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Wireless Telecom Group Announces Fourth Quarter and Year-End 2018 Financial Results
[March 12, 2019]

Wireless Telecom Group Announces Fourth Quarter and Year-End 2018 Financial Results


Wireless Telecom Group, Inc. (NYSE American: WTT) (the "Company") announced today results for the fourth quarter and twelve months ended December 31, 2018.

For the quarter ended December 31, 2018, the Company reported consolidated net revenues of $12,091,000, compared to $12,036,000 for the same period in 2017, an increase of 0.5%. For the twelve months ended December 31, 2018, the Company reported consolidated net revenues of $52,788,000 compared to $46,078,000 for the same period in 2017, an increase of 14.6%.

For the quarter ended December 31, 2018, net revenues in the Network Solutions segment were $5,094,000, compared to $5,492,000 for the same period in 2017, a decrease of 7.2%. For the twelve months ended December 31, 2018, net revenues in the Network Solutions segment were $22,275,000 compared to $23,052,000 for the same period in 2017, a decrease of 3.4%. The revenue decrease was due primarily to lower prices driven by a highly competitive pricing environment and softening demand in certain RF components, only slightly offset by increased sales of active components and customized integrated solutions.

For the quarter ended December 31, 2018, net revenues in the Test & Measurement segment were $3,231,000, compared to $3,126,000 for the same period in 2017, an increase of 3.4%. For the twelve months ended December 31, 2018, net revenues in the Test & Measurement segment were $14,212,000 compared to $13,380,000 for the same period in 2017, an increase of 6.2%. The increase over 2017 reflected increased sales of noise generation components and modules to customers in the satellite industry and for use in optical applications, offset by lower military and government orders.

For the quarter ended December 31, 2018, net revenues in the Embedded Solutions segment were $3,766,000, compared to $3,418,000 in the same period in 2017, an increase of 10.2%. For the twelve months ended December 31, 2018, net revenues in the Embedded Solutions segment were $16,301,000 compared to $9,646,000 for the period of ownership from February 17, 2018 through December 31, 2018. The increase in revenue was primarily due to higher sales of digital processing hardware used in wireless network test equipment.

The Company also reported consolidated gross profit of $5,264,000, or 43.5%, for the quarter ended December 31, 2018, compared to $5,471,000, or 45.5%, for the same period in 2017. Consolidated gross profit was $24,167,000, or 45.8%, for the year ended December 31, 2018, compared to $19,261,000, or 41.8%, for the same period in 2017. The year over year increase was driven primarily by increased volumes at the Embedded Solutions segment. The increase in 2018 also reflected the $1.9 million inventory impairment charges recorded in 2017 related to the Network Solutions segment and the Test and Measurement segment.

Gross profit in the Network Solutions segment was $9,756,000, or 43.8%, for the year ended December 31, 2018, compared to $9,064,000, or 39.3%, for the same period in 2017. Gross profit in the Test & Measurement segment was $7,018,000, or 49.4%, for the year ended December 31, 2018, compared to $5,854,000, or 43.8%, for the same period in 2017. Gross profit in the Embedded Solutions segment was $7,393,000, or 45.4%, for the year ended December 31, 2018, compared to $4,343,000, or 45.0% for the period of ownership from February 17, 2018 through December 31, 2018.

For the quarter ended December 31, 2018, the Company reported consolidated operating expenses of $6,006,000, compared to $5,178,000 for the same period in 2017, an increase of $828,000. For the twelve months ended December 31, 2018, the Company reported consolidated operating expenses of $23,388,000, compared to $22,129,000 for the same period in 2017, an increase of $1,259,000. Included in the 2018 consolidated operating expenses are losses on changes in the fair value of CommAgility contingent consideration of $365,000 for the quarter ending December 31, 2018 and $578,000 for the year ended December 31, 2018. The losses were the result of increases to the contingent consideration liability as a result of improved financial results at CommAgility for the year ended 2018 as compared to our original estimates. Additionally, the Company recognized approximately $281,000 of interest expense in 2018 related to the contingent consideration liability.

The net loss for the quarter ended December 31, 2018 was $718,000, compared to a net loss of $2,547,000 for the same period in 2017. The net income for the year-ended December 31, 2018 was $35,000 compared to a net loss of $4,493,000 for the year-ended December 31, 2017.

