Q4 2021 ADDvantage Technologies Group Inc Earnings Call
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2339 95 tree.
And we have your first and last name with spelling.
David Brown D E B I D B R O W N.
And I'm sorry, what was your first name.
David.
David Thank you and your phone number with area code.
212, 19 036 97.
And your company name.
IRA a I E R. A.
Thank you all play Shredder.
Yes.
Finally show the momentum we have been discussing for some time.
Thank you.
Wireless segment revenue jumped from $4 1 million in the third quarter.
7 million in the fourth quarter.
And we are confident that over the next six to nine months wireless revenue related to tower work and other aspects of the <unk> rollout will double again.
This growth has been broad based.
It involves several carriers not just one customer, including both long standing customers and one new entrant to the market dish wireless.
The work touches all the regions, we serve us and our pipeline of new projects.
The work we have been awarded where we either have purchase orders in hand or are waiting for purchase orders as permitting is complete.
US significant confidence that the long awaited <unk> Serge will occur in 2022.
The significant uptick in our fourth fiscal quarter validates this expectation.
We already have purchase orders in hand for fiscal year 2022, construction services that exceed the total value of our fiscal year 2021 total wireless revenue.
Simultaneously.
Our Tokyo segment continued to deliver strong results.
Ongoing chip shortages and electronic supply chain issues made new equipment more expensive and harder to source.
This makes the refurbished alternatives sold by May even Triton more attractive.
Especially for work from home folks looking for affordable options.
We continue to anticipate a leveling off of demand at some point in future quarters, albeit at a somewhat elevated level relative to the recent past the.
The result of all of this was that our nave business had a really strong year with revenue up 45% and Triton Datacom has made a nice recovery from a COVID-19 related softness in sales earlier in the year.
Overall, we delivered 62% revenue growth and positive earnings per share for the quarter.
Now much of the profit was related to the onetime benefit on the extinguishment of debt related to the forgiveness of a PPP loan.
Gross margin dropped from 36% to 26% quarter over quarter.
The 36% margin on Q4 of fiscal year 2020.
Benefited from the recovery of change order revenues from its previous Q2 of 'twenty and wasn't a one time event.
Margins during the recent Q4 'twenty one.
We're at 26%.
Those had been impacted due to the mobilization and material costs related to starting up multiple new markets.
This is expected to carry over into our current Q1.
That should normalize over the rest of our fiscal year 2022.
We expect those workloads in the new markets increase and as we move through fiscal 2022.
We will benefit from better economies of scale, making that segment of our business significantly more profitable.
Over the last few months, we have one site awards to upgrade technology to five G for over 600 cell sites and we have increased our staffing to meet this growing demand.
In fact staffing is the most challenging part of this growth in this tight labor market.
Currently we are running between 35 to 40 tower cranes up from 25 crews a few months ago, and we will be ramping up considerably from there during our Q2 fiscal year 2022 to meet even greater expansion in the second half of this fiscal year 2022.
As I previously said the five G network expansion will be massive.
Especially now that AT&T and Verizon are starting to build out there see a block spectrum.
You are just starting to see the opportunity manifest in our results reported yesterday.
This opportunity represents a multiyear secular trend not just for tower, but for Datacenters technology providers handset manufacturers and wireless carriers.
Our capital expenditure plans of wireless carriers are public information and often discussed.
Power work is just one piece of this effort and we are strategically positioned to capture a meaningful portion of this work due to our established relationships and experienced crews under Fulton technologies in key markets across the very center of the United States.
With that I'll now turn the call over to Michael Rutledge, our new CFO to provide a more detailed review of our financial results. Michael. Please go ahead.
Thank you Joe.
Sales for the fourth quarter of fiscal 2021 were $19 7 million up 61% compared to $12 2 million in the fourth quarter of fiscal 2020.
This increase of $7 5 million was driven by nearly $5 3 million increase in the telco segment and a $2 2 million increase in the wireless segment.
Gross profit increased by nearly 700000 to 5.0 million our highest level of gross profit in more than two years.
Paired with $4 4 million for the same quarter last fiscal year.
Gross profit margin was 26%.
