Third-quarter Revenues of $114.9 million, Up
12% Year Over Year
New Enterprise Resource Planning (ERP) System
Launched in January
Company Reaffirms Guidance for Fiscal Year
2023
TESSCO TECHNOLOGIES INCORPORATED (NASDAQ: TESS) today
reported final financial results for its fiscal year 2023 third
quarter, ended December 25, 2022.
Third-Quarter Fiscal 2023 Financial Highlights (all from
continuing operations):
- Third-quarter revenues of $114.9 million, up 12.1% year over
year
- Carrier segment revenues of $48.6 million, up 12.0% year over
year
- Commercial segment revenues of $66.3 million, up 12.2% year
over year
- Sales backlog of $84 million, compared to $98 million at end of
second quarter, reduction resulting from supply chain
improvements
- Third-quarter net income of $0.4 million, compared with net
income of $1.2 million in third quarter of fiscal year 2022, which
included favorable tax benefit of $1.1 million
- Adjusted EBITDA* of $1.8 million, compared with Adjusted EBITDA
of $1.0 million in third quarter of fiscal year 2022
- Company reaffirms guidance for fiscal year 2023
*See explanation of non-GAAP information below.
“Q3 was another successful quarter for TESSCO, with
year-over-year improvements in revenue, gross profit, and Adjusted
EBITDA,” said Sandip Mukerjee, TESSCO’s president and chief
executive officer. “Both of our business segments, Carrier and
Commercial, contributed to a year-over-year increase in revenue of
12 percent. At the same time, our margins continued to improve as a
result of the pricing strategies, supplier diversification, and
focus on higher-margin business opportunities that have been
central to our strategy.
“At the start of our fourth quarter, as previously announced, we
formally launched our new ERP system, which provides us with
considerable operational efficiencies over our legacy systems. We
expect to achieve a strong return on our investment in this major
infrastructural upgrade, with a significant expected positive
impact on EBITDA.
“Furthermore, we are reaffirming our business outlook for fiscal
year 2023, as our year-to-date results, combined with our strong
bookings and backlog, have put us on pace to meet our previously
announced guidance.”
Third-Quarter Financial Results
Due to the sale of TESSCO’s retail inventory and other related
assets in the third quarter of fiscal year 2021, and the Company’s
corresponding retail business exit, the Company’s Consolidated
Financial Statements present earnings from both continuing and
discontinued operations. The financial tables and financial results
discussed in this press release relate only to continuing
operations.
Third Quarter FY
2023
Third Quarter FY
2022
First Nine Months FY
2023
First Nine Months FY
2022
Revenue
$114.9M
$102.5M
$347.9M
$316.0M
Gross margin
20.6%
19.1%
20.2%
18.7%
Net income (loss)*
$0.4M
$1.2M
$1.3M
$(2.3M)
Income (loss) per share
$0.05
$0.14
$0.14
$(0.26)
Adjusted EBITDA**
$1.8M
$1.0M
$4.8M
$(0.3M)
*The third quarter of fiscal 2022 results included a $1.1
million tax benefit and the first nine months of fiscal year 2022
results included a $1.2 million tax benefit, both related to
accelerated deductions on the Company’s ERP system and a carryback
under the CARES Act.
**Adjusted EBITDA is a non-GAAP financial measure; please see
the discussion of non-GAAP information below and the reconciliation
of non-GAAP to GAAP results included as an exhibit to this press
release.
Revenue by Segment – Year over
Year
Q3 FY 2023 vs. Q3 FY
2022
First Nine Months FY 2023 vs.
