TESSCO Technologies, Inc. : TESSCO Announces Record Revenue of $226 Million and Record EPS of $0.59 for Third Quarter
01/17/2012| 05:30pm US/Eastern
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0
Quarterly operating margin increases to 3.5%
Record quarterly EBITDA* of $1.12 per share
9-month revenue reaches $539 million
9-month EPS reaches $1.60
9-month EBITDA per share reaches $3.08
$0.15 per share dividend date set
TESSCO Technologies Incorporated (NASDAQ:TESS), a leading provider to
the wireless communication industry, today reported revenues of $226.3
million and net income of $4.8 million, or $0.59 per diluted share, for
the third fiscal quarter ended December 25, 2011.
Chairman and CEO Robert Barnhill commented, "It was a great quarter,
resulting in record revenues and earnings! Sales in our Retail segment
surged 67 percent as our customers, including Tier 1 carrier customers,
responded to consumers' continued quest to equip their cell phones with
new cases, chargers and head sets. Our Commercial segment continued to
contribute strongly to our results as we supported the construction and
maintenance of our customers' wireless systems. We continued to deliver
exceptional value to all our customers with growing profitability;
operating profit margin reached 3.5 percent, a 35 percent increase
compared to last year's quarter.
"Fiscal year 2012 is indeed proving to be a remarkable year for TESSCO
as we successfully leverage the many opportunities arising from the
convergence of wireless and the internet, broaden our addressable
market, and build profitability and productivity.
"Going forward, we expect continued explosion of smart mobility devices,
the accelerated expansion and enhancement of the carrier networks to
support the devices' insatiable demand for bandwidth, and the creation
of new private wireless systems to transform the way we live, work and
play. TESSCO is there, leveraging these trends and delivering the
immediate, reliable availability of the product plus value chain
solutions needed, at the lowest total cost. We continue our goal of
driving shareowner value with intense focus on the success of our
customers, manufacturers and team members."
Third-Quarter Fiscal 2012 Financial Results
For its fiscal 2012 third quarter, TESSCO's revenue grew by 35 percent
compared to last year's third quarter and reached $226.3 million, while
its gross profit grew by 17 percent and reached $39.5 million. The
Company's operating margin improved to 3.5 percent compared to 2.6
percent in last year's third quarter.
In the Retail segment, revenue increased by 67 percent and gross profit
increased by 41 percent. Within this segment, the retailer, dealer agent
and Tier 2/3 carrier market produced 15 percent revenue growth and 36
percent gross profit growth, and the Tier 1 carrier market experienced
93 percent revenue growth and 44 percent gross profit growth. The growth
in the Tier 1 carrier market was mostly attributable to the expected
expansion of our relationship with our major Tier 1 carrier customer.
Retail segment directly allocatable expenses rose by 7 percent, and
market net profit contribution increased by 100 percent.
In the Commercial segment, revenue increased by 2 percent and gross
profit increased by 3 percent. Within this segment, the private and
government systems market produced 9 percent revenue growth and 11
percent gross profit growth; the commercial dealer and reseller market
produced 15 percent revenue growth and 11 percent gross profit growth;
and the public systems operator market experienced a 21 percent decline
in both revenue and gross profit. Segment directly allocatable expenses
declined by 13 percent, and market net profit contribution increased by
24 percent.
Corporate support expenses grew by $3.1 million, or 33 percent, for the
quarter. This growth is wholly attributable to increases in the
company-wide pay-for-performance bonus accruals, which offset declines
in other corporate support expenses.
Net income totaled $4.8 million, or $0.59 per diluted share, in the
third quarter as compared to $3.0 million, or $0.38 per diluted share,
in the prior-year quarter.
EBITDA* totaled $9.1 million, or $1.12 per diluted share, in the third
quarter of fiscal 2012 as compared to $5.5 million, or $0.69 per diluted
share, in the prior-year quarter.
For the first nine months of fiscal 2012, TESSCO reported revenues of
$538.6 million and net income of $12.9 million, or $1.60 per diluted
share. These results compare to revenues of $474.9 million and net
income of $8.4 million, or $1.07 per diluted share, in the first nine
months of fiscal 2011. EBITDA for the first nine months of fiscal 2012
totaled $24.8 million, or $3.08 per share, compared to $16.6 million, or
$2.11 per share, in the first nine months of fiscal 2011.
