ADDvantage Technologies Group, (AEY) research, news, and more from GeoInvesting

Company description

Wed, 11 Sep 2019 14:28:10 GMT

ADDvantage Technologies Group, Inc., through its subsidiaries, distributes and services a range of electronics and hardware for the telecommunications industries. The Company operates through Telecommunications (Telco) segment. The Company's Telco segment offers its customers a range of used telecommunication equipment across various manufacturers consisting of component parts to expand capacity, provides spares or replaces non-working components. The Telco segment's switching equipment products originate, terminate and route voice traffic. Its central office equipment includes optical, switching and data equipment on a customer's communication network. Its data equipment products transport Internet and voice over Internet protocol (VOIP) traffic through routers. The Company also offers customers decommissioning services for surplus and obsolete equipment, which it then processes through its recycling program.

Research

Wed, 22 Mar 2023 19:15:42 GMT

Removing AEY from Model Portfolios due to weak Q4 results in its telecom segment and lack of clarity on 2023 growth prospects.

Addvantage Technologies Group , (NASDAQ:AEY) ($1.4; $19.6M market cap; marked up pre market), a communications infrastructure services and equipment provider, announced Q4 2022 results:

Sales of $19.6 million vs $18.7 million in the prior year
Loss of $0.04 vs loss of $0.16 in the prior year

“This was a milestone year for ADDvantage Technologies, as we grew both our segments and delivered full-year positive net income, even with a challenging fourth quarter impacted by weather and economic headwinds,” commented Joe Hart, Chief Executive Officer. “Our Telco segment drove the majority of our growth, and this business benefits from customers seeking lower-cost technology such as our high-quality optical transport and refurbished end-user solutions. Our Wireless segment grew steadily throughout the year, delivering 49% year-over-year growth. We continue to gain market share in our target regions.”

“Recent upheaval in the wireless industry, and struggles of longstanding players, is creating new and exciting opportunities for us,” continued Mr. Hart. “Leading carriers are seeking new partners, partly due to the volume of work and partly due to issues involving legacy providers. We are well-positioned to secure new, long-term contracts due to our strong relationships with carriers and our capabilities.”

Conference call summary:

Focused more on the Wireless Division growth prospects
Acknowledged that the Telco Segment could face some near-term challenges
Implied that the company will lose money in Q1 2023

Research

Tue, 22 Nov 2022 14:24:20 GMT

Addvantage Technologies Group , (NASDAQ:AEY) ($1.79; $25.1M market cap), a communications infrastructure services and equipment provider, announced it has suspended its At-The-Market Offering with Northland Securities.

“With our Accounts Receivable Agreements in place we believe we have sufficient ability to generate cash to meet our current needs,” commented Joe Hart, Chief Executive Officer of ADDvantage Technologies. “At current levels, we are highly cognizant of ongoing dilution that results from sales utilizing the ATM, and the Board believes it appropriate to halt the ATM transaction.”

Although it is nice to see the company suspend the ATM, we would have preferred they canceled it completely as we mentioned in prior notes. Leaving the shelf registration in place could still be worrisome to investors who believe an offering is not out of the question.

Research

Tue, 15 Nov 2022 19:07:30 GMT

Addvantage Technologies Group , (NASDAQ:AEY) ($2.12; $29.7M market cap; marked up pre market), a communications infrastructure services and equipment provider announced Q3 2022 results:

Sales of $25.9 million vs $19.7 million in the prior year
Non-GAAP EPS of $0.08 vs loss of $0.03 in the prior year

“Continued double-digit revenue growth, strong demand for our solutions on both sides of our business, and the benefit of cost reduction and margin enhancement initiatives drove record net income for ADDvantage Technologies, Our overall growth continues to be led by our Telco segment, which increased more than $5.3 million in the quarter on strong demand for optical, wireless and enterprise products to offset supply chain challenges for new equipment and fuel the distributed workforce trends. This business generated nearly $2.0 million in contribution margin in the quarter.

Our Wireless segment continues to grow, and we are moving toward profitability for this segment as we drive operational efficiencies and reach an inflection point in terms of revenue, The fourth quarter is typically impacted by weather-related and holiday seasonality, but we are continuing to expand our presence with wireless carriers in key geographies, and we expect 2023 will reflect strong demand and strategic investments in our operations. As a result, we anticipate further wireless expansion and positive contribution margin, bolstering our profitable consolidated results.”