Non-GAAP Adjusted EBITDA for the quarter ended December 31, 2018 was $386,000, compared to $830,000 of non-GAAP Adjusted EBITDA for the same period in 2017. Non-GAAP Adjusted EBITDA for the year ended December 31, 2018 was $4,829,000, compared to $3,645,000 of non-GAAP Adjusted EBITDA for the same period in 2017. An explanation of our non-GAAP measures and a reconciliation of net income to non-GAAP Adjusted EBITDA are included as an attachment to this press release.

The increase in non-GAAP Adjusted EBITDA of $1,184,000, or 32.5%, from 2017 is primarily attributable to the $6,710,000 increase in consolidated revenues and $4,906,000 increase in consolidated gross profit.

The Company's consolidated backlog of firm orders to be shipped in the next twelve months was approximately $8,200,000 at December 31, 2018, a decrease of $1,700,000, or 17.2% compared to December 31, 2017. Backlog increased $2,100,000 or 34.0% from the third quarter ended September 30, 2018 on strong customer order flow of $14,281,000 in the fourth quarter ended December 31, 2018. This compares to order flow of $11,940,000 in the fourth quarter of 2017.

Tim Whelan, CEO of Wireless Telecom Group, Inc., commented, "We are pleased with our 2018 accomplishments which included consolidated revenue increases of 14.6% and revenue growth in 2 of our 3 segments, solid gross margins at 45.8%, improved operating income, and increasing Adjusted EBITDA profitability of $4,829,000. We improved our cash flow from operating activities to $3,990,000 leaving us with $5,015,000 of cash on our balance sheet at year-end. We also realized a strong quarter of bookings in Q4 totaling $14,281,000 which increased our backlog from September 30, 2018 by over $2,000,000. We have now realized two consecutive years of improved revenue growth, profitability, and cash flow which are attributable to the execution of our strategy, our investments in our product portfolio, enhancements in our go-to-market approach to improve how we serve our customers, and our lean operating initiatives creating operational leverage. We have made considerable progress on our long-term plans investing in our vision of enabling the development, testing and deployment of wireless technology."

Mr. Whelan continued, "With regard to our future, we remain committed to a growth strategy which includes both organic growth and acquisition opportunities which align to our vision and are accretive to our organic growth. We remain focused on investing in research and development on innovative solutions to address the growth trends in wireless technology and adding value to our customers across telecommunications, public safety, satellite communications, medical device manufacturing, defense contractors, military and government. We will continue to manage the business over the long term focused equally on revenue growth, improved profitability and cash flow. We believe we will benefit from the expected continuing trends in carrier densification initiatives and 5G deployments, increasing demands for test & measurement solutions and the requirements of private LTE buildouts."

The Company expects revenues for its first quarter ending March 31, 2019 to be comparable to the same quarter as last year and expects its gross margins for the March 31, 2019 quarter to be slightly below the same quarter last year due to expected revenue mix. The Company expects full year 2019 revenues to grow organically in the low to mid-single digit percentages and expects full year 2019 gross margins to be consistent with 2018 at approximately 46%. The Company expects to drive operational leverage and grow profitability and cash flow at rates higher than expected revenue growth.

Forward-Looking Statements

This press release contains "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. In some cases, such forward-looking statements may be identified by terms such as believe, expect, seek, may, will, intend, project, anticipate, plan, estimate, guidance or similar words. Forward-looking statements include, among others, statements regarding expectations for revenue and gross margins for the quarter ending March 31, 2019 and the year ending December 31, 2019, expectations for improved profitability and cash flow, and expectations relating to long-term growth and resulting improvement in profitability and cash flow. Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results, including, among others, the Company's ability to continue the successful integration of the acquired business, product demand and development of competitive technologies in the Company's market sector, the retention of key customers, fluctuations between the dollar and British pound, compliance with changing laws and regulations, as well as other risks and uncertainties set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2018. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, as except as required by law.

Conference Call

As previously announced, Wireless Telecom Group, Inc. will host a conference call today at 8:30 a.m. ET in which management will discuss fourth quarter and year end 2018 results and related matters. To participate in the conference call, dial 800-346-7359 or 973-528-0008. The conference identification number is 471526. The call will also be webcast over the internet at the following URL:

https://www.webcaster4.com/Webcast/Page/1690/29486

A replay will be made available on the Wireless Telecom website for a limited period of time following the conference call.

