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WIRELESS TELECOM GROUP ANNOUNCES THIRD QUARTER 2020 FINANCIAL RESULTS

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Wireless Telecom Group reported Q3 2020 net revenues of $10.9 million, slightly up from $10.8 million in 2019, with a gross profit of $5.7 million reflecting a 52% margin. The net loss widened to $775,000 from $461,000 a year prior. Non-GAAP Adjusted EBITDA surged to $722,000, a 644% increase year-over-year. New customer orders totaled $10.8 million, with significant contributions from the Holzworth acquisition, while the backlog grew to $6.1 million. Despite COVID-19 delays, the company anticipates growth in software solutions.

Positive
  • Non-GAAP Adjusted EBITDA increased by 644% year-over-year to $722,000.
  • Gross profit margin improved to 52%, up from 44.6% in Q3 2019.
  • New software and services contracts worth $2.4 million signed year-to-date.
Negative
  • Net loss increased to $775,000 compared to $461,000 in the same quarter last year.
  • Total new customer orders decreased to $10.8 million from $11.0 million year-over-year.
  • Operating expenses rose to $6.0 million from $5.5 million due to increased R&D investments.

Highlights for the quarter ended September 30, 2020:

Net revenues of $10.9 million
Gross profit of $5.7 million, 52% gross profit margin
New customer orders of $10.8 million
New customer software and services contract for an LTE satellite project
Net loss of $775,000, compared to a net loss of $461,000 for the same period last year
Non-GAAP Adjusted EBITDA of $722,000, an increase of $625,000 or 644% from the same period last year

Parsippany, New Jersey, Nov. 13, 2020 (GLOBE NEWSWIRE) -- Wireless Telecom Group, Inc. (NYSE American: WTT) (the “Company”) announced today results for the 2020 third quarter ended September 30, 2020.

Tim Whelan, CEO of Wireless Telecom Group, Inc., commented, “Despite the continued market challenges, we made progress in the third quarter executing on our strategic plan to drive long term organic growth and improved profitability. We released three new products and signed a new contract for our LTE software and services for a satellite application. Our improving gross profit margins reflect our continued success driving our Radio, Baseband and Software solutions and our Test & Measurement solutions which includes successful organic growth for our Holzworth product solutions.”

Whelan continued, “Momentum for our software solutions is accelerating, and I am excited to announce that the Company signed another new software contract in October. With this contract, we have year-to-date software and service wins of approximately $2.4 million. Our sales pipeline for our software and services solutions is robust and we expect additional new contracts to sign before the end of 2020 as well as in early 2021 which could meaningfully add scale within this market. We are thrilled that our RBS Solutions portfolio is providing successful growth milestones, including an expanding funnel, four signed contracts, and a larger backlog to be delivered over the next several quarters.”

Mr. Whelan concluded, “While the Covid-19 crisis has delayed spend on certain programs, our diversified product strategy and end-market focus has allowed us to successfully navigate through this challenging period. We remain focused on providing leading solutions for large and growing markets and we believe we are positioned for sales growth and improved profitability in 2021 and beyond.”

For the quarter ended September 30, 2020, the Company reported consolidated net revenues of $10.9 million compared to $10.8 million for the same period in 2019, which primarily reflects increases in our software licenses and Test & Measurement (T&M) products offset by lack of demand for our Radio, Baseband and Software (RBS) digital signal processing hardware products and lower sales of RF Components (RFC) products due to delays in spending by carriers on large venues. T&M revenue increased 93.5% from the prior year reflecting the inclusion of the Holzworth acquisition which contributed $2.8 million in revenue in the third quarter of 2020.

New customer orders for the third quarter were $10.8 million compared to $11.0 million in the same period in the prior year. The Company’s consolidated backlog of firm orders was $6.1 million at September 30, 2020, compared to $6.2 million at June 30, 2020. The September 30, 2020 backlog includes $875,000 of software and services compared to $385,000 at June 30, 2020.

The Company reported consolidated gross profit of $5.7 million or 52.0% of revenue, for the quarter ended September 30, 2020, compared to $4.8 million or 44.6% of revenue, for the same period in 2019. Gross margins increased in 2020 due to higher margin software sales in the RBS product group, the contribution of higher margin Holzworth products in the T&M product group and the impact of cost savings activities initiated by the Company at the beginning of the year.

For the quarter ended September 30, 2020, the Company reported consolidated operating expenses of $6.0 million, compared to $5.5 million for the same period in 2019. The increase resulted from higher investments in research and development in the area of T&M product roadmap and the addition of Holzworth operating expenses. Research and Development accounted for 30% of the operating expenses in the quarter compared to 24% during the same period in 2019.