To 36% for the prior year fourth quarter.
Gross profit margins were 27% for the current fiscal quarter in the wireless segment due to the costs associated with new markets as Joe mentioned.
Our operating expenses increased by <unk> 7 million to $2 6 million for the quarter ended September 32021.
Compared with $1 9 million for the same quarter of last year, which was due primarily to increased personnel related costs in our wireless segment as we ramp for the anticipated tower services work.
Okay.
Selling general and administrative expenses for the quarter increased $1 2 million.
To $4 4 million compared with $3 2 million for the same quarter last year.
This increase was due largely to higher commissions associated with increased revenue in our telco segment as well as personnel costs associated with supporting the company's growth.
Finally, net income for the quarter was <unk> 6 million or five cents per diluted share based on 12 million shares compared with a net loss of $1 million or a loss of nine cents per diluted share based on 11 2 million shares for the same quarter last year.
Included in the fourth quarter net income was a nonrecurring gain of extinguishment of debt of $3 million related to the forgiveness of our P. B pillar.
Yeah.
Okay.
For the year sales were $62 2 million up 24% compared to $50 2 million last year.
Our telco segment increased by $12 6 million offsetting a.
<unk> 6 million decline in the wireless segment.
Our gross profit increased by more than five 9% to $16 1 million compared with $11 7 million last year.
Gross profit margin was 26% compared to 23% last year.
Operating expenses increased by $1 1 million to $9 3 million for the year compared with $8 2 million last year.
Selling general and administrative expenses for the year increased by $3 6 million to $14 9 million compared with $11 2 million last year.
Net loss for the year was $6 5 million or a loss of 52 cents per diluted share based on 12 4 million shares compared with a net loss of $17 3 million or a loss of $1 55 per diluted share based on 11.2 million shares last year.
Now turning to our balance sheet cash and cash equivalents were $2 6 million as of September 32021, compared with $8 3 million as of September 32020.
Cash was used primarily to fund operations.
And at September 32021, the company had net inventories of $5 9 million.
Okay.
Our outstanding debt decreased during the year ended September 32021 by $3 9 million to $4 1 million, which is comprised of $2 1 million on our revolving line of credit and 2.0 million in financing leases.
At September 32021 outstanding debt was $8 million.
We continue to believe we are sufficiently capitalized with appropriate backstops to support near term business conditions until more normalized business conditions return.
This concludes the financial overview segment of our remarks, I will now turn the call over to the operator to facilitate any questions.
Of course, thank you.
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And we'll go ahead and take our first question from William Goldman from S. Advisors. Please go ahead.
Yeah. Thank you very much for taking my call a couple of quick questions for fiscal year, just ending $62 million in revenue did you give any I didn't hear if you gave guidance for upcoming year for total revenue anticipated. That's first question.
Okay.
Yes. Thank you for your call. This is Joe Hart No. We didnt give guidance, we have not traditionally given guidance.
Okay. Your presentation that was put out last summer kind of scale you were looking for 277 million in potential revenue in a positive but a huge EBITDA.
The ending.
2023.
You anticipate updating the presentation, so it's more believable than scale.
Yes, we do.
That presentation, where we.
We were.
We were intending to raise capital in order to go on an aggressive M&A.
Program.
We were doing that right in the height of the start of Covid.
Hum.
That was you know that effort to raise capital was frankly, a pretty disappointing but.
Totally understandable given our recent three or four year history of losses. So we believe that the best way to turn the company around was to completely get focused on organic growth, which we have done and which are the shareholders. We will.
See evidence of.
Now and during 2022 and once were healthy and profitable again. This year, then we will look at potentially raising capital to do something with M&A, but for right now we've been focused on organic.
Okay.
And a minor question you noticed the airlines are kind of all paranoid about five G and they want the feds to slow down the rollout what is the major do you see a major problem. There is there really a problem or is it just the paranoia the major airlines.
Yeah.
Well [laughter].
I'm certainly no radio frequency expert, but IRA I read everything that I, possibly can read about this particular subject and you've also seen in some recent earnings releases from the big carriers and some of the big construction companies.
Mike Mas Tech and die Com and others first of all [laughter].
