Drexel Hamilton
November 2015
ROBERT BARNHILL
ARIC SPITULNIK
CINDY KING
CEO, Chairman of the Board
SVP, Chief Financial Officer
VP, Investor Relations Officer,
410.229.1353
410.229.1419
Customer Transactions and
barnhill@tessco.com
spitulnik@tessco.com
Treasurer
Copyright
2015.
410.229.1161
kingc@tessco.com
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
11
Forward-Looking Statements
Certain statements made by us during this presentation are forward-looking
statements within the meaning of federal securities laws. TESSCO’s actual results
may differ materially from those discussed in any forward-looking statement.
Additional information concerning factors that may cause such a difference can be
found in TESSCO’s public disclosure, including TESSCO’s most recent report on
Form 10-K, as well as prior and subsequently filed reports.
Copyright 2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
22
Opportunity and Vision
The convergence of wireless and the Internet is revolutionizing the way we
live, work and play.
New systems and applications are creating challenges and opportunities at
an unprecedented rate.
TESSCO enables organizations to capitalize on wireless
opportunities by
Copyright 2015.
providing end-to-end knowledge, product and supply chain solutions.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
33
Delivering to the Customer What, When and Where
Needed
Four strategically positioned
locations for national reach:
Timonium, MD
Hunt Valley, MD
Reno, NV
San Antonio, TX (Product Development)
Copyright 2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
44
TESSCO Facts
Founded
1982
800
Team Members*
$525M
$0.70
EPS (LTM)
3.7%
Dividend
Yield*
$185M
Market Cap*
Revenue (LTM)
$16M
Adj. EBITDA (LTM)
Copyright 2015.
Note: LTM represents the twelve months ended 9/30/2015. * As of 11/3/2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
55
TESSCO Facts
Serving 20K+ customers per quarter
•
Public network organizations
•
Private system operators
•
Government system operators
•
Commercial resellers
•
Retailers
Growing proprietary products under
Ventev® brand
14
Supplying 51K+ products from 390+ vendors
•
•
•
•
Base station infrastructure
Network equipment
Installation, test & maintenance
Mobile device accessories
Copyright 2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
66
Building End-to-End Solutions with Products from Top Tier
Manufacturers to Serve a Broad and Diverse Customer Base
Products Offered*
Base Station
Infrastructure
Network
Equipment
Installation, Test
& Maintenance
Mobile Devices
Accessories
Customers Served*
Systems Supported
• Machine to Machine
39%
• Internet of Things
• Wireless Backhaul
16%
7%
38%
• Base Station
• Wi-Fi Networks
• Site Survey Test & Maintenance
• Enhanced Cellular Coverage &
Capacity
• In Vehicle & Mobile Communications
• Mobile Device Performance
Public Network
Organizations
18%
Private
System Operators
17%
Government
6%
Commercial
Resellers
24%
Retailers
35%
Copyright 2015.
* Based on last twelve months ended 9/30/15
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
77
Systems We Support
Enhanced
Cellular
Coverage &
Capacity
Mobile
Device
11/5/2015 2015
November
Wi-Fi
Network
Internet
of
Things
Wireless
Backhaul
Machine
to
Machine
Wireless
Base Station
In-Vehicle &
Mobile
Communications
Site Survey,
Test &
Maintenance
Copyright 2015.
Nasdaq: TESS
Copyright 2015
88
Offering Products from Industry-Leading Manufacturers
Base Station Infrastructure
Revenue*:
$207M
Gross profit
margin*:
28%
Copyright 2015.
*last the twelve months ended 9/30/2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
99
Offering Products from Industry-Leading Manufacturers
Network Systems
Revenue*:
$82M
Gross profit
margin*:
18%
Copyright 2015.
*last twelve months ended 9/30/2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
10
10
Offering Products from Industry-Leading Manufacturers
Installation & Maintenance
Revenue*:
$38M
Gross profit
margin*:
23%
Copyright 2015.
*last twelve months ended 9/30/2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
11
11
Offering Products from Industry-Leading Manufacturers
Mobile Devices & Accessories
Revenue*:
$198M
Gross profit
margin*:
23%
Copyright 2015.
*last twelve months ended 9/30/2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
12
12
Fulfilling Unmet Needs – TESSCO’s Design & Manufacturing Unit
•
Margins higher than core product offering
•
Launching aggressive product roadmap
•
14% of overall revenues
Wireless Infrastructure (48%)
Mobile Accessories (52%)
Comprehensive ecosystem of products to deploy,
protect, power and improve the performance of Wi-Fi,
DAS and LTE networks.
Accessories and components to support wireless
mobile and portable device performance.
•
•
•
•
•
•
•
•
•
Antennas
Cable
Site Hardware
Grounding Equipment
Enclosures
Mounts
Chargers
Protection
Power Hubs
Copyright 2015.
