WTT Wireless Telecom

Wireless Telecom Group, Inc. (NYSE American: WTT) (the “Company”) announced today results for the three months ended September 30, 2022. The earnings call previously announced in the Company’s press release dated November 7th, 2022 has been cancelled due to the continuing strategic alternatives process. 

Tim Whelan, CEO of Wireless Telecom Group, Inc. stated, “We are focused on our strategic alternatives process and evaluating the return of excess cash to shareholders, and we expect to communicate more about this in the future. With respect to our third quarter, we are exceptionally pleased with the accomplishment of record bookings and contract signatures in the third quarter, which far exceeded initial expectations of $8 to $10 million, and underscores the long-term health of the business.” 

Mr. Whelan continued, “Our third quarter saw a recovery from first half customer order uncertainty, and we realized a record quarter of contract signatures of $13.0 million which included multiple large orders initially projected for close prior to June 30, as well as strong bookings in both of our segments. As a result, we have realized significant increases in our backlog which are expected to lead to improving revenues and gross profits in the quarters ahead.” 

Third Quarter 2022 Operating Results: 

• Net revenues of $5.3 million, a decrease of $2.0 million, or 27.7% over the prior year period primarily due to decreased revenue of $1.9 million in our Test & Measurement (“T&M”) segment.  Third quarter revenue reflected lower than expected first half bookings caused by the Ukraine conflict disrupting the timing of military and defense spend, as well as general economic uncertainty impacting the closure of deals in our sales funnel in the second quarter. 
• Gross profit of $2.7 million, a decrease of $1.4 million, or 34.2% over the prior year period due primarily to lower T&M revenues. Gross profit margin declined from 54.8% to 49.9% due primarily to lower absorption of fixed manufacturing costs at T&M.   
• Backlog of $12.8 million, an increase of $6.4 million from June 30, 2022.
• Operating expenses were $5.2 million, a decrease of $913,000, or 14.8% from the prior year period, primarily due to the recognition of a $1 million loss on the change in the fair value of contingent consideration of the Holzworth earn out in 2021. 
• GAAP net loss from continuing operations of $2.3 million compared to a net loss from continuing operations of $1.2 in the prior year period due primarily to lower T&M gross profits and a lower tax benefit in 2022, offset by the recognition of a $1 million loss on the change in the fair value of contingent consideration of the Holzworth earn out in 2021.
• Non-GAAP adjusted EBITDA loss of $1.4 million compared to an Adjusted EBITDA loss of $486,000 in the prior year due primarily to lower revenues and gross profit.  Non-GAAP adjusted EBITDA is a metric the Company uses to measure our core operations.  A reconciliation of non-GAAP adjusted EBITDA to GAAP net income is provided later in this press release.

Cash Flow and Balance Sheet: 

• Net increase in Cash and Cash Equivalents of $6.2 million, reflecting the sale of the Microlab business in 2022, offset by the extinguishment of debt, share repurchases and higher working capital.
• Short-term and long-term debt of $0 as of September 30, 2022 compared to $3.7 million as of December 31, 2021. 

Contact

Michael Kandell

25 Eastmans Road

Parsippany, NJ 07054

Tel: (973) 386-9696

Fax: (973) 386-9191

www.wirelesstelecomgroup.com 

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 Non-GAAP adjusted operating income/(loss) as GAAP operating income/(loss) excluding non-cash amortization expense of purchased intangible assets, non-recurring expenses associated with acquisition and divestiture activities, expenses associated with our strategic initiatives and non-cash stock compensation expense. 

The Company defines Non-GAAP adjusted net income/(loss) from continuing operations as GAAP net income/(loss) from continuing operations excluding non-cash amortization expense of purchased intangible assets, non-recurring expenses associated with acquisition and divestiture activities, expenses associated with our strategic initiatives, non-cash stock compensation expense and the loss on extinguishment of our Muzinich and Bank of America N.A. credit facilities. 