The FCC didn't.
This frequency up for auction.
Before about five years of study.
On this particular subject and the sensitivity for airlines.
Lee.
This <unk>.
<unk> block is used.
Idly around the world with no with no impact on the airlines or aircraft communication Lastly.
The carriers have just spent oh I don't know a total of $50 $60 billion to buy this frequency. So they are proceeding with building out the network using this C block spectrum.
Now what they have agreed to do is not turn on sites that are in the airport glide path anywhere near an airport you know.
They'll leave those sites that's.
Muted until you know the politics of this I'll get flushed out but for right now everybody is building, but not necessarily turning on that spectrum, Florida sides.
So it hasnt affected construction at all.
Okay. One one more question for you.
The numbers are all over the place, but from what I could tell you would be considered an infrastructure play and I saw in 2020. One was estimated in the U S alone infrastructure works with respect to.
Five G was about $19 billion.
Worldwide the numbers range from in the next couple of years up to 80 billion to 111 billion. It's just they're all over the place I really hope that the company is really able to capitalize on this money that is being spent on this industry and I hope that.
I hope your numbers can be expand more than you think they were or are planning to tell us because there is so much work out there its just amazing so.
That's kind of my last comment.
Yeah, we we.
We would agree with you wholeheartedly.
Thank you for that comment thank.
Thank you very much sir.
Welcome.
And we'll go ahead and move on to our next question from George Gaspar. Please go ahead.
Yes.
Everyone Joe.
Scott.
I'd like to talk a little bit more about this crude number that you related to.
On the wireless.
You indicated I think it was 35 to 40 cruise ship you have exposed in the market now.
Yes, that's correct, that's what I say, okay, and how many of those crews are our in house crews.
I would say.
So thanks.
The good news is.
You are consistent with your questioning George so I'm always prepared for that.
So.
Well, what I've said for a long time and based on my years and years of experience with this work is you always wanted to be at least 50%.
Sub contract and in case like this where you are in rapid growth I like to go to about two thirds subcontract and one third in house and you use that subcontractor buffer to protect you from sort of the ebbs and flows the ups and downs.
In the construction workload.
So where we're about two thirds sub contract at the moment.
Got you, Okay, and just to give us.
Level of.
Tremendous progress in crew count exposure.
If I remember two years ago. It was about maybe 12 to 14 crews.
And then this past year it rose.
A year ago, as a maybe 18 or 20.
So can you describe.
How fast this crew count has gone up to 35 to 40 range.
Well I mean, it's it's all about <unk>.
Building the backlog.
Over the last couple of years.
Really 2020 in 2021.
You know the wireless <unk>.
Infrastructure business has been plagued with them are really all time low of construction activity you have the delay in the T mobile sprint merger dish wasn't even approved let alone.
Building anything and then you know you had AT&T and its.
Debt pay down you know at the global corporate level.
So a lot of things really impacted it. So there just wasn't a volume of work and.
You've heard me say it quarter after quarter look it hasn't happened yet, but it is coming well now AT&T and Verizon or <unk> are really starting to build strong again T mobile has been consistently constructing.
The last six to 12 months and then you have dish that.
FCC mandates to cover 70% of the population here by 2023. So you know it's all come together.
Simultaneously at last.
It took a little bit longer than the three GM Ford G cycles, but.
This this current cycle is definitely on a very swift and steep ramp and you.
You know where.
We're trying to be prudent you.
You saw that our operating expenses increased.
Some of that is the Onboarding and training of couple of weeks of training and then some O J T with these new tower crews.
That's an expense.
<unk> to new markets, and setting up cross docks and other logistics facilities and.
Detroit St. Louis.
Austin, San Antonio Houston, Arkansas.
These new markets that we've been talking about adding.
Each of those take some incremental expense to get started.
But then as the volume builds up in those markets.
Hey office there.
Ross over into you know acceptable and target level of profitability. So it's a bit of a slow moving process we.
We have a team made up of very seasoned veterans, who have been through this kind of ramp before so.
So I think that's all finally coming together nicely I see okay. This is specifically on crew count.
Can you relate in the first quarter since its now the 28th December.