Note: Percentages represent contribution to total Ventev® revenue last 12 months ended 9/30/15.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
13
13
Serving a Broad & Diverse Customer Base
Retailers
Gov
6%
Commercial Resellers
• Value Added Resellers & Integrators
Public System Operators
•
•
•
•
Program Managers
Tower Owners
Carriers
Contractors
Public
Network
Operators
18%
Commercial
Resellers
24%
Private System Operators
•
•
•
•
•
•
•
Mining
Technicians & Service Centers
Oil & Gas
Manufacturers
Transportation
Enterprise
Utilities
Private
System
Operators
17%
Government
• Federal Government
• State & Local
• GVARS
11/5/2015 2015
November
Retailers
35%
Copyright 2015.
Nasdaq: TESS
Copyright 2015
14
14
Making The Difference in our Customers’ Success
High
B2C experience on a
B2B website
Designed solutions
Technical
Complexity
Supply-Chain
Services
Knowledge and
Tech support
Complete
order configuration
Typical Distributors
Low
Narrow
11/5/2015 2015
November
Proprietary
Products
Training
Copyright 2015.
Broad
Offering
Nasdaq: TESS
Copyright 2015
15
15
Where we are today
FY2015 results were disappointing, primarily as a result of the dramatic pull-back in
purchasing from our wireless carrier customers, but also due to …
•
Tentativeness from our private system operator customers
•
Higher talent and technology investments we are making to execute upon our key growth initiatives
initiatives
These results did not reflect the progress we made to reduce carrier concentration,
renew growth and improve profitability
Q1 and Q2 FY 16 exceeded high end of our guidance
•
Sequential growth in all markets in both quarters
•
Reaffirmed annual guidance at $1.05 to $1.25
•
Continued $0.20 quarterly dividend
•
While carriers have grown sequentially, outlook still soft for FY16
11/5/2015 2015
November
Copyright 2015.
Nasdaq: TESS
Copyright 2015
16
16
What’s happening with the wireless carriers
Wireless carrier spending continues to be soft in the US as network builds and associated spending
continues to be delayed for a variety of reasons
•
It has impacted our business and many of our manufacturing partners and customers
We believe carriers are preserving capital as they look to acquire additional spectrum, integrate major
acquisitions, evaluate the FCC’s net neutrality policy, international network expansion and consider new
competition from other carriers and companies like Google and Apple
We believe carriers continue to expand and enhance their networks to meet consumers’ insatiable
appetite for data
Expect spending to pick up slightly during this fiscal year, but more so in our fiscal ’17
As spending and building does resume, we are well positioned to capture share within all segments of the
carrier eco-system
Copyright 2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
17
17
Transforming the Way We do Business to Realize Our
Opportunities and Vision
Value Engineering
Simplifying the way we do business
Relationship Solution Selling
End-to-End Solutions
Transitioning from reactive to proactive endto-end solution selling
Develop new products and solutions
Making the Trusted
Difference in our
Customers’ Success
Supply Chain & Operational
Excellence
Seamless, reliable delivery and availability of
configured, kitted end-to-end solutions
11/5/2015 2015
November
Scientific Data, Digital, Internet
Marketing
Delivering an extraordinary experience while
generating
Copyright
2015.opportunities for TESSCO
Nasdaq: TESS
Copyright 2015
18
18
D E TA I L E D F I N A N C I A L
R E S U LT S
Solid Core Revenue Growth
8.2%
CAGR
$539M
$450M
$560M
$550M
FY14
FY15
$482M
$371M
Transitioned
Major 3PL
11/5/2015 2015
November
FY10
FY11
FY12
FY13
$151M
$155M
$251M
$214M
NA
Copyright 2015.
Nasdaq: TESS
Copyright 2015
NA
20
20
Consistent Profitability
Core Gross Margin*
Operating Margin*
4.7%
3.7%
26.0%
24.6%
25.3%
24.5% 24.7%
Adjusted EBITDA*
FY10
FY11
FY10
FY11
2.6%
FY12
FY13
$2.03
$2.15
FY14
FY15
EPS*
$34.7
$22.7
2.6%
23.8%
FY10 FY11 FY12 FY13 FY14 FY15
$21.3
2.9%
3.9%
FY12
$36.7
FY13
$33.4
FY14
$20.7
$1.19
$1.27
FY15
FY10
FY11
$1.94
$1.04
FY12
FY13
FY14
FY15
*Includes impact of Major 3PL that ended at the end of FY13
11/5/2015 2015
September
Nasdaq: TESS
Copyright 2015
21
21
Delivering Shareholder Value
Annual Dividends
32%
CAGR
$0.80
$0.72*
$0.74
$0.55
$0.40
$0.20
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
Copyright 2015.