FY 2022
Carrier
12.0%
8.4%
Commercial
12.2%
11.4%
Total
12.1%
10.1%
Sales Backlog (end of
quarter)
Carrier
Commercial
Total
Q3 FY23
$41M
$43M
$84M
Q2 FY23
$46M
$52M
$98M
Q1 FY23
$45M
$54M
$99M
Q4 FY22
$32M
$43M
$75M
Q3 FY22
$33M
$35M
$68M
Selling, General and
Administrative Expenses as a % of Revenues
Third Quarter FY
2023
Third Quarter FY
2022
First Nine Months FY
2023
First Nine Months FY
2022
Variable1 expenses as a % of
revenue
6.4%
6.1%
6.3%
6.1%
Fixed expenses as a % of
revenue
13.3%
12.8%
13.2%
13.5%
Total expenses as a % of
revenue
19.8%
18.9%
19.5%
19.6%
1 Variable expenses are primarily
freight-out costs, distribution center labor, and sales
commissions. Freight charged to customers largely offset
freight-out costs and are included in revenue and gross profit.
For the fiscal 2023 third quarter, revenues totaled $114.9
million, compared with $102.5 million for the third quarter of
fiscal 2022, due to strong demand across the Company’s Carrier and
Commercial segments.
Gross profit was $23.7 million for the third quarter of fiscal
2023, compared with $19.6 million for the same quarter of fiscal
2022. Gross margin was 20.6% of revenue for the third quarter of
fiscal 2023, compared with 19.1% in the third quarter of the prior
year.
Third-quarter fiscal 2023 selling, general and administrative
(SG&A) expenses increased 17.1% from the prior-year quarter to
$22.7 million, primarily as a result of increased variable expenses
associated with the increase in revenues and reflecting what was an
atypically low level of SG&A expense in the year-ago period. On
a sequential basis, SG&A expenses rose only 0.5% from the
second quarter of fiscal 2023. Freight-out expenses are included in
SG&A, while the offsetting charge to customers is included in
revenue. SG&A expenses as a percentage of revenue were 19.8% in
the third quarter of fiscal 2023, compared with 18.9% in the
prior-year quarter.
Third-quarter fiscal 2023 net income was $0.4 million, compared
with net income of $1.2 million in the third quarter of fiscal year
2022; however, the fiscal 2022 third-quarter results benefitted
from a $1.1 million tax benefit related to accelerated deductions
on the Company’s ERP system and a carryback under the CARES Act.
Income before income taxes for the third quarter of fiscal 2023 was
$0.5 million, compared with $0.1 million in the third quarter of
fiscal 2022.
Adjusted EBITDA and Adjusted EBITDA per diluted share were $1.8
million and $0.19, respectively, for the third quarter of fiscal
2023. This compares with Adjusted EBITDA and Adjusted EBITDA per
diluted share of $1.0 million and $0.11, respectively, for the
third quarter of fiscal 2022.
As of December 25, 2022, the outstanding balance under the
Company’s $105 million line of credit was $61.6 million and the
Company had $3.3 million in cash and cash equivalents.
Business Outlook
Tessco’s business outlook for full-year fiscal 2023 remains
unchanged and is summarized below (all amounts relate to continuing
operations only):
FY 2023 Guidance
FY 2023 Nine Months to
Date
FY 2022 Actuals
Revenue
$450.0M - $475.0M
$347.9M
$417.5M
Net income (loss)
($5.0M) - ($2.1M)
$1.3M
($3.3M)
Adjusted EBITDA*
$4.0M - $7.0M
$4.8M
$0.3M
*Adjusted EBITDA is a non-GAAP financial measure. Please see the
discussion of non-GAAP information below and the reconciliation of
non-GAAP to GAAP results.
Forecasting future results or trends is inherently difficult for
any business, and actual results or trends may differ materially
from those forecasted. The business outlook published in this press
release reflects only the Company’s current best estimate and the
Company assumes no obligation to update the information contained
in this press release, including the business outlook, at any
time.
Fourth quarter results will be impacted by the launch of the
Company’s new ERP system. The Company expects incremental
depreciation of approximately $1.5 million in the fourth quarter,
which will impact net income, but not EBITDA or Adjusted EBITDA.
Additionally, the Company is currently in a “hyper-care” period
consistent with the launch of any major IT system. During this
period there will be higher expenses associated with ensuring a
smooth transition to the new system, which will negatively impact
net income, EBITDA, and Adjusted EBITDA for the quarter.