Positive takeaways:

Q3 Wireless segment performance is significantly improving, exhibiting significant operating leverage.
- income from operations materially improved year over year and sequentially - Current quarter loss of $202,000 vs a loss of $2.1 million in the prior year period and a loss of $1.4 million in the immediate previous quarter (sequential).
- Revenue was sequentially up from $7.9 vs $7.0 year over year and $7.2 sequentially.
Management commentary seems to be more decisively positive about the future
The company only sees a slight dropoff in its December end quarter which typically is its seasonal weakest quarter.

Negative takeaways:

Despite the progress the Company has made over the last two quarters and positive comments, The company has yet to close its ATM facility with Northland Securities and in fact offered 400,000 shares during the quarter (probably around $2.00).
The conference call transcript implies that the Company will leave this facility open (backstop).

“We continue to believe we are sufficiently capitalized with appropriate backstops to support near term business conditions until more normalized business conditions return.”

Hopefully, the purpose of this is to facilitate an acquisition, but obviously we feel the stock would be much higher if they canceled the ATM. We would advise the company to let the stock go higher and potentially execute a capital raise at much higher prices.

Research

Fri, 12 Aug 2022 04:00:00 GMT

Addvantage Technologies Group , (NASDAQ:AEY) ($1.41; $18.6M market cap; marked up pre market), a communications infrastructure services and equipment provider announced Q3 2022 results:

Sales of $27.8 million vs $17.0 million in the prior year
EPS of $0.07 vs loss of $0.17 in the prior year

“Both our Wireless and Telco Segments delivered double-digit growth driving record revenues of $27.8 million and overall profitability for the Company of $875,000 of net income,” commented Joe Hart, Chief Executive Officer. “The recent progress in both segments is encouraging, and we see continued cost optimization opportunities, particularly in our Wireless segment, driving further margin expansion as 5G demand continues to accelerate. ”

“The multi-year 5G build-out opportunity, combined with being strategically positioned as a trusted partner for our carrier customers, is leading to demand for both sides of our business,” continued Joe Hart. “For Wireless, as we grow to meet this demand, we will stay focused in our execution and bidding. By increasing our scale and maintaining our cost optimization initiative we expect to improve our wireless margins. Simultaneously, our Telco segment continues to expand our offerings to both wireless and optical network carriers to support both wireless and broadband connectivity for optical and IP transport.”

After several years of losses, the company posted a quarterly profit and expects further margin expansion. The company is still dealing with seasonality, so will need to see how the seasonal weaker quarters play out. (Q3 and Q4 seasonal stronger quarters).

Something to look forward to in future quarters is management reaffirming its commitment to cut expenses by $2.4 million on an annual basis. We were actually happy to see that this quarter's profit occurred, even without those initiatives taking place yet.

Interviews

Tue, 17 May 2022 19:22:43 GMT

5/17/2022 ADDvantage Technologies Group, Inc. (AEY) Management Morning Briefing

Research

Thu, 12 May 2022 17:38:50 GMT

Addvantage Technologies Group , (NASDAQ:AEY) ($1.07; $13.9M market cap), a communications infrastructure services and equipment provider announced second quarter 2022 results:

Sales of $23.8 million vs $12.7 million in the prior year
Nel loss of $0.11 vs net loss of $0.25

“We generated record revenue in both segments of our business, as our efforts to position Fulton as a key partner for 5G tower work led to rapid growth, and our Telco segment continues to benefit from supply chain challenges for new equipment and the growing remote workforce movement,” commented Joe Hart, Chief Executive Officer. “During the quarter, we initiated significant cost-reduction initiatives, which included operational efficiencies, reallocating resources to meet near-term demand and streamlining our back-office infrastructure. We expect these changes to materially improve third fiscal quarter margins and enable us to minimize our cash burn. We are executing on all cylinders at this point, and demand for tower work continues to grow. The third quarter is typically our seasonally strongest quarter, and we are well-positioned to deliver continued top line performance and significant bottom-line improvements.”

Balance sheet update:

Cash and cash equivalents were $3.9 million as of March 31, 2022, compared with $1.8 million at December 31, 2021. As of March 31, 2022, the Company had net inventories of $5.8 million.
Outstanding debt as of March 31, 2022 was $2.2 million, which is comprised of financing leases. The Company paid down $2.1 million and closed its line of credit during the quarter ended March 31, 2022. The line of credit was replaced with an accounts receivable purchase facility, which when combined with a similar facility already in place in the Wireless segment will provide a total capacity of $19.0 million, which gives the Company increased funding flexibility across the three subsidiaries as the business flexes up and down.

Now, the main issue to contend with is understanding when this company can start making money, because management keeps missing its target on when profitability will be attained.