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 and divestitures expenses, expenses associated with our strategic initiatives, integration expenses, unrealized and realized foreign exchange gains and losses, purchase accounting adjustments, non-recurring legal fees associated with the Harris arbitration, goodwill and indefinite lived intangible asset impairment charges, (gain)/loss on change in fair value of contingent consideration, gain on extinguishment of our PPP loan, loss on extinguishment of our Muzinich and Bank of America N.A. credit facilities and other non-recurring costs. A reconciliation of net income/(loss) to non-GAAP Adjusted EBITDA is included as an attachment to this press release. 

The Company views Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Income/(Loss) and Non-GAAP Adjusted Net Income/(Loss) from Continuing Operations as important indicators of performance, consistent with the manner in which management measures and forecasts the Company’s performance. We believe these Non-GAAP measures are important performance metrics because they facilitate 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 Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Income/(Loss) and Non-GAAP Adjusted Net Income/(Loss) from Continuing Operations 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.

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, our expectations with respect to bookings, backlog and strategic alternatives, among other things. 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 ongoing impact that the conflict in Ukraine and related sanctions have had and may continue to have on our business, supply chain, transportation costs, and our backlog; the impact that the evolving COVID-19 pandemic has had and may continue to have on our supply chain, human capital and the general economy in the future; the impact inflation has had and may continue to have on our business and the economy in general, our dependency on capital spending on data and communication networks by our customers and end users; our dependency on the deployment of 4G LTE and 5G NR private networks and related services to grow our business; the impact of the loss of any significant customers; the ability of our management to successfully implement our evolving business plan; the impact of competitive products and pricing; our abilities to protect our intellectual property rights and our ability to manage risks related to our information technology and cyber security 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, 2021. 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.

 About Wireless Telecom Group, Inc.

Wireless Telecom Group, Inc., comprised of Boonton, CommAgility, Holzworth, 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, and semiconductor industries, Wireless Telecom Group products enable innovation across existing and emerging wireless technologies. With a product portfolio including peak power meters, signal generators, phase noise analyzers, signal processing modules, LTE PHY/stack software, noise sources, and programmable noise generators, Wireless Telecom Group supports the development, testing, and deployment of wireless technologies around the globe. Wireless Telecom Group, Inc.’s website address is wirelesstelecomgroup.com.

  

Wireless Telecom Group Inc.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)(UNAUDITED)(In thousands, except per share amounts) 

		For the Three Months Ended								For the Nine Months Ended
		September 30								September 30
		2022				2021				2022				2021
Net revenues		$	5,330			$	7,376			$	18,994			$	23,348
Cost of revenues			2,672				3,334				8,566				10,074
Gross profit			2,658				4,042				10,428				13,274
Operating expenses
Research and development			1,068				1,210				3,352				3,610
Sales and marketing			1,100				1,201				3,620				3,540
General and administrative			3,071				2,741				9,169				8,379
Loss on change in contingent consideration			-				1,000				-				1,000
Total operating expenses			5,239				6,152				16,141				16,529
Operating loss			(2,581	)			(2,110	)			(5,713	)			(3,255	)
Gain/(loss) on extinguishment of debt			-				-				(792	)			2,045
Other income/(expense)			(46	)			20				87				29
Interest income/(expense)			18				(365	)			(159	)			(947	)
Income/(loss) before taxes			(2,609	)			(2,455	)			(6,577	)			(2,128	)
Tax benefit			(341	)			(1,255	)			(1,540	)			(1.390	)
Net income/(loss) from continuing operations		$	(2,268	)		$	(1,200	)		$	(5,037	)		$	(738	)
Net income from discontinued operations, net of taxes			87				1,013				11,695				1,854
Net income/(loss)		$	(2,181	)		$	(187	)		$	6,658			$	1,116
Other comprehensive income/(loss):
Foreign currency translation adjustments			(244	)			(152	)			(761	)			(64	)
Comprehensive income/(loss)		$	(2,425	)		$	(339	)		$	5,897			$	1,052
Income/(loss) per share from continuing operations:
Basic		$	(0.11	)		$	(0.05	)		$	(0.23	)		$	(0.03	)
Diluted		$	(0.11	)		$	(0.05	)		$	(0.23	)		$	(0.03	)
Income per share from discontinued operations:
Basic		$	0.00			$	0.05			$	0.53			$	0.08
Diluted		$	0.00			$	0.05			$	0.53			$	0.08
Income/(loss) per share:
Basic		$	(0.10	)		$	0.00			$	0.30			$	0.05
Diluted		$	(0.10	)		$	0.00			$	0.30			$	0.05
Weighted average shares outstanding:
Basic			21,134				22,234				21,886				21,900
Diluted			21,134				22,234				21,886				21,900