As of December 25, 2011, the company's cash balance totaled $14.5
million and there was no balance outstanding on the revolving line of
credit.
Quarterly Cash Dividend
As previously reported, the company is continuing its quarterly dividend
program with a $0.15 per common share cash dividend payable on February
15, 2012, to holders of record on February 1, 2012. Any future
declaration of dividends, and the establishment of record and payment
dates, is subject to further determinations of the company's Board of
Directors.
Business Outlook
Based on results through the third quarter of fiscal 2012 and our view
of the current pipeline of business opportunities, we currently expect
that earnings per diluted share for fiscal 2012 will range from $1.90 to
$2.10.
Forecasting future results is inherently difficult for any business and
actual results may differ materially from those forecasted. Moreover,
the nature of our business is that we typically ship products within
several days after booking orders. The lack of an order backlog makes it
even more difficult to forecast future results. The Business Outlook
published in this press release reflects only the company's current best
estimate and the company assumes no obligation to update the information
contained in this press release, including the Business Outlook, at any
time
As we have previously disclosed, our major tier one carrier customer has
indicated that, over time, it expects to continue to explore business
model changes in an ongoing effort to lower total costs. Notwithstanding
the recent expansion of the relationship with this customer, it should
be noted that this relationship, like those with most of our other
customers and suppliers, contains no ongoing purchase or sale
obligations and is terminable by either party upon relatively short
notice. Further, any future business model changes by our largest
customer put our supply chain business with this customer at risk.
Absent this supply chain relationship, we could, however, maintain the
ability to sell our proprietary products to this customer.
Third-Quarter Fiscal 2012 Conference Call
Management will host a conference call to discuss its results for the
third fiscal quarter, ended December 25, 2011, on Wednesday, January 18,
2012 at 10:00 a.m. ET. To participate in the conference call, please
call: 800-901-5217 (domestic call-in) or 617-786-2964 (international
call-in) and reference code #53070260. A live webcast of the conference
call will be available at http://www.tessco.com/go/pressroom.
All participants should call or access the website approximately 10
minutes before the conference begins.
A telephone replay of the conference call will be available from 1:00
p.m. ET on January 18, 2012 until 5:00 p.m. ET on January 25, 2012 by
calling 888-286-8010 (domestic) or 617-801-6888 (international) and
entering confirmation #90641439. An archived replay of the conference
call will also be available on the company's website.
*Non-GAAP Information
EBITDA, a measure used by management to evaluate the company's ongoing
operations and as a general indicator of its operating cash flow (in
conjunction with a cash flow statement which also includes among other
items, changes in working capital and the effect of non-cash charges),
is defined as income from operations, plus interest expense, net of
interest income, provision for income taxes, and depreciation and
amortization. Management believes EBITDA as well as EBITDA per share are
useful to investors because they are frequently used by securities
analysts, investors and other interested parties in the evaluation of
companies. Because not all companies use identical calculations, the
company's presentation of EBITDA and EBITDA per share may not be
comparable to other similarly titled measures of other companies. EBITDA
is not a recognized term under GAAP and does not purport to be an
alternative to net income as a measure of operating performance or to
cash flows from operating activities as a measure of liquidity. EBITDA
per diluted share is also a non-GAAP calculation defined as EBITDA
divided by the company's diluted weighted average shares outstanding.
Additionally, EBITDA is not intended to be a measure of free cash flow
for management's discretionary use, as it does not reflect certain cash
requirements such as interest payments, tax payments and debt service
requirements. The amounts shown for EBITDA as presented herein differ
from the amounts calculated under the definition of EBITDA used in the
company's loan agreements. The definition of EBITDA as used in the
company's loan agreements is further adjusted for certain cash and
non-cash charges/credits, including stock compensation expense, and is
used to determine compliance with financial covenants and the ability to
engage in certain activities such as incurring additional debt.
A reconciliation of the company's non-GAAP to GAAP results is included
as an exhibit to this release.
About TESSCO
TESSCO Technologies, (NASDAQ:TESS), is Your Total Source® for
making wireless work. The convergence of wireless and the internet is
revolutionizing the way we live and work. New systems and applications
are unlocking human potential at an unprecedented rate. TESSCO is there,
thinking in new ways for exceptional outcomes. TESSCO architects and
delivers, with innovation, productivity and speed, the product and value
chain solutions to organizations responsible for building, using and
maintaining wireless voice, data and video systems.