We will be on the conference call this morning at 9AM EST to see if management's target for profitability remains on target for late 2022.

Research

Tue, 15 Feb 2022 17:42:40 GMT

Addvantage Technologies Group , (NASDAQ:AEY) ($1.24; $15.7M market cap), a communications infrastructure services and equipment provider announced Q1 2022 results:

Sales of $18.7 million vs $12.7 million in the prior year
Net loss of $0.16 vs loss of $0.16 in the prior year

“We have moved quickly to ramp capabilities to meet the growing demand for 5G-related tower work, as our wireless segment delivered its second consecutive quarter of revenue greater than $7 million, even with weather and holiday-related interruptions, and we anticipate further growth as we move through calendar 2022,” commented Joe Hart, Chief Executive Officer. “The ramp up and entree into the new markets adversely effected margins for Q1 and into Q2 of this fiscal year. With our ramp up largely complete, we are now squarely focused on effectively aligning resources for demand, and improving operational efficiency and reducing general and administrative expenses, to drive margin expansion. We expect further growth in both revenue and margin expansion in the last half of the year.”

As we mentioned after the Q4 release, despite the strong revenue growth, until the company reaches profitability, investors will remain extremely cautious as the company’s liquidity position remains an issue. The path to profitability has been pushed back over the last several quarters, originally slated for this quarter, and now it seems like a possible Q3 2022 event. We will be on the conference call later this morning to see if management offers any more color on this issue.

Research

Tue, 28 Dec 2021 05:00:00 GMT

Addvantage Technologies Group , (NASDAQ:AEY) ($1.84; $23.0M market cap), a communications infrastructure services and equipment provider announced Q4 2021 results:

Sales of $19.7 million vs $12.2 million in the prior year
Non-GAAP net loss of $0.17 vs loss of $0.09 in the prior year

“As planned, 5G services activity is surging translating to revenue, as our Wireless segment grew 69% sequentially and 47% year-over-year in the fourth quarter, reaching $7.0 million,” commented Joe Hart, Chief Executive Officer. “This growth is broad-based, representing contracts from several large carriers in various regions, reinforcing our confidence that the 5G buildout is now underway in earnest and ADDvantage Technologies is strategically well-positioned to benefit from this secular, multi-year spending cycle. This momentum for Wireless continued into the first fiscal quarter at the same pace as the fourth fiscal quarter and we anticipate further growth in the second half of the fiscal year well beyond the recent and current two quarters subject to our success in onboarding additional in-house and subcontract crews in this challenging labor market. We expect that fiscal 2022 will be a record year for our Wireless segment, enabling strong top- and bottom-line growth.”

We continue to be concerned about the level of losses the company is reporting despite the strong revenue growth it is finally experiencing.

We will be on the conference call at 10AM this morning to see if management offers any color on profitability in the near term. Recall that on the Q3 conference call, they stated that profitability would be achieved by Q1 2022.

Research

Fri, 03 Sep 2021 14:50:20 GMT

Addvantage Technologies Group , (NASDAQ:AEY) ($2.73; $34.1M market cap), a communications infrastructure services and equipment provider, announced it has hired Michael Rutledge as CFO. Michael has an impressive track record which you can read about here, but we wanted to highlight one quote from the release:

“ADDvantage Technologies is on the brink of a breakout year in 2022 as the 5-G rollout accelerates and I am excited to play a role in this emerging growth opportunity,” added Mr. Rutledge.

Research

Fri, 13 Aug 2021 17:36:04 GMT

Addvantage Technologies Group , (NASDAQ:AEY) ($2.56; $32.0M market cap), a communications infrastructure services and equipment provider announced Q3 2021 results:

Sales of $17.0 million vs $12.0 million in the prior year
Net loss of $0.17 vs loss of $0.06 in the prior year

“The third fiscal quarter benefited from 65% higher revenue in our Telco segment, specifically from Nave Communications, an all-time high for Nave, as the ongoing chip and electronics supply chain issues for new technology drove higher demand for refurbished alternatives,The higher volumes have generally continued into the fourth fiscal quarter, but we anticipate a leveling off of demand at some point in future quarters, albeit at a somewhat elevated level relative to the recent past. Nave is having a really strong year and Triton Datacom has recovered from a COVID-related softness in sales earlier in the year...

