EX-99.1 2 pressrelease_08132019.htm PRESS RELEASE - Q3 2019 EARNINGS
ADDvantage Technologies Group, Inc.
1221 E. Houston
Broken Arrow, Oklahoma 74012

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

ADDvantage Technologies Group, Inc. Announces Financial Results
for the Fiscal Third Quarter of 2019
BROKEN ARROW, Oklahoma, August 13, 2019 – ADDvantage Technologies Group, Inc. (NASDAQ: AEY) (“ADDvantage Technologies” or the “Company”) announced today its financial results for the three and nine month periods ended June 30, 2019.
“Revenues for the third quarter of 2019 were $17.6 million, which was an increase of 129% as compared to the third quarter of 2018,” said Joe Hart, President and CEO. “We also reported positive Adjusted EBITDA of $0.4 million, compared with a loss of $0.3 million for the same period in 2018. This improvement in financial performance was driven by both the Wireless and Telco segments, reflecting our increased focus on these high-growth markets. A major accomplishment this quarter was the sale of the Cable TV segment, which closed on June 30. This major milestone significantly advances our growth strategy by providing us with additional funds to invest in solidifying and expanding our position in the telecommunications and wireless infrastructure services markets.  As a reminder, the results for the Cable TV segment have been reclassified to discontinued operations as a result of the Cable TV segment sale, so we are now only reporting the Wireless and Telco segments.

“Fulton reported revenue of $8.7 million in the third quarter of 2019, compared with $4.2 million in the second quarter of 2019, which is a doubling of revenue quarter over quarter, as we continue to integrate and ramp up the company’s operations. Over the next several quarters, we plan to implement further operational improvements and project oversight at Fulton to improve project efficiency and margins. To support the scaling of the business we are also expanding Fulton’s management talent and suite of services. We are excited by Fulton’s growth and financial results in their second quarter with ADDvantage and are encouraged by the opportunities we see unfolding in the industry as wireless carriers prepare and rollout 5G networks. We believe that Fulton will continue to provide strong revenue growth and gradually improving margins as it executes on growth opportunities in the market.

“The Telco segment reported revenues of $8.8 million for the three months ended June 30, 2019, compared with $7.7 million in the same period last year, driven by improved performance at both Nave and Triton. Notably, the Telco segment reported positive Adjusted EBITDA of $0.5 million, compared with a loss of $0.3 million in the third quarter of 2018. This turnaround is mainly attributed to the new operational structure at Nave, which led to improved efficiencies and enabled us to focus on our core sales and recycling activities. Looking ahead, we are also ramping up our repair activities to take advantage of our new capabilities and our expanded business lines. We are also looking forward to Triton’s upcoming move to its new facility in Pembroke Park, Florida, scheduled in August. This move will enable us to streamline and improve our processes, which, together with our strategy to add additional product lines and manufacturers, is expected to drive improved sales at Triton. We believe that Triton is poised to expand, capture additional market share and develop new customers.  While Nave was the main Adjusted EBITDA growth driver in the third quarter, we expect to see Triton’s operating results improve as a result of the upcoming changes.

“ADDvantage now has a stronger and more efficient foundation to support top and bottom line growth. The sale of the Cable TV segment marks a turning point for the Company, and we are excited to capitalize on this opportunity by investing in the long-term growth of our wireless and telecom businesses. Our growth initiatives in Triton and Nave have already led to improved results, and we can
see significant room for sales growth in both these businesses. This, combined with the major opportunity at Fulton to grow market share in the expanding wireless infrastructure services market, leaves us well-positioned to build value for our shareholders,” concluded Mr. Hart.

Results for the three months ended June 30, 2019

Consolidated sales increased 129% to $17.6 million for the three months ended June 30, 2019 compared with $7.7 million for the three months ended June 30, 2018.  The increase in sales was in the Wireless segment and Telco segment of $8.7 million and $1.2 million, respectively.

