Dig A Bit Deeper To Find The Wireless Treasure

At first glance Wireless Telecom Group (WTT – $2.45) announced weak second quarter 2014 results, but when you dig a little deeper…

Wireless Telecom Group, a New Jersey corporation, designs and manufactures radio frequency and microwave-based products for wireless and advanced communications industries and currently markets its products and services worldwide under the Boonton, Microlab and Noisecom brands.

Noisecom is a global provider of electronic noise generation equipment and noise sources in the commercial and military telecommunications fields. Utilized for accurate, reliable measurements, users look to Noisecom for specialized assistance with their equipment design.

Boonton Electronics, is a leader in the manufacture of test equipment dedicated to measuring the power of RF and Microwave systems used in multiple telecommunication markets. A pioneer in the industry, Boonton continues to provide high quality and high value instruments for users backed with outstanding customer support.

Microlab, a wholly owned subsidiary, is a global provider of passive microwave components including power splitters, directional couplers and filters. These products are employed as system components in commercial applications such as wireless base stations for cellular, paging and private communications, in-building wireless signal distribution, television transmitters and aircraft navigation landing systems. Microlab products are also used in military systems such as electronic countermeasures and missile guidance.

The Company has 115 full-time employees, including its officers, 60 of whom are engaged in manufacturing and repair services, 11 in administration and financial control, 21 in engineering and research and development, and 23 in marketing and sales.

Marketing and Sales

Wireless Telecom presents its operations in two reportable segments: (1) network solutions and (2) test and measurement. The network solutions segment is comprised primarily of the operations of Microlab, while the test and measurement segment is comprised primarily of the operations of Boonton and Noisecom.

In 2013 the Network Solutions segment generated about $22 million in sales, while the Test and Measurment segment made almost $12 million. Regional consolidated sales from operations for fiscal 2013 were made to customers in the Americas ($26,760,912 or 79% of total consolidated sales), Europe, Middle East and Africa ($4,434,037 or 13% of total consolidated sales) and Asia Pacific ($2,630,124 or 8% of total consolidated sales).

Approximately 86% of the Company’s consolidated sales in fiscal 2013 were derived from commercial customers, while the remaining sales were comprised of sales made to the United States government (particularly the armed forces) and prime defense contractors.

Wireless Telecom’s products are sold globally through its in-house sales people and by over one hundred manufacturers’ representatives and distributors.

Financials

Mid-August, Wireless Telecom announced second quarter results for the period ending June 30, 2014.

For the quarter ended June 30, 2014, the Company reported net sales of $10,439,000, compared to $8,705,000 for the same period in 2013, an increase of 20%. The Company also reported net income of $716,000 or $0.03 per diluted share for the second quarter of 2014, compared to net income of $1,058,000, or $0.04 per diluted share, for the second quarter of 2013, a decrease of 32%.

For the six months ended June 30, 2014, the Company reported net sales of $19,624,000, compared to $15,502,000 for the same period in 2013, an increase of 27%. For the first six months of 2014, net income reached $1,156,000 or $0.05 per diluted share, compared to net income of $1,404,000, or $0.06 per diluted share, for the first six months of 2013, a decrease of 18%.

At first glance the earnings look pretty week, but when we dig a bit deeper, we discover a whole different picture. For the three and six-months ended June 30, 2014, the Company recorded tax expense of approximately $545,000 and $877,000, respectively. The tax expense is primarily due to the reduction of the Company’s deferred tax asset based upon estimated Federal taxable income and estimated utilization of net operating losses thereon, and a provision for state income taxes. For the three and six-months ended June 30, 2013, the Company realized a tax benefit of approximately $140,000 and $227,000, respectively. The tax benefit was primarily due to a decrease in the Company’s deferred tax asset valuation allowance, partially offset by a provision for state income taxes.

	Three Months Ended June 30		Six Months Ended June 30
Amounts in $000’s	2014	2013	2014	2013
Net Sales	10,439	8,705	19,624	15,502
Gross Profit	4,930	4,080	9,196	7,401
Income Before Taxes	1,261	918	2,033	1,177
Tax Provision (benefit)	545	(140)	877	(227)
Net Income	716	1,058	1,156	1,404
Earnings Per Share	0.03	0.04	0.05	0.06
Most important income statement data for the quarters and six months ending June 30, 2014 and June 30, 2013. Source: Company Press Release

So looking at the table above, it’s clear that pre-tax numbers were much better than last year.

Paul Genova, CEO of Wireless Telecom Group, Inc. commented on the results, “We continue to experience strong order flow in our Network Solutions segment and are encouraged by our Test and Measurement customers’ recent order flow in our new USB peak power meter. We remain committed to our ongoing investment in products for the DAS and LTE marketplace which we believe will benefit the Company through increased revenue, earnings and improved cash flow.”

Mr. Genova continued, “In April, we repurchased 4.8M shares from our largest shareholder for $2.00 per share. We believe the stock repurchase represents an attractive use of our capital and reflects our commitment to the enhancement of long-term shareholder value.”

Balance Sheet

The company’s balance sheet is also in excellent condition. It has $25.8 million in current assets to just $3.7 million in current liabilities. Long term debt is negligible and book value is around $1.65 per share.

Conclusion

The wireless communications business continues to grow at nice rates. Wireless Telecom is well positioned to benefit from the solid market activity.

The company’s results have shown strong growth during the past few quarters, including several double digit percentage gains in quarterly revenues.

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