ADDVANTAGE TECHNOLOGIES GROUP INC - FORM 8-K - EX-99.1 - PRESS RELEASE - Q3 2017 EARNINGS - August 14, 2017

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8-K - QUARTER 3 2017 EARNINGS RELEASE 8-K - ADDVANTAGE TECHNOLOGIES GROUP INCq3_08142017-8k.htm
ADDvantage Technologies Group, Inc.
1221 E. Houston
Broken Arrow, Oklahoma 74012

For further information
KCSA Strategic Communications
Company Contact:
Garth Russell
Scott Francis  (918) 251-9121
(212) 896-1250
grussell@kcsa.com

ADDvantage Technologies Announces Financial Results
for the Fiscal Third Quarter of 2017
- - -


BROKEN ARROW, Oklahoma, August 14, 2017 – ADDvantage Technologies Group, Inc. (NASDAQ: AEY), today announced its financial results for the three and nine month periods ended June 30, 2017. The nine month period includes the financial results for the Company’s asset acquisition of Triton Miami, Inc. (“Triton Datacom”) from October 14, 2016 to June 30, 2017.

“We reported a 29% increase in consolidated sales for the second quarter of 2017, which is mostly attributable to the Telco segment resulting from our acquisition of Triton Datacom’s assets last year. We continue to be pleased with this acquisition, as it further diversified our business and positively contributed to our consolidated financial results over the last few quarters.  However, we continue to be disappointed with the consolidated operating results of the Company as a result of the poor sales performance at Nave Communications, which is part of the Telco segment,” commented David Humphrey, President and CEO of ADDvantage Technologies.

“Due primarily to our two acquisitions that created our Telco segment, we added a VP of Sales executive role in our Company to lead our overall sales organization.  Since joining the Company in May, our new VP of Sales, Don Kinison, has been focused on the development and implementation of an improved sales strategy and organization for Nave Communications. His goal is to increase the sales volume and therefore improve profitability of the overall Telco segment. We are pleased with the initial progress thus far and look forward to seeing the impact on future sales and bottom-line results,” continued Mr. Humphrey.

“We are also reviewing our various operations and operating costs within the Company to optimize our performance.  We still remain confident in the long-term direction of the Company. While we have encountered certain market headwinds and internal challenges that slowed our progress, specifically in our Telco segment, we believe that we have a sound overall business strategy and look forward to seeing the results of the improved sales strategy over the next several quarters,” concluded Mr. Humphrey.
 
Results for the three months ended June 30, 2017

Consolidated sales increased 29% to $13.0 million for the three months ended June 30, 2017 compared with $10.1 million for the three months ended June 30, 2016.  The increase in sales was in both the Telco segment and Cable segment of $2.9 million and $0.1 million, respectively.  The increase in Cable TV sales was due to an increase in new equipment sales and repairs sales of $0.2 million and $0.3 million, respectively, partially offset by a decrease in refurbished equipment sales of $0.4 million. The increase in Telco used equipment sales was primarily due to Triton Datacom, which offset the continued lower sales from the remaining portion of this segment.  The Company is continuing to address the lower sales in the Telco segment by expanding its sales force, targeting a broader end-user customer base, expanding the capacity of the recycling program and testing the used equipment inventory prior to sale to end-user customers.

Consolidated operating, selling, general and administrative expenses increased $0.7 million, or 23%, to $3.8 million for the three months ended June 30, 2017 from $3.1 million for the same period last year.  This increase in expenses was due to the Telco segment of $0.8 million, while the Cable TV segment decreased by $0.1 million.  The increase for the Telco segment was due primarily to operating expenses of $0.8 million from Triton Datacom and Triton Datacom earn-out expenses of $0.1 million.

Net loss for the three months ended June 30, 2017, was $67,000, or $0.01 per diluted share, compared with a net income of $316,000, or $0.03 per diluted share, for the same period of 2016.

Consolidated EBITDA for the three months ended June 30, 2017 was $0.4 million compared with $0.7 million for the same period ended June 30, 2016.

Results for the nine months ended June 30, 2017

Consolidated sales increased 26% before the impact of intercompany sales to $36.4 million for the nine months ended June 30, 2017 from $28.9 million for the nine months ended June 30, 2016.  The increase in sales was in both the Cable TV and Telco segment of $0.6 million and $6.8 million, respectively.  Sales for the Telco segment increased $6.8 million to $18.9 million for the nine months ended June 30, 2017 from $12.1 million for the same period last year.  The increase in Telco equipment sales was primarily due to Triton Datacom on October 14, 2016, which offset the continued lower sales from the remaining portion of this segment.  The increase in sales for the Cable TV segment was due to an increase in new equipment sales and repair sales of $0.5 million and $0.9 million, respectively, partially offset by a decrease in refurbished equipment revenue of $0.8 million.

Consolidated operating, selling, general and administrative expenses increased 23% to $11.0 million for the nine months ended June 30, 2017 from $9.0 million for the same period last year.  This increase in expenses was due to the Telco segment of $2.2 million, partially offset by a decrease in the Cable TV segment of $0.2 million.

