GlobeNewswire Inc | Nov 13, 2020 06:10AM EST

November 13, 2020

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 Companys 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 Companys 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 Companys 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 Companys 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 managements 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 Companys 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 Companys business plan and strategy; managements 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 Companys 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 Companys 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 Groups website address is http://www.wirelesstelecomgroup.com.

Contact:Michael Kandell: +1 (973) 386-9696Wireless Telecom Group Inc.25 Eastmans RoadParsippany, NJ 07054Tel: (973) 386-9696Fax: (973) 386-9191www.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 For the Nine Months Ended Ended September 30 September 30 2020 2019 2020 2019 Net revenues $ 10,868 $ 10,812 $ 31,404 $ 37,353 Cost of 5,214 5,987 15,655 20,668 revenues Gross profit 5,654 4,825 15,749 16,685 Operating expensesResearch and 1,826 1,343 5,080 4,556 developmentSales and 1,732 1,753 5,111 5,718 marketingGeneral and 2,444 2,407 7,322 7,341 administrativeTotal operating 6,002 5,503 17,513 17,615 expenses Operating loss (348 ) (678 ) (1,764 ) (930 ) Other income/ (43 ) 108 252 273 (expense)Interest (256 ) (60 ) (727 ) (248 )(expense) Loss before (647 ) (630 ) (2,239 ) (905 )taxes Tax provision/ 128 (169 ) 352 (256 )(benefit) Net Loss $ (775 ) $ (461 ) $ (2,591 ) $ (649 ) Othercomprehensive income/(loss):Foreigncurrency 565 (491 ) (406 ) (566 )translationadjustmentsComprehensive $ (210 ) $ (952 ) $ (2,997 ) $ (1,215 )loss Loss per share: Basic $ (0.04 ) $ (0.02 ) $ (0.12 ) $ (0.03 )Diluted $ (0.04 ) $ (0.02 ) $ (0.12 ) $ (0.03 ) Weightedaverage 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 December 30 31 2020 2019CURRENT ASSETS Cash & cash equivalents $ 2,203 $ 4,245 Accounts receivable - net of reserves of $42 and 8,040 6,152 $69, respectivelyInventories - net of reserves of $1,082 and $969, 9,074 7,325 respectivelyPrepaid 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 issuedCommon stock, $.01 par value, 75,000,000 sharesauthorized 349 345 34,905,571 and 34,488,252 shares issued,21,695,010 and 21,300,252 shares outstandingAdditional paid in capital 50,049 49,062 Retained earnings 4,552 7,142 Treasury stock at cost, 13,210,561 and 13,188,000 (24,540 ) (24,509 )sharesAccumulated 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 (138 ) (67 )Cash EquivalentsNET INCREASE/(DECREASE) IN CASH AND CASH (2,042 ) (2,280 )EQUIVALENTS Cash and Cash Equivalents, at Beginning of 4,245 5,015 Period 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 $ 4,418 $ 5,185 40.7 % 48.0 % $ (767 ) -14.8 %componentsTest and 5,797 2,996 53.3 % 27.7 % 2,801 93.5 %measurementRadio,baseband, 653 2,631 6.0 % 24.3 % (1,978 ) -75.2 %softwareTotal net $ 10,868 $ 10,812 100.0 % 100.0 % $ 56 0.5 %revenues Three months ended September 30, Gross Profit Gross Profit % Change 2020 2019 2020 2019 Amount Pct. RF $ 1,927 $ 2,104 43.6 % 40.6 % $ (177 ) -8.4 %componentsTest and 3,182 1,497 54.9 % 50.0 % 1,685 112.6 %measurementRadio,baseband, 545 1,224 83.5 % 46.5 % (679 ) -55.5 %softwareTotal gross $ 5,654 $ 4,825 52.0 % 44.6 % $ 829 17.2 %profit Nine months ended September 30, Revenue % of Revenue Change 2020 2019 2020 2019 Amount Pct. RF $ 14,555 $ 16,518 46.4 % 44.2 % $ (1,963 ) -11.9 %componentsTest and 14,013 9,219 44.6 % 24.7 % 4,794 52.0 %measurementRadio,baseband, 2,836 11,616 9.0 % 31.1 % (8,780 ) -75.6 %softwareTotal net $ 31,404 $ 37,353 100.0 % 100.0 % $ (5,949 ) -15.9 %revenues Nine months ended September 30, Gross Profit Gross Profit % Change 2020 2019 2020 2019 Amount Pct. RF $ 6,576 $ 6,893 45.2 % 41.7 % $ (317 ) -4.6 %componentsTest and 7,451 4,843 53.2 % 52.5 % 2,608 53.9 %measurementRadio,baseband, 1,722 4,949 60.7 % 42.6 % (3,227 ) -65.2 %softwareTotal gross $ 15,749 $ 16,685 50.1 % 44.7 % $ (936 ) -5.6 %profit

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/ $ (775 ) $ (461 ) $ (2,591 ) $ (649 )(loss), as reportedTax provision/ 128 (169 ) 352 (256 )(benefit)Depreciation and 579 474 1,628 1,671 amortization expenseInterest expense 256 60 727 248 Non-GAAP EBITDA 188 (96 ) 116 1,014 Stock compensation 151 160 360 560 Merger andacquisition/ 15 - 243 - integrationRestructuring costs 46 123 119 123 Inventory impairment (14 ) (13 ) (26 ) (18 )recoveryUS GAAP purchase 258 - 548 - accountingFX (gain)/loss 95 (108 ) (140 ) (257 )Non recurringarbitration legal (17 ) 31 (14 ) 156 costsNon-GAAP adjusted $ 722 $ 97 $ 1,206 $ 1,578 EBITDA

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 (151 ) (160 ) (360 ) (559 )compensationMerger andacquisition/ (15 ) - (243 ) - integrationRestructuring (46 ) (123 ) (119 ) (123 )costsUS GAAP purchase - - (100 ) - accountingDepreciation &amortization (ex. (478 ) (421 ) (1,356 ) (1,479 )COGS)Non recurringarbitration legal 17 (31 ) 14 (156 )costsNon GAAP Opex $ 5,329 $ 4,768 $ 15,349 $ 15,298