GlobeNewswire Inc | Aug 13, 2020 06:15AM EDT

August 13, 2020

Highlights for the quarter ended June 30, 2020:

-- Net revenues of $11.1 million -- Gross Profit of $5.7 million, 51% Gross Margin -- New Customer orders of $12.4 million -- Two new customer software license contracts, including first for NXP-based 5G solutions -- New GTM strategy, addition of industry veteran to executive team as Chief Revenue Officer

Parsippany, New Jersey , Aug. 13, 2020 (GLOBE NEWSWIRE) -- Wireless Telecom Group, Inc. (NYSE American: WTT) (the Company) announced today results for the 2020 second quarter ended June 30, 2020.

Tim Whelan, CEO of Wireless Telecom Group, Inc., commented, We are pleased with our second quarter financial results which reflect sequential new order growth of 18.5%, improved gross margins and greater contributions from software revenues. I am also excited to report we signed software agreements with two new customers, including our first customer for our NXP-based 5G solutions. We are seeing a high level of interest from potential customers who are looking to deploy 5G across a range of applications.

Whelan continued, While there continues to be a great deal of uncertainty, we are optimistic about the remainder of 2020 due to solid growth in our sales funnel, strong performance by the Holzworth acquisition, and improving gross margins across multiple product lines. Furthermore, the recent addition of Alfred Rodriguez, an industry veteran from Xilinx, as our new Chief Revenue Officer strengthens our executive leadership and is a key hire in implementing our unified go-to-market strategy.

For the quarter ended June 30, 2020, the Company reported consolidated net revenues of $11,108,000, compared to $13,508,000 for the same period in 2019, a decrease of 17.8%, which was primarily due to the previously announced lower sales of digital signal processing hardware of $4.5 million in our Radio, Baseband and Software product group. This decrease was offset by increased LTE software license revenue of $500,000 compared to the prior year, as well as an increase in RF Components revenue of 5.1% compared to the prior year due to revenues from large projects. Test & Measurement revenue increased 40.1% from the prior year reflecting the inclusion of the Holzworth acquisition which contributed $1.9 million in revenue in the second quarter, which offset declines in other products due to reductions in capital expenditures by customers due to Covid 19.

New customer orders for the second quarter were $12,354,000 compared to $10,424,000 in the first quarter, an increase of 18.5%, reflecting the recent pivot in the Companys go-to-market strategy and contribution from Holzworth. The Companys consolidated backlog of firm orders to be shipped in the next twelve months was $6,219,000 at June 30, 2020, an increase of 26.9% compared to March 31, 2020.

The Company reported consolidated gross profit of $5,668,000 or 51.0% of revenue, for the quarter ended June 30, 2020, compared to $6,133,000 or 45.4% of revenue, for the same period in 2019. Gross margins increased in 2020 on lower costs due primarily to cost savings initiatives implemented at the beginning of 2020, the inclusion of higher margin Holzworth revenues, and favorable product mix of higher margin software.

For the quarter ended June 30, 2020, the Company reported consolidated operating expenses of $5,727,000, compared to $5,987,000 for the same period in 2019. The decrease resulted from cost savings initiatives implemented at the beginning of 2020, offset by higher investments in research and development in the area of 5G roadmap development and the addition of Holzworth operating expenses.

Net loss for the quarter ended June 30, 2020 was $668,000, compared to net income of $156,000 for the same period in 2019.

Non-GAAP Adjusted EBITDA for the quarter ended June 30, 2020 was $794,000, compared to $1,127,000 for the same period in 2019. The decrease in non-GAAP Adjusted EBITDA from the prior year is attributable to the decrease in revenues, which was only partially offset by improved gross profit margins and lower operating expenses. The Companys explanation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to net income (loss) is set out below in this press release.

Corporate Initiatives

During the Companys Annual Shareholders Meeting on June 4, 2020, management presented a strategy update, including a new go-to-market initiative reorganizing to a single segment with three product groupings: Radio, Baseband and Software Solutions, RF Components, and Test and Measurement Solutions.

As part of this new initiative the Company expanded its executive team to add a Chief Revenue Officer role who will lead consolidated global sales across all 3 product groupings, and on August 4, 2020, Alfred Rodriquez was appointed to this role. Mr. Rodriquez joins the Company from Xilinx and brings more than 20 years of leadership experience with deep, design-in solutions and signal processing products.

As previously disclosed, the Companys long-term goals are:

-- Annual double-digit organic revenue growth; -- 50%+ gross margins; and -- Adjusted EBITDA margins of 15% by 2024.

The slides and a recording of the presentation are available on the Companys website.

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 second quarter results and related matters. To participate in the conference call, dial 800-346-7359 or 973-528-0008. The conference identification number is 715082. The call will also be webcast over the internet at the following URL:

https://www.webcaster4.com/Webcast/Page/1690/36457

A replay will be made available on the Wireless Telecom website for a limited period of time 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 nonGAAP 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 nonGAAP 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 nonGAAP 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 noncash 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 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. 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.