Net loss for the quarter ended September 30, 2020 was $775,000, compared to net loss of $461,000 for the same period in 2019, primarily due to higher research and development expenses, higher foreign exchange loss, higher interest expense and higher tax expense primarily due to qualified PPP loan expenses that cannot be deducted if the loan is expected to be forgiven, offset by greater gross profit margin contribution.

Non-GAAP Adjusted EBITDA for the quarter ended September 30, 2020 was $722,000, compared to $97,000 for the same period in 2019, an increase of 644%, or $625,000. The increase in non-GAAP Adjusted EBITDA from the prior year is attributable to the increased gross margins and lower operating expenses in our core business offset by the inclusion of the operating expenses from the Holzworth acquisition. The Company’s explanation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to net income (loss) is set out below in this press release.

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 third quarter results and related matters. To participate in the conference call, dial 800-346-7359 or 973-528-0008. The conference identification number is 442232. The call will also be webcast over the internet at the following URL:

https://www.webcaster4.com/Webcast/Page/1690/38126

A replay will be made available on the Wireless Telecom website following the conference call.

Contact: Mike Kandell
(973) 386-9696

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, unrealized and realized foreign exchange gains and losses, purchase accounting adjustments, non-recurring legal fees associated with the Harris arbitration and other non-recurring costs. A reconciliation of net income to non-GAAP Adjusted EBITDA is included as an attachment to this press release.

The Company defines Adjusted EBITDA margin as Adjusted EBITA divided by revenue. The Company does not provide a forward-looking reconciliation of expected Adjusted EBITDA Margin because the amount and significance of special items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts. These special items could be meaningful.

GAAP operating expenses (“GAAP opex”) includes research and development expenses, sales and marketing expenses and general and administrative expenses. The Company defines non-GAAP Operating Expenses (“Non-GAAP Opex”) as GAAP opex excluding stock compensation expense, restructuring charges, acquisition expenses, integration expenses, depreciation and amortization expense, non-recurring legal fees associated with the Harris arbitration and other non-recurring costs and expenses.

The Company views Adjusted EBITDA, Adjusted EBITDA margin and Non-GAAP Opex as important indicators 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 and Non GAAP Opex 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, statements related to the ongoing effects the COVID-19 pandemic is expected to have on our business; our expectation of additional new contracts to sign in the future as well as the meaningfulness and added scale of any such contracts; our position for sales growth and improved profitability in the future and financial results and statements regarding the overall improving margins and opportunity for continued growth ahead, goals of organic double digit revenue growth, 50+% gross margins and Adjusted EBITDA margins of 15% by 2024. 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 impact of the coronavirus outbreak on customer orders, supply chain and the Company’s operations; the ability of the Company to obtain forgiveness of the PPP loan pursuant to the CARES Act and provisions of the PPP; the demand for private 4G LTE and 5G private networks; the loss of any significant customers of the Company; the ability of management to successfully implement the Company’s business plan and strategy; management’s ability to integrate the Holzworth business successfully; the impact of competitive products and pricing; 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, 2019 as supplemented and revised by the risks and uncertainties set forth in the Company’s subsequent reports filed with the SEC. 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, 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 generators, phase noise analyzers, signal processing modules, LTE PHY/stack software, power splitters and combiners, GPS repeaters, public safety components, noise sources, and programmable noise generators, Wireless Telecom Group enables 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.

Contact:
Michael Kandell: +1 (973) 386-9696
Wireless Telecom Group Inc.
25 Eastmans Road
Parsippany, NJ 07054
Tel: (973) 386-9696
Fax: (973) 386-9191
www.wtcom.com

Wireless Telecom Group, Inc.

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)
(In thousands, except per share amounts, Unaudited)

  For the Three Months Ended  For the Nine Months Ended 
  September 30  September 30 
  2020  2019  2020  2019 
Net revenues $10,868  $10,812  $31,404  $37,353 
                 
Cost of revenues  5,214   5,987   15,655   20,668 
                 
Gross profit  5,654   4,825   15,749   16,685 
                 
Operating expenses                
Research and development  1,826   1,343   5,080   4,556 
Sales and marketing  1,732   1,753   5,111   5,718 
General and administrative  2,444   2,407   7,322   7,341 
Total operating expenses  6,002   5,503   17,513   17,615 
                 
Operating loss  (348)  (678)  (1,764)  (930)
                 
Other income/(expense)  (43)  108   252   273 
Interest (expense)  (256)  (60)  (727)  (248)
                 
Loss before taxes  (647)  (630)  (2,239)  (905)
                 
Tax provision/(benefit)  128   (169)  352   (256)
                 
Net Loss $(775) $(461) $(2,591) $(649)
                 
Other comprehensive income/(loss):                
Foreign currency translation adjustments  565   (491)  (406)  (566)
Comprehensive loss $(210) $(952) $(2,997) $(1,215)
                 
Loss per share:                
Basic $(0.04) $(0.02) $(0.12) $(0.03)
Diluted $(0.04) $(0.02) $(0.12) $(0.03)
                 
Weighted average shares outstanding:                
Basic  21,703   20,866   21,643   20,854 
Diluted  21,703   20,866   21,643   20,854 

In periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation because they are anti-dilutive.