What's your what with what would be your average crew count for this first quarter.
Ending this month.
Relative to the fourth quarter of your past fiscal year can you give us those numbers.
Hum.
Yeah, I would I would say that the crew counts increased by about I mean 10.
I mean, 10 10, or so like so when I compared 35 to 40.
225, a few months ago.
That was real time information so that we have been running 35 to 40, the last couple of months.
We reported.
We were at 25.
In August so that was the last quarterly conference call. We had with you right. So during this quarter.
Right.
But I hesitate to give guidance, but where we're on the same plane.
In Q1 as Q4, and then we're going to see a drastic ramp up as we move into Q2 and through the rest of the year second half of 'twenty two should be quite active as I said in my remarks.
Yes.
Joe just I'll.
Also in terms of the magnitude of where you're generating your revenues from a it's not just.
And that's putting something on a tower, but it's it's the additional that's required away from the tower in terms of this five G build out.
Yeah.
Well for us, it's it's mostly work.
On the sell side. So there is groundwork groundwork to add platforms in equipment in some cases, we are bringing fiber optic cable in from the property line or out at the.
At the right of way, we bring the fiber into the cell site.
Especially for somebody new like dish who's going onto existing cell sites for the first time. So there is some ground level infrastructure work that is part of the revenue stream from each cell site.
Okay, alright, and could reach into the telco side.
I just congratulations on the.
Significant build out of the new facility in Florida.
Obviously that helped our telco get moving up.
And and I know you're in Alabama now your your revenue stream has really moved forward.
On a per basis and.
It is this giving you some technology thoughts on continuing to try to drive forward what telco is all about.
In the near term.
In the longer term can you describe any of that.
Hi.
I I I am grateful and obviously pleased that the.
Triton Datacom.
Revenue stream returned.
During COVID-19 that revenue stream, where was cut in half on a monthly basis. So if it came back to normal and the team has done a nice job of.
So building that up a little bit beyond what used to be normal nave birds has.
Somewhat unpredictably.
Taking off very nicely this past year and.
Continuous so in this current quarter, what we don't know, Georgia, how long that will last I mean, I think all of you read you see the pictures are no ships in the Los Angeles poor, although our supply chain articles that are out there.
It's got an impact, especially on chips.
The core telephone network.
Question is how long will it last and that we don't have a crystal ball on so where.
We're optimistic that it'll be.
Oh, good to decent year for the telco E that we just have no way of knowing for sure.
Okay, and then lastly on the number of shares outstanding in the company at.
At this point in time, it's about $12.4 million.
I recall.
That's.
Very modest.
Number of shares by our contents in the stock market today for companies that are out there really you know growing and it is in the shareholders' they've gotta be pleased that Joe you only have that many shares out and you're into this huge expansion program now in the wireless area.
So the.
The question is basically how do you view the need for getting some additional capital through.
Stock sales or our through acquisition and.
And that brings up the point I know that I think you've made some comments in the past about maybe trying to make an acquisition or two to expand its operations. I can you can you can you share any thoughts on this.
Well.
I think as I play.
To our.
First color you know.
We we took a run at trying to raise capital about.
Year, and a half ago or so.
And in that environment at that time, it just it didn't make sense.
And quite frankly, I think everybody that's an investor is on the call.
Does that.
You know we have not had.
Oh, good financial performance history.
Our job and our our pledge really is to get that turned around here in 2022. So we believe we're being very sober up about this that we need to have that get to breakeven quarter, followed by a couple of strong quarters of profitability.
And then we'll look at trying to raise capital in a significant way to do some more aggressive M&A, but for right now our focus is on getting this company profitable.
Ah, Okay and drive that that's a very nice approach you just related to everyone. On this call and I I. Appreciate everything you are really trying to do and its absolutely amazing.
Man them that you have going and that you've been able to do it clothing things together the way you have and.
We're all looking forward to something very substantial going forward by the end of this current fiscal year take care.
Thanks George.
And well go ahead and move on to our next time.
And as a reminder, it is star one if you would like to ask your question or one sticker like that's a good question and I'll move on to our next question from Aaron Overwhelm. Please go ahead.