Third-Quarter 2023 Conference Call
Management will host a conference call with accompanying slides
to discuss these results on Wednesday, February 8, at 8:30 a.m. ET.
To participate in the conference call telephonically, please dial
888-210-2975 (domestic call-in) or 646-960-0497 (international
call-in). The conference ID is 421902840.
A live webcast of the conference call will be available on the
Events & Presentations page of the Company’s website. A slide
show will accompany the webcast. All participants should call or
access the website 10 minutes before the conference begins. An
archived version of the webcast will be available on the Company's
website for one year.
Non-GAAP Information
EBITDA, Adjusted EBITDA, and their corresponding per share
equivalents are measures used by management to evaluate the
Company’s ongoing operations, and to provide a general indicator of
the Company's operating cash flow (in conjunction with a cash flow
statement, which also includes among other items, changes in
working capital and the effect of non-cash charges). EBITDA is
defined as income from operations, plus interest expense, net of
interest income, provision for (benefit from) income taxes, and
depreciation and amortization. EBITDA per diluted share is defined
as EBITDA divided by TESSCO’s diluted weighted average shares
outstanding. Adjusted EBITDA is EBITDA as defined above, but also
adds stock-based compensation and goodwill impairments.
Management believes these EBITDA measures are useful to
investors because they are frequently used by securities analysts,
investors and other interested parties in the evaluation of
companies. Because not all companies use identical calculations,
the Company’s presentation of these non-GAAP measures may not be
comparable to other similarly titled measures of other companies.
EBITDA, EBITDA per diluted share, Adjusted EBITDA and Adjusted
EBITDA per diluted share are not recognized terms under GAAP, and
EBITDA and Adjusted EBITDA do not purport to be an alternative to
net income as a measure of operating performance or to cash flows
from operating activities as a measure of liquidity. Additionally,
EBITDA and EBITDA per diluted share, are intended to be measures of
free cash flow for management's discretionary use, as certain cash
requirements, such as interest payments, tax payments and debt
service requirements, are not reflected.
A reconciliation of actual GAAP to non-GAAP results is included
as an exhibit to this release.
A reconciliation of GAAP to non-GAAP measures pertaining to the
business outlook is as follows:
Low
High
Net loss per business outlook
$(5.0M)
$(2.1M)
Add: provision for income taxes
0.2M
0.3M
Add: depreciation
6.3M
6.3M
Add: interest
1.5M
1.5M
Add: stock compensation
1.0M
1.0M
Adjusted EBITDA per business outlook
$4.0M
$7.0M
About TESSCO Technologies Incorporated (NASDAQ: TESS)
TESSCO Technologies, Inc. (NASDAQ: TESS) is a value-added
technology distributor, manufacturer, and solutions provider
serving commercial customers in the wireless infrastructure
ecosystem. The Company was founded more than 40 years ago with a
commitment to deliver industry-leading products, knowledge,
solutions, and customer service. TESSCO supplies products to the
industry’s top manufacturers in mobile communications, Wi-Fi,
Internet of Things (“IoT”), wireless backhaul, and more. Tessco is
a single source for outstanding customer experience, expert
knowledge, and complete end-to-end solutions for the wireless
industry. For more information, visit www.tessco.com.
Forward-Looking Statements
This press release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical facts
contained herein, including statements regarding our future results
of operations and financial position, strategy and plans and future
prospects, and our expectations for future operations, are
forward-looking statements. These forward-looking statements are
based on current expectations and analysis, and actual results may
differ materially from those projected. These forward-looking
statements may generally be identified by the use of the words
"may," "will," "expects," "anticipates," “targets,” “goals,”
“projects,” “intends,” “plans,” “seeks,” "believes," "estimates,"
and similar expressions, but the absence of these words or phrases
does not necessarily mean that a statement is not forward-looking.
