EX-99.1 2 pressrelease_05152018.htm PRESS RELEASE - Q2 2018 EARNINGS
ADDvantage Technologies Group, Inc.
1221 E. Houston
Broken Arrow, Oklahoma 74012

For further information
KCSA Strategic Communications
Company Contact:
Elizabeth Barker
Scott Francis        (918) 251-9121
(212) 896-1203
ebarker@kcsa.com

ADDvantage Technologies Announces Financial Results
for the Fiscal Second Quarter of 2018
- - -


BROKEN ARROW, Oklahoma, May 15, 2018 – ADDvantage Technologies Group, Inc. (NASDAQ: AEY), today announced its financial results for the three and six month periods ended March 31, 2018.

“Revenues for the second fiscal quarter of 2018 increased 3% compared with the same period in the prior year, driven by improved Telco segment sales and partially offset by declines in the Cable TV segment,” commented David Humphrey, President and CEO of ADDvantage Technologies. “On the Telco side, we were pleased to see our new sales strategy and restructuring initiatives at Nave Communications positively impact revenue growth. At Triton Datacom, we continue to be pleased with its overall sales performance despite slightly lower equipment sales due to reduced demand in the market early in the quarter. Looking ahead, we believe that the impact of our sales initiatives at both Nave and Triton, along with improved market demand, will drive top line growth in the Telco segment.  Despite experiencing top-line growth this quarter, our operating loss further increased, primarily due to lower revenues from our recycling business this quarter, which was driven by timing of shipments, and lower margins generated from our equipment sales.”

“Sales in the Cable TV segment continued to be impacted by the market weakness reported in the first fiscal quarter and the loss of a large repair business customer. We have implemented several initiatives to adapt to the declining revenues in this segment, including continued operational process improvements and right-sizing the Company's cost structure. This led to an improvement in operating income of thirteen percentage points compared to last year in the Cable TV segment.

Mr. Humphrey concluded, “Our results for the quarter also included equity losses of $0.3 million for a legal settlement with a subcontractor related to the YKTG Solutions, LLC wireless cell tower decommissioning project and the associated legal expenses.  Looking ahead, we believe we now have the framework in place to drive stronger top-line results in our Telco segment, and we have implemented initiatives to improve the margins on our equipment sales, both of which are expected to improve bottom-line results.  In addition, we anticipate that our recycling revenue will return to normal levels next quarter, and we do not expect any further expenses related to the YKTG Solutions project. We remain confident in the opportunities to grow market share and build value for shareholders.”

Results for the three months ended March 31, 2018

Consolidated sales increased 3% to $11.6 million for the three months ended March 31, 2018 compared with $11.3 million for the three months ended March 31, 2017.  The increase in sales was in the Telco segment of $0.7 million, partially offset by a decrease in the Cable TV segment of $0.4 million.

Consolidated operating, selling, general and administrative expenses decreased $0.3 million, or 7%, to $3.4 million for the three months ended March 31, 2018, from $3.7 million in the same period in the prior year. This was due to lower expenses in the Cable TV segment, while the Telco segment was relatively flat.

The loss from equity method investment for the three months ended March 31, 2018 consisted primarily of a legal settlement with a subcontractor on the YKTG Solutions wireless cell tower decommissioning project and the associated legal expenses.

Net loss for the three months ended March 31, 2018, was $0.3 million, or $0.03 per diluted share, compared with net income of $11,000, or $0.00 per diluted share, for the same period of 2017.

Adjusted EBITDA for the three months ended March 31, 2018 was $0.3 million compared with $0.5 million for the same period ended March 31, 2017.


Results for the six months ended March 31, 2018

Consolidated sales increased 2% to $23.9 million for the six months ended March 31, 2018 compared with $23.4 million for the six months ended March 31, 2017.  The increase in sales was in the Telco segment of $1.6 million, partially offset by a decrease in the Cable TV segment of $1.1 million.

Consolidated operating, selling, general and administrative expenses decreased $0.2 million, or 3%, to $7.1 million for the six months ended March 31, 2018, from $7.3 million in the same period in the prior year. This was due to lower expenses in the Cable TV segment, and was partially offset by higher Telco segment expenses.

The loss from equity method investment for the three months ended March 31, 2018 consisted primarily of a legal settlement with a subcontractor on the YKTG Solutions wireless cell tower decommissioning project and the associated legal expenses.

The provision for income taxes was $0.2 million for the six months ended March 31, 2018 compared to a provision for income taxes of $0.1 million for the same period of 2017.  The increase in the tax provision was due primarily to the Tax Cuts and Jobs Act enacted on December 22, 2017.  One of the provisions of this legislation was to reduce the corporate income tax rates effective beginning January 1, 2018.  As a result of the reduced corporate income tax rate, the Company remeasured its deferred tax balances at the reduced corporate income tax rate, which resulted in income tax expense of $0.4 million.  The Company estimates that its effective income tax rate for the remaining quarters of fiscal year 2018 will be approximately 30% as a result of the legislation.