The increase in sales for the Wireless segment of $8.7 million was as a result of the acquisition of Fulton Technologies, which closed on January 4, 2019.  The Company did not report any revenues for the Wireless segment for the same period in fiscal 2018.

The increase in sales for the Telco segment was due to an increase in equipment sales and recycling revenue of $1.0 million and $0.2 million, respectively.  The increase in Telco equipment sales was due primarily to increased sales at Triton Datacom of $1.0 million.  The increase in recycling revenue was due primarily to timing of recycling shipments.

Consolidated gross profit increased $1.3 million due to the Wireless segment and Telco segment, which increased by $0.9 million and $0.4 million, respectively.

Consolidated operating, selling, general and administrative expenses increased 25% to $3.3 million compared with $2.7 million for the three months ended June 30, 2018. The increase in expenses was due to the Wireless segment of $1.0 million, partially offset by a decrease in the Telco segment of $0.4 million.

Equity earnings for the three months ended June 30, 2019 were $20,000, compared with zero for the three months ended June 30, 2018.  Equity earnings for the three months ended June 30, 2019 consisted of payments received from certain YKTG Solutions investment equity owners related to amounts owed to the Company.

The Company recorded a benefit for income taxes of $42,000 for the three months ended June 30, 2019, compared with $0.4 million for the three months ended June 30, 2018.  The change in the tax provision was due primarily to the valuation allowance netting the deferred tax assets to zero for the three months ended June 30, 2019, offset by income taxes payable to certain tax jurisdictions.

Net loss for the three months ended June 30, 2019, was $1.5 million, or $0.14 per diluted share, compared with a net loss of $1.5 million, or $0.15 per diluted share, for the same period of 2018.

On May 29, 2019, at a special stockholders’ meeting, the Company’s stockholders voted in favor of selling the Company’s Cable TV segment to Leveling 8, Inc. (“Leveling 8”), a company controlled by David Chymiak.  David Chymiak is a director and substantial shareholder of the Company, and he was the Chief Technology Officer and President of Tulsat LLC until the closing of the sale on June 30, 2019.  Therefore, the Company has classified the Cable TV segment as discontinued operations.

Loss from discontinued operations, net of tax, was $1.4 million for the three months ended June 30, 2019, compared to a loss of $1.2 million for the same period last year.  This activity included the operations of the Cable TV segment prior to the sale on June 30, 2019.  The Company recognized a loss on the sale of the Cable TV segment of $1.5 million for the three months ended June 30, 2019.  The Cable TV segment recognized a goodwill impairment charge of $1.2 million for the three months ended June 30, 2018.

Adjusted EBITDA for the three months ended June 30, 2019 was income of $0.4 million compared with a loss of $0.3 million for the same period ended June 30, 2018.

Results for the nine months ended June 30, 2019

Consolidated sales increased 76% to $37.3 million for the nine months ended June 30, 2019 compared with $21.1 million for the nine months ended June 30, 2018.  The increase in sales was in the Wireless segment and Telco segment of $13.0 and $3.2 million, respectively.

Revenues for the Wireless segment were $13.0 million for the nine months ended June 30, 2019, as a result of the acquisition of Fulton Technologies. The Company did not report any revenues for the Wireless segment for the same period last year.

Sales for the Telco segment increased $3.2 million to $24.4 million for the nine months ended June 30, 2019 from $21.2 million for the same period last year.  The increase in sales for the Telco segment was due to an increase in equipment sales of $3.3 million, partially offset by a decrease in recycling revenue of $0.1 million.  The increase in Telco equipment sales was due to increased sales at Nave Communications and Triton Datacom of $1.8 million and $1.5 million, respectively.

Consolidated gross profit increased $1.3 million due to the Wireless segment and Telco segment of $1.0 million and $0.3 million, respectively.

Operating, selling, general and administrative expenses increased $1.9 million, or 25%, to $9.7 million for the nine months ended June 30, 2019 from $7.8 million for the same period last year.  This increase in expenses was due to the Wireless segment of $2.3 million, partially offset by a decrease in the Telco segment of $0.4 million.