Use of Non-GAAP Financial Measures

The Company reports its financial results in accordance with generally accepted accounting principles ("GAAP"). Management believes, however, that certain non-GAAP financial measures used in managing the Company's business may provide users of this financial information with additional meaningful comparisons between current results and prior reported results. Certain of the information set forth herein and certain of the information presented by the Company from time to time may constitute non-GAAP financial measures within the meaning of Regulation G adopted by the Securities and Exchange Commission. We have presented herein a reconciliation of these measures to the most directly comparable GAAP financial measure. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies. The foregoing measures do not serve as a substitute and should not be construed as a substitute for GAAP performance, but provide supplemental information concerning our performance that our investors and we find useful.

The Company defines EBITDA as its net earnings before interest, taxes, depreciation and amortization. "Adjusted EBITDA" is EBITDA excluding our stock compensation expense, restructuring charges, acquisition expenses, integration expenses, the one-time non-cash inventory impairment charges, unrealized and realized foreign exchange gains and losses, and other non-recurring costs and includes cash received in 2018 related to revenue that would have been recognized in 2018 but for the adoption of ASU Topic 606. A reconciliation of net income to non-GAAP Adjusted EBITDA is included as an attachment to this press release.

The Company views Adjusted EBITDA as an important indicator of performance, consistent with the manner in which management measures and forecasts the Company's performance. We believe Adjusted EBITDA is an important performance metric because it facilitates the analysis of our results, exclusive of certain non-cash and non-recurring items, including items which do not directly correlate to our business operations.

The Company believes that Adjusted EBITDA metrics provide qualitative insight into our current performance; we use these measures to evaluate our results, the performance of our management team and our management's entitlement to incentive compensation; and we believe that making this information available to investors enables them to view our performance the way that we view our performance and thereby gain a meaningful understanding of our core operating results, in general, and from period to period.

About Wireless Telecom Group, Inc.

Wireless Telecom Group, Inc., comprised of Boonton Electronics, CommAgility, Microlab and Noisecom, is a global designer and manufacturer of advanced RF and microwave components, modules, systems and instruments. Serving the wireless, telecommunication, satellite, military, aerospace, semiconductor and medical industries, Wireless Telecom Group products enable innovation across a wide range of traditional and emerging wireless technologies. With a unique set of high-performance products including peak power meters, signal analyzers, signal processing modules, LTE PHY and stack software, power splitters and combiners, GPS repeaters, public safety monitors, noise sources, and programmable noise generators, Wireless Telecom Group supports the development, testing, and deployment of wireless technologies around the globe. Wireless Telecom Group is headquartered in Parsippany, New Jersey, in the New York City metropolitan area, and maintains a global network of Sales and Service offices for excellent product service and support. Wireless Telecom Group's website address is http://www.wirelesstelecomgroup.com





 

Wireless Telecom Group, Inc.

 

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

(In thousands, except per share amounts)

     
Three Months Ended Twelve Months Ended
December 31 December 31
(Unaudited)  

2018

 

2017

2018

2017

NET REVENUES $ 12,091 $ 12,036 $ 52,788 $ 46,078
 
COST OF REVENUES   6,827       6,565     28,621       26,817  
 
GROSS PROFIT 5,264 5,471 24,167 19,261
 
Operating Expenses
Research and Development 1,249 1,127 4,909 4,395
Sales and Marketing 1,956 1,799 7,595 6,960
General and Administrative 2,435 2,505 10,306 11,027
(Gain)/Loss on Change in Fair Value
of Contingent Consideration
  365       (253 )   578       (253 )
Total Operating Expenses 6,005 5,178 23,388 22,129
 
Operating Income/(Loss) (742 ) 293 779 (2,868 )
 
Other Income/(Expense) (48 ) (32 ) (121 ) (82 )
Interest Expense   (226 )     (67 )   (575 )     (296 )
 
Income/(Loss) before taxes (1,015 ) 194 83 (3,246 )
 
Tax Provision/(Benefit) (297 ) 2,741 48 1,247
           
Net Income/(Loss) $ (718 )   $ (2,547 ) $ 35     $ (4,493 )
 
Other Comprehensive Loss:
Foreign Currency Translation Adjustments   710       (120 )   (892 )     1,004  
Comprehensive Income/(Loss) $ (8 )   $ (2,666 ) $ (857 )   $ (3,489 )
 
