Market Overview

Wireless Telecom Group Announces Second Quarter 2018 Financial Results

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Highlights of the quarter:

  • Net revenues of $13,414,000 for the quarter ended June 30, 2018
    • A year over year increase of $1,481,000, or 12%
  • Gross Profit of $6,170,000, or 46% of revenue, for the quarter
    ended June 30, 2018
    • A year over year increase of $2,826,000, or 85% (2017 gross profit
      includes $1,930,000 impairment charge)
  • Net loss of $180,000 for the quarter ended June 30, 2018
    • Compared to a net loss of $1,370,000 for the same period last year
  • Non-GAAP Adjusted EBITDA of $1,076,000 for the quarter ended June
    30, 2018
    • A year over year increase of $169,000, or 19%
  • New customer orders of $11,871,000 for the quarter ended June 30,
    2018
    • Compared to new customer orders of $12,110,000 for the same period
      last year
  • June 30, 2018 order backlog of $8,801,000
    • A year over year increase of $1,831,000

Wireless Telecom Group, Inc. (NYSE:WTT) (the "Company")
announced today results for the second quarter ended June 30, 2018.

For the quarter ended June 30, 2018, the Company reported consolidated
net revenues of $13,414,000, compared to $11,933,000 for the same period
in 2017, an increase of 12%. Net revenues in the Network Solutions
segment were $5,636,000, compared to $5,617,000 for the same period in
2017, an increase of .3%. Net revenues in the Test & Measurement segment
were $3,534,000, compared to $3,316,000 for the same period in 2017, an
increase of 6.6%. Net revenues in the Embedded Solutions segment were
$4,244,000, compared to $3,000,000 for the same period in 2017, an
increase of 41.5%.

The Company also reported consolidated gross profit of $6,170,000, or
46% of revenue, for the quarter ended June 30, 2018, compared to
$3,344,000, or 28% of revenue, for the same period in 2017. The 2017
second quarter gross profit was adversely affected by a non-cash
inventory impairment charge of $1,930,000.

For the quarter ended June 30, 2018, gross profit in the Network
Solutions segment was $2,468,000, or 43.8%, compared to $1,182,000, or
21%, for the same period in 2017. Network Solutions gross profit in the
2017 quarter was adversely affected by approximately $1.2 million of an
inventory impairment charge. Gross profit in the Test & Measurement
segment was $1,815,000, or 51.4%, for the quarter ended June 30, 2018,
compared to $832,000, or 25.1%, for the same period in 2017. Test &
Measurement gross profit in the 2017 quarter was adversely affected by
approximately $725,000 of an inventory impairment charge. Gross profit
in the Embedded Solutions segment was $1,887,000, or 44.5% for the
quarter ended June 30, 2018, compared to $1,330,000, or 44.3%, for the
same period in 2017.

For the quarter ended June 30, 2018, the Company reported consolidated
operating expenses of $6,137,000, compared to $5,614,000 for the same
period in 2017, an increase of $523,000. Non GAAP operating expenses
were $5,265,000 for the three months ended June 30, 2018 compared to
$4,467,000 for the year ago period.

The Company reported a net loss of $180,000 for the quarter ended June
30, 2018, compared to a net loss of $1,370,000 for the same period in
2017.

Non-GAAP Adjusted EBITDA for the quarter ended June 30, 2018 was
$1,076,000, compared to non-GAAP Adjusted EBITDA of $907,000 for the
same period in 2017.

The Company defines EBITDA as its net earnings before interest expense,
provisions for taxes, depreciation expense and amortization expense.
"Adjusted EBITDA" is EBITDA excluding our stock compensation expense,
restructuring charges, acquisition expenses, integration expenses, the
one-time non-cash inventory impairment charges, unrealized and realized
foreign exchange gains and losses, and other non-recurring costs. A
reconciliation of net income to non-GAAP Adjusted EBITDA is included as
an attachment to this press release.

The Company reported cash flow provided by operations of $196,000 for
the six months ending June 30, 2018 compared to cash provided by
operations of $489,000 for the same period in 2017. Cash flow from
operations for the six months ended June 30, 2018 was impacted by higher
working capital which reflects the improved funnel and backlog and the
mix of sales to our larger customers with longer payment terms.

The Company reported customer orders of $11,871,000 during the quarter
ending June 30, 2018, compared to $12,110,000 of customer orders for the
same period in 2017. The consolidated backlog of firm orders to be
shipped in the next twelve months was approximately $8,801,000 at June
30, 2018, a year over year increase of $1,831,000 over the backlog of
$6,970,000 at June 30, 2017.

