Wireless Telecom Group, Inc. (NYSE MKT: WTT), a leader in
advanced wireless communications solutions, announced today it has
acquired CommAgility, Ltd., a privately-held developer of embedded
signal processing and RF modules, LTE PHY/stack software for 4G/5G
mobile networks and related applications.
CommAgility, headquartered in Leicestershire, England, provides
proprietary solutions enabling the customization of the LTE
standard for small cell and private network applications in a
variety of rapidly growing commercial and defense markets,
including satellite communications, backhaul and research.
Additionally, CommAgility is a critical supplier for leading
cellular network validation test systems currently on the
market.
“The transaction with CommAgility is directly aligned with our
strategy to add transformational growth opportunities to the
Company and enhance our scale,” said Tim Whelan, Wireless Telecom’s
CEO. “The combination creates a powerful expansion of the value
proposition of our solution set by adding software centric
solutions and a combined hardware and software skill set which
enhances our product design capability to address large market
opportunities. CommAgility also brings world-class engineering
talent focused on LTE wireless communications that will allow us to
accelerate our innovation to networking trends driven by 5G
deployment and IoT development.”
“We are excited and believe that Wireless Telecom is the ideal
partner to accelerate our growth initiatives to build upon our
successful 10-year history,” said Edward Young, Managing Director
and co-founder of CommAgility. “We share many of the same values
including our dedication to innovation and commitment to customer
excellence. We both have deep technical skills and incredible
industry talent which together, strengthen our market leadership
and create value for our customers, employees and
shareholders.”
Benefits of the Combination:
Enhances our value proposition across both our Network
Solutions and Test & Measurement segments
- CommAgility’s technology is uniquely
synergistic with WTG’s business, enabling new market applications
and greater differentiation.
Accelerates expansion into fast growing markets, positions
Wireless Telecom to support capacity requirements related to
emerging 5G networks
- Wireless Telecom becomes a vital
supplier of signal processing technology for network validation
systems supporting LTE and 5G deployments.
Enhances our scale and expands our total addressable
market
- CommAgility is expected to add
approximately $10m USD of annual revenue to the combined business;
on a pro-forma basis, the combined businesses generated revenue and
Adjusted EBITDA (1) of $39.9 million and $2.1 million respectively
for the twelve months ending September 30, 2016.
Adds deep LTE software and embedded hardware design
expertise, and accelerates Wireless Telecom’s product
roadmap
- Adds over 30 engineers with software
and hardware design skills to the combined enterprise and adds
exceptional talent solving LTE and customized 4G/5G solutions.
Immediately accretive to margins and earnings, attractive
purchase multiple and purchase structure aligned to shareholder
interests
- The acquisition is expected to be
immediately accretive to Wireless Telecom’s gross and Adjusted
EBITDA margins. Total purchase consideration including an estimated
range of earn-outs is expected to be between 4.5x and 6.2x
CommAgility’s 2018 UK GAAP Adjusted EBITDA. Upfront equity
consideration and employment agreements for the 4 founders aligns
long-term equity interests.
The combination of Wireless Telecom and CommAgility brings
together two complementary companies with common core competencies
designing custom and semi-custom RF solutions for overlapping end
markets. CommAgility expects continued momentum designing custom
LTE network solutions for the U.S. defense market, where Wireless
Telecom has an entrenched position with its Boonton and Noisecom
businesses. CommAgility also significantly enhances the Company’s
Microlab offering for small cell and distributed antenna systems
supporting carriers’ ever growing need for network coverage and
capacity.
The initial purchase price for CommAgility is comprised of $12.5
million in cash and $6.25 million of Wireless Telecom common stock.
The total purchase consideration includes up to $12.5 million of
additional cash consideration in the form of a 24-month earn-out.
The cash portion of the consideration at close was funded from a
combination of cash on hand and borrowings from a newly issued
senior credit facility from Bank of America, N.A.
The Board of Directors of both companies unanimously approved
the transaction which closed simultaneously with the execution of
the definitive agreement. B. Riley & Co., LLP is serving as
exclusive financial advisor to Wireless Telecom Group and Bryan
Cave LLP is serving as legal counsel. Convex Capital is serving as
financial advisor and Rosenblatt LLP is serving as legal counsel to
CommAgility.
A presentation further detailing the acquisition has been made
available in the investor relations section of the Company’s
website.
(1) Adjusted EBITDA is a non-GAAP measure. A
calculation of the combined pro-forma financials of WTG and
CommAgility along with a reconciliation of Net Income to Adjusted
EBITDA is set forth at the end of this press release.
Forward Looking Statements
Except for historical information, the matters discussed in this
press release may be considered "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements include declarations regarding the intent,
belief or expectations of the Company and its management and
include the statements regarding increased revenues, immediate
accretion, improved profitability margins and other financial
benefits of the transaction. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance
and involve a number of risks and uncertainties that could
materially affect actual results, including, among others, the
Company’s ability to successfully integrate CommAgility, the
ability to attract and retain key management, engineers and other
key personnel of CommAgility, changes in exchange rates between our
reporting currency, the dollar, and the British pound sterling,
potential risks that arise from operating an multinational
business, including compliance with changing regulatory
environments, the Foreign Corrupt Practices Act and other similar
laws, compliance with changing laws and regulations, potential
economic and regulatory impact of the U.K.’s withdrawal from the
European Union, the ability of management to successfully implement
the Company’s business plan and strategy, product demand and
development of competitive technologies in the Company’s or
CommAgility’ s market sector, the impact of competitive products
and pricing, the loss of any significant customers of the Company
or CommAgility, the Company’s ability to protect its and
CommAgility’ s property rights, the effects of adoption of newly
announced accounting standards, the effects of economic conditions
generally and trade, legal and other economic risks, as other risks
and uncertainties set forth in the Annual Report on Form 10-K for
the year ended December 31, 2015, and other filings with the
Securities and Exchange Commission. These forward-looking
statements speak only as of the date of this release and the
Company does not undertake any obligation to update or revise any
forward-looking information to reflect changes in assumptions, the
occurrence of unanticipated events, or otherwise, as except as
required by law.