Yeah.
Yes.
How was your original underwriter in the company and also arrays.
Money for them and privately are always back end loaded.
For our company.
But.
Oh I see you have or I understand are you have a registration with the S E C.
Is that correct.
Yes are you referring to the S. Three registration that we did about a year year and a half ago.
Okay.
Right.
I'm not sure I have just one.
Your recent releases you indicated S AC registration it sounded like it was something he could sell shares along the way at your discretion.
Yes, that's the S. Three registration that we filed about a year and a half ago.
And it is still.
Currently we have not been selling shares.
I mean to any substantive way due to the share price and the performance there kind of a combination of those things. So it is still available to us.
You're correct. It was originally about.
13, 13.3 or four.
And.
About a year ago, we sold.
About 1 million shares that raised the float and it raised our total outstanding by about a million shares we did that sort of sort of as in progress sort of thing.
Price was.
Yeah.
Those were at about 380, 379 380 average.
Oh right. So I mean, the share price just hasn't been.
Where it makes any sense to be selling so.
[laughter] yeah.
Yeah.
Yeah.
Yes, they really are making a sizable turnaround here.
Yeah.
Well, we hope so [laughter].
That's all of our effort is focused on that so.
No.
Oh.
But we're headed in the right direction.
Uh huh.
Thank you Randy.
We will take a quarter yep yep.
Yeah.
And we'll go ahead and move on to our next question from Kurt Caramanica from Carlin hanging. Please go ahead.
Hi, guys.
You alluded to.
Our strong top and bottom line growth in 'twenty, two and I think you've kind of mentioned this when I was in queue, but do you see profitability ramping like each quarter.
In your backlog booked meaning Q1, but whatever that is gonna be and then getting better per quarter is that youre kind of goes out not so much seasonality as much as just building on all the backlog.
Okay.
Hum.
I know the answer to your question I'm trying to decide how much of that.
Good [laughter], because I've always tried to stay away from.
Specific guidance like I think that this current quarter.
Still one of the ramping so it's you know some of the material cost to get started in these new markets you can make an upfront investment.
To get the material you make an upfront investment in a couple of people per market and the upfront investment and setting up the logistics and cross docks and things like that so that.
And we've had some training cost for a tower crews during this current quarter. So you know this.
This quarter started.
Back in October so it's been part of the ramp process.
Sure.
Really our calendar 2022.
Takeoff of growth so.
Without trying to be implied at the same time not go into too much more detail hopefully you'll get the picture I mean so.
Yeah.
We're just about at the tail end of that.
We're going through the Christmas break and then we see calendar 'twenty two is a.
An exciting year for us on the wireless side and continued growth on the telco side.
Great. Thank you.
Yeah.
Yeah.
Well not that we have no further questions I would now like to hand, the call back over to management for any additional or closing remark.
Yeah.
Thank you operator.
So I would say to those folks that have been investors for a long time and those folks that have just recently joined us as.
As investors and a Y that it's it's been a long pole, it's been a long transition here in the last couple of years we.
We put both of our telco equipment, our operations into new facilities in Florida, and a three P. L location in Huntsville, Alabama.
That's been reported for the last couple of years really paid off this last year in 2020, one on the equipment side of our business.
On the wireless side of our business.
We bought Fulton back in early 2019.
We were off to a good start in 2019 and then the construction growth just kind of went flat in 'twenty and 2021 we've seen a ramp up in the Q4 of our fiscal year 'twenty, one, which we reported on today.
I have described a situation where we are clearly.
In a steep ramp kind of environment as we grow into calendar 2022.
We know that our obligation is to get this company turned around and profitable again and everybody in the company is focused on that.
Yeah.
It's not going to be an immediate like we.
We had this call and suddenly we're gonna be profitable, but we are within reach of that over the next few months. So.
We think this is going to be the year that are a Y starts could deliver for its shareholders and we are pledged to make that happen. So thank you for your continued investment and.
And.
We hope we can return the confidence.
You very much.
Okay.
And with that that does conclude today's call. Thank you for your participation you may now disconnect.
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Yeah.
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Yeah.