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 Six Months Ended June 30 June 30 2020 2019 2020 2019 NET REVENUES $ $ $ $ 11,108 13,508 20,536 26,540 COST OF REVENUES 7,375 5,440 10,441 14,681 GROSS PROFIT 6,133 5,668 10,095 11,859 Operating ExpensesResearch and 1,675 3,213 Development 1,499 3,254Sales and Marketing 1,661 2,027 3,379 3,964General and 2,461 Administrative 2,391 4,878 4,933Total Operating 5,987 Expenses 5,727 11,511 12,110 Operating Income (59 ) 146 ) )/(Loss) (1,416 (251 Other Income 56 135 295 165 Interest Expense (246 ) (73 ) ) ) (471 (188 Income/(Loss) ) 208 ) (274 )before taxes (249 (1,592 Tax Provision/ 419 52 225 (86 )(Benefit) Net Income/ $ ) $ 156 $ ) $ )(Loss) (668 (1,817 (188 OtherComprehensive Income/(Loss):Foreign Currency Translation (36 ) (380 ) (971 ) (75 )AdjustmentsComprehensive $ ) $ (224 ) $ ) $ )Income/(Loss) (704 (2,788 (263 Earnings/(Loss) Per Share:Basic $ (0.03 ) $ 0.01 $ (0.08 ) $ (0.01 )Diluted $ (0.03 ) $ 0.01 $ (0.08 ) $ (0.01 ) Weighted AverageShares Outstanding:Basic 21,707 20,973 21,626 20,973Diluted 21,707 21,593 21,626 20,973

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) June 30 December 31 2020 2019CURRENT ASSETS Cash & Cash Equivalents $ 2,894 $ 4,245 Accounts Receivable - net of reserves of $71 and 8,002 6,152 $69, respectivelyInventories - net of reserves of $1,027 and $969, 8,651 7,325 respectivelyPrepaid Expenses and Other Current Assets 1,952 1,871 TOTAL CURRENT ASSETS 21,499 19,593 PROPERTY PLANT AND EQUIPMENT - NET 2,147 1,938 OTHER ASSETS Goodwill 10,069 14,427Acquired Intangible Assets, net 5,202 2,219 Deferred Income Taxes 5,318 6,013 Right Of Use Assets 1,956 1,436 Other 874 1,445TOTAL OTHER ASSETS 28,348 20,611 TOTAL ASSETS $ $ 51,785 42,351 CURRENT LIABILITIES Short Term Debt $ 454 $ 2,696 Accounts Payable 2,328 2,227 Short Term Leases 530 440 Accrued Expenses and Other Current Liabilities 6,378 2,657 Deferred Revenue 93 42 TOTAL CURRENT LIABILITIES 8,062 9,783 LONG TERM LIABILITIES Long Term Debt 9,260 - Long Term Leases 1,473 1,018 Other Long Term Liabilities 95 77 Deferred Tax Liability 470 503 TOTAL LONG TERM LIABILITIES 1,598 11,298 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 348 345 34,835,571 and 34,488,252 shares issued,21,647,571 and 21,300,252 shares outstandingAdditional Paid in Capital 49,884 49,062Retained Earnings 5,327 7,142 Treasury Stock at Cost, 13,188,000 shares ) ) (24,535 (24,509Accumulated Other Comprehensive Income ) 651 (320TOTAL SHAREHOLDERS' EQUITY 30,704 32,691 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ $ 51,785 42,351

CONSOLIDATED STATEMENT OF CASH FLOWS(In thousands, unaudited)

For the Six Months Ended June 30 2020 2019 CASH FLOWS USED BY OPERATING ACTIVITIES Net Loss $ ) $ ) (1,817 (188Adjustments to reconcile net loss to net cash used by operating activities:Depreciation and Amortization 1,049 1,196Amortization of Debt Issuance Fees 137 31 Share-based Compensation Expense 210 400 Deferred Rent (14 ) (12 )Deferred Income Taxes 695 ) (146Provision for Doubtful Accounts 2 18 Inventory Reserves 90 137 Changes in Assets and Liabilities, Net of Acquisition:Accounts Receivable ) ) (1,351 (968Inventories ) ) (260 (1,776Prepaid Expenses and Other Assets ) 899 (110Accounts Payable 16 2,046Payment of Contingent Consideration - ) (772Accrued Expenses and Other Liabilities 737 ) (883Net Cash Used by Operating Activities ) (18 ) (616 CASH FLOWS USED BY INVESTING ACTIVITIES Capital Expenditures ) ) (100 (261Acquisition of Business, Net of Cash Acquired ) ) (7,189 (426Net Cash Used by Investing Activities ) ) (7,289 (687 CASH FLOWS PROVIDED BY FINANCING ACTIVITIES Revolver Borrowings 16,856 18,594Revolver Repayments ) ) (18,840 (17,642Term Loan Borrowings 8,400 - Term Loan Repayments ) (76 ) (384Debt Issuance Fees ) - (1,261Paycheck Protection Program Loan 2,045 Payment of Contingent Consideration - ) (782Shares Withheld for Employee Taxes (26 ) - Net Cash Provided by Financing Activities 6,790 94 Effect of Exchange Rate Changes on Cash and Cash ) 3 Equivalents (236NET INCREASE/(DECREASE) IN CASH AND CASH ) )EQUIVALENTS (1,351 (608 Cash and Cash Equivalents, at Beginning of Period 4,245 5,015 CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 2,894 $ 4,407 SUPPLEMENTAL INFORMATION: Cash Paid During the Period for Interest $ 347 $ 97 Cash Paid During the Period for Income Taxes $ 40 $ 53