Net loss for the six months ended March 31, 2018, was $1.0 million, or $0.09 per diluted share, compared with net income of $0.2 million, or $0.02 per diluted share, for the same period of 2017.

Adjusted EBITDA for the six months ended March 31, 2018 was $0.5 million compared with $1.4 million for the same period ended March 31, 2017.

Cash and cash equivalents were $0.9 million as of March 31, 2018, compared with $4.0 million as of September 30, 2017.  The decrease in cash was due primarily to the extinguishment of one of the Company’s term loans in December 2017 by paying the outstanding balance of $2.7 million and the first annual guaranteed payment of $0.7 million related to the acquisition of Triton Miami, Inc.  As of March 31, 2018, the Company had inventory of $22.3 million, relatively unchanged compared with $22.3 million as of September 30, 2017.

Earnings Conference Call

The Company will host a conference call today, Tuesday, May 15th, at 12:00 p.m. Eastern Time featuring remarks by David Humphrey, President and Chief Executive Officer, Dave Chymiak, Chief Technology Officer, Scott Francis, Chief Financial Officer, and Don Kinison, Vice President of Sales.

The conference call will be available via webcast and can be accessed through the Investor Relations section of ADDvantage's website, www.addvantagetechnologies.com.  Please allow extra time prior to the call to
visit the site and download any necessary software to listen to the Internet broadcast. The dial-in number for the conference call is 1-866-548-4713 (domestic) or 1-323-794-2093 (international). All dial-in participants must use the following code to access the call: 5415022. Please call at least five minutes before the scheduled start time.

For interested individuals unable to join the conference call, a replay of the call will be available through May 29, 2018 at 1-844-512-2921 (domestic) or 1-412-317-6671 (international). Participants must use the following code to access the replay of the call: 5415022.  An online archive of the webcast will be available on the Company's website for 30 days following the call.

About ADDvantage Technologies Group, Inc.

ADDvantage Technologies Group, Inc. (NASDAQ:  AEY) supplies the cable television (Cable TV) and telecommunications industries with a comprehensive line of new and used system-critical network equipment and hardware from a broad range of leading manufacturers. The equipment and hardware ADDvantage distributes is used to acquire, distribute, and protect the communications signals carried on fiber optic, coaxial cable and wireless distribution systems, including television programming, high-speed data (Internet) and telephony. In addition, ADDvantage operates a national network of technical repair centers focused primarily on Cable TV equipment and recycles surplus and obsolete Cable TV and telecommunications equipment.

ADDvantage operates through its subsidiaries, Tulsat, Tulsat-Atlanta, Tulsat-Texas, NCS Industries, ComTech Services, Nave Communications and Triton Datacom. For more information, please visit the corporate web site at www.addvantagetechnologies.com.

The information in this announcement may include forward-looking statements.  All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, are forward-looking statements.  These statements are subject to risks and uncertainties, which could cause actual results and developments to differ materially from these statements.  A complete discussion of these risks and uncertainties is contained in the Company’s reports and documents filed from time to time with the Securities and Exchange Commission.

Non-GAAP Financial Measures
Adjusted EBITDA is a supplemental, non-GAAP financial measure.  EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization.  Adjusted EBITDA as presented excludes other income, interest income and income from equity method investment.  Management believes providing Adjusted EBITDA in this release is useful to investors’ understanding and assessment of the Company’s ongoing continuing operations and prospects for the future and it is a used by the financial community to evaluate the market value of companies considered to be in similar businesses.  Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance.  Adjusted EBITDA, as calculated in the table below, may not be comparable to similarly titled measures employed by other companies.  In addition, Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs.


(Tables follow)

ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

   
Three Months Ended March 31,
    
Six Months Ended March 31,
  
   
2018
    
2017
    
2018
    
2017
  
Sales
  
$
11,649,528
    
$
11,294,756
    
$
23,934,293
    
$
23,390,582
  
Cost of sales
    
8,304,463
      
7,530,327
      
17,208,073
      
15,602,524
  
Gross profit
    
3,345,065
      
3,764,429
      
6,726,220
      
7,788,058
  
Operating, selling, general and administrative expenses
    
3,429,282
      
3,677,425
      
7,076,105
      
7,274,249
  
Income (loss) from operations
    
(84,217
)
    
87,004
      
(349,885
)
    
513,809
  
Other income (expense):
                                
Loss from equity method investment
    
(258,558
)
    
–
      
(258,558
)
    
–
  
Interest expense
    
(45,922
)
    
(97,333
)
    
(142,016
)
    
(193,977
)
Total other expense, net
    
(304,480
)
    
(97,333
)
    
(400,574
)
    
(193,977
)
                                 
Income (loss) before income taxes
    
(388,697
)
    
(10,329
)
    
(750,459
)
    
319,832
  
Provision (benefit) for income taxes
    
(129,000
)
    
(21,000
)
    
216,000
      
92,000
  
                                 
Net income (loss)
  
$
(259,697
)
  
$
10,671
    
$
(966,459
)
  
$
227,832
  
                                 
Earnings (loss) per share:
                                