Net income for the nine month period ended June 30, 2017 was $161,000, or $0.02 per diluted share, compared with $486,000, or $0.05 per diluted share, for the same period of 2016.

Consolidated EBITDA for the nine months ended June 30, 2017 remained flat at $1.8 million compared with the same period ended June 30, 2016.

Cash and cash equivalents were $3.7 million as of June 30, 2017, compared with $4.5 million as of September 30, 2016.  The Company generated $2.3 million of cash from operations for the nine months ended June 30, 2017.  As of June 30, 2017, the Company had inventory of $22.7 million compared with $21.5 million as of September 30, 2016.

Earnings Conference Call

The Company will host a conference call on Monday, August 14th, at 12:00 p.m. Eastern Time featuring remarks by David Humphrey, President and Chief Executive Officer, Dave Chymiak, Chief Technology Officer, Scott Francis, Chief Financial Officer, and Don Kinison, Vice President of Sales.

The conference call will be available via webcast and can be accessed through the Investor Relations section of ADDvantage's website, www.addvantagetechnologies.com. Please allow extra time prior to the call to visit the site and download any necessary software to listen to the Internet broadcast. The dial-in number for the conference call is 800- 967-7141 (domestic) or 913-312- 1227 (international). All dial-in participants must use the following code to access the call: 2191269. Please call at least five minutes before the scheduled start time.

For interested individuals unable to join the conference call, a replay of the call will be available through August 28, 2017 at 844-512-2921 (domestic) or 412-317-6671 (international). Participants must use the following code to access the replay of the call: 2191269.  An online archive of the webcast will be
available on the Company's website for 30 days following the call.

About ADDvantage Technologies Group, Inc.

ADDvantage Technologies Group, Inc. (NASDAQ:  AEY) supplies the cable television (Cable TV) and telecommunications industries with a comprehensive line of new and used system-critical network equipment and hardware from a broad range of leading manufacturers. The equipment and hardware ADDvantage distributes is used to acquire, distribute, and protect the communications signals carried on fiber optic, coaxial cable and wireless distribution systems, including television programming, high-speed data (Internet) and telephony. In addition, ADDvantage operates a national network of technical repair centers focused primarily on Cable TV equipment and recycles surplus and obsolete Cable TV and telecommunications equipment.

ADDvantage operates through its subsidiaries, Tulsat, Tulsat-Atlanta, Tulsat-Arizona, Tulsat-Nebraska, Tulsat-Tennessee, Tulsat-Texas, NCS Industries, ComTech Services, Nave Communications and Triton Datacom. For more information, please visit the corporate web site at www.addvantagetechnologies.com.

The information in this announcement may include forward-looking statements.  All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, are forward-looking statements.  These statements are subject to risks and uncertainties, which could cause actual results and developments to differ materially from these statements.  A complete discussion of these risks and uncertainties is contained in the Company’s reports and documents filed from time to time with the Securities and Exchange Commission.

Non-GAAP Financial Measures
EBITDA is a supplemental, non-GAAP financial measure.  EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization.    In addition, EBITDA as presented excludes other income, interest income and income from equity method investment.  Management believes providing EBITDA in this release is useful to investors’ understanding and assessment of the Company’s ongoing continuing operations and prospects for the future and it is a used by the financial community to evaluate the market value of companies considered to be in similar businesses.  Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance.  EBITDA, as calculated in the table below, may not be comparable to similarly titled measures employed by other companies.  In addition, EBITDA is not necessarily a measure of our ability to fund our cash needs.


(Tables follow)


ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

   
Three Months Ended June 30,
    
Nine Months Ended June 30,
  
   
2017
    
2016
    
2017
    
2016
  
Sales
  
$
12,989,990
    
$
10,060,242
    
$
36,380,572
    
$
28,897,097
  
Cost of sales
    
9,234,039
      
6,594,091
      
24,836,563
      
19,080,954
  
Gross profit
    
3,755,951
      
3,466,151
      
11,544,009
      
9,816,143
  
Operating, selling, general and administrative expenses
    
3,757,027
      
3,062,288
      
11,031,276
      
8,987,316
  
Income (loss) from operations
    
(1,076
)
    
403,863
      
512,733
      
828,827
  
Other income (expense):
                                
    Other income
    
–
      
70,517
      
–
      
180,071
  
    Interest income
    
–
      
28,950
      
–
      
31,122
  
Loss from equity method investment
    
–
      
63,977
      
–
      
(77,021
)
Interest expense
    
(85,787
)
    
(54,221
)
    
(279,764
)
    
(184,289
)
Total other income (expense), net
    
(85,787
)
    
109,223
      
(279,764
)
    
(50,117
)
                                 
Income (loss) before income taxes
    
(86,683
)
    
513,086
      
232,969
      
778,710
  
Provision (benefit) for income taxes
    
(20,000
)
    
197,000
      
72,000
      
293,000
  
                                 
Net income (loss)
  
$
(66,863
)
  
$
316,086
    
$
160,969
    
$
485,710
  
                                 
Earnings (loss) per share:
                                
Basic
  
$
(0.01
)
  