Tim Whelan, CEO of Wireless Telecom Group, Inc., commented, "We are very
pleased with a stronger than expected quarter of results and we are
especially pleased with the organic growth realized in our Test &
Measurement and Embedded Solutions segment. We believe these results
reflect the investments we have made in our channels, our products and
in the acquisition of CommAgility."

Whelan continued, "We are continuing to improve our operational and
financial performance through top line growth, lean manufacturing and
supply chain improvements. We continue to invest in our R&D roadmaps and
we are excited by our products for 5G and millimeter wave development
which we recently showcased. We are adding value to our customers in
their continued investments in long-term network densification, 4G and
5G testing applications, government and military radar applications, and
LTE network deployments. Our most recent product announcement is focused
on new products for in-building public safety networks, an area of
investment with new requirements from local governments and investments
related to FirstNet deployments. We expect to see continued strong
customer bookings and financial results in the third quarter."

The Company expects the following in the quarter ended September 30,
2018 for the three combined segments:

  • Revenue between $13,000,000 and $13,500,000
  • Gross margins between 45% and 46%
  • Non-GAAP operating expenses between $5.4 and $5.5 million
    (specifically, the Company's GAAP operating expenses, excluding
    depreciation expense, amortization expense, stock compensation
    expense, restructuring charges, purchase accounting adjustments in
    accordance with US GAAP, and non-recurring CommAgility acquisition and
    integration expenses, which cannot be itemized for reconciliation to
    the comparable future GAAP measure at this time).

Conference Call

As previously announced, Wireless Telecom Group Inc. will host a
conference call today at 8:30 a.m. ET in which management will discuss
second quarter 2018 results and related matters. To participate in the
conference call, dial 800-346-7359 or 973-528-0008. The conference
identification number is 740345. The call will also be webcast over the
internet at the following URL:

https://www.webcaster4.com/Webcast/Page/1690/26930

A replay will be made available on the Wireless Telecom website for a
limited period of time following the conference call.

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 constitutes
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 views Adjusted EBITDA as an important indicator of
performance, consistent with the manner in which management measures and
forecasts the Company's performance. We believe Adjusted EBITDA is an
important performance metric because it facilitates the analysis of our
results, exclusive of certain non‐cash items, including items which do
not directly correlate to our business operations.

The Company believes that Adjusted EBITDA 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, statements regarding revenue, gross margins, non-GAAP
operating expenses and customer bookings for the quarter ending
September 30, 2018 and free cash flow and debt reduction in the second
half of the year. Investors are cautioned that any 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 Company's ability to successfully integrate
acquired businesses, the ability of management to successfully implement
the Company's business plan and strategy, product demand and development
of competitive technologies in the Company's market sector, the impact
of competitive products and pricing, the loss of any significant
customers of the Company, and other risks and uncertainties set forth in
the Company's Annual Report on Form 10-K for the year ended December 31,
2017. 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 Electronics,
CommAgility, Microlab 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, semiconductor and medical industries, Wireless
Telecom Group products enable innovation across a wide range of
traditional and emerging wireless technologies. With a unique set of
high-performance products including peak power meters, signal analyzers,
signal processing modules, LTE PHY and stack software, power splitters
and combiners, GPS repeaters, public safety monitors, noise sources, and
programmable noise generators, Wireless Telecom Group supports the
development, testing, and deployment of wireless technologies around the
globe. Wireless Telecom Group is headquartered in Parsippany, New
Jersey, in the New York City metropolitan area, and maintains a global
network of Sales and Service offices for excellent product service and
support. Wireless Telecom Group's website address is http://www.wtcom.com.

         

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME/(LOSS)

(In thousands, except share and per share amounts, Unaudited)

 
Three Months Ended June 30 Six Months Ended June 30

2018

   

2017

2018

   

2017

NET REVENUES $ 13,414 $ 11,933 $ 26,678 $ 21,482
 
COST OF REVENUES   7,244         8,589     14,239         13,805  
 
GROSS PROFIT 6,170 3,344 12,439 7,677
 
Operating Expenses
Research and Development 1,313 1,130 2,469 2,217
Sales and Marketing 1,933 1,663 3,844 3,215
General and Administrative 2,678 2,821 5,311 6,233
Loss on change in fair value
of contingent consideration
  213         -     213         -  
Total Operating Expenses 6,137 5,614 11,837 11,665
 
Operating income/(loss) 33 (2,270 ) 602 (3,988 )
 