...The long-awaited 5G expansion has begun in earnest, and the hard work to position our company as a key player in the development of 5G networks by our Fulton Technologies team has paid off, Over the last few months, we have won site awards to upgrade technology to 5G for over 1,000 cell sites in seven major metropolitan markets. We have also added two new major Tier-1 clients. We remain confident that the Wireless segment revenue in the second half of calendar 2021, the period encompassing our fourth fiscal quarter of this year and first fiscal quarter of next year, could gradually double the levels we reported in the first half of calendar 2021. Moreover, this represents only a portion of the total work to be done. We already have purchase orders for fiscal year 2022 construction services that exceed the total value of our fiscal year 2021 total Wireless revenue...

...The expected incremental revenue from our Wireless segment in the fourth quarter, along with the higher Telco sales, should help us finish the year strong, with improved margins and significant momentum heading into the new fiscal year,”

It looks like AEY could be reaching an inflection point of growth, particularly in its wireless segment. We were banking on that happening when we published our bullish thesis on the company on October 30, 2019 detailing restructuring initiatives enacted by a new management team.

Furthermore, the modernization of the company’s Telco segments (provider of networking and communication products to telecom and enterprise customers) that resulted in better inventory controls and sourcing of products is paying off, helping customers fill the demand/supply gap created by ongoing supply chain shortages in the technology markets it serves. A summary of some of the restructuring moves includes:

New management team joining the company with an incredible pedigree for operating telecom companies in the past
Eliminating a good deal of debt from the balance sheet
Modernizing distribution and warehouse facilities
Improving product procurement activities so that the company carries optimal inventory on the shelves and moves inventory faster
Improving the quality of its product offerings
Expanding the company’s relationships with telecom carriers with which it did not have prior relationships
Expanding the company’s geographic footprint
Acquiring a company out of bankruptcy at a deep discount to its true value to create the company’s wireless infrastructure division

At the time of our published research report, shares were trading at $1.84. The company had much less positive business momentum, but rose over 250% in 3 months. However, the arrival of COVID-19 led to project delays for the company's major telecom and business customers, especially in the wireless business segment. Subsequently, the stock has given up nearly all of its early gains.

Notwithstanding the positive momentum in sales, we still have little color on what level of revenue the company will need to achieve to generate profits. Frankly, we are surprised at the magnitude of the loss for the quarter.

This was the same concern we had when we first wrote about the company. So, we have to be cognizant of the possibility of the company raising capital by selling shares. Hopefully, the yet to be issued third quarter 10Q and conference call at 10 AM EST today will shed some light on this concern.

Research

Mon, 17 May 2021 04:00:00 GMT

Addvantage Technologies Group , (NASDAQ:AEY) ($2.24; $27.9M market cap), a communications infrastructure services and equipment provider reported its Q2 2021 results on Thursday after the close. Our premium tweet on Friday made note of comments indicating that financial performance is finally set to improve. Today, we wanted to highlight some additional bullish Information Arbitrage remarks from the conference call:

“We are finally seeing the long-awaited acceleration in 4G and 5G tower work by all of the wireless carriers. Over the last few weeks, we have received a significant increase in site awards and initial purchase orders. In the aggregate, the awards received today indicate that Wireless revenue in the second half of calendar 2021, the period encompassing our fourth fiscal quarter of this year and first fiscal quarter of next year, will be double the levels we will report in the first half of calendar 2021.”

“There are additional sites still to be awarded. In fact, the initial awards are just a small part of the overall scope of work. So we have quite a bit of upside in our future. The initial awards are from multiple carriers in several markets. We expect additional markets to be awarded over the next few months. Some of these markets are new regions for us, and others are markets where we have an established presence, but all are in the Greater Midwest and Southwest regions.”

“To be clear, this notable uptick in activity is not reflected in the results we are reporting today for Q2. We expect to see the commencement of new site activity late in our current third quarter and anticipate a substantial increase in Wireless revenue in the fourth quarter for the period ending September 30. This activity will also give us momentum carrying into our fiscal 2022 , which starts in October.”

Based on the bullish comments in the conference call, we are improving the Model Portfolio Ranking from 2 to 1.5 and may look to add to our existing long position.

Research

Fri, 12 Feb 2021 17:33:05 GMT

Addvantage Technologies Group, (NASDAQ:AEY) ($3.31; $39.8M market cap), a communications infrastructure services and equipment provider announced Q1 2021 results:

Sales of $12.7 million vs $14.0 million in the prior year period
Net loss of $0.16 vs net loss of $0.17 in the prior year

“The first fiscal quarter was impacted by the typical seasonality in our wireless segment, as the winter weather, the holidays and the lack of specialty work impacted revenue and margins...

