CEO: Tessco Technologies to invest in sales team, products to fuel new growth
Tessco Technologies, Inc. (Nasdaq:TESS) CEO Robert Barnhill said the provider of supply chain products and services will invest in its sales team, product offerings, electronic database marketing, Internet presence and make customer and product acquisitions in an effort to fuel business growth. Barnhill made the comments during a Wednesday morning conference call with analysts and investors.
In an early morning press release, the Hunt Valley, Md.-based company adjusted its earnings outlook for fiscal 2009 to a range of $1.25 to $1.40 per share, from a previous range of $1.10 to $1.40 per share. Tessco said the new guidance reflects improving market conditions, accelerated revenue growth and productivity initiatives.
“Going forward, we know that revenues in the current market conditions will demand increasing [market] share with our current customers and markets and expanding the markets that we serve,” Barnhill said. “Our strategy is to expand both our value to our customers and expand our product solutions offering.”
Tessco said early Wednesday that its first-quarter net income rose to $2.1 million, or $0.38 per share, from $0.9 million, or $0.15 per share, a year earlier. Wall Street analysts expected earnings of $0.31 per share.
“We delivered on our commitment to grow earnings independent of revenue growth through a continued, intense focus on increasing value to our customers, margins and productivity,” Barnhill said.
Quarterly revenue for the three months fell to $122.1 million, from $124.4 million a year ago. The results fell short of Wall Street’s expectation of $132.8 million.
“It was a very strong quarter for us and we’re very pleased to report these results,” CFO David Young said.
Sales, general and administrative expenses rose 3% to $27.5 million from $26.7 million a year earlier. The increase was spurred by business generation efforts, compensation increases related to its sales team and bonus accruals. Gross profit increased 10% to $31 million versus $28.2 million during the same period of 2007.
“Increasing the size and scope of our sales organization is very important as we look to significantly increase the number of customers that buy from us and the average purchases of those buyers,” Barnhill said. “We feel that this 3% growth in operating expenses on a 10% growth in gross profit shows that we’ve done a good job of getting productivity quickly from these new sales people and that we’re controlling all of our other expenses.”
During the first quarter, no shares of common stock were repurchased. However, at the start of the second quarter, Tessco repurchased 470,000 shares for $13.64 apiece in a privately negotiated deal.
“We’re very pleased with this transaction,” Young said. “This opportunity to repurchase a large number of shares was presented to us and, after careful deliberation, we decided that it represented an excellent way to enhance shareholder value.”
Since May 2003, about 2.6 million shares have been repurchased at an average price of $13.28 each. Under Tessco’s current buyback program, up to 254,593 shares remain available for repurchase.
The chief financial officer said Tessco is confident that it can continue its positive business momentum.
“This was a very strong quarter for us. We’ve very happy with the momentum that we’ve build,” Young said. “This was the third consecutive strong quarter that we’ve had following the difficult start to last fiscal year and we think that we’re very well positioned to continue this growth.”
In Wednesday midday trading, TESS is up 13.87%, or $1.70, to $13.96.