Other income/(expense) 33 (2 ) (13 ) (3 )
Interest Expense   (141 )       (110 )   (234 )       (159 )
 
(Loss)/Income before taxes (75 ) (2,382 ) 355 (4,150 )
 
Tax Provision/(Benefit)   105         (1,012 )   161         (1,551 )
               
Net (Loss)/Income $ (180 )     $ (1,370 ) $ 194       $ (2,599 )
 
Other Comprehensive (Loss)/Income:
Foreign currency translation adjustments   (963 )       635     (383 )       576  
Comprehensive (Loss) $ (1,143 )     $ (735 ) $ (189 )     $ (2,023 )
 
 
Net (Loss)/Income per common share:
Basic $ (0.01 ) $ (0.07 ) $ 0.01 $ (0.13 )
Diluted $ (0.01 ) $ (0.07 ) $ 0.01 $ (0.13 )
 
Weighted average shares outstanding:
Basic 20,864,428 19,765,101 20,755,027 19,577,271
Diluted 20,864,428 19,765,101 21,510,539 19,577,271
 
         

WIRELESS TELECOM GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)

 
June 30 December 31
2018 2017
(Unaudited)
CURRENT ASSETS
Cash & cash equivalents $ 2,635 $ 2,458
Accounts receivable - net of reserves of $66 and $44, respectively 10,979 9,041
Inventories - net of reserves of $1,661 and $1,856, respectively 7,565 6,526
Prepaid expenses and other current assets   1,358         4,733  
TOTAL CURRENT ASSETS 22,537 22,758
 
PROPERTY PLANT AND EQUIPMENT - NET 2,760 2,730
 
OTHER ASSETS
Goodwill 10,066 10,260
Acquired Intangible Assets, net 3,864 4,511
Deferred income taxes 6,146 5,939
Other   647         723  
TOTAL OTHER ASSETS 20,723 21,433
       
TOTAL ASSETS $ 46,020       $ 46,921  
 
CURRENT LIABILITIES
Short term debt $ 2,583 $ 1,335
Accounts payable 4,007 4,109
Accrued expenses and other current liabilities 5,133 2,894
Deferred Revenue   376         629  
TOTAL CURRENT LIABILITIES 12,099 8,967
 
LONG TERM LIABILITIES
Long term debt 418 494
Other long term liabilities 98 1,590
Deferred Tax Liability   1,033         767  
TOTAL LONG TERM LIABILITIES 1,549 2,851
 
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,
34,168,252 and 33,868,252
shares issued, 20,979,651 and 22,772,167 shares outstanding 342 339
Additional paid in capital 48,127 47,494
Retained earnings 7,791 7,176
Treasury stock at cost, 13,188,601 and 11,096,085 shares,
respectively
(24,509 ) (20,910 )
Accumulated Other Comprehensive Income   621         1,004  
TOTAL SHAREHOLDERS' EQUITY 32,372 35,103
       
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 46,020       $ 46,921  
 
     

WIRELESS TELECOM GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands, Unaudited)

 
For the Six Months
Ended June 30

2018

   

2017

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net Income/(Loss) $ 194 $ (2,599 )
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities:
Depreciation and amortization 1,237 1,059
Amortization of debt issuance fees 39 29
Share-based compensation expense 348 284
Deferred rent 7 13
Deferred income taxes 88 (1,492 )
Provision for (recovery of) doubtful accounts 22 (4 )
Inventory reserves 45 1,278
Changes in assets and liabilities, net of acquisition:
Accounts receivable (2,090 ) 658
Inventories (1,101 ) 1,005
Prepaid expenses and other assets (154 ) 84
Accounts payable (50 ) (771 )
Accrued expenses and other liabilities   1,611         945  
Net cash provided by operating activities   196         489  
CASH FLOWS (USED) BY INVESTING ACTIVITIES
Capital expenditures (583 ) (318 )
Proceeds from asset disposal - 7
Acquisition of business net of cash acquired   (811 )       (8,842 )
Net cash (used) by investing activities   (1,394 )       (9,153 )
 
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Revolver borrowings 19,721 15,794
Revolver repayments (18,473 ) (14,272 )
Term loan borrowings - 760
Term loan repayments (76 ) (38 )
Debt issuance fees - (215 )
Proceeds from exercise of stock options   288         38  
Net cash provided by financing activities   1,460         2,067  
Effect of exchange rate changes on cash and cash equivalents (85 ) 61
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 177 (6,536 )
 
Cash and cash equivalents, at beginning of period   2,458         9,351  
 
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 2,635       $ 2,815  
 
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest $ 78 $ 73
Cash paid during the period for income taxes $ 24 $ 34
 
     

WIRELESS TELECOM GROUP, INC.

