Q4 2023 ADDvantage Technologies Group Inc Earnings Call

Good afternoon, and welcome to the advantaged technology script. The school 20, twenty-three third quarter financial results Conference call.

Speaker 1: Good afternoon and welcome to the Advantage Technologies Group.

Speaker 1: 2023 third quarter financial results conference call. All participants.

All participants will be in listen only mode.

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Please note this event is being recorded.

Speaker 1: would now like to turn the conference over to Brett Moss with Hayden IR. Please go ahead.

I would now like to turn the conference over to Brett Maas with Hayden IR. Please go ahead.

Speaker 2: Thank you, operator. We're joined today by Joe Hart, president and CEO , as well as Michael Rutledge, the company's chief financial officer.

Thank you operator, we're joined today by Joe Hart, President and CEO as well as Michael Rutledge, The company's Chief Financial Officer before we begin today's call I would like to remind you. This conference call may contain certain forward looking statements, which are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 195.

Speaker 2: Before we begin today's call, I would like to remind you that this conference call may contain certain forward-looking statements which are subject to the Safe Harbor provisions of the Private Securities Illegation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events, such as the ability of Advantage Technologies and its subsidiaries to maintain strategic relationships and agreements with certain original equipment manufacturers and multiple system operators, as well as future financial performance of Advantage Technologies.

Forward looking statements include among other things statements regarding future events, such as the ability of advantaged technologies and its subsidiaries to maintain strategic relationships and agreements with certain original equipment manufacturers and multiple system operators as well as future financial performance of advantaged technologies.

Speaker 2: The statements involve a number of risks and uncertainties. Participants are cautioned that these four statements are only predictions and may materially differ from actual future events and results due to a variety of factors, such as those contained in Advantage Technology's most recent report on Form 10-K on file with the Securities Exchange Committee.

This involve a number of risks and uncertainties participants are cautioned that these forward looking statements are only predictions and may materially differ from actual future events and results due to a variety of factors such as those contained in advantaged technologies. Most recent report on Form 10-K on file with Securities and Exchange Commission.

Speaker 2: Financial information presented on this conference call should be considered in conjunction with the consolidated financial statements and notes included in the company's press release issued earlier today and included in Advantage Technologies' most recent report on form.

All information presented on this conference call should be considered in conjunction with the consolidated financial statements and notes included the company's press release issued earlier today and including the advantage technologies. Most recent report on Form 10-K, the guidance regarding anticipated future results on this call is based on limited information currently available on advent advantage technologies, which is subject to change although it.

Speaker 2: The guidance regarding anticipated future results on this call is based on limited information currently available on Advantage Technologies, which is subject to change. Although any such guidance and factors influenced yet may change, Advantage Technologies will not necessarily update the information, and the company will only provide guidance at certain points during the year. Such information speaks only to the date of this call.

Such guidance and factors influencing it may change advanced technologies will not necessarily update the information as the company will only provide guidance at certain points during the year, especially information and speaks only as of the date of this call.

Speaker 2: And during this call, we also present certain non-GAAP financial measures, such as non-GAAP net income and certain ratios that are used with these measures. In our press release and in the financial tables issued earlier today, which are located on our website at advantagetechnologies.com, you will find a reconciliation of these non-GAAP financial measures with the closest GAAP financials and a discussion about why we believe these non-GAAP financial measures are relevant.

During this call. We may also present certain non-GAAP financial measures such as non-GAAP net income and certain ratios that are used with these measures in our press release and in the financial tables issued earlier today, which are located on our website at an advantage technologies Dot Com you will find a reconciliation of these non-GAAP financial measures with the closest GAAP financials and a discussion as well about why we believe these non-GAAP financial measures are.

Relevant these financial measures are included for the benefit of investors and should be considered in addition to announce instead of GAAP measures I'd like to now turn the call over to Joe Hart, President and Chief Executive Officer of Advanced Technologies chose please go ahead.

Speaker 2: These financial measures are included for the benefit of investors and should be considered in addition to and not instead of GAAP measures .

Thank you Brett and thank you to everyone joining us on the call today.

The environment for both our telco and wireless segments remains challenging.

Speaker 3: The environment for both our telco and wireless segments remains challenging.

Speaker 3: And we have taken positive and proactive steps to better position the company to navigate these challenges and to expand our market opportunity.

And we have taken positive and proactive steps to better position the company to make up to navigate these challenges and to expand our market opportunity.

To be sure. These results are not acceptable to management and we are frustrated by current market conditions.

As has been widely reported.

Speaker 3: Several wireless carriers have paused CapEx investment.

Several wireless carriers have pause capex investments flowing the deployment of five G upgrades due to a higher cost of capital and economic uncertainty.

Speaker 3: slowing the deployment of 5G upgrades due to a higher cost of capital and economic uncertainty.

Additionally, while <unk> capable handsets continued to be sold at a brisk pace. Many of the apps on these devices do not yet benefit from five G speeds suppressing the need for expensive five G network build outs.