...Our sales and bid activity are picking up as we continue to see accelerating demand in anticipation of the 5G roll-out, though the velocity has yet to reach desired levels. We are prudently ramping our crew capacity in anticipation of expected demand, an initiative we undertook based on a high level of confidence that we will win projects to effectively utilize this capacity. We currently expect the second half of calendar 2021 to benefit from the higher volumes, and our business is scaled to drive improvements in profitability based on these expected levels...

...We have confidence in our plan as we move through 2021 with an improved balance sheet, an experienced management team, and are strategically well-positioned to capture a meaningful share of the 5G infrastructure buildout that is expected to be realized this year.”

Research

Mon, 21 Dec 2020 05:00:00 GMT

Addvantage Technologies Group, (NASDAQ:AEY) ($3.31; $39.8M market cap), a communications infrastructure services and equipment provider announced year end results last week which we highlighted here.

In our article published on October 30 2019, we discussed how the company generates some revenues from temporary tower development for outdoor events:

"...

A smaller piece of Fulton’s revenue comes from temporary tower deployment:

Mobile cell sites are transportable on trucks, allowing fast and easy installation in restricted spaces. Their use is strategic for the rapid expansion of cellular networks putting into service point-to-point radio connections, as well as supporting sudden increases of mobile traffic in case of extraordinary events (trade fairs, sports events and concerts, emergencies, catastrophic events, etc.). Mobile cell sites require neither civil works nor foundations, just minimal requirements like commercial power and grounding. The mobile units have been designed to be a temporary solution, but if requested, they can be transformed into a permanent station.

..."

In its Q4 release the company mentioned how COVID-19 continues to impact its business:

“These hurdles were primarily driven by the shift to remote work as offices shut down impacting our Telco business and closure of special outdoor events or large gathering events impacting our Wireless business.”

So, we thought it was worth mentioning that over the weekend, Congress passed another stimulus package for $900 billion. In the bill, there are specified grants to help live event venues which could potentially be beneficial to AEY:

“The Democrats said it would put $284 billion into Paycheck Protection Program small business loans, and include funds for loans from small and minority-owned lenders. It would direct another $20 billion to small business grants and $15 billion to live event venues.”

Research

Thu, 17 Dec 2020 05:00:00 GMT

Addvantage Technologies Group, (NASDAQ:AEY) ($3.75; $44.2M market cap), a communications infrastructure services and equipment provider, announced Q4 2020 results:

Sales of $12.2 million vs $17.9 million in the prior year
Loss of $0.09 vs loss of $0.15 in the prior year

“We anticipate double-digit revenue growth for our business in fiscal 2021 and anticipate reaching positive net income on a quarterly basis by the end of the year. We enter 2021 with a lean and efficient organization, strategically positioned throughout the middle of the country, with strong relationships with the leading Wireless Carriers and Telco clients and we have significantly improved our liquidity to execute our growth strategy. We are already starting to see wireless activity picking up in our southwest region, another positive indicator. All indications from trade news and industry press releases are that 5G network construction will be in full swing by midyear 2021.”

Covid-19 has been a major setback for the company. The pandemic led to delays in the 5G rollout for major carriers as well as cancellations for almost all major outdoor special event gatherings, which was an incremental source of sales for the company.

Many mobile networks have delayed their 5G rollout plans due to Covid-19. See a recent article highlighting some of the issues the space is facing:

“Delayed spectrum auctions, permitting, technology evaluations, and testing have all been delayed by about nine to 12 months due to the ongoing global pandemic, Davidson, the SVP and GM of Cisco’s Mass-Scale Infrastructure unit, said at an investor conference today.”

We will continue to monitor company developments, but we obviously remain cautious about AEY and our related portfolio position in the short term. We are especially concerned about the possibility that the company may have to raise money as it waits for profitability to arrive.

Research

Wed, 12 Aug 2020 19:09:59 GMT

Addvantage Technologies Group, (NASDAQ:AEY) ($2.31; $23.2M market cap), a communications infrastructure services and equipment provider, announced Q3 2020 results:

Sales of $12.0 million vs $17.6 million in the prior year
Non-GAAP loss of $0.05 vs $0.00 in the prior year

"We continue to lay the groundwork to position ADDvantage Technologies for the widely anticipated acceleration of the 5G network rollout... The 5G expansion remains a critical initiative, particularly amidst the Pandemic and the strains of the work-from-home situation, but the expected investments by the large wireless providers are still largely in a holding pattern, impacting our near-term sales. As the roll-out accelerates, with our strong customer relationships, we are well-positioned for this 5G opportunity to help our customers grow and for the U.S. to take a leadership position in the 5G roll-out....