 
Earnings/(Loss) Per Share:
Basic $ (0.03 ) $ (0.12 ) $ 0.00 $ (0.22 )
Diluted $ (0.03 ) $ (0.12 ) $ 0.00 $ (0.22 )
 
Weighted Average Shares Outstanding:
Basic 20,973 20,887 20,858 19,984
Diluted 20,973 20,887 21,566 19,984
 

 

CONSOLIDATED BALANCE SHEET

(In thousands, except number of shares and par value)

 
December 31 December 31
2018 2017
CURRENT ASSETS
Cash & Cash Equivalents $ 5,015 $ 2,458
Accounts Receivable - net of reserves of $44 and $44, respectively 8,638 9,041
Inventories - net of reserves of $1,910 and $1,856, respectively 6,884 6,526
Prepaid Expenses and Other Current Assets   1,689       4,733  
TOTAL CURRENT ASSETS 22,226 22,758
 
PROPERTY PLANT AND EQUIPMENT - NET 2,578 2,730
 
OTHER ASSETS
Goodwill 9,778 10,260
Acquired Intangible Assets, net 3,206 4,511
Deferred Income Taxes 5,592 5,939
Other   787       723  
TOTAL OTHER ASSETS 19,363 21,433
     
TOTAL ASSETS $ 44,167     $ 46,921  
 
CURRENT LIABILITIES
Short Term Debt $ 2,016 $ 1,335
Accounts Payable 3,252 4,109
Accrued Expenses and Other Current Liabilities 6,085 2,894
Deferred Revenue   103       629  
TOTAL CURRENT LIABILITIES 11,454 8,967
 
LONG TERM LIABILITIES
Long Term Debt - 494
Other Long Term Liabilities 115 1,590
Deferred Tax Liability   616       767  
TOTAL LONG TERM LIABILITIES 731 2,851
 
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value, 2,000,000 shares authorized, none issued - -
Common Stock, $.01 par value, 75,000,000 shares authorized, 34,393,252 and 33,868,252
shares issued, 21,205,251 and 22,772,167 shares outstanding 344 339
Additional Paid in Capital 48,479 47,494
Retained Earnings 7,556 7,176
Treasury Stock at Cost, 13,188,601 and 11,096,085 shares, respectively (24,509 ) (20,910 )
Accumulated Other Comprehensive Income   112       1,004  
TOTAL SHAREHOLDERS' EQUITY 31,982 35,103
     
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 44,167     $ 46,921  
 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

 
For the Twelve Months
Ended December 31

2018

 

2017

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net Income/(Loss) $ 35 $ (4,493 )
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and Amortization 2,305 1,747
Amortization of Debt Issuance Fees 78 68
Share-based Compensation Expense 702 536
Deferred Rent 11 23
Deferred Income Taxes 233 1,395
Provision for Doubtful Accounts - 33
Inventory Reserves 359 1,357
Changes in Assets and Liabilities, Net of Acquisition:
Accounts Receivable 231 (1,456 )
Inventories (751 ) 1,713
Prepaid Expenses and Other Assets (850 ) (119 )
Accounts Payable (735 ) (210 )
Accrued Expenses and Other Liabilities   2,372       809  
Net Cash Provided by Operating Activities   3,990       1,403  
 
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital Expenditures (853 ) (927 )
Proceeds from Asset Disposal - 7
Acquisition of Business, Net of Cash Acquired   (805 )     (9,434 )
Net Cash Used by Investing Activities   (1,658 )     (10,354 )
 
 
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Revolver Borrowings 37,695 58,420
Revolver Repayments (37,355 ) (57,237 )
Term Loan Borrowings - 760
Term Loan Repayments (152 ) (114 )
Debt Issuance Fees - (215 )
Proceeds from Exercise of Stock Options 288 437
Shares Withheld for Employee Taxes   -       (87 )
Net Cash Provided by Financing Activities   476       1,964  
Effect of Exchange Rate Changes on Cash and Cash Equivalents (251 ) 94
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,557 (6,893 )
 
Cash and Cash Equivalents, at Beginning of Period 2,458 9,351
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 5,015     $ 2,458  
 
SUPPLEMENTAL INFORMATION:
Cash Paid During the Period for Interest $ 176 $ 125
Cash Paid During the Period for Income Taxes $ 41 $ 68
 
   

NET REVENUE AND GROSS PROFIT BY SEGMENT

(In thousands)

