenues | 21.0 | % | 20.2 | % | |||||||||||
| TESSCO Technologies Incorporated | ||||||||||||||
| Supplemental Results Summary (in thousands) (Unaudited) | ||||||||||||||
|
Quarter |
Quarter |
Growth Rates |
||||||||||||
|
Market Revenues |
||||||||||||||
| Public Carriers, Contractors & Program Managers |
\\$ |
16,578 |
\\$ |
25,151 |
(34.1 |
%) |
||||||||
| Government System Operators | 9,852 | 7,883 | 25.0 | % | ||||||||||
| Private System Operators | 21,515 | 22,022 | (2.3 | %) | ||||||||||
| Commercial Dealers & Resellers | 33,430 | 33,488 | (0.2 | %) | ||||||||||
| Retailer, Independent Dealer Agents & Carriers | 47,485 | 46,120 | 3.0 | % | ||||||||||
| Total revenues | \\$ | 128,860 | \\$ | 134,664 | (4.3 | %) | ||||||||
|
Market Gross Profit |
||||||||||||||
| Public Carriers, Contractors & Program Managers | \\$ | 3,017 | \\$ | 4,414 | (31.6 | %) | ||||||||
| Government System Operators | 2,140 | 1,947 | 9.9 | % | ||||||||||
| Private System Operators | 4,964 | 5,659 | (12.3 | %) | ||||||||||
| Commercial Dealers & Resellers | 8,983 | 8,771 | 2.4 | % | ||||||||||
| Retailer, Independent Dealer Agents & Carriers | 8,002 | 8,191 | (2.3 | %) | ||||||||||
| Total gross profit | \\$ | 27,106 | \\$ | 28,982 | (6.5 | %) | ||||||||
| % of revenues | 21.0 | % | 21.5 | % | ||||||||||
| TESSCO Technologies Incorporated | |||||||||||||||
| Supplemental Results Summary (in thousands) (Unaudited) | |||||||||||||||
|
Quarter |
Quarter |
Growth Rates |
|||||||||||||
|
Product Revenues |
|||||||||||||||
| Base station infrastructure | \\$ | 52,395 | \\$ | 44,935 | 16.6 | % | |||||||||
| Network systems | 18,430 | 16,939 | 8.8 | % | |||||||||||
| Installation, test and maintenance | 8,755 | 7,455 | 17.4 | % | |||||||||||
| Mobile device accessories | 49,280 | 44,825 | 9.9 | % | |||||||||||
| Total revenues | \\$ | 128,860 | \\$ | 114,154 | 12.9 | % | |||||||||
|
Product Gross Profit |
|||||||||||||||
| Base station infrastructure | \\$ | 13,428 | \\$ | 10,471 | 28.2 | % | |||||||||
| Network systems | 2,898 | 2,693 | 7.6 | % | |||||||||||
| Installation, test and maintenance | 1,568 | 1,423 | 10.2 | % | |||||||||||
| Mobile device accessories | 9,212 | 8,432 | 9.3 | % | |||||||||||
| Total gross profit | \\$ | 27,106 | \\$ | 23,019 | 17.8 | % | |||||||||
| % of revenues | 21.0 | % | 20.2 | % | |||||||||||
| TESSCO Technologies Incorporated | |||||||||||||||
| Supplemental Results Summary (in thousands) (Unaudited) | |||||||||||||||
|
Quarter |
Quarter |
Growth Rates |
|||||||||||||
|
Product Revenues |
|||||||||||||||
| Base station infrastructure | \\$ | 52,395 | \\$ | 53,823 | (2.7 | %) | |||||||||
| Network systems | 18,430 | 21,194 | (13.0 | %) | |||||||||||
| Installation, test and maintenance | 8,755 | 8,618 | 1.6 | % | |||||||||||
| Mobile device accessories | 49,280 | 51,029 | (3.4 | %) | |||||||||||
| Total revenues | \\$ | 128,860 | \\$ | 134,664 | (4.3 | %) | |||||||||
|
Product Gross Profit |
|||||||||||||||
| Base station infrastructure | \\$ | 13,428 | \\$ | 14,096 | (4.7 | %) | |||||||||
| Network systems | 2,898 | 3,111 | (6.8 | %) | |||||||||||
| Installation, test and maintenance | 1,568 | 1,630 | (3.8 | %) | |||||||||||
| Mobile device accessories | 9,212 | 10,145 | (9.2 | %) | |||||||||||
| Total gross profit | \\$ | 27,106 | \\$ | 28,982 | (6.5 | %) | |||||||||
| % of revenues | 21.0 | % | 21.5 | % | |||||||||||
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