Q1 2023 TESSCO Technologies Inc Earnings Call
I will now walk you through the results and highlights of the past quarter in the following format.
First, our two market segments, carrier and commercial.
Second, the three key elements of our business, namely distribution, centers, and software.
And third, the performance of Desco.com. You want to mark another solid quarter for our carrier business.
Carrier revenue was up 2% year over year and 6% sequentially.
Due to a more favorable customer and product mix, gross profit was up 18% year-over-year and 36% sequentially.
Our booklands remain from with growth of 11% year over year and 45% sequentially.
Our backlog at the end of Q1 was over $45 million, up 78% year over year and 39% sequentially.
Our strongest growth within the carrier segment this quarter came from our tower business.
which grows significantly.
Up 64% year over year and 56% sequentially. We earned an additional business line with our largest style of customer.
which started in Q4 and significantly proved this quarter.
We expect steady growth for this new business line to obstacle 2023.
Additionally, we have begun to play some of our invented products with our tower customers.
and expect Ventus product sales to continue to grow this fiscal year. Regarding our AT&T turf contractors, we continue to improve our market share and have seen increased spend with two of the largest turf contractors.
The major tier one carrier customer that we signed last year has begun to show significant growth quarter over quarter.
We've also made considerable progress with our general contractor customers.
developing even stronger relationships and supporting them across multiple tier one carrier projects.
Our continued success in this market stems from several factors.
First, our logistics and supply chain expertise. Second, our proprietary engineering and production capabilities. Third, our strong relationships with customers and manufacturing partners.
And finally, beyond going and successful execution for business development efforts.
I will now turn to the commercial market, which includes all wireless infrastructure business outside the Caviar ecosystem.
Q1 was a very strong order for commercial revenue with an 11% increase year over year and a 14% increase sequentially. Q1 was a very strong order for commercial revenue with an 11% increase year over year after the 25% increase year over year and a 14% increase sequentially. eventually.
Rose traffic increased 12% year over year and 13% sequentially.
Bookings were also strong, ending Q1 at $76 million.
Up 16% year over year and 18% sequentially.
Backlog hit yet another record at quarter-end, growing to $54 million, a 144% increase year-over-year and 26% sequentially.
our scale, technical expertise, value added services.
program management support, and personalized account coverage are the key reasons why our customers rely on Tesco.
I mentioned last quarter that hospitals were a large market segment that we had accessed through our DAS integrators. That continues to be the case.
Through the AT&T Enhanced Inbuilding Program or EIB, we were able to book over $6 million dollars this past quarter with one of the EIB integrators and shipped over $4 million.
We still have a sizeable backlog for that customer, totaling over $10 million, which we expect to be able to ship over the coming months.
We're also engaged with other BIV integrators.
Our utility market grew 21% year over year and 5% sequentially.
These strong results confirm our strategy of helping electric utilities modernize and helping with their overall grid automation projects.
Growth initiatives in this market include businesses development campaign or automated means rooms infrastructure
Our VAR market grew significantly, up 10% year over year and 14% sequentially. Our transportation segment also grew, up 37% year over year and 87% sequentially.
This included projects to support micro waves equipment for Class 1 railroad customers.
We are very encouraged by the strong momentum We are counting into the second quarter.
Running now to the 3D elements of our business.
Specifically distribution, inventive and software.
Starting with our distribution business, we are focused on increasing the market share growth we captured last fiscal year and reviewing new strategic supply relationships to help diversify Tesco's overall business and buffer against supply chain constraints affecting our largest suppliers.
To address the persistent global supply chain challenges and mitigate long lead times, we are utilizing our demand planning and supply chain team.
to work directly with many of our customers.
This close collaboration has encouraged many of our customers to provide blanket or advanced purchase orders.
to help overcome inconsistent lead times and to ensure the timely completion of their projects.
This helps us in forecasting and in ordering the materials they need.
We leverage our relationships with our manufacturer partners to pull in product delivery dates.
As I've mentioned in prior quarters, we consistently stress death the quality of our backlog and that remains very strong. And that remains very strong.
We continue to focus on supplier and customer engagement in support of project planning and forecasting for critical communications solutions related to public safety tasks, cellular tasks, broadband, small cell, macro site, and CBRS, slash LTE applications.
while also supporting run rate business needs.
related to land mobile radio and testing solutions.
Our teams have produced creative and innovative ways to positively impact profit margins.
despite material delays and pricing and freight increases from our supplier partners.