Forward-Looking Statements
This press release, including the statements of Robert Barnhill and the
discussion under the heading "Business Outlook", contains
forward-looking statements as to anticipated results and future
prospects. These forward-looking statements are based on current
expectations and analysis, and actual results may differ materially.
These forward-looking statements may generally be identified by the use
of the words "may," "will," "expects," "anticipates," "believes,"
"estimates," and similar expressions, but the absence of these words or
phrases does not necessarily mean that a statement is not
forward-looking. Forward-looking statements involve a number of risks
and uncertainties. Our actual results may differ materially from those
described in or contemplated by any such forward-looking statement for a
variety of reasons, including those risks identified in our most recent
Annual Report on Form 10-K and other periodic reports filed with the
Securities and Exchange Commission, under the heading "Risk Factors" and
otherwise. Consequently, the reader is cautioned to consider all
forward-looking statements in light of the risks to which they are
subject.
We are not able to identify or control all circumstances that could
occur in the future that may adversely affect our business and operating
results. Without limiting the risks that we describe in our periodic
reports and elsewhere, among the risks that could lead to a materially
adverse impact on our business or operating results are the following:
termination or non-renewal of limited duration agreements or
arrangements with our vendors and affinity partners that are typically
terminable by either party upon several months or otherwise relatively
short notice; loss of significant customers or relationships, including
affinity relationships; loss of customers as a result of consolidation
among the wireless communications industry; the strength of our
customers', vendors' and affinity partners' business; economic
conditions that may impact customers' ability to fund or pay for our
products and services; failure of our information technology system or
distribution system; technology changes in the wireless communications
industry; third-party freight carrier interruption; increased
competition; our inability to access capital and obtain financing as and
when needed; and the possibility that, for unforeseen reasons, we may be
delayed in entering into or performing, or may fail to enter into or
perform, anticipated contracts or may otherwise be delayed in realizing
or fail to realize anticipated revenues or anticipated savings.
TESSCO Technologies Incorporated
Consolidated Statements of Income (Unaudited)
Fiscal Quarters Ended
Nine Months Ended
December 25,
September 25,
December 26,
December 25,
December 26,
2011
2011
2010
2011
2010
Revenues
$
226,250,100
$
148,837,400
$
167,940,000
$
538,602,500
$
474,919,000
Cost of goods sold
186,773,300
114,847,500
134,137,000
427,935,400
371,996,200
Gross profit
39,476,800
33,989,900
33,803,000
110,667,100
102,922,800
Selling, general and administrative expenses
31,596,300
28,159,900
29,465,800
89,431,300
89,581,100
Income from operations
7,880,500
5,830,000
4,337,200
21,235,800
13,341,700
Interest , net
73,500
72,900
118,900
251,900
326,500
Income before provision for income taxes
7,807,000
5,757,100
4,218,300
20,983,900
13,015,200
Provision for income taxes
3,033,400
2,216,900
1,257,100
8,095,900
4,638,800
Net income
$
4,773,600
$
3,540,200
$
2,961,200
$
12,888,000
$
8,376,400
Basic earnings per share
$
0.61
$
0.46
$
0.39
$
1.67
$
1.11
Diluted earnings per share
$
0.59
$
0.44
$
0.38
$
1.60
$
1.07
TESSCO Technologies Incorporated
Consolidated Balance Sheets
December 25, 2011
March 27, 2011
(unaudited)
(audited)
ASSETS
Current Assets:
Cash and cash equivalents
$
14,451,300
$
8,178,200
Trade accounts receivable, net
123,617,200
65,708,700
Product inventory
68,446,300
45,709,800
Deferred tax assets