Speaker 3: Additionally, while 5G capable handsets continue to be sold at a brisk pace, many of the apps on these devices do not yet benefit from 5G speeds, suppressing the need for expensive 5G network buildout.

Wireless construction is expected to pick back up 'twenty 'twenty four as wireless data consumption and network demand continues to accelerate the need for increased bandwidth, which leads to the need for more cell sites and more sell side capacity.

Speaker 3: Wireless construction is expected to pick back up in 2024 as wireless data consumption and network demand continues to accelerate the need for increased bandwidth, which leads to the need for more cell sites and more cell site capacity.

In response, we are carefully managing expenses and broadening our offerings to address a wider range of telecom infrastructure projects.

Speaker 3: In response, we are carefully managing expenses and broadening our offerings to address a wider range of telecom infrastructure projects.

The recent slowdown in wireless construction activity was unexpected and sudden.

Speaker 3: The recent slowdown in wireless construction activity was unexpected and sudden.

Speaker 3: But those companies that can weather this lull in activity will come out the other side in 2024, better poised to take advantage of a market that has reduced competitors and a broader opportunity for growth.

But those companies that can weather this lull in activity will come out the other side in 2020 for better poised to take advantage of a market that has reduced competitors and a broader opportunity for growth.

We have established.

Speaker 3: We have established relationships and multi-year service agreements with all of the wireless carriers, OEMs, and tower companies across the country, and in just the past four months, we have added agreements with the two largest OEMs in the optical transport network space.

Stablish relationships and multiyear service agreements with all of the wireless carriers Oems and tower companies across the country.

And in just the past four months, we have added agreements with the two largest Oems in the optical transport network space.

Yes.

Speaker 3: This will help us expand our services business to design and build fiber cable and six wireless networks to serve the broadband needs of underserved communities across America.

This will help us expand our services business to design and build fiber cable and fixed wireless networks to serve the broadband needs of underserved communities across America.

Speaker 3: The federal government has allocated some $80 billion through various funds to help new broadband network companies build out rural, tribal, and underserved inner city communities.

The federal government has allocated some $80 billion through various funds to help new broadband network companies build out rural tribal and underserved inner city communities.

We have proven capabilities that are in demand, especially as others in the industry have struggled with quality and capacity, creating additional opportunities.

Speaker 3: We have proven capabilities that are in demand, especially as others in the industry have struggled with quality and capacity, creating additional opportunities.

Speaker 3: We added Brian Davidson as our Chief Revenue Officer in May.

We added Brian Davidson as our Chief revenue officer in May.

Speaker 3: Since then, we have added key personnel with deep industry experience to lead this important broadband initiative along with Brian .

Since then we have added key personnel with deep industry experience to lead this important broadband initiative along with Brian.

Speaker 3: In just the last four months, we have built our broadband backlog to $7 million.

In just the last four months, we have built our broadband backlog to $7 million.

Speaker 3: We remain optimistic that over the next few quarters, we can continue to expand our offerings, drive a high level of new revenue, and better utilize our capability.

We remain optimistic that over the next few quarters, we can continue to expand our offerings drive a high level of new revenue and better utilize our capabilities.

Our objective is to diversify our revenue expand our presence across wireless broadband and fixed wireless to facilitate cross selling and to create a major new source of revenue to Fulton technologies.

Speaker 3: Our objective is to diversify our revenue, expand our presence across wireless, broadband, and fixed wireless, to facilitate cross-selling, and to create a major new source of revenue to Fulton Technology.

Speaker 3: Government infrastructure spending serves as a catalyst for this initiative.

Government infrastructure spending serves as a catalyst for this initiative.

Speaker 3: The funding of the World Broadband Program, or BEAD, and the World Digital Opportunity Fund, RDOF, provide several hundred billion dollars in fiber and fixed wireless network investment over the next several years.

The funding of the World broadband program or beat them.

And the World Digital opportunity fund our dos provide several hundred billion dollars in fiber and fixed wireless network investment over the next several years.

We are aggressively pursuing opportunities to design and build fiber networks across multiple regions as a complement to our current wireless infrastructure offerings.

Speaker 3: We are aggressively pursuing opportunities to design and build fiber networks across multiple regions as a complement to our current wireless infrastructure offering.

Speaker 3: The situation with our telco segment has also been challenged.

The situation with our telco segment has also been challenging.

Speaker 3: As we discussed last quarter, the rapid normalization of the supply chain and resolution of the chip shortage over the last nine months has significantly slowed demand for our telco business.

As we discussed last quarter.

The rapid normalization of the supply chain and resolution of the chip shortage over the last nine months has significantly slowed demand for our telco business.

Companies no longer needed to build inventory to account for supply chain challenges in the chip shortages in many customers had significant inventory in house that they needed to work off before resuming purchases.

Speaker 3: Companies no longer needed to build inventory to account for supply chain challenges and the chip shortages, and many customers had significant inventory in-house that they needed to work off before resuming purchases.

