TESSCO Technologies Incorporated

Good day and thank you for standing by. Welcome to the Q1 2022 Tesco Technologies Incorporated earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Mr. David Colusius. Please go ahead.

Good morning, everyone, and thank you for joining Tesco's Q1 Fiscal Year 2022 conference call. Joining me today are Sandeep Mukherjee, Tesco's President and Chief Executive Officer, and Eric Sputelnik, the company's CFO. Please note that management's discussions today will contain forward-looking statements about anticipated results and future prospects. Forward-looking statements involve a number of risks and uncertainties, and Tesco's results may differ materially from those discussed today. Information concerning factors that may cause such a difference can be found in Tesco's public disclosures, including the company's most recent Form 10-K and other periodic reports filed with the Securities and Exchange Commission. With that introduction, I'd like to turn the call over to Sandeep Mukherjee, Tesco's President and CEO. Sandeep, please go ahead.

Thank you, David. And good morning, everyone. Thank you for joining us. This past quarter's results confirm that the work we have done on our strategic initiatives over the past 18 months are yielding positive results. Our revenue grew 18% sequentially and 9% year over year, with gains in both our markets, carrier and the commercial business. Furthermore, our growth in sales bookings was even stronger, up 37% year-over-year, showing robust demand for our products and services. This past quarter was a record for our carrier market, as we continued to grow share with our existing customers while adding new customers to our portfolio. We also saw increasing utilization and strong growth in revenue on our website, tesco.com, both sequentially and year-over-year. At the same time, we continue to make progress industrializing and refining our ventive business while developing our software offerings. Our strong execution coupled with the post-pandemic recovery across our markets and the industry-wide adoption and implementation of new technology give us confidence in our operating plan of the following. Achieving between $408 and $442 million in revenue, representing 9% to 18% growth over last year. Number two, achieving full year adjusted EBITDA of between breakeven and $2.4 million. This compared to a loss of $12.8 million last year. These result in a full year net loss of between $6.4 to $4.1 million, and that compares to a $14.3 million loss last year. This is an improvement of between 7.9 to 10.2 million year-over-year. I would now like to walk you through the results and highlights of this past quarter in the following format. First, I will speak about our two markets, carrier and commercial. Second, the three elements of our business, distribution, ventures, and software. And finally, the performance of Tesco.com. To help everyone follow our progress through the year more easily, we will stick to this format for the remainder of this fiscal year. Let me start with the carrier business. This first fiscal quarter marked the highest carrier market revenue in Tesco's history. Our continued strength is due to our logistics and supply chain management expertise our proprietary engineering and production capabilities, and the successful execution of our business development efforts. Carrier market revenue was 46 million, up 17% year over year. Notably, our AT&T ecosystem revenue grew 28% year over year, while our Verizon ecosystem revenue grew 26% year over year. The overall carrier market bookings were up 64% year over year. Within the AT&T ecosystem, we achieved growth with existing customers and added new customers by solidifying our overall AT&T offer. As a result, we increased our market share within this ecosystem. Key factors that resonated with the turf contractors has been our demand planning expertise and our reliable execution. We're working on some new projects that can further increase our market share. And during the second half of calendar 2021, we expect demand in this ecosystem to increase, driven mainly by the C-band bills. As for the Verizon ecosystem, once again, we increased our market share with existing customers and developed new relationships. Our tower owner business grew 4% year over year. Although DAS installations with one of our tower owner customers were down significantly last year, you will remember, due to building closures and limited access, they are now picking up as pandemic-related limitations continue to ease. Our business development efforts outside of the AT&T and Verizon channels are also producing results. We have one new business with another of the largest wireless carriers in the U.S., and we have been awarded the contract to provide equipment for small cell sites for one of the largest broadband companies in the U.S. We expect revenues from these two customers in the second half of the current fiscal year. Our success in our carrier business is in large measure the result of our having implemented strategic adjustments to get the right people focused on the targeted initiatives. We spent last year focused on business development, and those efforts are now yielding results. As overall market conditions improve, we see growing demand for our products, solutions, and supply chain services. Furthermore, 5G will continue to be a key market driver in this space. We estimate that 5G currently represents approximately 25% of our carrier spend. Let me turn to the commercial market, which includes all wireless infrastructure business outside the carrier ecosystem. and which we previously referred to as VAR and integrator. The commercial market had its best revenue quarter since the fourth quarter of our fiscal year 2020. Revenues were up 10% sequentially and 3% year-over-year. Bookings were up 21% year-over-year, and our gross margins improved