Half Year 2021 ADDvantage Technologies Group Inc Earnings Call

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Yes, it's.

Five seven to 9134.

And your name with spelling.

David D. A V I N D Brown B R O W. Anna.

And your contractor business phone number area code first.

Two on 290 603697.

Okay and then your company.

I had a I E R E.

AI.

E R E.

He is on Victor or a.

No, it's ilike equal echo offer a meal for Apple.

Okay I'll post COVID-19.

We remain hopeful.

That increase vaccinations will lead to a return to the office for most U S workers and have a positive impact on the sale of our enterprise network products.

With that I will now turn the call over to Don a guy our controller to provide a more detailed review of our financial results.

Donna Please go ahead.

Thank you Joe.

Sales for the second quarter of fiscal 2020, one were up eight 4% to $12 7 million compared to $12 million in the second quarter of fiscal 2020.

The increase from 700000 was driven by a $1 million year over year increase in the telco segment, partially offset by a 300000 decrease in the wireless segment.

Gross profit increased by $3 6 million to $3 2 million compared with a negative margin of 439000 from the same quarter last fiscal year.

This was due to an increase of $2 3 million in our telco segment related to the prior year quarter's charge for obsolete inventory of $2 1 million and an increase of $1 3 million in our wireless segment due to increased operational efficiency.

Gross profit margin was 25 per cent compared to negative four per cent per the prior year quarter.

Operating expenses were relatively flat at $2 2 million for the quarter compared with $2 1 million for the same quarter last year.

Selling general and administrative expenses for the quarter increased by 900000 to $3 8 million compared with $2 9 million for the same quarter last year.

The increase relates to increased personnel costs, such as noncash stock compensation of 100000 executive severance of 215000 as well as increased computing and communications cost of 200000 and increased selling costs of 400000 compared to the same period last year.

Sure.

Net loss for the quarter was $3 1 million or a loss of 25 cents per diluted share based on 12 4 million shares compared with a loss of $14 7 million or a loss of $8 41 per diluted share based on $10 4 million shares from the same quarter last year.

Net loss for the prior year fiscal quarter included an $8 7 million impairment charge related to intangible assets, including goodwill.

And an inventory obsolescence charge of $2 1 million.

Yeah.

Adjusted EBITDA was a loss of $2 3 million from the second quarter of fiscal 2021.

Compared with an adjusted EBITDA loss of $5 4 million for the same quarter last fiscal year.

Adjusted EBITDA loss from the second fiscal quarter of 2020 included the inventory obsolescence obsolescence charge of $2 1 million.

Yeah.

Turning to our balance sheet.

Cash and cash equivalents from $5 2 million as of March 31, 2021.

Compared with $8 4 million as of September 30th 2020.

Cash was used primarily to fund operations.

As of March 31, 2021, the company had net inventories of $5 7 million up slightly from $5 6 million at September 32020.

Outstanding debt went down by 1 million to 7 million at March 31, 2021.

That was comprised of 2.8 million under our revolving line of credit a $2 9 million P. P. P loan for which we have applied for forgiveness.

And $1 2 million of finance lease obligations.

Debt as of September 32020 was $8 million, which was comprised of $2 8 million under our revolving line of credit.

$4 1 million of notes payable, including the P. P P loan and $1 1 million of finance lease obligations.

We continue to believe we are sufficiently capitalized with appropriate backstops to support near term business needs as more normalized business conditions fully return.

This concludes our financial overview portion of my remarks, I will now turn the call over to the operator to facilitate any questions. Thank you.

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Yeah.

Our first question will come from George Gaspar private Investor.

Yes. Thank you good afternoon to everyone.

Uh huh.

It's very positive to hear.

The commentary.

Hi, Joe that you presented on.

The.

Near term and.

What we could see.

By the end of this current fiscal year.

I would like to.

Could you relate.

The number of crews that you have in line working.

We're preparing to work on the.

On may five G install and anything else that you're doing on the towers on side.

And if you could describe maybe some of the work processing that goes into all of this.

And how.

How is that number of crews going to change going forward, what's your thought on that.

Sure Hi, George.

Good to hear you back yes.

I think.

Yeah.

We're probably in that transition right now, where we're growing from about 20 or so standing crews it varies a little bit weekend, two week out, but let's say about a level of 20 and.

We will be growing to a little over 60 crews here in the <unk>.