Equity earnings for the nine months ended June 30, 2019 were $0.1 million and equity losses were $0.3 million for the nine months ended June 30, 2018.  The equity earnings for the three months ended June 30, 2019 consisted primarily of repayments of a loan from the former YKTG partners.  The equity losses for the nine months ended June 30, 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 benefit for income taxes was $13 thousand for the nine months ended June 30, 2019, compared to a benefit for income taxes of $0.2 million for the nine months ended June 30, 2018.  The increase in the tax provision was due primarily to the valuation allowance netting the deferred tax assets to zero for the nine months ended June 30, 2019, offset by income taxes payable to certain tax jurisdictions.

Net loss for the nine months ended June 30, 2019, was $3.7 million, or $0.36 per diluted share, compared with net loss of $2.5 million, or $0.24 per diluted share, for the same period of 2018.

Loss from discontinued operations, net of tax, was $1.3 million for the nine months ended June 30, 2019 compared to a loss of $0.5 million for the same period last year.  This activity included the operations of the Cable TV segment prior to the sale on June 30, 2019.  The Company recognized a loss on the sale of the Cable TV segment of $1.5 million for the nine months ended June 30, 2019.  The Cable TV segment recognized a goodwill impairment charge of $1.2 million for the nine months ended June 30, 2018.

Adjusted EBITDA for the nine months ended June 30, 2019 was a loss of $1.1 million compared with a loss of $0.6 million for the same period ended June 30, 2018.

As a result of the sale of the Cable TV segment to Leveling 8, Inc., which closed on June 30, 2019, and the sales of three Cable TV segment facilities to David Chymiak LLC prior to the sale of the Cable TV segment, the Company will receive total proceeds of $14.2 million.  These proceeds consist of $7.1 million in cash received from the facility sales, a receivable of $0.7 million due in the fourth quarter of 2019 and a promissory note of $6.4 million to be paid over five years.

Cash and cash equivalents were $2.7 million as of June 30, 2019, compared with $3.2 million as of September 30, 2018.  As of June 30, 2019, the Company had inventory of $9.1 million, compared with

 $7.5 million as of September 30, 2018.

Earnings Conference Call

The Company will host a conference call today, Tuesday, August 13th, at 12:00 p.m. Eastern Time featuring remarks by Joseph Hart, President and Chief Executive Officer, Kevin Brown, Chief Financial Officer, Colby Empey, President of the Wireless Services Division, Don Kinison, President of the Telecommunications Division, and Scott Francis, Chief Accounting Officer.   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 1-888-394-8218 (domestic) or 1-323-701-0225 (international). All dial-in participants must use the following code to access the call: 4982983. 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 August 27, 2019 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: 4982983.  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) is a communications infrastructure services and equipment provider operating a diversified group of companies through its Wireless Infrastructure Services and Telecommunications segments.  Through its Wireless segment, Fulton Technologies provides turn-key wireless infrastructure services including the installation, modification and upgrading of equipment on communication towers and small cell sites for wireless carriers, national integrators, tower owners and major equipment manufacturers.  Through its Telecommunications segment, Nave Communications and Triton Datacom sell equipment and hardware used to acquire, distribute, and protect the communications signals carried on fiber optic, coaxial cable and wireless distribution systems.  The Telecommunications segment also offers repair services focused on telecommunication equipment and recycling surplus and related obsolete telecommunications equipment.

ADDvantage operates through its subsidiaries, Fulton Technologies, 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 discontinued operations, stock compensation expense, other income, other expense, 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 June 30,
    
Nine Months Ended June 30,
  
   
2019
   
2018
   
2019
   
2018
 
Sales
  
$
17,559,315
    
$
7,674,997
    
$
37,259,352
    
$
21,137,787
  
Cost of sales
    
14,248,680
      
5,681,646
      
29,953,292
      
15,158,725
  
Gross profit
    
3,310,635
      
1,993,351
      
7,306,060
      
5,979,062
  
Operating, selling, general and administrative expenses
    
3,315,268
      
2,661,493
      
9,665,151
      
7,715,354
  
Loss from operations
    
(4,633
)
    