Of course, these are global and industry-wide challenges.
but we remain focused on driving a positive customer experience and setting Tesco apart by making it easier for both our customers and suppliers to do business with us.
Turning now to Ventives. Our strategy of industrializing our Ventive operations continues to yield results.
Ventus had its second highest quarter in our history, growing 19% year-over-year, while down 18% sequentially from its record performance in Q4.
From a bookings perspective, Ventev had a 20% increase year over year and a 30% increase sequentially.
increase market share with a wide range of existing customers.
including a Fortune 500 utility company, the world's largest technology company based on revenue, the world's most valuable automaker, and the world's largest social media platform.
Our international sales efforts resulted in overseas more than doubling year-over-year.
The sparse water ventived executed an agreement with HPE Aruba to provide a powered protective enclosure system for the Aruba CX4100i industrial switch platform.
This will allow single-squeue ordering of Aruba switching combined with ventive-powered solutions for a complete implementation for Hosh environments.
To recap, our strategy for Ventures has been to standardize our product line while recognizing that configurability is a fundamental and differentiating requirement.
This has been demonstrated by the use of product lines, such as the Cisco design in powered enclosures and our new universal antenna solutions.
These standardized configurations have resulted in fewer SKUs while allowing for greater flexibility for the customer.
Through these efforts, we have been able to eliminate 10% of our skews without any customer or revenue impact.
Regarding our software business, we have branded our software as a service, or SaaS, monitoring solution as Tesco Observer.
While revenue for Tesco Observer has not been significant to this point, we made good progress in Q1.
We have made several announcements to the platform, including integrations with industry leading ticketing solutions like HubSpot. We have made several announcements to the platform, including ticketing solutions like HubSpot.
expanding our notification capabilities using solutions like Twilio.
And expanding our capabilities with onboarding, SNLP and connectivity options, example, modbus support.
We have significantly increased the number of devices we support on our platform to over 550 distinct model numbers. And I've also increased the number of brands supported.
Our sales team has been actively working on several opportunities, and we expect revenue from Tesco Observer to begin ramping later this fiscal year.
Lastly, in terms of our sales channels, as you know, we sell both direct and online through Tesco.com.
We continue to attract new customers to Tesco.com, which resulted in revenue of over $9.8 million this quarter.
New features this quarter included the addition of a resolution bot on Tesco.com that directs customers to answers for commonly asked questions.
We also have implemented content syndication on paid platforms.
With that, I will now turn over the call to Eric for the financial review.
to Eric for the financial review. Eric?
Thank you, Sandy. Good morning, everyone. As a reminder, the income statement amounts that our old reference are all from continuing operations and exclude the activity from our former retail business. And exclude the activity from our former retail business.
First quarter revenues grew 7% year-over-year to 112 million.
We achieved these results despite industry-wide disruptions from the global supply chain.
This was first quarter sales between 311 percent.
As Sendeep mentioned, we ended the quarter with another record level of backlog, totally 99 million at the end of Q1.
and up 109% year-over-year, and up 32% over last quarter.
Gross profit was $22.4 million for the first quarter of fiscal 2023, compared with $19.7 million for the same quarter of fiscal 2022.
Gross margin was 19.9% of revenue for the first quarter of fiscal 2023, compared with 18.8% in the first quarter of last year.
This was largely due to a favorable customer and product mix in our public carrier market.
in continued strong, offensive revenues in our commercial market.
We also produced higher revenue growth in the commercial segment.
which has higher margins than the carrier segment.
We remain focused on cost management.
As G&A expenses as a percentage of revenues continued last year's trend of being lower than the comparable amount from last year.
Representing 20.2%.
this quarter as compared to 20.6% in last year's first quarter.
We achieved this reduction despite a significant increase in freight expenses caused by the global supply chain disruptions.
The first quarter of fiscal 2023 net loss was 0.5 million, and down significantly from the first quarter of fiscal 2022 loss of 2.2 million. The first quarter of fiscal 2022 loss of 2.2 million.
Adjusted EBITDA was a positive 0.5 million in Q1. It is compares with the adjusted EBITDA loss of 1.1 million a year ago.
Turn into the balance sheet.
Product inventory increased by 3.8 million in the first quarter.
This was in support of managing through supply chain disruptions.
We remain strategic in our overall inventory management.
in the face of persistent supply challenges.