 
Three months ended December 31
Revenue     % of Revenue     Change
2018   2017     2018   2017     Amount   Pct.
Network Solutions $ 5,094   $ 5,492     42.1 %   45.6 %     $ (398 )   -7.2 %
Test and Measurement 3,231 3,126 26.7 % 26.0 % 105 3.4 %
Embedded Solutions   3,766     3,418     31.1 %   28.4 %       348     10.2 %
Total Net Revenues $ 12,091   $ 12,036     100.0 %   100.0 %     $ 55     0.5 %
 
 
Three months ended December 31
Gross Profit     Gross Profit %     Change
2018   2017     2018   2017     Amount   Pct.
Network Solutions $ 2,204 $ 2,440 43.3 % 44.4 % $ (236 ) -9.7 %
Test and Measurement 1,509 1,522 46.7 % 48.7 % (13 ) -0.9 %
Embedded Solutions   1,551     1,509     41.2 %   44.1 %       42     2.8 %
Total Gross Profit $ 5,264   $ 5,471     43.5 %   45.5 %     $ (207 )   -3.8 %
 
 
 
Twelve months ended December 31
Revenue     % of Revenue     Change
2018   2017     2018   2017     Amount   Pct.
Network Solutions $ 22,275 $ 23,052 42.2 % 50.0 % $ (777 ) -3.4 %
Test and Measurement 14,212 13,380 26.9 % 29.0 % 832 6.2 %
Embedded Solutions   16,301     9,646     30.9 %   21.0 %       6,655     69.0 %
Total Net Revenues $ 52,788   $ 46,078     100.0 %   100.0 %     $ 6,710     14.6 %
 
 
Twelve months ended December 31
Gross Profit     Gross Profit %     Change
2018   2017     2018   2017     Amount   Pct.
Network Solutions $ 9,756 $ 9,064 43.8 % 39.3 % $ 692 7.6 %
Test and Measurement 7,018 5,854 49.4 % 43.8 % 1,164 19.9 %
Embedded Solutions   7,393     4,343     45.4 %   45.0 %       3,050     70.2 %
Total Gross Profit $ 24,167   $ 19,261     45.8 %   41.8 %     $ 4,906     25.5 %
 
 

RECONCILIATION OF NET INCOME TO NON-GAAP EBITDA AND NON-GAAP ADJUSTED EBITDA

(In thousands, unaudited)

     
Three Months Ended Twelve Months Ended
December 31 December 31

2018

 

2017

2018

 

2017

GAAP Net Income/(Loss), as reported $ (718 ) $ (2,547 ) $ 35 $ (4,493 )
Tax Provision/(Benefit) (297 ) 2,741 48 1,247
Depreciation and Amortization Expense 531 401 2,305 1,747
Interest Expense   226       67     575       296  
Non-GAAP EBITDA (258 ) 662 2,963 (1,203 )
Stock Compensation Expense 197 28 702 536
ASC 606 Adjustment - - 345 -
Merger and Acquisition Expenses - - - 1,290
Integration Expenses - 63 60 386
Inventory Impairment - - - 1,930
Inventory Recovery (5 ) (10 ) (28 ) (25 )
FX Loss 47 32 104 32
US GAAP Purchase Accounting 40 - 105 71
Change in Fair Value of Contingent Consideration 365 (253 ) 578 (253 )
Restructuring Charges and Other Non-Recurring Costs   -       308     -       881  
Non-GAAP Adjusted EBITDA $ 386     $ 830   $ 4,829     $ 3,645  
 
   

RECONCILIATION OF OPEX TO NON-GAAP OPEX

(In thousands, unaudited)

 
Three Months Ended Twelve Months Ended
December 31 December 31

2018

 

2017

2018

 

2017

GAAP Opex $ 6,005 $ 5,178 $ 23,388 $ 22,129
M&A/Integration - (63 ) (60 ) (1,675 )
Restructuring - (308 ) - (881 )
Stock Comp (197 ) (28 ) (702 ) (536 )
Depreciation and Amort. (ex. COGS) (455 ) (438 ) (1,783 ) (1,526 )
Contingent Consideration (365 ) 221 (578 ) 221
Tax Bonus/Purchase Accounting   (40 )     -     (105 )     -  
Non GAAP Opex $ 4,948     $ 4,562   $ 20,160     $ 17,732  
 


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