 

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

		(Unaudited)
		September 30 2022				December 31 2021
CURRENT ASSETS
Cash & cash equivalents		$	10,726			$	4,472
Accounts receivable - net of reserves of $183 and $196, respectively			4,329				2,407
Inventories - net of reserves of $686 and $681, respectively			5,685				5,088
Prepaid expenses and other current assets			2,196				1,689
Current assets of discontinued operations			-				6,869
TOTAL CURRENT ASSETS			22,936				20,525
PROPERTY PLANT AND EQUIPMENT - NET			1,162				1,110
OTHER ASSETS
Goodwill			9,405				10,108
Acquired intangible assets, net			3,070				3,661
Deferred income taxes			2,412				5,580
Right of use assets			724				1,146
Other assets			253				284
Non current assets of discontinued operations			-				1,937
TOTAL OTHER ASSETS			15,864				22,716
TOTAL ASSETS		$	39,962			$	44,351
CURRENT LIABILITIES
Short term debt		$	-			$	126
Accounts payable			1,527				1,481
Short term leases			369				585
Accrued expenses and other current liabilities			4,307				6,676
Deferred revenue			92				408
Current liabilities of discontinued operations			-				1,965
TOTAL CURRENT LIABILITIES			6,295				11,241
LONG TERM LIABILITIES
Long term debt			-				3,595
Long term leases			397				615
Other long term liabilities			30				52
Deferred tax liability			189				228
TOTAL LONG TERM LIABILITIES			616				4,490
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 36,535,636 and 35,915,636 shares issued, 21,570,439 and 22,666,072 shares outstanding			366				359
Additional paid in capital			52,635				51,555
Retained earnings			7,210				554
Treasury stock at cost, 14,965,197 and 13,249,564 shares			(27,170	)			(24,619	)
Accumulated other comprehensive income			10				771
TOTAL SHAREHOLDERS' EQUITY			33,051				28,620
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	39,962			$	44,351

 

CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)

		For the Nine Months
		Ended September 30
		2022				2021
CASH FLOWS PROVIDED/(USED) BY OPERATING ACTIVITIES
Net income		$	6,658			$	1,116
Adjustments to reconcile net loss to net cash provided/(used) by operating activities:
Depreciation and amortization			1,081				1,604
Extinguishment of PPP loan			-				(2,045	)
Loss on extinguishment of term debt			792				-
Gain on sale of Microlab			(16,490	)			-
Amortization of debt issuance fees			55				217
Share-based compensation expense			950				302
Deferred rent			(22	)			(22	)
Deferred income taxes			3,169				(387	)
Provision for doubtful accounts			(13	)			72
Inventory reserves			35				115
Changes in assets and liabilities, net of divestiture:
Accounts receivable			(2,052	)			(1,998	)
Inventories			(960	)			(993	)
Prepaid expenses and other assets			(88	)			459
Accounts payable			506				728
Deferred revenue			(285	)			(225	)
Accrued expenses and other liabilities			(1,034	)			1,592
Net cash provided/(used) by operating activities			(7,698	)			535
CASH FLOWS PROVIDED/(USED) BY INVESTING ACTIVITIES
Capital expenditures			(582	)			(417	)
Deferred purchase price payment			(250	)			(200	)
Divestiture of Microlab, net			22,969				-
Net cash provided/(used) by investing activities			22,137				(617	)
CASH FLOWS USED BY FINANCING ACTIVITIES
Revolver borrowings/(repayments), net			-				45
Term loan borrowings			-				345
Term loan repayments			(4,422	)			(4,191	)
Acquisition of treasury stock			(2,525	)			-
Payment of contingent consideration			(1,097	)			(460	)
Proceeds from exercise of stock options			137				209
Shares withheld for employee taxes			(26	)			(44	)
ATM share sold			-				565
Net cash used by financing activities			(7,933	)			(3,531	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents			(252	)			(14	)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS			6,254				(3,627	)
Cash and Cash Equivalents, at Beginning of Period			4,472				4,910
CASH AND CASH EQUIVALENTS, AT END OF PERIOD		$	10,726			$	1,283
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest		$	122			$	698
Cash paid during the period for income taxes		$	957			$	150