NET REVENUES AND GROSS PROFIT BY SEGMENT

(In thousands, Unaudited)

 
Three months ended June 30
Revenue     % of Revenue     Change
2018     2017     2018     2017     Amount     Pct.
Network solutions $ 5,636     $ 5,617     42.0 %     47.1 %     $ 19     0.3 %
Test and measurement 3,534 3,316 26.4 % 27.8 % 218 6.6 %
Embedded solutions   4,244       3,000     31.6 %     25.1 %       1,244     41.5 %
Total net revenues $ 13,414     $ 11,933     100.0 %     100.0 %     $ 1,481     12.4 %
 
Three months ended June 30
Gross Profit     Gross Profit %     Change
2018     2017     2018     2017     Amount     Pct.
Network solutions $ 2,468 $ 1,182 43.8 % 21.0 % $ 1,286 108.8 %
Test and measurement 1,815 832 51.4 % 25.1 % 983 118.1 %
Embedded solutions   1,887       1,330     44.5 %     44.3 %       557     41.9 %
Total gross profit $ 6,170     $ 3,344     46.0 %     28.0 %     $ 2,826     84.5 %
 
 
 
Six months ended June 30
Revenue     % of Revenue     Change
2018     2017     2018     2017     Amount     Pct.
Network solutions $ 11,147 $ 11,133 41.8 % 51.8 % $ 14 0.1 %
Test and measurement 7,297 6,352 27.3 % 29.6 % 945 14.9 %
Embedded solutions   8,234       3,997     30.9 %     18.6 %       4,237     106.0 %
Total net revenues $ 26,678     $ 21,482     100.0 %     100.0 %     $ 5,196     24.2 %
 
Six months ended June 30
Gross Profit     Gross Profit %     Change
2018     2017     2018     2017     Amount     Pct.
Network solutions $ 4,911 $ 3,643 44.1 % 32.7 % $ 1,268 34.8 %
Test and measurement 3,660 2,166 50.2 % 34.1 % 1,494 69.0 %
Embedded solutions   3,868       1,868     47.0 %     46.7 %       2,000     107.1 %
Total gross profit $ 12,439     $ 7,677     46.6 %     35.7 %     $ 4,762     62.0 %
 
 

WIRELESS TELECOM GROUP, INC.

RECONCILIATION OF NET INCOME TO NON-GAAP EBITDA AND NON-GAAP
ADJUSTED EBITDA

(In thousands, Unaudited)

 
      Three Months Ended June 30     Six Months Ended June 30

2018

   

2017

2018

   

2017

 
GAAP Net Income $ (180 ) $ (1,370 ) $ 194 $ (2,599 )
Tax Provision/(Benefit) 105 (1,012 ) 161 (1,551 )
Depreciation And Amortization Expense 610 645 1,237 1,059
Interest Expense   141         110     234         159  
Non-GAAP EBITDA 676 (1,627 ) 1,826 (2,932 )
Stock Compensation Expense 161 (18 ) 348 284
ASC 606 Adjustment - - 188 -
Mergers and Acquisitions Expenses 64 17 64 1,290
Integration Expenses 11 117 60 164
Inventory Impairment - 1,930 - 1,930
Inventory Recovery (6 ) - (14 ) -
FX (Gain)/Loss (43 ) - 4 -
US GAAP Purchase Accounting 213 18 213 71
Restructuring Charges and other
non-recurring costs
  -         470     -         550  
Non-GAAP Adjusted EBITDA $ 1,076       $ 907   $ 2,689       $ 1,357  
 
         

WIRELESS TELECOM GROUP, INC.

RECONCILIATION OF TOTAL OPERATING EXPENSES TO NON-GAAP
OPERATING EXPENSES

(In thousands, Unaudited)

 
Three Months Ended June 30 Six Months Ended June 30

2018

   

2017

2018

   

2017

Total Operating Expenses $ 6,137 $ 5,614 $ 11,837 $ 11,665
 
M&A/Integration (75 ) (135 ) (124 ) (1,454 )
Restructuring - (470 ) - (550 )
Stock Comp (161 ) 18 (348 ) (284 )
Depreciation and amort. (ex. COGS) (424 ) (559 ) (888 ) (889 )
Contingent Consideration         (213 )       -         (213 )       -  
Non GAAP Operating Expenses       $ 5,265       $ 4,467       $ 10,264       $ 8,488  
 

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