(668,142
)
    
(2,359,091
)
    
(1,736,292
)
Other income (expense):
                                
    Income (loss) from equity method investment
    
20,005
    
‒
      
75,005
      
(258,558
)
Other expense
    
(89,708
)
    
–
      
(132,967
)
    
–
  
Interest expense
    
(25,860
)
    
(39,571
)
    
(68,612
)
    
(171,017
)
Total other expense, net
    
(95,563
)
    
(39,571
)
    
(126,574
)
    
(429,575
)
                                 
Loss before income taxes
    
(100,196
)
    
(707,713
)
    
(2,485,665
)
    
(2,165,867
)
Benefit for income taxes
    
(42,000
)
    
(359,000
)
    
(13,000
)
    
(169,000
)
Loss from continuing operations
    
(58,196
)
    
(348,713
)
    
(2,472,665
)
    
(1,996,867
)
                                 
Discontinued operations, net of tax
    
(1,426,969
)
    
(1,157,986
)
    
(1,267,344
)
    
(476,291
)
                                 
Net loss
  
$
(1,485,165
)
  
$
(1,506,699
)
  
$
(3,740,009
)
  
$
(2,473,158
)
                                 
Loss per share:
                                
Basic
                                
   Continuing operations
  
$
(0.00
)
  
$
(0.03
)
  
$
(0.24
)
  
$
(0.19
)
      Discontinued operations
    
(0.14
)
    
(0.12
)
    
(0.12
)
    
(0.05
)
    Net loss
  
$
(0.14
)
  
$
(0.15
)
  
$
(0.36
)
  
$
(0.24
)
    Diluted
                                
  Continuing operations
  
$
(0.00
)
  
$
(0.03
)
  
$
(0.24
)
  
$
(0.19
)
      Discontinued operations
    
(0.14
)
    
(0.12
)
    
(0.12
)
    
(0.05
)
    Net loss
  
$
(0.14
)
  
$
(0.15
)
  
$
(0.36
)
  
$
(0.24
)
Shares used in per share calculation:
                                
Basic
    
10,361,292
      
10,306,145
      
10,361,292
      
10,261,617
  
Diluted
    
10,361,292
      
10,306,145
      
10,361,292
      
10,261,617
  

A reconciliation by segment of operating income (loss) to Adjusted EBITDA follows:

   
Three Months Ended June 30, 2019
  
   
Wireless
   
Telco
   
Total
 
Income (loss) from operations
  
$
(147,463
)
  
$
142,830
    
$
(4,633
)
Stock compensation expense
    
12,166
      
34,436
      
46,602
  
Depreciation
    
80,076
      
29,615
      
109,691
  
Amortization
    
6,100
      
266,775
      
272,875
  
Adjusted EBITDA
  
$
(49,121
)
  
$
473,656
    
$
424,535
  

   
Three Months Ended June 30, 2018
  
   
Wireless  
    
Telco  
    
Total  
  
Loss from operations
  
$
 ‒

 
$
(668,142
 )
 
$
(668,142
)
Stock compensation expense
    
 ‒
      
46,782
      
46,782
  
Depreciation
    
 ‒
      
32,583
      
32,583
  
Amortization
    
 ‒
      
313,311
      
313,311
  
Adjusted EBITDA
  
$
 ‒

 
$
(275,466
 )
 
$
(275,466
 )


   
Nine Months Ended June 30, 2019
  
   
Wireless  
    
Telco  
    
Total  
  
Loss from operations
  
$
(1,334,215
)
  
$
(1,024,876
)
  
$
(2,359,091
)
Stock compensation expense
    
31,628
      
121,063
      
152,691
  
Depreciation
    
159,604
      
97,524
      
257,128
  
Amortization
    
12,200
      
800,325
      
812,525
  
Adjusted EBITDA (a)
  
$
(1,130,783
)
  
$
(5,964
)
  
$
(1,136,747
)
                         
(a)
The Wireless segment includes acquisition expenses of $0.2 million related to the acquisition of Fulton and Mill City.