$
0.03
    
$
0.02
    
$
0.05
  
Diluted
  
$
(0.01
)
  
$
0.03
    
$
0.02
    
$
0.05
  
Shares used in per share calculation:
                                
Basic
    
10,192,244
      
10,134,235
      
10,160,017
      
10,098,564
  
Diluted
    
10,192,244
      
10,135,607
      
10,160,582
      
10,103,054
  

   
Three Months Ended June 30, 2017
    
Three Months Ended June 30, 2016
  
   
Cable TV
    
Telco
    
Total
    
Cable TV
    
Telco
    
Total
  
                                     
Income (loss) from
operations
  
$
414,383
    
$
(415,459
)
  
$
(1,076
)
  
$
528,651
    
$
(124,788
)
  
$
403,863
  
Depreciation
    
77,114
      
33,673
      
110,787
      
84,152
      
24,902
      
109,054
  
Amortization
    
−
      
313,311
      
313,311
      
−
      
206,451
      
206,451
  
EBITDA (a)
  
$
491,497
    
$
(68,475
)
  
$
423,022
    
$
612,803
    
$
106,565
    
$
719,368
  

(a)
The Telco segment includes earn-out expenses of $0.1 million and zero for the three months ended June 30, 2017 and 2016, respectively, related to the acquisition of Triton Miami, Inc. and Nave Communications.

   
Nine Months Ended June 30, 2017
    
Nine Months Ended June 30, 2016
  
   
Cable TV
    
Telco
    
Total
    
Cable TV
    
Telco
    
Total
  
                                     
Income (loss) from
operations
  
$
1,586,013
    
$
(1,073,280
)
  
$
512,733
    
$
981,770
    
$
(152,943
)
  
$
828,827
  
Depreciation
    
225,253
      
103,420
      
328,673
      
237,418
      
74,985
      
312,403
  
Amortization
    
−
      
953,871
      
953,871
      
−
      
619,353
      
619,353
  
EBITDA (a)
  
$
1,811,266
    
$
(15,989
)
  
$
1,795,277
    
$
1,219,188
    
$
541,395
    
$
1,760,583
  


(a)
The Telco segment for the nine months ended June 30, 2017 includes acquisition related costs of $0.2 million.  The Telco segment includes earn-out expenses of $0.2 million and zero for the nine months ended June 30, 2017 and 2016, respectively, related to the acquisition of Triton Miami, Inc. and Nave Communications.


ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)

   
June 30,
2017
    
September 30,
2016
  
Assets
            
Current assets:
            
Cash and cash equivalents
  
$
3,744,508
    
$
4,508,126
  
Accounts receivable, net of allowance for doubtful accounts of
$250,000
    
6,024,786
      
4,278,855
  
Income tax receivable
    
101,754
      
480,837
  
Inventories, net of allowance for excess and obsolete
                
inventory of $2,984,641 and $2,570,868, respectively
    
22,660,271
      
21,524,919
  
Prepaid expenses
    
332,421
      
323,289
  
Total current assets
    
32,863,740
      
31,116,026
  
                 
Property and equipment, at cost
    
11,438,582
      
11,203,865
  
Less: Accumulated depreciation
    
(5,320,592
)
    
(4,993,102
)
Net property and equipment
    
6,117,990
      
6,210,763
  
                 
Investment in and loans to equity method investee
    
288,703
      
2,588,624
  
Intangibles, net of accumulated amortization
    
8,860,798
      
4,973,669
  
Goodwill
    
6,031,511
      
3,910,089
  
Deferred income taxes
    
1,490,000
      
1,333,000
  
Other assets
    
136,412
      
135,988
  
                 
Total assets
  
$
55,789,154
    
$
50,268,159
  
                 
Liabilities and Shareholders’ Equity
                
Current liabilities:
                
Accounts payable
  
$
3,350,598
    
$
1,857,953
  
Accrued expenses
    
1,590,339
      
1,324,652
  
Notes payable – current portion
    
6,828,961
      
899,603
  
Other current liabilities
    
660,919
      
963,127
  
Total current liabilities
    
12,430,817
      
5,045,335
  
                 
Notes payable, less current portion
    
–
      
3,466,358
  
Other liabilities
    
1,419,894
      
131,410
  
Total liabilities
    
13,850,711
      
8,643,103
  
                 
Shareholders’ equity:
                
 Common stock, $.01 par value; 30,000,000 shares authorized; 
10,692,902 and 10,634,893 shares issued, respectively; 
10,192,244 and 10,134,235 shares outstanding, respectively
    
106,929
      
106,349
  
Paid in capital
    
(4,764,953
)
    
(4,916,791
)
Retained earnings
    
47,596,481
      
47,435,512
  
Total shareholders’ equity before treasury stock
    
42,938,457
      
42,625,070
  
                 
Less: Treasury stock, 500,658 shares, at cost
    
(1,000,014
)
    
(1,000,014
)
Total shareholders’ equity
    
41,938,443
      
41,625,056
  
                 
Total liabilities and shareholders’ equity
  
$
55,789,154
    
$
50,268,159
  


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