...Meanwhile, the company’s strategy and focus on execution is starting to pay off as we improved gross margins by 9% year-over-year... Year-over-year, we have reduced our quarterly SG&A expenses by 15%. We also strengthened our balance sheet as cash exceeds $10 million and working capital is almost $10 million. This solidifies our place in an industry readied for explosive growth.”

Covid is delaying the 5G rollout, but management sees major carriers restarting efforts by Q4 2020 and into 2021. The following conference call excerpt elaborates on this:

“T-Mobile, following its merger with Sprint, is expected to be the biggest player in the near-term with a significant list of sites to upgrade for 5G and thousands of Sprint sites that need to be either integrated or decommissioned. Our understanding is that the real estate and [permitting] work is well underway, and much of the equipment is being purchased. The industry consensus is that much of this work may start in calendar Q4 of 2020. Other providers have significant quantities of work as well. And we expect these to begin to be released between now and early 2021. We have not missed out on any meaningful projects today. The 5G initiative is just delayed. Partly due to COVID, partly due to the economy, and lastly, due to critical architecture decisions and OEM negotiations on equipment supply by the carriers.”

Growth expectations for 5G:

“By 2025, the number of 5G subscriptions in North America will grow to 320 million as 4G declines to 110 million. During this time, the amount of data traffic per smartphone will increase 5x, driven heavily by video applications and usage. And the total amount of mobile data traffic will increase 6x. All of this fuels tremendous demand for increased bandwidth and capacity across all wireless networks in the U.S. but also throughout the fiber optic backhaul network. While some of the carriers are announcing 5G availability this year, it is limited in coverage and scale in the initial stages. The [indiscernible] share of the work to upgrade these networks is just beginning and will last the next 5 to 7 years”

While the story is taking longer than we had hoped, it seems that the company’s growth plan is still intact, and once the Covid related delays are behind us, the company will be well positioned to take advantage. We continue to hold our long position and hope the stock stays depressed throughout the quarter especially towards the end. We may consider adding shares if the stock remains its current levels.

Research

Fri, 15 May 2020 19:28:17 GMT

Addvantage Technologies Group, (NASDAQ:AEY) ($2.22; $23.2M market cap), a communications infrastructure services and equipment provider, announced Q2 2020 results:

Sales of $12.0 million vs $12.9 million in the prior year
Non-GAAP loss of $0.56 vs loss of $0.12 in the prior year

“While we continue to see strong drivers in the need for 5G networks, immediate and near term activity has slowed industry wide significantly impacting our Fulton business and leading to lower operating margins and net losses,” commented Joe Hart, Chief Executive Officer. “In addition, our Nave and Triton businesses experienced softening sales during the quarter. This is not unexpected given the challenges in a COVID-19 environment, but with a view towards the long term we continue to improve operations and personnel to position us for profitable growth as the economy recovers. We are fortunate that our businesses are classified as ‘essential services’ and are allowed to continue operations in either providing needed network equipment or installing or maintaining cellular network communications...

..We see flat revenue performance in our Wireless segment in the second half of the fiscal year due to a lack of visibility on the timing of 5G buildout,” Hart continued. “We made several recent leadership changes at Fulton to address operational issues which significantly impacted our direct costs in the second quarter and should see a return to normalized gross margins. These operational challenges should be behind us. In our Telcom segment, Triton and Nave often perform well in a challenging economy as businesses look to repair instead of replace existing telephony systems.”

Research

Fri, 14 Feb 2020 17:12:34 GMT

Addvantage Technologies Group, (NASDAQ:AEY) ($3.21; $33.2M market cap), a communications infrastructure services and equipment provider, announced Q1 2020 results:

Sales of $14.0 million vs $6.8 million in the prior year
Loss per share of $0.17 vs loss of $0.12 in prior year period.

“We continue to make progress in the Company’s transformation and achieved year-over-year revenue growth across the company during this pivotal phase of the company’s transition. During the Quarter, we did experience the expected impact of weather and the holiday season, as well as unexpected geographic shifts in customer demand at Fulton. These factors negatively impacted margins and profitability, but are not unusual for this industry from time to time,” said Joe Hart, President and CEO. “The steps taken in the second half of 2019 to prepare the company for future growth are beginning to yield results as we have a robust pipeline of opportunities and continue to see a significant market opportunity with 5G across all of ADDvantage’s businesses. The weather impact at Fulton will continue in the second fiscal quarter, but similar to last year, we expect significant top and bottom line improvements in the second half of the year during the industry’s high season. Warmer weather also leads to increased productivity and special events work in the Midwest.”