 

NET REVENUE AND GROSS PROFIT BY SEGMENT(In thousands)Unaudited  

		Three months ended September 30
		Revenue								% of Revenue								Change
		2022				2021				2022				2021				Amount				Pct.
Test and measurement			4,080				5,931				76.5	%			80.4	%			(1,851	)			-31.2	%
Radio, baseband, software			1,250				1,445				23.5	%			19.6	%			(195	)			-13.5	%
Total net revenues		$	5,330			$	7,376				100.0	%			100.0	%		$	(2,046	)			-27.7	%

 

		Three months ended September 30
		Gross Profit								Gross Profit %								Change
		2022				2021				2022				2021				Amount				Pct.
Test and measurement			2,132				3,367				52.3	%			56.8	%			(1,235	)			-36.7	%
Radio, baseband, software			526				675				42.1	%			46.7	%			(149	)			-22.1	%
Total gross profit		$	2,658			$	4,042				49.9	%			54.8	%		$	(1,384	)			-34.2	%

 

		Nine months ended September 30
		Revenue								% of Revenue								Change
		2022				2021				2022				2021				Amount				Pct.
Test and measurement			15,628				16,779				82.3	%			71.9	%			(1,151	)			-6.9	%
Radio, baseband, software			3,366				6,569				17.7	%			28.1	%			(3,203	)			-48.8	%
Total net revenues		$	18,994			$	23,348				100.0	%			100.0	%		$	(4,354	)			-18.6	%

 

		Nine months ended September 30
		Gross Profit								Gross Profit %								Change
		2022				2021				2022				2021				Amount				Pct.
Test and measurement			8,811				9,690				56.4	%			57.8	%			(879	)			-9.1	%
Radio, baseband, software			1,617				3,584				48.0	%			54.6	%			(1,967	)			-54.9	%
Total gross profit		$	10,428			$	13,274				54.9	%			56.9	%		$	(2,846	)			-21.4	%

 

SEGMENT FINANCIAL STATEMENTS(In thousands, unaudited)

		Three months ended												Three months ended												Nine months ended												Nine months ended
		September 30, 2022												September 30, 2021												September 30, 2022												September 30, 2021
		T&M				RBS				Total				T&M				RBS				Total				T&M				RBS				Total				T&M				RBS				Total
Net revenues		$	4,080			$	1,250			$	5,330			$	5,931			$	1,445			$	7,376			$	15,628			$	3,366			$	18,994			$	16,779			$	6,569			$	23,348
Cost of revenues			1,948				724				2,672				2,564				770				3,334				6,817				1,749				8,566				7,089				2,985				10,074
Gross profit			2,132				526				2,658				3,367				675				4,042				8,811				1,617				10,428				9,690				3,584				13,274
Operating expenses			1,787				1,418				3,205				1,858				1,684				3,542				5,645				4,456				10,101				5,338				5,307				10,645
Segment profitability			345				(892	)			(547	)			1,509				(1,009	)			500				3,166				(2,839	)			327				4,352				(1,723	)			2,629
Corporate expenses											2,034												2,610												6,040												5,884
Operating loss											(2,581	)											(2,110	)											(5,713	)											(3,255	)
Other income/(expense)											(46	)											20												(705	)											2,074
Interest expense											18												(365	)											(159	)											(947	)
Income/(loss) before taxes											(2,609	)											(2,455	)											(6,577	)											(2,128	)
Tax provision/(benefit)											(341	)											(1,255	)											(1,540	)											(1,390	)
Net income/(loss) from continuing operations											(2,268	)											(1,200	)											(5,037	)											(738	)
Net income from discontinued operations, net of tax											87												1,013												11,695												1,854
Net income/(loss)										$	(2,181	)										$	(187	)										$	6,658											$	1,116
Depreciation and Amortization		$	260			$	70			$	330			$	225			$	249			$	474			$	794			$	287			$	1,081			$	676			$	742			$	1,418