   
Nine Months Ended June 30, 2018
  
   
Wireless  
    
Telco  
    
Total  
  
Loss from operations
  
$
 ‒

 
$
(1,736,292
)
  
$
(1,736,292
)
Stock compensation expense
    
 ‒
      
122,142
      
122,142
  
Depreciation
    
 ‒
      
96,055
      
96,055
  
Amortization
    
 ‒
      
939,933
      
939,933
  
Adjusted EBITDA (a)
  
$
 ‒

 
$
(578,162
)
  
$
(578,162
)
 
ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)

   
June 30,
2019
    
September 30,
2018
  
Assets
            
Current assets:
            
Cash and cash equivalents
  
$
2,672,640
    
$
3,129,280
  
Restricted cash
    
260,802
    
‒
  
Accounts receivable, net of allowance for doubtful accounts of
$150,000
    
5,481,478
      
2,578,998
  
Unbilled revenue
    
2,272,381
    
‒
  
Other receivable
    
753,199
    
‒
  
Promissory note – current
    
1,400,000
    
‒
  
Income tax receivable
    
174,290
      
178,766
  
Inventories, net of allowance for excess and obsolete
                
inventory of $800,000 and $815,000, respectively
    
9,094,002
      
7,462,491
  
Prepaid expenses
    
793,992
      
253,405
  
Other current assets
    
171,695
    
‒
  
Current assets of discontinued operations
  
‒
      
16,925,526
  
Total current assets
    
23,074,479
      
30,528,466
  
                 
Property and equipment, at cost:
                
Machinery and equipment
    
2,419,740
      
1,084,024
  
Leasehold improvements
    
190,984
      
190,984
  
Total property and equipment, at cost
    
2,610,724
      
1,275,008
  
Less: Accumulated depreciation
    
(813,978
)
    
(773,312
)
Net property and equipment
    
1,796,746
      
501,696
  
                 
Promissory note – noncurrent
    
4,975,000
    
‒
  
Investment in and loans to equity method investee
  
‒
      
49,000
  
Intangibles, net of accumulated amortization
    
6,275,873
      
6,844,398
  
Goodwill
    
4,836,472
      
4,820,185
  
Other assets
    
210,854
      
125,903
  
Assets of discontinued operations
  
‒
      
1,524,972
  
                 
Total assets
  
$
41,169,424
    
$
44,394,620
  


   
June 30,
2019
    
September 30,
2018
  
Liabilities and Shareholders’ Equity
            
Current liabilities:
            
Accounts payable
  
$
6,856,372
    
$
3,300,388
  
Accrued expenses
    
1,644,337
      
711,936
  
Bank revolving line of credit
    
750,000
    
‒
  
Notes payable – current portion
  
‒
      
1,996,279
  
Other current liabilities
    
748,850
      
664,374
  
Current liabilities of discontinued operations
  
‒
      
2,392,780
  
Total current liabilities
    
9,999,559
      
9,065,757
  
                 
Other liabilities
    
203,682
      
801,612
  
Total liabilities
    
10,203,241
      
9,867,369
  
                 
Shareholders’ equity:
                
Common stock, $.01 par value; 30,000,000 shares authorized; 
  10,861,950 and 10,806,803 shares issued, respectively; 
  10,361,292 and 10,306,145 shares outstanding, respectively
    
108,620
      
108,068
  
Paid in capital
    
(4,419,954
)
    
(4,598,343
)
Retained earnings
    
36,277,531
      
40,017,540
  
Total shareholders’ equity before treasury stock
    
31,966,197
      
35,527,265
  
                 
Less: Treasury stock, 500,658 shares, at cost
    
(1,000,014
)
    
(1,000,014
)
Total shareholders’ equity
    
30,966,183
      
34,527,251
  
                 
Total liabilities and shareholders’ equity
  
$
41,169,424
    
$
44,394,620