5,004,500
5,004,500
Prepaid expenses and other current assets
1,884,800
1,668,900
Total current assets
213,404,100
126,270,100
Property and equipment, net
22,606,600
21,148,100
Goodwill, net
11,684,700
11,684,700
Other long-term assets
1,961,100
2,057,700
Total assets
$
249,656,500
$
161,160,600
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable
$
132,640,900
$
62,913,000
Payroll, benefits and taxes
13,385,500
7,342,500
Income and sales tax liabilities
3,111,200
2,539,300
Accrued expenses and other current liabilities
1,101,900
1,278,400
Revolving line of credit
--
--
Current portion of long-term debt
248,700
359,100
Total current liabilities
150,488,200
74,432,300
Deferred tax liabilities
3,407,900
3,407,900
Long-term debt, net of current portion
2,770,700
2,959,100
Other long-term liabilities
1,874,500
1,481,200
Total liabilities
158,541,300
82,280,500
Shareholders' Equity:
Preferred stock
--
--
Common stock
86,800
84,100
Additional paid-in capital
43,750,000
40,668,100
Treasury stock, at cost
(45,044,100
)
(44,388,400
)
Retained earnings
92,322,500
82,540,900
Accumulated other comprehensive loss
--
(24,600
)
Total shareholders' equity
91,115,200
78,880,100
Total liabilities and shareholder's equity
$
249,656,500
$
161,160,600
TESSCO Technologies Incorporated
Reconciliation of Net Income to Earnings Before Interest, Taxes
and Depreciation and
Amortization (EBITDA) (Unaudited)
Fiscal Quarters Ended
Nine Months Ended
December 25,
September 25,
December 26,
December 25,
December 26,
2011
2011
2010
2011
2010
Net income
$
4,773,600
$
3,540,200
$
2,961,200
$
12,888,000
$
8,376,400
Add:
Provision for income taxes
3,033,400
2,216,900
1,257,100
8,095,900
4,638,800
Interest, net
73,500
72,900
118,900
251,900
326,500
Depreciation and amortization
1,243,000
1,157,700
1,141,600
3,573,700
3,240,400
EBITDA
$
9,123,500
$
6,987,700
$
5,478,800
$
24,809,500
$
16,582,100
EBITDA per diluted share
$
1.12
$
0.87
$
0.69
$
3.08
$
2.11
TESSCO Technologies Incorporated
Supplemental Results Summary (in thousands) (Unaudited)
Three months ended December 25, 2011
Commercial
Retail
Segment
Segment
Total
Revenues
Public carrier, contractor & program manager market
$
18,573
$
-
$
18,573
Private system operator & government market
33,617
-
33,617
Commercial dealer & reseller market
32,724
-
32,724
Retailer, dealer agent & Tier 2/3 carrier market
-
33,404
33,404
Revenues, excluding Tier 1 carrier market
84,914
33,404
118,318
Tier 1 carrier market
-
107,932
107,932
Total revenues
84,914
141,336
226,250
Gross Profit
Public carrier, contractor & program manager market
4,336
-
4,336
Private system operator & government market
8,632
-
8,632
Commercial dealer & reseller market
8,784
-
8,784
Retailer, dealer agent & Tier 2/3 carrier market
-
7,233
7,233
Gross profit, excluding Tier 1 carrier market
21,752
7,233
28,985
% of revenues
25.6%
21.7%
24.5%
Tier 1 carrier market
-
10,492
10,492
Total gross profit
21,752
17,725
39,477
% of revenues
25.6%
12.5%
17.4%
Directly allocatable expenses
10,400
8,680
19,080
Segment net profit contribution
$
11,352
$
9,045
20,397
% of revenues
13.4%
6.4%
9.0%
Corporate support expenses*
12,590
Income before provision for income taxes
$
7,807
% of revenues
3.5%
Growth Rates Compared to Prior Year Period:
Revenues
Public carrier, contractor & program manager market
-21.1%
-21.1%
Private system operator & government market
8.6%
8.6%
Commercial dealer & reseller market
14.6%
14.6%
Retailer, dealer agent & Tier 2/3 carrier market
15.3%
15.3%
Revenues, excluding Tier 1 carrier market
2.2%
15.3%
5.6%
Tier 1 carrier market
93.0%
93.0%
Total revenues
2.2%
66.5%
34.7%
Gross Profit
Public carrier, contractor & program manager market
-21.1%
-21.1%
Private system operator & government market
11.0%
11.0%
Commercial dealer & reseller market
10.8%
10.8%
Retailer, dealer agent & Tier 2/3 carrier market
36.4%
36.4%
Gross profit, excluding Tier 1 carrier market
2.6%
36.4%
9.4%
Tier 1 carrier market
43.8%
43.8%
Total gross profit