“In our Wireless Segment, our near-term focus continues to be the expansion of our customer base within our existing markets while widening our addressable market in the adjacent regions to better position us for the 5-G rollout nationwide,” continued Mr. Hart. “During the quarter, a large carrier completed its work in the Southern United States earlier than expected, requiring us to reposition crews to the Northern region. The repositioning took several weeks, creating unforeseen costs and lost revenue. In aggregate, the time required to reposition crews, plus the expected weather and holiday impact, resulted in approximately three weeks of lost productivity, significantly impacting our revenue, margin, and profitability. We believe this situation is not representative of the normalized business in the future. We remain optimistic about the future of both our business Segments and are looking forward to substantial growth and positive results for this fiscal year.”

Conference call takeaways:

On the possibility of needing to raise money:

“So right now, we have a $4 million line of credit that we're able to use for working capital purposes. We're also -- as we stated in our 10-Q, we're also exploring our options around raising additional capital because to ramp-up in operation such as Fulton with a large contract that we win, we would need. Especially as George talked about, acquisitions and other things like that, there would be a need for additional capital.”

On reaching profitability:

“Yes. I mean, we fully expect 2020 to be a profitable year...I mean, we're focused on EBITDA -- yes, we're focused on EBITDA, John, and that's what we're trying to generate. So unfortunately, we aren't big enough at the moment to get through that winter slump without it having an impact. We hope to be there next winter and be able to mitigate some of the downside of our cyclical business.”

In our view, there wasn't much to get excited about in the quarter, from a numbers perspective. Even though the headline revenue number was strong, the growth was primarily driven by the inclusion of revenues from the wireless segment that AEY they acquired in Q4 2018. Thus, wireless segment revenue was not included in last year's Q1 numbers (we would have liked AEY to have included a proforma comparison). Telecom revenue only grew 5% to $7.2 million.

Regardless, as we mentioned in our original article published on October 30, 2019 when the stock was trading at $2.10, the AEY turnaround story is going to take some time to play out. We think the company is a quarter or 2 away from putting some of the short term challenges associated with the turnaround story behind them so it can grow revenues aggressively and get closer to achieving profitability.

In all, the story is playing out as we expected.

We were initially not too thrilled to notice that the company mentioned that it may be looking to raise capital. However, if you read in between the lines it appears that they are doing this to possibly prepare for a large project. So, a raise could possibly come in conjunction with some very positive news.

Another minor concern from the call is that management currently measures its profit goals in terms of EBITDA and not EPS. However, we assume this will change as their turnaround progresses.

Research

Wed, 18 Dec 2019 18:53:58 GMT

Addvantage Technologies Group, (NASDAQ:AEY) ($2.72; $28.0M market cap), a communications infrastructure services and equipment provider, announced Q4 2019 results yesterday after the close. We view today's pull back in shares as a possible opportunity to add to our position. It’s possible that any panic selling may be a result of investors misunderstanding the typical seasonality in the wireless infrastructure business that could impact the segment's Q1 and Q2 results.

AEY posted::

Q4 sales of $17.9 million vs $6.3 million in the prior year
Loss per share of $0.15 vs $0.37 in the prior year

“The second half of our fiscal year demonstrated the progress we have made in positioning all the segments of our business for sustainable growth and positive EBITDA contribution,” said Joe Hart, President and CEO. “As we move into the historically slower portion of our fiscal year impacted by winter weather, customer budget cycles and the holiday season, we are focused on streamlining our processes and developing a strong backlog of work for the calendar year. Accordingly, we expect continued year-over-year improvement throughout fiscal 2020.”

From the conference call:

“we are at the beginning of a multiyear secular trend, a catalyst, which is expected to drive our growth for several years”

“We are forecasting a strong double-digit top line increase to Fulton (wireless tower infrastructure division) and we expect positive adjusted EBITDA for fiscal 2020.”

“And although the New Year may start slowly, we believe fiscal year 2020 will be a year of solid top and bottom line improvements. We are encouraged by the rapid progress we have made in fiscal year 2019 and the nimbleness of our organization to flex and adapt to the changes in our business. We are poised to have an even better year in 2020."

It is our belief that the long term story is well intact and that company has placed itself in position for strong growth for years to come. As we mentioned in our initial October 30, 2019 report, we believe revenue growth is in the cards in the short-term and that profits will eventually arrive. We are just unsure on the timing of profitability.

We think short term investors, especially those not familiar with the company’s weather related seasonality in the wireless tower infrastructure segment, may look to exit since the stock has had a strong push over the last 3 months. Regarding the telecom segment, which is comprised of two business units...