* Does not include one-time Special Dividend of $0.75 per share
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
22
22
Strong Balance Sheet
•
9/27/2015
($ in millions)
3/29/2015
Total assets
$6.0
$66.2
$75.1
$20.5
$11.7
$13.3
$192.8
$7.5
$59.6
$72.4
$21.1
$11.7
$17.3
$189.6
Accounts payable
Note payable
Accrued expenses & other liabilities
Total liabilities
$56.4
$2.1
$19.7
$78.2
$51.8
$2.2
$22.5
$76.5
$114.6
Total liabilities Copyright
& equity 2015. $192.8
$113.1
$189.6
Assets
$6.0 million in cash; no
operational debt outstanding
•
$35 million credit facility
•
Generated $11.1 million in
cash from operations in
FY15
•
Minimal CAPEX
•
$0.20 per share quarterly
dividend
Cash and equivalents
Accounts receivable
Inventory
Property & equipment
Goodwill
Other
Liabilities
Equity
Equity
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
23
23
Positioned for Growth
Making the trusted difference in our customers’ success and
increasing shareholder value
• Exploding new markets and systems
• Relationship selling and online commerce
• Digital and Internet marketing to deliver the knowledge and
opportunities
• Strong balance sheet
• Scalable operating leverage to grow profitability
• Strong dividend yield
11/5/2015 2015
November
Copyright 2015.
Nasdaq: TESS
Copyright 2015
24
24
CASE STUDIES
®
Case Study: Ventev Infrastructure
Client
Southern Company – premier energy company
Challenge
Provide SCADA (industrial control system)
radio enclosure with capability to remotely monitor
& test backup batteries & send reports
by Ethernet
TESSCO Solution
“ Now, I ask others in the
industry if they are remotely
testing their backup
batteries.
And when they say they are
not, I tell them to call
TESSCO.”
-Bob Cheney, Southern Company
Ventev® Outdoor Wireless Enclosure
& custom-engineered Battery Test
Remote Monitor
TESSCO Advantage
Pre-engineered, turnkey solution
for faster, less expensive deployment
Copyright 2015.
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
26
26
Case Study: Cellular Coverage & Capacity Enhancement
Client
American Tower Corporation – global provider
of wireless communications infrastructure
Challenge
Managing and keeping up with the high velocity
inventory requirements and logistics of their major
DAS program rollout
“ Our DAS supply chain
relies on TESSCO almost
entirely… the TESSCO
group is the engine behind
all of it.”
-Sean Christopher,
American Tower Sourcing Manager
TESSCO Solution
TESSCO acts as an extension of ATC: dealing with
product manufacturers to manage the lead times,
tracking, and delivery of materials, and ensuring
that deployments stay on schedule
TESSCO Advantage
Thoroughly executed program management allows
for rapid deployment in an ever changing,
demanding DAS marketplace
Copyright 2015.
•
11/5/2015 2015
November
Nasdaq: TESS
Copyright 2015
27
27
27
Case Study: Retail Support
Client
Mybullfrog.com –
Verizon Premium Wireless Retailer
Challenge
Increase sales of power accessories through
training and education of employees and
customers
“ We had huge success working
with TESSCO and Ventev® on
the promotional program… it
really was a collaborative team
effort.”
-Jason Hancock, mybullfrog
Marketing Communications Manager
TESSCO Solution
TESSCO and Ventev® developed a thoroughly
integrated marketing strategy including training,
product demos, promotions, videos, and social
media
TESSCO Advantage
Custom training solutions translated directly to
a substantial increase in accessory attach rates
and sales
11/5/2015 2015
November
Copyright 2015.
Nasdaq: TESS
Copyright 2015
28
28
APPENDIX
TESSCO Technologies Incorporated
Reconciliation of Net Income to Earnings Before
Interest, Taxes and Depreciation and Amortization
(EBITDA) (Unaudited)
September
27, 2015
Net income
$
Fiscal Quarters Ended
June 28,
September
2015
28, 2014
$
3,513,600
Six Months Ended
September
September 28,
27, 2015
2014
2,748,300
$ 1,695,300
$
4,443,600
$
7,185,000
1,850,900
1,117,900
2,303,600
2,968,800
4,676,200
47,100
46,300
49,400
93,400
77,800
1,207,200
1,131,300
1,185,100
2,338,500
2,352,900
5,853,500
$ 3,990,800
9,844,300
$ 14,291,900
268,000
131,700
228,000
399,700
677,600
$ 4,122,500
$
7,279,700
$ 10,244,000
$ 14,969,500
Add:
Provision for income taxes
Interest, net
Depreciation and
amortization
EBITDA
Add: Stock based
compensation
$
Adjusted EBITDA
$
6,121,500
EBITDA per diluted share
Adjusted EBITDA per
diluted share
$
0.71
$
0.48
$
0.84Copyright
$ 2015. 1.19
$
1.70
$
0.74
$
0.50
$
0.86
$
1.78
11/5/2015 2015
November
$
7,051,700
Nasdaq: TESS
$
$
1.24
Copyright 2015
30
30