2.6%
40.7%
16.8%
Directly allocatable expenses
-13.4%
7.4%
-5.0%
Segment net profit contribution
23.5%
100.2%
48.8%
Corporate support expenses*
32.6%
Income before provision for income taxes
85.1%
* Includes corporate overhead, facilities expense, depreciation,
interest and company-wide pay-for-performance bonus expense
TESSCO Technologies Incorporated
Supplemental Results Summary (in thousands) (Unaudited)
Nine months ended December 25, 2011
Commercial
Retail
Segment
Segment
Total
Revenues
Public carrier, contractor & program manager market
$
56,804
$
-
$
56,804
Private system operator & government market
96,158
-
96,158
Commercial dealer & reseller market
92,861
-
92,861
Retailer, dealer agent & Tier 2/3 carrier market
-
88,946
88,946
Revenues, excluding Tier 1 carrier market
245,823
88,946
334,769
Tier 1 carrier market
-
203,833
203,833
Total revenues
245,823
292,779
538,602
Gross Profit
Public carrier, contractor & program manager market
12,995
-
12,995
Private system operator & government market
26,764
-
26,764
Commercial dealer & reseller market
25,896
-
25,896
Retailer, dealer agent & Tier 2/3 carrier market
-
19,228
19,228
Gross profit, excluding Tier 1 carrier market
65,655
19,228
84,883
% of revenues
26.7
%
21.6
%
25.4
%
Tier 1 carrier market
-
25,784
25,784
Total gross profit
65,655
45,012
110,667
% of revenues
26.7
%
15.4
%
20.5
%
Directly allocatable expenses
30,747
22,197
52,944
Segment net profit contribution
$
34,908
$
22,815
57,723
% of revenues
14.2
%
7.8
%
10.7
%
Corporate support expenses*
36,739
Income before provision for income taxes
$
20,984
% of revenues
3.9
%
Growth Rates Compared to Prior Year Period:
Revenues
Public carrier, contractor & program manager market
-18.3
%
-18.3
%
Private system operator & government market
17.8
%
17.8
%
Commercial dealer & reseller market
5.2
%
5.2
%
Retailer, dealer agent & Tier 2/3 carrier market
11.1
%
11.1
%
Revenues, excluding Tier 1 carrier market
2.7
%
11.1
%
4.8
%
Tier 1 carrier market
31.2
%
31.2
%
Total revenues
2.7
%
24.3
%
13.4
%
Gross Profit
Public carrier, contractor & program manager market
-19.2
%
-19.2
%
Private system operator & government market
24.5
%
24.5
%
Commercial dealer & reseller market
8.9
%
8.9
%
Retailer, dealer agent & Tier 2/3 carrier market
16.0
%
16.0
%
Gross profit, excluding Tier 1 carrier market
7.0
%
16.0
%
8.9
%
Tier 1 carrier market
3.3
%
3.3
%
Total gross profit
7.0
%
8.3
%
7.5
%
Directly allocatable expenses
-14.2
%
-9.7
%
-12.4
%
Segment net profit contribution
36.7
%
34.4
%
35.8
%
Corporate support expenses*
24.5
%
Income before provision for income taxes
61.2
%
* Includes corporate overhead, facilities expense, depreciation,
interest and company-wide pay-for-performance bonus expense
TESSCO Technologies Incorporated
Supplemental Results Summary (in thousands)
Three months ended
Nine months ended
December 25, 2011
December 25, 2011
Revenues
Base station infrastructure
$
50,237
$
146,909
Network systems
18,861
57,474
Installation, test and maintenance
12,112
34,188
Mobile device accessories
145,040
300,031
Total revenues
226,250
538,602
Gross Profit
Base station infrastructure
15,504
45,407
Network systems
4,073
11,718
Installation, test and maintenance
2,736
7,655
Mobile device accessories
17,164
45,887
Total gross profit
39,477
110,667
% of revenues
17.4
%
20.5
%
Growth Rates Compared to Prior Year Period
Revenues
Base station infrastructure
3.4
%
-0.9
%
Network systems
13.4
%
16.5
%
Installation, test and maintenance
-15.8
%
-1.3
%
Mobile device accessories
64.2
%
23.6
%
Total revenues
34.7
%
13.4
%
Gross Profit
Base station infrastructure
9.4
%
9.2
%
Network systems
18.4
%
36.1
%
Installation, test and maintenance
-4.6
%
-7.7
%
Mobile device accessories
28.8
%
3.2
%
Total gross profit
16.8
%
7.5
%
TESSCO Technologies Incorporated David Young, 410-229-1380 Chief
Financial Officer young@tessco.com or LHA Harriet
Fried, 212-838-3777 hfried@lhai.com
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