As a result orders for used and refurbished equipment in our telco segment were drastically reduced.

Speaker 3: As a result, orders for used and refurbished equipment in our telco segment were drastically reduced.

We have just recently seen an uptick in orders for the optical transport business that give us reason to believe that things may be normalizing.

Speaker 3: We have just recently seen an uptick in orders for the optical transport business that give us reason to believe that things may be normalizing.

Speaker 3: We have also responded by methodically reducing our telco inventory levels in light of lower demand.

We have also responded by methodically, reducing our telco inventory levels in light of lower demand.

We continue to trim, our operating and SG&A expenses by almost $2 million this year.

Speaker 3: We continue to trim our operating and SG&A expenses by almost $2 million this year.

Speaker 3: to position us for profitability in 2024 as revenues normalize in both a telco and wireless broadband division.

To position us for profitability in 2024 as revenues normalize in both the telco and wireless broadband divisions.

Speaker 4: With that, I'll now turn the call over to Michael Rollage, our CFO , to provide a more detailed review of our financial results. Michael, please go ahead. Thank you, Joe. Consolidated sales decreased 15.6 million, or 60%, to 10.3 million for the third quarter from 25.9 million for the three months ended September 30, 2020.

With that I'll now turn the call over to Michael <unk>, our CFO to provide a more detailed review of our financial results. Michael. Please go ahead. Thank you Joe Consol.

Consolidated sales decreased $15 6 million or 60% to $10 3 million for the third quarter from $25 9 million for the three months ended September 32022.

Speaker 4: The decrease was primarily due to a decrease of $11.4 million in telco revenue and a decrease of $4.2 million in telecom revenues.

The decrease was primarily due to a decrease of $11 4 million in telco revenue and a decrease of $4 2 million in wireless revenue.

Gross profit was $2 8 million or a 27% gross margin compared to gross profit of $8 5 million or 33% gross margin for the same period last year.

Speaker 4: Gross profit was $2.8 million, or a 27% gross margin, compared to gross profit of $8.5 million, or a 33% gross margin for the same period last year.

Speaker 4: Operating expenses decreased six hundred thousand dollars or twenty seven percent

Operating expenses decreased $600000 or 27%.

Two 1.7 million, reflecting the previously announced cost reduction initiatives.

Speaker 4: to 1.7 million, reflecting the previously announced cost reduction.

Consolidated selling general and administrative expenses include overhead, which consist of personnel insurance professional services communication and other cost categories decreased 1.4 million or 31% to $3 1 million for the three months ended September 32023 from four point.

$5 million for the same period last year.

Speaker 4: Net loss for the quarter was $2.7 million,

Net loss for the quarter was $2 7 million or a <unk> 19 cents per basic share diluted share.

Compare.

At <unk> 19 cents loss per basic and diluted share compared to net income of $1 5 million or <unk> 11 per basic and diluted share for the same quarter last year.

Speaker 4: a 19 cent loss per basic and diluted share compared to net income of 1.5 million or 11 cents per basic and diluted share for the same quarter last year.

Speaker 4: Turning to our balance sheet, cash and cash equivalents were $1.6 million at September 30, compared to $2.6 million at December 31, 2020.

Turning to our balance sheet cash and cash equivalents were $1 6 million at September 30, compared to 2.6 million at December 31 2022.

As of September 32023, the company had net inventories of $7 8 million down from $8 1 million at June 30, and $9 6 million at December 31 2022.

Speaker 4: As of September 30, 2023, the company had net inventories of $7.8 million, down from $8.1 million at June 30, and $9.6 million at December 31, 2023.

Speaker 4: Reducing our inventory exposure in our telco business has been an area of focus.

Reducing our inventory exposure and our telco business had been an area of focus.

Our outstanding debt at September 30 was $3 6 million.

Speaker 4: Our outstanding debt at September 30 was $3.6 million.

This concludes my overview of our remarks, I will now turn the call back over to Joe.

Speaker 4: This concludes the overview section of our remarks. I will now turn the call back over.

Speaker 3: Thanks, Michael. I would like to conclude with.

Thanks, Michael.

I would like to conclude with <unk>.

Speaker 3: thanking everyone for their continued interest and investment in ADDvantage Technologies.

Thinking everyone for their continued interest and investment in advanced technologies.

Speaker 3: We believe that the environment is beginning to improve and that broadband opportunities will provide a significant growth opportunity for AEY in 2024.

We believe that the environment is beginning to improve and that broadband opportunities will provide a significant growth opportunity for a y in 2024.

Speaker 3: as the spending patterns for both wireless and equipment sales begin to normalize.

As the spending patterns for both wireless and equipment sales begin to normalize.

Speaker 3: We think we have a much improved future, and that the worst is behind us. But things continue to remain a challenge. So thank you.

We think we have a much improved future and that.

The worst is behind us but.

Things continue to remain a challenge.

Thank you.

And that concludes our remarks for today.

Okay.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Speaker 1: Thank you for attending today's presentation and you may now disconnect.

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