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

  (Unaudited)    
  September 30
2020
  December 31
2019
 
CURRENT ASSETS        
Cash & cash equivalents $2,203  $4,245 
Accounts receivable - net of reserves of $42 and $69, respectively  8,040   6,152 
Inventories - net of reserves of $1,082 and $969, respectively  9,074   7,325 
Prepaid expenses and other current assets  2,074   1,871 
TOTAL CURRENT ASSETS  21,391   19,593 
         
PROPERTY PLANT AND EQUIPMENT - NET  1,898   2,147 
         
OTHER ASSETS        
Goodwill  15,881   10,069 
Acquired intangible assets, net  5,479   2,219 
Deferred income taxes  4,956   6,013 
Right of use assets  1,814   1,436 
Other  1,617   874 
TOTAL OTHER ASSETS  29,747   20,611 
         
TOTAL ASSETS $53,036  $42,351 
         
CURRENT LIABILITIES        
Short term debt $84  $2,696 
Accounts payable  1,894   2,227 
Short term leases  527   440 
Accrued expenses and other current liabilities  8,497   2,657 
Deferred revenue  170   42 
TOTAL CURRENT LIABILITIES  11,172   8,062 
         
LONG TERM LIABILITIES        
Long term debt  9,290   - 
Long term leases  1,338   1,018 
Other long term liabilities  89   77 
Deferred tax liability  492   503 
TOTAL LONG TERM LIABILITIES  11,209   1,598 
         
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
34,905,571 and 34,488,252 shares issued, 21,695,010 and 21,300,252 shares outstanding
  349   345 
Additional paid in capital  50,049   49,062 
Retained earnings  4,552   7,142 
Treasury stock at cost, 13,210,561 and 13,188,000 shares  (24,540)  (24,509)
Accumulated other comprehensive income  245   651 
TOTAL SHAREHOLDERS’ EQUITY  30,655   32,691 
         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $53,036  $42,351 

CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands, unaudited)

  For the Nine Months 
  Ended September 30 
  2020  2019 
CASH FLOWS USED BY OPERATING ACTIVITIES        
Net Loss $(2,591) $(649)
Adjustments to reconcile net loss to net cash used by operating activities:        
Depreciation and amortization  1,631   1,671 
Amortization of debt issuance fees  215   47 
Share-based compensation expense  360   560 
Deferred rent  (22)  (18)
Deferred income taxes  1,057   (309)
Provision for doubtful accounts  (28)  20 
Inventory reserves  119   139 
Changes in assets and liabilities, net of acquisition:        
Accounts receivable  (1,343)  520 
Inventories  (461)  (1,627)
Prepaid expenses and other assets  (226)  993 
Accounts payable  (451)  (567)
Payment of contingent consideration  -   (772)
Accrued expenses and other liabilities  888   (1,635)
Net cash used by operating activities  (852)  (1,627)
         
CASH FLOWS USED BY INVESTING ACTIVITIES        
Capital expenditures  (228)  (339)
Acquisition of business, net of cash acquired  (7,189)  (426)
Net cash used by investing activities  (7,417)  (765)
         
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES        
Revolver borrowings  27,432   27,408 
Revolver repayments  (29,786)  (26,333)
Term loan borrowings  8,400   - 
Term loan repayments  (405)  (114)
Debt issuance fees  (1,305)  - 
Paycheck protection program loan  2,045   - 
Payment of contingent consideration  -   (782)
Proceeds from exercise of stock options  15   - 
Shares withheld for employee taxes  (31)  - 
Net cash provided by financing activities  6,365   179 
         
Effect of Exchange Rate Changes on Cash and Cash Equivalents  (138)  (67)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS  (2,042)  (2,280)
         
Cash and Cash Equivalents, at Beginning of Period  4,245   5,015 
         
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $2,203  $2,735 
         
SUPPLEMENTAL INFORMATION:        
Cash paid during the period for interest $527  $143 
Cash paid during the period for income taxes $53  $69 

NET REVENUE AND GROSS PROFIT BY PRODUCT GROUP
(In thousands, Unaudited)