Counts receivable increased by 4.5 million in the first quarter.
This is reflective of the backloaded sales quarter that was even more pronounced due to the supply chain challenges.
The balance on our line of credit increased by approximately 4.8 million this quarter.
We ended the quarter with income tax receivables of $3.6 million.
The timing of receipts of these payments is largely dependent on the IRS.
During Q1, we did receive $3 million of the tax refunds outstanding at year end.
Our Q1 results continued the year-to-year improvement we saw during FY22.
I'm very pleased with how we are executing on our strategy.
Despite macro level headwinds impacting our business, we are encouraged by the strong sales and even more so the record bookings and record backlog and believe that we will continue to see improvements in our results.
Accordingly, we are reaffirming our guidance for fiscal year 2023, which is as follows.
Revenue of 450 million to 475 million.
which would reflect growth of 8 to 14% from last year.
A net loss of 5 million to 2.1 million, which compares to a net loss of 3.3 million in fiscal year 2022. The net adjusted EBDAF of between 4 and 7 million, which compares to 2.3 million in fiscal year 2022.
With that, I will turn the call back over to Sydney.
Thank you Eric. Before we open the call to questions, I want to reiterate some of the highlights from this quarter.
Strong, fierce momentum, let do record bookings and a record backlog.
Our expenses continue to decline as a percentage of revenue.
We reported positive adjusted EBITDA of a half a million dollars compared to a year ago loss of 1.1 million.
The ventors achieved strong sales and bookings.
Tesco Observer continues to add features and devices to the platform, and we have a growing pipeline of opportunities that we believe will begin to result in revenue over the next several quarters.
And lastly,
Two years ago, in the last first quarter.
before the sale of our retail business.
Our total bookings, including $24 million from retail, were $114 million.
Now, this quarter.
After the divestiture of retail, our bookings topped $137 million.
This growth in sales along with the significantly lower cost basis following the retail divestiture is a key sign that the strategy we laid out back in fiscal year 2021 is yielding results.
We will now open the call to questions.
At this time, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. Again, that is star one to ask a question.
We will pause for just a moment to compile the Q&A roster.
Once again, for any questions, simply press star one. Please ensure that you are picking up your handset before registering to ask your question.
We will take our first question from the line of Jesse Wilson with William Blair. Please go ahead.
Congrats on the quarter. You mentioned revenue from Tesco Observer is expected to ramp later this year. Where do you think that can sit in terms of revenue over a multi-year timeline?
Hey, good morning, Jesse. Thank you. And thanks for your question. Thank you. Thank you. Thank you. And thanks for your question. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
We haven't given a multi-year guidance yet, so we will...
We will wait to answer that question. For this year though, Jesse, we expect, as we said on this call and as I said earlier, we do expect revenue to ramp and that revenue is included in the guidance that we have provided for the year. Thanks for having us.
Once again, if you'd like to ask a question, simply press star followed by the number one on your telephone keypad. Again, that is star one.g exceptional at cell number one, start by going to the cell number one person, press
We will take a follow-up question from the line of Jesse Wilson with William Blair.
Hey, just a follow up question from me. So can you talk about how you performed in the quarter versus your internal expectations and how that informs your decision to reiterate guidance this quarter? And to reiterate guidance this quarter?
Eric, do you want to start and I'll follow up? Yeah, thanks, Jesse. So obviously, since we're keeping guidance the same, I think it was a fairly indicative quarter of where we would be expecting. The bookings, obviously, were very strong this quarter. So we expect that to funnel the second half of the year. And so with backlog being as high as it is and with bookings where it is, I think we're very confident in the guidance that we provided. And
this call and focus on in terms of ventive industrialization, improving margins on that. Those are all going per plan. So we're pretty confident and therefore have reiterated our guidance. We're going to have reiterated our guidance.
Understood. Thank you for taking my questions.
Thank you, Jesse. Thanks, sir.
Once again, to ask a question, simply press star 1 on your telephone keypad.
and simply press star one on your telephone keypad.
We have no further questions at this time. I'll hand the conference back over to Sandeep Murkaji for any concluding remarks.
Thank you, operator. And thanks again to everyone for joining us today. We appreciate your support of Tesco.
And also thank you to our team members for all their hard work and dedication. Your efforts are yielding positive results.
We look forward to speaking with you again next quarter. This concludes our earnings call. Thank you everyone and have a nice day.
Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect. and will repeat after the montage of the recording
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