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

Three months ended June 30, Revenue % of Revenue Change 2020 2019 2020 2019 Amount Pct.RF Components $ $ 52.7 % 41.3 % $ 287 5.1 % 5,862 5,575Test and 40.3 % 23.6 % 40.1 %Measurement 4,471 3,192 1,279Radio, Baseband, 7.0 % 35.1 % ) -83.7 %Software 775 4,741 (3,966Total Net $ $ 100.0 % 100.0 % $ ) -17.8 %Revenues 11,108 13,508 (2,400 Three months ended June 30, Gross Profit Gross Profit % Change 2020 2019 2020 2019 Amount Pct.RF Components $ $ 46.2 % 43.1 % $ 306 12.7 % 2,708 2,402Test and 52.9 % 55.6 % 33.2 %Measurement 2,364 1,775 589Radio, Baseband, 76.9 % 41.3 % ) -69.5 %Software 596 1,956 (1,360Total Gross $ $ 51.0 % 45.4 % $ ) -7.6 %Profit 5,668 6,133 (465 Six months ended June 30, Revenue % of Revenue Change 2020 2019 2020 2019 Amount Pct.RF Components $ $ 49.4 % 42.7 % $ ) -10.6 % 10,137 11,333 (1,196Test and 40.0 % 23.4 % 32.0 %Measurement 8,216 6,222 1,994Radio, Baseband, 10.6 % 33.9 % ) -75.7 %Software 2,183 8,985 (6,802Total Net $ $ 100.0 % 100.0 % $ ) -22.6 %Revenues 20,536 26,540 (6,004 Six months ended June 30, Gross Profit Gross Profit % Change 2020 2019 2020 2019 Amount Pct.RF Components $ $ 45.9 % 42.3 % $ ) -2.9 % 4,649 4,790 (141Test and 52.0 % 53.7 % 27.7 %Measurement 4,269 3,343 926Radio, Baseband, 53.9 % 41.5 % ) -68.4 %Software 1,177 3,726 (2,549Total Gross $ $ 49.2 % 44.7 % $ ) -14.9 %Profit 10,095 11,859 (1,764

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

Three Months Ended Six Months Ended June 30 June 30 2020 2019 2020 2019 GAAP Net Income/(Loss), $ ) $ 156 $ ) $ )as reported (668 (1,816 (188Tax Provision/(Benefit) 52 (86 ) 418 225Depreciation and Amortization Expense 525 647 1,049 1,196Interest Expense 73 246 471 188Non-GAAP EBITDA ) 521 928 (71 1,110Stock Compensation 128 191 210 400Merger and Acquisition/ - - Integration 37 228 Restructuring Costs - - 73 - Inventory Impairment ) (2 ) ) )Recovery (12 (13 (4US GAAP Purchase - - Accounting 114 290 FX (Gain)/Loss 4 ) ) ) (114 (235 (149Non Recurring 2 3 Arbitration Legal Costs 124 124Non-GAAP Adjusted EBITDA $ 794 $ $ 485 $ 1,127 1,481

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

Three Months Ended Six Months Ended June 30 June 30 2020 2019 2020 2019 GAAP Opex $ $ $ $ 5,727 5,987 11,510 12,110Stock Compensation ) ) ) ) (128 (190 (210 (400Merger and Acquisition/ ) - ) - Integration (37 (228 Restructuring Costs - - ) - (73 US GAAP Purchase - - ) - Accounting (100 Depreciation & ) ) ) )Amortization (ex. COGS) (432 (584 (877 (1,058Non Recurring ) ) ) )Arbitration Legal Costs (2 (124 (3 (124Non GAAP Opex $ $ $ $ 5,128 5,089 10,019 10,528

Wireless Telecom Group INC.25 Eastmans RoadParsippany, NJ 07054Tel. (973) 386-9696 Fax (973) 402-4042