About Wireless Telecom Group, Inc.
Wireless Telecom Group designs and manufactures radio frequency
(RF) and microwave-based products for wireless and advanced
communications industries and markets its products and services
worldwide under the Boonton, Microlab and Noisecom brands. Its
complementary suite of high performance components and instruments
includes RF combiners and broadband combiner boxes for in-building
distributed antenna systems deployments (DAS), RF power splitters
and diplexers, hybrid couplers, peak power meters, signal
analyzers, noise modules, precision noise and generators. The
Company serves both commercial and government markets with
workflow-oriented, WiFi, WiMAX, satellite, cable, radar, avionics,
medical, and computing applications. Wireless Telecom Group is
headquartered in Parsippany, New Jersey, in the New York City
metropolitan area, and maintains a global network of Sales and
Service offices for excellent product service and support. Wireless
Telecom Group’s website address is http://www.wtcom.com.
About CommAgility
CommAgility is an award-winning, world-leading developer of
embedded signal processing and RF modules and LTE PHY/stack
software, for 4G and 5G mobile network and related applications.
CommAgility designs the latest DSP, FPGA and RF technologies into
compact, powerful, and reliable products based on industry standard
architectures. CommAgility’s LTE software for mobile devices and
wireless infrastructure includes physical layer and protocol stack
for small cells, physical layer and protocol stack for terminals,
an advanced scheduler for small cells, and IP development in the
areas of advanced PHY algorithms in multi-core SDR platforms.
CommAgility’s customers around the world integrate CommAgility
products into high performance test equipment, specialized radio
and intelligence systems, R&D demonstrators and trial systems.
CommAgility is highly flexible and works closely with its key
customers to meet their technical needs and to support them through
development into volume production.
CommAgility was honored with two Queen’s Awards for Enterprise,
in Innovation in 2016 and in International Trade in 2013. It
appeared in the Sunday Times Hiscox Tech Track 100 list of fastest
growing technology companies in 2015, and featured in the Deloitte
UK Fast 50 in 2016, 2013, and 2012. See www.commagility.com.
Pro-Forma financial information and reconciliation of
Adjusted EBITDA to US GAAP Net Income
The following table combines the unaudited financial results of
WTT for the 12 months ended September 30, 2016 with CommAgility’s
12 months ended September 30, 2016 and also reconciles Net Income
to Adjusted EBITDA for the trailing 12 month period ending
September 30, 2016:
(1)WTT TTM9/30/2016
(2)CommagilityTTM (UK
GAAP)9/30/2016
(3)Adjustment forUS GAAP
(4)Commagility TTM(US
GAAP)9/30/2016
(5)Combined
TTMPro-forma9/30/2016
(in thousands) Net Revenues $ 30,251 $ 10,305 $ (674)
$ 9,631 $ 39,882 Cost of Revenues 16,595 3,890
3,890 20,485 Gross Profit 13,656 6,415 (674) 5,741 19,397
Gross Profit % 45% 62% 60% 49% Operating Expenses 14,561
4,890 4,890 19,451 Operating Income (905)
1,525 (674) 851 (54) Other Expense - Net 101 4
4 105 Net Income/(Loss) before taxes (1,006) 1,521 (674) 847
(159) Provision/(Benefit) for Income Taxes (358) (83)
(83) (441) Net Income/(Loss) (648) $ 1,604 $
(674) $ 930 $ 282
Reconciliation to Adjusted
EBITDA: Taxes (358) (83) (83) (441) Depreciation and
Amortization 625 633 633 1,258 Stock Compensation Expense 523 - -
523 M&A Costs/Strategic Committee 416 - - 416 Restructuring
51 - - 51 Adjusted EBITDA $ 609 $ 2,154
$ 1,480 $ 2,089 Adjusted EBITDA as a % of revenue 2% 5%
(3) US GAAP - Footnote Reconciliation applied above:
Net Income/(Loss) - UK GAAP $ 1,604 Software Revenue Recognition
Deferral (674) Net Income under US GAAP $ 930
(1) WTT’s unaudited trailing 12 months (TTM) ending 9/30/16(2)
CommAgility’s results for the year ended 9/30/16 (UK GAAP)(3)
Adjustments for US GAAP(4) CommAgility’s 9/30/16 audited financial
statements in accordance with US GAAP, adjusted for US GAAP(GBP
translated at $1.25/£1 avg exchange rate)(5) Combined results do
not include effects of purchase accounting or financing
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version on businesswire.com: http://www.businesswire.com/news/home/20170221005572/en/
Wireless Telecom Group, Inc.Mike Kandell, 973-386-9696
Wireless Telecom (AMEX:WTT)
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