These forward-looking statements are only predictions and involve a
number of risks, uncertainties and assumptions, many of which are
outside of our control. Our actual results may differ materially
and adversely from those described in or contemplated by any such
forward-looking statement for a variety of reasons, including those
risks identified in our most recent Annual Report on Form 10-K and
other periodic reports filed with the Securities and Exchange
Commission (the “SEC”), under the heading "Risk Factors" and
otherwise. Consequently, the reader is cautioned to consider all
forward-looking statements in light of the risks to which they are
subject. For additional information with respect to risks and other
factors which could occur, see Tessco’s Annual Report on Form 10-K
for the year ended March 27, 2022, including Part I, Item 1A, "Risk
Factors" therein, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and other securities filings with the SEC that are
available at the SEC's website at www.sec.gov and other securities
regulators.
We are not able to identify or control all circumstances that
could occur in the future that may materially and adversely affect
our business and operating results. Without limiting the risks that
we describe in our periodic reports and elsewhere, among the risks
that could lead to a materially adverse impact on our business or
operating results are the following: the impact and results of any
new or continued activism activities by activist investors;
termination or non-renewal of limited duration agreements or
arrangements with our suppliers, which are typically terminable by
either party upon several months or otherwise relatively short
notice; loss of significant customers, suppliers or other
relationships, or reduction of customer business or product
availability; loss of customers or suppliers either directly or
indirectly as a result of consolidation among large wireless
service carriers and others within the wireless communications
industry; deterioration in the strength of our customers' or
suppliers' business; negative or adverse economic conditions,
including those adversely affecting consumer confidence or consumer
or business spending or otherwise adversely impacting our suppliers
or customers, including their access to capital or liquidity, or
our customers' demand for, or ability to fund or pay for, the
purchase of our products and services; our dependence on a
relatively small number of suppliers, which could hamper our
ability to maintain appropriate inventory levels and meet customer
demand; changes in customer and product mix that affect gross
margin; effect of “conflict minerals” regulations on the supply and
cost of certain of our products; failure of our information
technology system or distribution system; our inability to maintain
or upgrade our technology or telecommunication systems without
undue cost, incident or delay; system security or data protection
breaches and exposure to cyber-attacks, and the cost associated
with ongoing efforts to maintain cyber-security measures and to
meet applicable compliance standards; damage or destruction of our
distribution or other facilities; prolonged or otherwise unusual
quality or performance control problems; technology changes in the
wireless communications industry or technological failures, which
could lead to significant inventory obsolescence or devaluation
and/or our inability to offer key products that our customers
demand; third-party freight carrier interruption; increased
competition from competitors, including manufacturers or national
and regional distributors of the products we sell and the absence
of significant barriers to entry which could result in pricing and
other pressures on profitability and market share; our relative
bargaining power and inability to negotiate favorable terms with
our suppliers and customers; our inability to access capital and
obtain or retain financing as and when needed; transitional and
other risks associated with acquisitions of companies that we may
undertake in an effort to expand our business; claims against us
for breach of the intellectual property rights of third parties;
product liability claims; our inability to protect certain
intellectual property, including systems and technologies on which
we rely; our inability to hire or retain for any reason our key
professionals, management and staff; health epidemics or pandemics
or other outbreaks or events, or national or world events or
disasters beyond our control; changes in political and regulatory
conditions, including tax and trade policies; and the possibility
that, for unforeseen or other reasons, we may be delayed in
entering into or performing, or may fail to enter into or perform,
anticipated contracts or may otherwise be delayed in realizing or
fail to realize anticipated revenues or anticipated savings.
The above list should not be construed as exhaustive and should
be read in conjunction with our other disclosures, including but
not limited to the risk factors described in our most recent Annual
Report on Form 10-K and other periodic reports filed with the
Securities and Exchange Commission (the “SEC”), under the heading
"Risk Factors" and otherwise. Other risks may be described from
time to time in our filings made under the securities laws. New
risks emerge from time to time. It is not possible for our
management to predict all risks.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, level of activity, performance or achievements. In
addition, neither we nor any other person assumes responsibility
for the accuracy and completeness of any of these forward-looking
statements. Any forward-looking statement made by us in this press
release speaks only as of the date on which it is made. We disclaim
any duty to update any of these forward-looking statements after
the date of this press release to confirm these statements to
actual results or revised expectations.