RECONCILIATION OF NON GAAP MEASURES(In thousands, unaudited) 

		Three Months Ended								Nine Months Ended
		September 30								September 30
		Unaudited								Unaudited
		2022				2021				2022				2021
Net Income/(loss) from continuing operations		$	(2,268	)		$	(1,200	)		$	(5,037	)		$	(738	)
Tax Benefit			(341	)			(1,255	)			(1,540	)			(1,390	)
Depreciation and amortization expense			330				476				1,081				1,418
Interest (income)/expense			(18	)			365				159				947
Non-GAAP EBITDA			(2,297	)			(1,614	)			(5,337	)			237
Stock compensation expense			300				98				950				301
Divestiture and strategic initiative expenses			388				44				1,131				114
Restructuring Costs			-				-				-				36
Change in Fair Value of Contingent Consideration			-				1,000				-				1,000
FX (Gain)/Loss			135				(14	)			145				(19	)
PPP Loan Forgiveness			-				-				-				(2,045	)
Loss on Extinguishment of Debt			-				-				792				-
Non recurring HR costs			100				-				100				-
Non Recurring Arbitration Legal Costs			-				-				-				4
Non-GAAP Adjusted EBITDA		$	(1,374	)		$	(486	)		$	(2,219	)		$	(371	)
GAAP Operating Income/(Loss), as reported		$	(2,581	)		$	(2,110	)		$	(5,713	)		$	(3,255	)
Adjustments:
Amortization of acquired intangible assets			143				329				521				990
Divestiture and strategic initiative expenses			388				44				1,131				114
Stock Compensation Expense			300				98				950				302
Restructuring costs and contingent consideration			-				1,000				-				1,025
Total Adjustments to operating income/(loss)			831				1,471				2,602				2,431
Non-GAAP Adjusted Operating Income/(Loss)		$	(1,750	)		$	(639	)		$	(3,111	)		$	(824	)
Net Income/(loss) from continuing operations, as reported		$	(2,268	)		$	(1,200	)		$	(5,037	)		$	(738	)
Adjustments:
Total pretax adjustments to operating income/(loss)			831				1,471				2,602				2,431
Loss/(Gain) on Extinguishment of Debt			-				-				792				(2,045	)
Total Adjustments to Net loss from continuing operations			831				1,471				3,394				386
Tax effects of adjustments			244				516				995				135
Non-GAAP Adjusted Net Income/(loss) from continuing operations		$	(1,681	)		$	(245	)		$	(2,638	)		$	(487	)
Basic EPS, as reported		$	(0.11	)		$	(0.05	)		$	(0.23	)		$	(0.03	)
Diluted EPS, as reported		$	(0.11	)		$	(0.05	)		$	(0.23	)		$	(0.03	)
Non-GAAP Adjusted Basic EPS		$	(0.08	)		$	(0.01	)		$	(0.12	)		$	(0.02	)
Non-GAAP Adjusted Diluted EPS		$	(0.08	)		$	(0.01	)		$	(0.12	)		$	(0.02	)
Basic Shares			21,134				22,234				21,886				21,900
Diluted Shares			21,134				22,234				21,886				21,900