Basic
  
$
(0.03
)
  
$
0.00
    
$
(0.09
)
  
$
0.02
  
Diluted
  
$
(0.03
)
  
$
0.00
    
$
(0.09
)
  
$
0.02
  
Shares used in per share calculation:
                                
Basic
    
10,252,712
      
10,153,571
      
10,239,353
      
10,143,903
  
Diluted
    
10,252,712
      
10,156,426
      
10,239,353
      
10,145,112
  

   
Three Months Ended March 31, 2018
    
Three Months Ended March 31, 2017
  
   
Cable TV
    
Telco
    
Total
    
Cable TV
    
Telco
    
Total
  
                                     
Income (loss) from
operations
  
$
296,153
    
$
(380,370
)
  
$
(84,217
)
  
$
262,648
    
$
(175,644
)
  
$
87,004
  
Depreciation
    
66,660
      
32,549
      
99,209
      
74,894
      
39,205
      
114,099
  
Amortization
    
−
      
313,311
      
313,311
      
−
      
328,574
      
328,574
  
Adjusted EBITDA (a)
  
$
362,813
    
$
(34,510
)
  
$
328,303
    
$
337,542
    
$
192,135
    
$
529,677
  

(a)
The Telco segment includes earn-out expenses of zero and $0.2 million for the three months ended March 31, 2018 and 2017, respectively, related to the acquisition of Triton Miami, Inc.

   
Six Months Ended March 31, 2018
    
Six Months Ended March 31, 2017
  
   
Cable TV
    
Telco
    
Total
    
Cable TV
    
Telco
    
Total
  
                                     
Income (loss) from
operations
  
$
107,653
    
$
(457,538
)
  
$
(349,885
)
  
$
1,171,631
    
$
(657,822
)
  
$
513,809
  
Depreciation
    
133,607
      
63,745
      
197,352
      
148,138
      
69,748
      
217,886
  
Amortization
    
−
      
626,622
      
626,622
      
−
      
640,560
      
640,560
  
Adjusted EBITDA (a)
  
$
241,260
    
$
232,829
    
$
474,089
    
$
1,319,769
    
$
52,486
    
$
1,372,255
  


(a)
The Telco segment includes earn-out expenses of zero and $0.1 million for the six months ended March 31, 2018 and 2017, respectively, and acquisition related costs of $0.2 million for the six months ended March 31, 2017 related to the acquisition of Triton Miami, Inc.






ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)

   
March 31,
2018
    
September 30,
2017
  
Assets
            
Current assets:
            
Cash and cash equivalents
  
$
886,367
    
$
3,972,723
  
Accounts receivable, net of allowance for doubtful accounts of
$150,000
    
5,238,520
      
5,567,005
  
Income tax receivable
    
242,327
      
247,186
  
Inventories, net of allowance for excess and obsolete
                
inventory of $3,000,000 and $2,939,289, respectively
    
22,339,874
      
22,333,820
  
Prepaid expenses
    
404,800
      
298,152
  
Total current assets
    
29,111,888
      
32,418,886
  
                 
Property and equipment, at cost
    
11,393,821
      
11,416,363
  
Less: Accumulated depreciation
    
(5,550,601
)
    
(5,395,791
)
Net property and equipment
    
5,843,220
      
6,020,572
  
                 
Investment in and loans to equity method investee
    
100,000
      
98,704
  
Intangibles, net of accumulated amortization
    
7,920,865
      
8,547,487
  
Goodwill
    
5,970,244
      
5,970,244
  
Deferred income taxes
    
1,438,000
      
1,653,000
  
Other assets
    
135,753
      
138,712
  
                 
Total assets
  
$
50,519,970
    
$
54,847,605
  
                 
Liabilities and Shareholders’ Equity
                
Current liabilities:
                
Accounts payable
  
$
2,816,766
    
$
3,392,725
  
Accrued expenses
    
1,130,947
      
1,406,722
  
Notes payable – current portion
    
2,853,916
      
4,189,605
  
Other current liabilities
    
656,607
      
664,325
  
Total current liabilities
    
8,876,206
      
9,653,377
  
                 
Notes payable, less current portion
    
–
      
2,094,246
  
Other liabilities
    
784,181
      
1,401,799
  
Total liabilities
    
9,660,387
      
13,149,422
  
                 
Shareholders’ equity:
                
 Common stock, $.01 par value; 30,000,000 shares authorized;
   10,806,803 and 10,726,653 shares issued, respectively;
   10,306,145 and 10,225,995 shares outstanding, respectively
    
108,068
      
107,267
  
Paid in capital
    
(4,619,408
)
    
(4,746,466
)
Retained earnings
    
46,370,737
      
47,337,396
  
Total shareholders’ equity before treasury stock
    
41,859,397
      
42,698,197
  
                 
Less: Treasury stock, 500,658 shares, at cost
    
(1,000,014
)
    
(1,000,014
)
Total shareholders’ equity
    
40,859,583
      
41,698,183
  
                 
Total liabilities and shareholders’ equity
  
$
50,519,970
    
$
54,847,605