Wireless Telecom Group, Inc.

Consolidated revenue for Q2 2022 decreased 22% year over year, driven primarily by lower digital signal processing hardware sales at RBS. Consolidated gross profit declined 22% year over year, while consolidated gross margin was consistent with the prior year; T&M gross margins remained above 56%. GAAP loss from continuing operations was $1.4 million versus net income of $1.1 million in the prior-year period, and non-GAAP adjusted loss from continuing operations was $887,000 versus income of about $459,000 last year. For the first half, revenue was $13.7 million, down about $2.3 million, and management said first-half T&M revenue was 7% higher than the prior-year first half. Cash was $13.3 million at June 30, and management forecast about $9.4 million in cash at December 31. Q3 bookings are expected to be between $8 million and $10 million.

Tim Whelan framed the quarter as a period of near-term disruption but argued the company has better long-term positioning after the Microlab transaction and reorganization into T&M and RBS. He emphasized that the company is reviewing strategic alternatives, including a sale of the whole business or separate segment sales, while also saying the company is prepared to keep operating for growth and profitability if needed. His tone was upbeat on backlog, bookings, and the company’s ability to use its software, margins, and end-market exposure to unlock value.

Mike Kandell said Q2 consolidated revenue fell 22% year over year, gross profit fell 22%, and operating expenses declined 1.6% thanks to lower R&D, amortization, and headcount costs partly offset by strategic-review-related expenses. He reported a GAAP loss from continuing operations of $1.4 million and a non-GAAP adjusted loss of $887,000. On liquidity, he said cash was $13.3 million at June 30 versus $19.1 million at March 31, and the company expects about $9.4 million at year-end; during the quarter it paid about $600,000 in Holzworth earn-outs, $500,000 in estimated taxes, and $2.5 million in share repurchases. He also noted the board-authorized $4 million buyback program has used about $2.6 million, leaving $1.4 million available.

Analysts focused on whether T&M could be more valuable inside a larger company, how much more Holzworth earn-out cash may be needed, how fast software revenue could grow over the next 12 months, and what the cost of being a small public company really is. Management said it would not speculate on larger-company synergies, but reiterated that T&M margins have improved over five years and that corporate public-company costs are “a couple of million dollars” plus management time. On Holzworth, Tim Whelan said there is about $2.3 million of deferred liability and the company expects to use some cash in the second half of the year. On software, he pointed to growth from about $1.4 million in 2019 to over $4 million in 2021 and said next-12-month software revenue should be above $4 million, with further upside from the ADVA-type bundled contracts.