TESSCO Technologies
Incorporated
Consolidated Statements of
Income (Loss) (Unaudited)
Fiscal Quarters Ended
Nine Months Ended
December 25,
December 26,
September 25,
December 25,
December 26,
2022
2021
2022
2022
2021
Revenues
$
114,879,700
$
102,462,400
$
120,658,900
$
347,863,800
$
315,954,700
Cost of goods sold
91,188,600
82,841,600
96,628,000
277,614,400
256,852,000
Gross profit
23,691,100
19,620,800
24,030,900
70,249,400
59,102,700
Selling, general and
administrative expenses
22,715,800
19,403,800
22,592,900
67,846,300
62,038,600
Operating income (loss)
975,300
217,000
1,438,000
2,403,100
(2,935,900
)
Interest expense, net
516,400
131,000
383,400
1,159,200
503,400
Income (loss) from continuing
operations before provision for (benefit from) income taxes
458,900
86,000
1,054,600
1,243,900
(3,439,300
)
Provision for (benefit from)
income taxes
34,200
(1,129,000
)
(86,300
)
(46,600
)
(1,166,200
)
Net income (loss) from continuing
operations
$
424,700
$
1,215,000
$
1,140,900
$
1,290,500
$
(2,273,100
)
Income (loss) from discontinued
operations, net of taxes
—
243,800
—
—
1,187,900
Net income (loss)
$
424,700
$
1,458,800
$
1,140,900
$
1,290,500
$
(1,085,200
)
Basic earnings (loss) per
share
Continuing operations
$
0.05
$
0.14
$
0.12
$
0.14
$
(0.26
)
Discontinued operations
$
—
$
0.03
$
—
$
—
$
0.13
Consolidated operations
$
0.05
$
0.16
$
0.12
$
0.14
$
(0.12
)
Diluted earnings (loss) per
share
Continuing operations
$
0.05
$
0.14
$
0.12
$
0.14
$
(0.26
)
Discontinued operations
$
—
$
0.03
$
—
$
—
$
0.13
Consolidated operations
$
0.05
$
0.16
$
0.12
$
0.14
$
(0.12
)
Basic weighted-average common
shares outstanding
9,199,494
8,957,502
9,152,476
9,138,889
8,910,857
Effect of dilutive options and
other equity instruments
17,654
39,335
26,763
49,106
—
Diluted weighted-average common
shares outstanding
9,217,148
8,996,837
9,179,239
9,187,995
8,910,857
TESSCO Technologies
Incorporated
Consolidated Balance Sheets
(Unaudited)
December 25,
March 27,
2022
2022
ASSETS
Current assets:
Cash and cash equivalents
$
3,271,800
$
1,754,000
Trade accounts receivable,
net
79,497,400
75,546,300
Product inventory, net
70,855,700
55,945,300
Income taxes receivable
3,741,800
4,293,400
Prepaid expenses and other
current assets
4,660,500
2,961,700
Total current assets
162,027,200
140,500,700
Property and equipment, net
10,554,900
10,835,900
Intangible assets, net
40,731,500
30,595,600
Income taxes receivable,
non-current
—
3,118,600
Lease asset - right of use
7,012,500
8,910,400
Other long-term assets
9,411,300
8,552,100
Total assets
$
229,737,400
$
202,513,300
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
66,254,800
$
65,254,900
Payroll, benefits and taxes
6,381,200
5,230,500
Income and sales tax
liabilities
1,283,300
1,188,100
Accrued expenses and other
current liabilities
1,676,800
1,455,500
Lease liability, current
2,498,300
2,566,300
Current portion of long-term
debt
347,000
340,300
Total current liabilities
78,441,400
76,035,600