Nave: provides telecom and network equipment to telecom operators.

Triton: provides telecom and network equipment to businesses.

...Nave is currently driving the growth. We Believe Triton will start contributing to the segment's revenue and probability by no later than AEY's second quarter. We expect Triton to be a high-margin contributor to AEY's business, due to greater efficiencies and product capabilities related to a new facility that Triton recently moved into. Unfortunately, the move to the new facility took a little longer than expected, but now seems to fully operational, based on a site visit we recently conducted.

Research

Thu, 03 Oct 2019 14:25:33 GMT

* AEY Article To BE Available Soon

We've been in constant communication with the management of Addvantage Technologies Group, (NASDAQ:AEY) ($1.95; $19.9M market cap) over the last 2 weeks to continue to gain an understanding of the business. We just wanted to let you know that our optimism is growing surrounding the direction that new management is taking the company.

We believe our research article on AEY should be available soon, and hope to get it to you within the next week.

Research

Wed, 11 Sep 2019 17:31:14 GMT

**Call To Action - Adding AEY To The Selected Long Screen

Our Expectations of The Time Horizon Needed For CTA To Play Out: Longer Term; Exploring Multibagger Potential

On August 13,2019 we highlighted Addvantage Technologies Group, (NASDAQ:AEY) ($1.74; $18.0M market cap) Q3 2019 results showing strong top line growth and improvements on the bottom line. AEY is a communications infrastructure services and equipment provider in the midst of a business shift that has caught our attention. The Company recently sold its Cable TV segment and is now focused on its wireless infrastructure and Telco equipment services divisions.

AEY is still in the early innings of its turnaround process, but it seems like the Company is on the right path to profitability and growth. We recently interviewed management to discuss the history of the business, why they sold the cable TV segment, and how it plans to catalyze the growth of two acquisitions the company recently consummated. We are very impressed with the management team and their handle on the opportunities that lie ahead of them, including the rollout of 5G, and area in which it appears they will be a significant benefactor.

We do believe that revenue will accelerate quickly. We are trying to gain a better handle on when consistent profit growth will be in the cards, which will ultimately determine how quickly this idea may play out.

We plan to publish an article on this idea.

Research

Tue, 13 Aug 2019 18:10:48 GMT

Addvantage Technologies Group, (NASDAQ:AEY) ($1.74; $18.0M market cap) a communications infrastructure services and equipment provider announced its Q3 2019 results:

Sales of $17.6 million vs $7.7 million in the prior year
Loss per share of $0.14 vs $0.15 in the prior year (loss includes losses from discontinued operations from recent sale of cable business)
Earnings from continuing operations of $0.00 vs a loss of $0.03 in the prior year

Yesterday via tweet we stated:

Comments from management:

"We also reported positive Adjusted EBITDA of $0.4 million, compared with a loss of $0.3 million for the same period in 2018. This improvement in financial performance was driven by both the Wireless and Telco segments, reflecting our increased focus on these high-growth markets. A major accomplishment this quarter was the sale of the Cable TV segment, which closed on June 30. This major milestone significantly advances our growth strategy by providing us with additional funds to invest in solidifying and expanding our position in the telecommunications and wireless infrastructure services markets. As a reminder, the results for the Cable TV segment have been reclassified to discontinued operations as a result of the Cable TV segment sale, so we are now only reporting the Wireless and Telco segments...

...We are excited by Fulton's growth and financial results in their second quarter with ADDvantage and are encouraged by the opportunities we see unfolding in the industry as wireless carriers prepare and rollout 5G networks. We believe that Fulton will continue to provide strong revenue growth and gradually improving margins as it executes on growth opportunities in the market...

...We believe that Triton is poised to expand, capture additional market share and develop new customers. While Nave was the main Adjusted EBITDA growth driver in the third quarter, we expect to see Triton's operating results improve as a result of the upcoming changes.

ADDvantage now has a stronger and more efficient foundation to support top and bottom line growth. The sale of the Cable TV segment marks a turning point for the Company, and we are excited to capitalize on this opportunity by investing in the long-term growth of our wireless and telecom businesses. Our growth initiatives in Triton and Nave have already led to improved results, and we can see significant room for sales growth in both these businesses. This, combined with the major opportunity at Fulton to grow market share in the expanding wireless infrastructure services market, leaves us well-positioned to build value for our shareholders," concluded Mr. Hart.

We will be on the company’s Q3 conference call at noon EST today to see if any information arbitrage is presented.