Next door I'll say during the next <unk>.

60 to 90 days.

Yeah.

The balance on that.

Six Oh, yeah, okay.

The balance you know we tried to keep a good balance between subcontractor crews and in house crews. So that we don't over invest with.

With the in house crews so yes.

Yes, we are.

We're very encouraged obviously.

Morale is really peaking and we're in a good place.

And when I gave you the crew count that's a balance of both.

Civil crews as well as tower crews right the mix of work changes a little between customers and type of work so.

Probably not a lot of value in giving you more detail because until the actual.

Orders command month by month.

We won't know the precise mix of work, but overall.

This is the first time, we've had visibility into a backlog that takes us through the end of the calendar year. So.

We are very encouraged on.

It's been a longtime coming been making these promises quarter after quarter. It looks like it's finally here and work has started so it's.

It's going to be a bit of a slow ramp here in this current third quarter.

May isn't very strong, but June is going to pick up quite a bit and then July August and September are going to be just a.

Florida Gangbuster construction months so.

It truly has kicked in and we do have actual backlog.

I see okay, and Andrew if you could explain a little bit more about the elaboration or or elaborate on them.

What work.

That you end up.

Accomplishing away from the tower.

At work itself.

I assume you're going to be actually doing.

Work on streets, along the way on buildings and.

Installing is that is that right or not.

Well right now the workload that we have on hand.

For the balance of the calendar year is principally made up of macro cell sites.

And as I said in my remarks, it's it's a combination of different kinds of work some customers are asking us to decommission equipment and make room for the.

The coming five <unk> radios, some customers were expanding.

Additional frequencies and <unk> and.

And then other customers, we're actually installing new <unk> radios and antennas for them.

You know on I should point out debt.

Doing doing more <unk> work is a good thing because you know the balance of voice and I'll say text messaging is conducted over the existing <unk> frequencies and the five G frequencies are going to be used.

Primarily for video streaming and large data file transfers and things like that so.

So.

The new network will be.

Comprised of a heavy balance of both <unk> and <unk> frequencies. So.

It's all in the nature of good end.

You know, even making room on existing towers of rooftops for the coming five G is really advanced prep work. So it's kind of a combination of scopes of work.

Okay, alright, well that sounds like it could end up being a very.

Big job on it I think you made one comment are there about.

The potential of the ongoing business on a year to year basis do you do you see.

Some of this work that's coming at you maybe further down the line and current where you could actually signing contracts that would.

Put you out into a multiple years of activity.

Well all of our.

Service agreements with their carriers and Oems and integrators, they're all multi year typically they are three year service agreements.

And.

The actual work.

So.

The the <unk>.

Problem, we've been in the last 12 months or so is that we've been getting enough backlog to three maybe four weeks out in front of our nose.

But now we actually have.

As much as six months.

Scheduled assigned site work so.

The quality quantity and the length of the backlog.

Are really extending nicely so.

We're very encouraged by that that allows us to plan for cruise and.

<unk> trucks and tools, just everything right warehouse space you name it it flows downhill, so where we are.

We're feeling very encouraged by that.

Okay.

Okay, Okay and.

In terms of the geographical you mentioned that Midwest southwest.

Is the primary area are you are you trying to or will you be pushing it into any larger areas, let's say into the south east from the central South part of maybe where where you're working or will be working.

Credit card you end up going.

North West in the Western part of the United States, What's your strategy on on that.

So are you know the strategy document that we actually have on our website says that.

After the greater Midwest and southwest, which are you know top two targets.

And our sort of Homebase.

Our next targets, our southeast and mid Atlantic.

We don't have the working capital or really the resource base to be chasing things in the northeast and the West coast right now.

So I don't envision that anytime soon.

So I think wood wood, we follow any of the major carriers are Oems through the southeast and the mid Atlantic region. Most certainly right those are high growth areas, Georgia, Florida, the Carolinas et cetera, but for now.

We have no plans to.

Go North east or West Coast.

Okay, and then a question regarding your financing that's going to be required to get this really rolling forward do you feel comfortable with the loan agreements that you have in place now or are you gonna have to.

Search forward and try to build them.

Debt.

Resale agreements that are expanded.

We don't before for the growth that we envision for 2022.

We feel that.

We have.

Have adequate capital work, we're doing I think a very good job being very diligent been diligent about managing our cash.