Deferred tax liabilities
145,600
145,600
Revolving line of credit
61,584,000
36,914,600
Non-current lease liability
4,746,000
6,586,200
Long-term debt
5,861,400
6,155,000
Other non-current liabilities
705,700
753,200
Total liabilities
151,484,100
126,590,200
Shareholders’ equity:
Common stock
107,900
105,900
Additional paid-in capital
70,361,900
69,166,100
Treasury stock
(287,300
)
(129,200
)
Retained earnings
8,070,800
6,780,300
Total shareholders’ equity
78,253,300
75,923,100
Total liabilities and
shareholders’ equity
$
229,737,400
$
202,513,300
TESSCO Technologies
Incorporated
Reconciliation of Net Income
(Loss) to Earnings Before Interest, Taxes, Depreciation, and
Amortization (EBITDA) from
Continuing Operations
(Unaudited)
Fiscal Quarters Ended
Nine Months Ended
December 25,
December 26,
September 25,
December 25,
December 26,
2022
2021
2022
2022
2021
Net income (loss) from continuing
operations
$
424,700
$
1,215,000
$
1,140,900
$
1,290,500
$
(2,273,100
)
Add:
Provision for (benefit from)
income taxes
34,200
(1,129,000
)
(86,300
)
(46,600
)
(1,166,200
)
Interest expense, net
516,400
131,000
383,400
1,159,200
503,400
Depreciation and amortization
517,600
633,000
525,500
1,580,700
1,878,400
EBITDA
$
1,492,900
$
850,000
$
1,963,500
$
3,983,800
$
(1,057,500
)
Add:
Stock-based compensation
266,100
101,700
307,600
796,500
724,700
Adjusted EBITDA
$
1,759,000
$
951,700
$
2,271,100
$
4,780,300
$
(332,800
)
EBITDA per diluted
share
$
0.16
$
0.09
$
0.21
$
0.43
$
(0.12
)
Adjusted EBITDA per diluted
share
$
0.19
$
0.11
$
0.25
$
0.52
$
(0.04
)
TESSCO Technologies
Incorporated
Supplemental Results Summary
(in thousands) (Unaudited)
Three Months Ended
December 25,
December 26,
September 25,
Growth Rates Compared
to
2022
2021
2022
Prior Year Period
Prior Period
Market Revenues
Carrier
$
48,627
$
43,409
$
51,984
12.0
%
(6.5
)%
Commercial
66,253
59,053
68,675
12.2
%
(3.5
)%
Total revenues
$
114,880
$
102,462
$
120,659
12.1
%
(4.8
)%
Market Gross Profit
Carrier
$
6,354
$
5,484
$
6,826
15.9
%
(6.9
)%
Commercial
17,337
14,137
17,205
22.6
%
0.8
%
Total gross profit
$
23,691
$
19,621
$
24,031
20.7
%
(1.4
)%
% of revenues
20.6
%
19.1
%
19.9
%
Nine Months Ended
December 25,
December 26,
Growth Rates
2022
2021
Compared to Prior Year
Period
Market Revenues
Carrier
$
147,745
$
136,348
8.4
%
Commercial
200,120
179,607
11.4
%
Total revenues
$
347,864
$
315,955
10.1
%
Market Gross Profit
Carrier
$
19,492
$
16,365
19.1
%
Commercial
50,757
42,738
18.8
%
Total gross profit
$
70,249
$
59,103
18.9
%
% of revenues
20.2
%
18.7
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230207005906/en/
TESSCO Technologies Incorporated Aric Spitulnik Chief Financial
Officer 410-229-1419 spitulnik@tessco.com
David Calusdian Sharon Merrill Associates, Inc. 617-542-5300
TESS@investorrelations.com
TESSCO Technologies (NASDAQ:TESS)
Gráfico Histórico do Ativo
De Abr 2024 até Mai 2024
TESSCO Technologies (NASDAQ:TESS)
Gráfico Histórico do Ativo
De Mai 2023 até Mai 2024