  Three months ended September 30, 
  Revenue  % of Revenue  Change 
  2020  2019  2020  2019  Amount  Pct. 
RF components $4,418  $5,185   40.7%  48.0% $(767)  -14.8%
Test and measurement  5,797   2,996   53.3%  27.7%  2,801   93.5%
Radio, baseband, software  653   2,631   6.0%  24.3%  (1,978)  -75.2%
Total net revenues $10,868  $10,812   100.0%  100.0% $56   0.5%
    
  Three months ended September 30, 
  Gross Profit  Gross Profit %  Change 
  2020  2019  2020  2019  Amount  Pct. 
RF components $1,927  $2,104   43.6%  40.6% $(177)  -8.4%
Test and measurement  3,182   1,497   54.9%  50.0%  1,685   112.6%
Radio, baseband, software  545   1,224   83.5%  46.5%  (679)  -55.5%
Total gross profit $5,654  $4,825   52.0%  44.6% $829   17.2%
    
  Nine months ended September 30, 
  Revenue  % of Revenue  Change 
  2020  2019  2020  2019  Amount  Pct. 
RF components $14,555  $16,518   46.4%  44.2% $(1,963)  -11.9%
Test and measurement  14,013   9,219   44.6%  24.7%  4,794   52.0%
Radio, baseband, software  2,836   11,616   9.0%  31.1%  (8,780)  -75.6%
Total net revenues $31,404  $37,353   100.0%  100.0% $(5,949)  -15.9%
    
  Nine months ended September 30, 
  Gross Profit  Gross Profit %  Change 
  2020  2019  2020  2019  Amount  Pct. 
RF components $6,576  $6,893   45.2%  41.7% $(317)  -4.6%
Test and measurement  7,451   4,843   53.2%  52.5%  2,608   53.9%
Radio, baseband, software  1,722   4,949   60.7%  42.6%  (3,227)  -65.2%
Total gross profit $15,749  $16,685   50.1%  44.7% $(936)  -5.6%

RECONCILIATION OF NET INCOME TO NON-GAAP EBITDA AND NON-GAAP ADJUSTED EBITDA
(In thousands, Unaudited)

  Three Months Ended  Nine Months Ended 
  September 30  September 30 
  2020  2019  2020  2019 
GAAP net income/(loss), as reported $(775) $(461) $(2,591) $(649)
Tax provision/(benefit)  128   (169)  352   (256)
Depreciation and amortization expense  579   474   1,628   1,671 
Interest expense  256   60   727   248 
Non-GAAP EBITDA  188   (96)  116   1,014 
Stock compensation  151   160   360   560 
Merger and acquisition/integration  15   -   243   - 
Restructuring costs  46   123   119   123 
Inventory impairment recovery  (14)  (13)  (26)  (18)
US GAAP purchase accounting  258   -   548   - 
FX (gain)/loss  95   (108)  (140)  (257)
Non recurring arbitration legal costs  (17)  31   (14)  156 
Non-GAAP adjusted EBITDA $722  $97  $1,206  $1,578 

RECONCILIATION OF GAAP OPEX TO NON-GAAP OPEX
(In thousands, Unaudited)

  Three Months Ended  Nine Months Ended 
  September 30  September 30 
  2020  2019  2020  2019 
GAAP Opex $6,002  $5,503  $17,513  $17,615 
Stock compensation  (151)  (160)  (360)  (559)
Merger and acquisition/integration  (15)  -   (243)  - 
Restructuring costs  (46)  (123)  (119)  (123)
US GAAP purchase accounting  -   -   (100)  - 
Depreciation & amortization (ex. COGS)  (478)  (421)  (1,356)  (1,479)
Non recurring arbitration legal costs  17   (31)  14   (156)
Non GAAP Opex $5,329  $4,768  $15,349  $15,298 


FAQ

What were the Q3 2020 revenues for Wireless Telecom Group (WTT)?

Wireless Telecom Group reported net revenues of $10.9 million for Q3 2020.

How did Wireless Telecom Group's gross profit margin change in Q3 2020?

The gross profit margin increased to 52% in Q3 2020, up from 44.6% in the same quarter last year.

What was the net loss reported by Wireless Telecom Group in Q3 2020?

The company reported a net loss of $775,000 for the quarter ended September 30, 2020.

What is the Adjusted EBITDA for Wireless Telecom Group in Q3 2020?

The non-GAAP Adjusted EBITDA for Q3 2020 was $722,000, marking a 644% increase year-over-year.

How much new customer orders did Wireless Telecom Group secure in Q3 2020?

New customer orders totaled $10.8 million in Q3 2020.

Wireless Telecom Group, Inc.

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Parsippany