ADDvantage Technologies (AEY) Stock: Over 18% Increase Explanation

By Amit Chowdhry ● May 14, 2021
  • The stock price of ADDvantage Technologies Group, Inc. (NASDAQ: AEY) has increased by over 18% during intraday trading. This is why it happened.

The stock price of ADDvantage Technologies Group, Inc. (NASDAQ: AEY) has increased by over 18% during intraday trading. Investors are responding positively to the company’s financial results for the three- and six-month periods ended March 31, 2021.

Financial Results for the Three Months Ended March 31, 2021

— Sales increased $0.7 million, or 6%, to $12.7 million for 3 months ended March 31, 2021 from $12 million for the 3 months ended March 31, 2020. The increase in sales was due to increased sales in the Telco segment of $1 million partially offset by a decrease in Wireless segment sales of $0.3 million.

— Gross profit increased $3.6 million for 3 months ended March 31, 2021 to $3.2 million compared to a deficit of $0.4 million for the same period last year. And the increases in gross profit were due to an increase in the Telco segment of $2.3 million, and a Wireless segment increase of $1.3 million. The 3 months ended March 31, 2020 included an inventory obsolescence charge in the Telco segment of $2.1 million.

— Operating expenses include indirect costs associated with operating the business like indirect personnel, facilities, vehicles, insurance, communication, and business taxes. Operating expenses remained consistent at approximately $2.2 million for the 3 months ended March 31, 2021 and $2.1 million for the same period last year.

— Consolidated selling, general and administrative (SG&A) expenses include overhead, which consist of personnel, insurance, professional services, communication, and other cost categories. And the SG&A expenses increased $0.9 million, or 30%, to $3.8 million for the 3 months ended March 31, 2021 from $2.9 million for the same period last year. The increase in SG&A relates to increased personnel costs such as non-cash stock compensation of $0.1 million, executive severance of $0.2 million, as well as computing and communications costs of approximately $0.2 million, and $0.4 million of increased selling costs compared to the same period last year.

— The net loss for the 3 months ended March 31, 2021 was $3.1 million, or a loss of $0.25 per diluted share, an improvement of $11.6 million compared with a net loss of $14.7 million, or a loss of $1.41 per diluted share for the same quarter last year. And net loss for the 3-month period ended March 21, 2020 included $8.7 million in impairment charges related to intangible assets including goodwill, and inventory obsolescence $2.1 million.

— The adjusted EBITDA loss for the 3 months ended March 31, 2021 was $2.5 million compared with an Adjusted EBITDA loss of $5.4 million for the same quarter last year. And adjusted EBITDA loss for the three months ended March 31, 2020 included an inventory obsolescence charge of $2.1 million.

Financial Results for the Six Months Ended March 31, 2021

— Sales decreased $0.5 million, or 2%, to $25.4 million for the six months ended March 31, 2021 from $25.9 million for the six months ended March 31, 2020. The decrease in sales was primarily in the Wireless segment, which decreased $1.9 million, partially offset by an increase in sales from the Telco segment of $1.4 million.

— The gross profit increased $3.7 million, or 116%, to $6.8 million for the six months ended March 31, 2021 from $3.2 million for the same period last year. The increase in gross profit was due to an increase in the Telco segment of $2.6 million, as well as an increase in the Wireless segment of $1.1 million.

— The operating expenses decreased $0.1 million, or 1%, to $4.2 million for the six months ended March 31, 2021 from $4.3 million for the same period last year.

— Selling, general and administrative expenses increased $1.3 million, or 23%, to $7.0 million for the six months ended March 31, 2021 from $5.7 million for the same period last year. General and administrative costs accounted for $0.7 million of the increase, while selling costs accounted for $0.6 million of the increase. The increase in G&A was due to increased personnel costs of $0.4 million and increased computing and communication costs of approximately $0.3 million.

— The net loss for the six months ended March 31, 2021 was $5.0 million, or a loss of $0.41 per diluted share, an improvement of $11.4 million compared with a net loss of $16.4 million, or a loss of $1.58 per diluted share for the six months ended March 31, 2020. The six-month period during 2020 included impairment of intangibles including goodwill of $8.7 million and inventory reserve and net realizable value adjustments totaling $2.1 million.

— The Adjusted EBITDA loss for the six months ended March 31, 2020 was $3.8 million compared with an Adjusted EBITDA loss of $6.7 million for the same quarter last year. Adjusted EBITDA loss for the six months ended March 31, 2020 included an inventory obsolescence charge of $2.1 million.

— The cash and cash equivalents were $5.2 million as of March 31, 2021, compared with $8.4 million as of September 30, 2020. And as of March 31, 2021, the company had net inventories of $5.7 million, compared with $5.6 million as of September 30, 2020.

— The outstanding debt decreased during the six month period ended March 31, 2021 by $1 million to $7 million, which is comprised of $2.8 million on a revolving line of credit, $2.9 million of notes payable under their Payroll Protection Program (PPP) loan, and $1.3 million in financing leases. At September 30, 2020 outstanding debt was $8.0 million. The Company has applied for forgiveness of the PPP loan. The lender reviewed the application and forwarded to the SBA for approval on September 27, 2020.

— During the first quarter, the company renewed its revolving bank line of credit for one year to a maturity date of December 17, 2021. And as part of this renewal, capacity on the revolving bank line of credit remained $4 million, or the sum of 80% of eligible accounts receivable and 60% of eligible inventory, as defined in the loan agreement. As of March 31, 2021, $2.8 million has been drawn on the revolving bank line, with $1.2 million remaining eligibility. In combination with operating cash of $4.9 million, the Company had $6.1 million of liquidity at March 31, 2021.

KEY QUOTES:

“Late in the second fiscal quarter, we began to see a clear and significant ramp in the number of 5G and 4G site awards from multiple carriers with multiple awards in both existing and net new markets throughout the greater Midwest and Southwest regions. The awards were either for prepping for the 5G transformation by decommissioning and removing older technologies to make room for new 5G installations or greenfield sites for installing new 5G radios and antennas. In addition, we continue to see insatiable wireless capacity demands as we continue to earn awards for installing additional 4G frequencies. These notice of awards, and in some cases the initial purchase orders, represent the long-awaited ramp up of Wireless construction activity related to 5G in our Central Region markets.”

“This encouraging progress gives us confidence that our growth and investment strategy for our wireless segment in the second half of calendar 2021 is starting to pay off. Based on the specific schedules provided by our both our Wireless Carrier and OEM customers, we expect these awards will benefit us starting in our FY21 Q4 timeframe.”

“During our FY21 Q3, we expect incremental, phased awards, resulting in additional clarity regarding the magnitude of the 5G and 4G work. We expect to be able to report a growing backlog of assigned tower work, demonstrating the progress we have made and positioning us for a strong FY21 Q4 and an exciting FY22.”

— Joe Hart, Chief Executive Officer

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.