Tessco Technologies (TESS) Tops Q1 EPS by 5c, Revenues Beat

Tessco Technologies (NASDAQ: TESS) reported Q1 EPS of ($0.54), $0.05 better than the analyst estimate of ($0.59). Revenue for the quarter came in at $119.8 million versus the consensus estimate of $110.81 million.

“Our number-one priority continues to be the health and safety of our employees, customers and suppliers,” said President and Chief Executive Officer Sandip Mukerjee. “As an essential business, maintaining the integrity of our operations—specifically the continued delivery of our products and services, the sustainability of our supply chain, our liquidity and financial flexibility—is how we can best serve our customers and provide critical equipment and vital services to fill the urgent needs of service providers, emergency responders, and law enforcement. I am proud of the commitment, determination and resourcefulness our team has shown in rising to the challenges posed by this global pandemic.”

“We took actions to streamline our retail operations in response to the global retail market decline and the impact of COVID-19. In order to manage the decline in that business, we reduced payroll expenses, renegotiated customer contracts, significantly lowered retail inventory, and tightly managed fulfillment and delivery expenses. In large part due to many of these cost-reduction initiatives, we lowered our total SG&A expense by 16%. In addition, Retail Segment profitability was higher than in each of the two prior sequential quarters. We saw retail revenues trend up as the first quarter progressed, and with several phone launches planned during our second fiscal quarter, we expect a continuation of that trend. We will continue to take actions to improve the profitability of the Retail Segment as we face ongoing macro headwinds.

“We are progressing well on our long-term growth strategy,” said Mukerjee. “The focus of our strategy to drive long-term value for shareholders is our commercial business. Commercial revenues were down slightly year over year, with growth in our Public Carrier market offset by a decline in the VAR and Integrator market. As we expected, our VAR and Integrator market continued to be affected by COVID-19 as we are seeing delayed projects, especially in venues where there was a lack of access, including DAS and Wi-Fi installations and several higher-margin Ventev projects at theme parks. Many state and local governments also reduced spending as a result of the pandemic, and the oil and gas industry continues to be impacted by overall macro-economic conditions. While there is still uncertainty in the VAR & Integrator market due to the pandemic, we are encouraged by growth in the transportation channel, near-term opportunities in education, and opportunities to provide critical communications equipment to help in COVID recovery efforts. Our Ventev products, our engineering capabilities, our tenured sales team and our supply chain services are instrumental to Tessco being the trusted partner for our customers. Our ability to provide this full complement of services to VARs, contractors and private system operators in numerous industries is what differentiates us. Moreover, it represents tremendous growth and profitability opportunities for Tessco. While our VAR and Integrator results do not yet reflect the progress we are making in this market, I strongly believe in our strategy and that the efforts we are making today will produce improved results in this market as the year continues.

“We reported double-digit first-quarter year-over-year growth in the Public Carrier market as a result of our ability to take market share, despite build delays and lower overall capex spend from Tier 1 Carriers due to the pandemic,” added Mukerjee. “We achieved this growth with only limited revenue related to 5G. Even without significant near-term 5G spend, we expect growth in this market to continue in the coming quarters, with additional growth resulting from 5G in calendar year 2021.

“Tessco is uniquely positioned to capitalize on the exponential growth, technological change and resultant complexity that will continue to drive our industry. To capitalize on that opportunity, we have reallocated capital to our commercial business and are executing on a three-pillar strategy that includes driving growth in our core distribution business, in our high-margin innovative Ventev brand, and in our value-added and managed services offerings. In addition, we continue to make progress on our e-commerce and technology initiatives, including enhancing tessco.com. Our bolstered management team now combines a strong team of long-tenured individuals with several newly-hired industry veterans with strong track records of success. This team is ready to deliver improved results, and we expect to see overall profitability improve in the second half of this fiscal year. Tessco is providing a unique value proposition for customers as they prepare for seismic changes in the wireless industry,” concluded Mukerjee.

For earnings history and earnings-related data on Tessco Technologies (TESS) click here.

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