We do have the standing S. Three that it's been out there for over a year.

Should the share price.

Make a nice recovery here over the next few months.

We may we may sell some shares via the S. Three as we did last year, but.

We don't see substantially needing to increase our debt as a matter of fact.

Should the PPP loan be forgiven.

We actually see on a debt level decreasing by that too.

$2 9 million at some point here.

We continue to talk to our banks about.

Keeping our line of credit in good standing and.

Maybe periodically having to draw from it but so far we're in we feel.

Pretty confident about our cash position, okay, well, that's that's encouraging and the beauty you know one of the real positive things Joe for what you've got going I E. Why is the math.

Modest number of shares outstanding at this point in time and when you look at the overview of the.

Huge operational improvement.

Improvement going forward within another three months six months period.

I really.

It creates a.

On an opportunity to create to develop some real leveraged earnings going forward hopefully.

That's an outsider looking in it okay and.

I got one question on and on the telco.

Operations and and this the whole the telephonic area I know you've done a lot of work in terms of rate.

We are generating that business and it would seem that going forward there should be some pretty decent opportunity for you to build that business out on.

What's your what's your thinking on that.

Yeah.

Well Reggie and his team have done a lot of work and including.

<unk> predecessor, but so we operationally we think we have both nave and Triton.

And really as.

Optimal position as possible from an operations perspective.

On the nave team has done a nice job on this.

This year sales have have increased margins have have held nicely.

And so we're very encouraged on the nave side. The Triton team is a great team in and works well I mean, they just are in our network space of enterprise.

Products that was hit hard by the remote work and the COVID-19, so they they have restored revenue to.

Somewhat of a normal level after a couple of really bad months.

<unk>.

Last year, but.

I think they are doing as well as can be expected given the uncertainty around the whole when will large offices returned to work so.

It's a bit of.

It's a bit of an unknown catch on.

On that.

That network, but the nave team.

Both teams work really hard on do really well.

And so we feel pretty pretty blessed actually that we've had the kind of year. We've had for both our telco teams alright, okay, great and one last thing about management as you're looking forward now on this expansive opportunity.

Uh huh.

The five G development area.

Do you feel that you're going to need to add to your base management.

B I know you're going to do it in the on the cruise side.

And that might be required having some additional personnel on board to coordinate that kind of.

Activity, if you're gonna go from the 20th crew to 60 crews or whatever can you give us just a little thought process on that.

Well, we have we have add Jimmy Taylor has added recently we added.

Dan malaria as the vice President for the Northern region up in Chicago Native Chicago, and longtime wireless industry construction and program management executive.

Most recently worked for mass tech, probably the largest integrator in the United States.

I've known Dan and we've known Dan for a long time is both our competitor <unk>.

And on customer in the last few years. So Dan has joined US in Chicago. He just finished his first month and then we and added a fellow Sean Rickman here to be the VP GM of the southern region.

Sean was a long time.

AT&T wireless.

Management representative.

In the Texas and southwest region, and more recently with some of the other.

Integrator, so we have added to.

Long standing operations V.

V piece to the team so we've been bolstering up the team as we've gone along so we feel we're in a good place.

And.

We're ready to spring forward with the work great.

Great. That's that's fine well, thanks, very much free or formations to my questions and I'll turn it over to you guys.

Okay. Thanks.

George.

Thank you once again, if you would like to signal with questions. Please press star one on your Touchtone telephone again that is star.

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And there are no further questions at this time I will now turn the conference back over to you for any additional or closing remarks.

Okay. This is.

This is Joe Hart again.

I want to thank everybody for joining us on on the call.

It's one of those mixed.

Bag kind of sessions where results.

Are not good and where we want them to be for Q2.

We're about halfway through Q3, we.

We are just starting to pick up in the volume of wireless work here towards the second half of May and.

It should be a pretty good June, but Q3 will not be.

Anything.

Hum.

Of of exception it.

We'll be somewhat in the pattern of Q2, but we have the backlog now and we have the trajectory to really ramp up into a very strong finish to the fiscal year.

And we think we're we'll be at a plateau to take us into a.

On new level going into 2022.

So we.

I appreciate your interest we appreciate your participation in the call and thank you for being investors in advantaged technologies.

Well. Thank you from that does conclude today's conference. We do thank you for your participation have an excellent day.