over 200 basis points to 24.4%. The largest growth sector this quarter was with our VAR customers, up 23% year over year. This growth was driven by our sales focus on these VARs, the continued lessening of the pandemic-related impact we described earlier, and greater availability of inventory targeted for this sector. Our utility business had a tepid quarter as existing projects neared completion. Customers are currently in the investigation phase of new technology investments, including private LTE, microwave, and broadband. Tesco is well prepared with new vendor relationships, solutions, and expertise to support these opportunities as they develop. The success we have demonstrated with new business development in the carrier market is also being aggressively pursued in our commercial market. For the commercial business, this includes an emphasis on vented sales and the continued focus on Tesco.com sales, which we expect will lead to increased revenue and gross profit performance. I will now turn to the three key elements of our business, namely distribution, vented, and software. Starting with our distribution business, we continue to win market share, develop new customer relationships, and add new OEM partners. Additionally, we are making progress with our IT infrastructure modernization projects, which will provide cost efficiencies and make Tesco much easier to do business with. We have focused on adding new manufacturing partners to our line card, identifying those who are top leaders in wireless, particularly as private LTE and 5G mature. We expect a growing demand for small cell solutions to support both carrier customers as well as utilities. We recently joined the Nokia Global Partner Program, which allows us to distribute Nokia's wide range of products and services. As a result, we now offer one of the most robust and comprehensive critical communications portfolios in the market, including a range of turnkey solutions. In conjunction with our value-added services, including everything from solution development and design to site kitting and logistics, help to manage total project costs for our customers and minimize their deployment challenges. Like most industries, the wireless industry continues to experience supply chain challenges. For Tesco, this has resulted in longer lead times for certain products. We are mitigating this by detailed and forward-looking demand planning with our customers. In the short term, this will create some swings in overall inventory that Eric will discuss in more detail, but will also create a healthy backlog for Tesco that will eventually convert to revenues. Looking ahead, we will continue to focus on driving growth and creating efficiencies throughout our distribution business, which in turn will help us improve profitability. Regarding our Ventus business, sales grew 3% year-over-year, totaling $8 million. Bookings for Ventus grew 23% year-over-year and were among the highest Ventus has ever achieved. In Q1, we had several new business wins, including a major home fitness company, one of the world's largest search engines, a major credit card company, a leading provider of fiber infrastructure, and a large multinational technology company. Ventus' large and growing customer base now includes 35 of the Fortune 100 companies. This quarter, Ventus launched several new products, including indoor Omni and directional CDRS antennas, four and six lead SEMCO patch antennas, Tate floor panel antennas, BTRM 400, and Cisco DART-enabled enclosures. Our focus is to ensure attachments of Ventive products with LMR, two-way, public safety dash, and small cell solutions. When we are able to sell these differentiated solutions kitted together, our margins improve along with customer satisfaction. Additionally, as you may recall, we established a partnership with Cisco via the Cisco Design In program. This program has yielded new business and revenues with several customers. Moreover, there are additional attractive opportunities in the pipeline with national service providers and large Cisco VARs. Turning to our software business, our device monitoring and alerting service met our general availability or what is called the GA milestone this quarter and is now in production, providing customers with a single interface to monitor disparate network devices. This last quarter, we engaged new companies on the platform, and initial reviews of the service have been very favorable. We are presenting this product to our reseller customers to include as part of their service offerings. This will provide them with a product to resell and to attach to products they procure from our line card. Over the next few quarters, we will continue to add new features to this platform, such as remote management and software updates, Although revenue in this area will not be significant this fiscal year, we believe it will begin to ramp in fiscal year 2023. Our immediate focus is to add new reseller customers and new devices, leveraging the strong relationships we have with VARs on our target list. Lastly, in terms of our sales channels, Tesco sells both directly and online via tesco.com. Improvements to Tesco.com are a part of our ongoing IT transformation. The benefits to date have included improvements to our customer service and auto processing, and we expect a longer term benefit to our profitability. Our sales on Tesco.com come with higher margins and are more cost efficient to process. In Q1, revenue increased 15% year over year, totaling over $10 million. Engagements measured by product page views increased 223% year-over-year. Enhancements completed this past quarter include launching a B2B buyer research platform and adding in-stop notification emails. We are very excited about our progress and the results we have achieved. With that, let me turn it over to Eric for his financial summary for this past quarter. Eric?