Good day, and welcome to the ADDvantage Technologies third quarter financial results 2022 conference call. Today's call is being recorded. At this time, I would like to turn the call over to Kimberly Rogers, Hayden IR. Please go ahead, ma'am.
Thank you, Carrie. We are joined today by Joe Hart, President and CEO, as well as Michael Rutledge, the company's Chief Financial Officer. Before we begin today's call, I'd like to remind you that this conference call may contain certain forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events, such as the ability of ADDvantage Technologies and its subsidiaries to maintain strategic relationships and agreements with certain original equipment manufacturers and multi-system Operators, as well as the future financial performance of ADDvantage Technologies. These statements involve a number of risks and uncertainties.
Participants are cautioned that these forward-looking statements are only predictions and may materially differ from actual future events or results due to a variety of factors, such as those contained in ADDvantage Technologies' most recent report on Form 10-K on file with the Securities and Exchange Commission. Financial information presented on this conference call should be considered in conjunction with the consolidated financial statements and notes included in the company's press release issued earlier today and included in ADDvantage Technologies' most recent report on Form 10-K. The guidance regarding anticipated future results on this call is based on limited information currently available on ADDvantage Technologies, which is subject to change. Although any such guidance and factors influencing it may change, ADDvantage Technologies will not necessarily update the information, as the company will only provide guidance at certain points during the year.
Such information speaks only as of the date of this call. During this call, we may also present certain Non-GAAP financial measures, such as Non-GAAP net income and certain ratios that are used with these measures. In our press release and in the financial tables issued earlier today, which are located on our website at addvantagetechnologies.com, you will find a reconciliation of these Non-GAAP financial measures with the closest GAAP financials and a discussion about why we believe these Non-GAAP financial measures are relevant. These financial measures are included for the benefit of investors and should be considered in addition to, and not instead of, GAAP measures. I would now like to turn the call over to Joe Hart, President and Chief Executive Officer of ADDvantage Technologies. Joe, please go ahead.
Thank you, Kim, and thank you to everyone joining us on the call today. We delivered record net income this quarter of $1.5 million, reflecting the combined benefit of strong demand, higher revenue, and our focus on cost rationalization and operational efficiency. ADDvantage Technologies is now in an excellent position to make another leap forward in 2023. Consolidated revenues increased 31% for the quarter to $25.9 million, our second highest quarterly revenue ever, behind only the recent June 2022 quarter. While revenue increased 31%, our operating expenses actually declined by more than $0.3 million or about 12%. This reflects our cost reduction initiatives and focus on operational efficiencies, specifically in our wireless segment.
We have targeted approximately $2.4 million in reduced wireless expenses on an annual basis, and we are making good progress in that effort. We recognize some of that benefit in the third quarter, but we still have work to do to achieve the full benefit, and we are on target to see those annual savings over the next several quarters. This was the fifth quarter in a row with wireless revenue over $7 million, and we almost crossed $8 million in Q3 as the growth in 5G tower work continues for our wireless division. We also benefited from strong growth in our telco business with over $18 million in sales, which represents telco's second highest quarterly sales volume, reflecting continued demand for our optical transport, wireless, and enterprise network offerings. We expect continued growth in our wireless segment as we move into fiscal 2023.
When combined with cost and expense reductions, we expect to achieve net profitability in our wireless business during 2023. Our growth continues to be broad-based, involving both new and longtime customers, and including all four wireless carriers and the major OEMs and tower companies. The work touches all the regions we service and is spread across the center of the United States. Our pipeline of new projects, meaning work we have been awarded where we are waiting for purchase orders or permitting is complete, is at an all-time high and gives us significant confidence that the growth will continue as we enter into the new year, 2023. 5G and the associated infrastructure build-out represents a multi-year growth opportunity for tower work across all four of the major wireless carriers.
Each of the carriers are investing billions of dollars in the expansion, and the CapEx plans of those carriers are public and widely discussed. Our telco segment had another great quarter as we bring solutions to the demand for optical transport equipment and fiber networks across the United States. We also support the need for new and refurbished products for wireless and enterprise networks through our Nave and Triton business units. This was the sixth consecutive quarter of revenue over $11 million in sales. Our telco segment continues to generate solid and positive contribution margin to our company. We anticipate a leveling off of demand at some point in future quarters, albeit at a somewhat elevated level relative to our recent past. However, we continue to see global supply chain issues and microchip shortages throughout the industry, which drive demand for our product offerings.
With that, I'll now turn the call over to Michael Rutledge, our CFO, to provide a more detailed review of our financial results. Michael, please go ahead.
Thank you, Joe. As a reminder, we have changed our fiscal year from September 30 to December 31, which we believe will streamline our reporting process and better align our reporting cadence with other companies. As a result, we are reporting the three months ended September 30, 2022 as our third quarter and comparing it to the September 30 quarter last year, which at the time was our first fiscal quarter. The year-to-date periods both compare the period from January 1 to September 30 of 2022 and 2021. Consolidated sales increased $6.2 million or 31% to $25.9 million for the third quarter, up from $19.7 million for the three months ended September 30, 2021.
The increase in sales was due to increases in wireless sales of $0.9 million and telco sales of $5.3 million. Consolidated gross profit increased $3.5 million to $8.5 million from the quarter compared to $5.0 million for the same period last year. The increase was due to an increase in the telco segment of $2.6 million and a $0.9 million increase in gross profit for the wireless segment due to both increased revenues and stronger margins. Consolidated selling, general and administrative, SG&A, expenses include overhead, which consists of personnel, insurance, professional services, communication, and other cost categories, increased $0.1 million or 2% to $4.5 million for the three months ended September 30, 2022, up from $4.4 million for the same period last year.
The increase in SG&A relates primarily to increased selling and commissions expenses to support higher revenues. During the quarter, we realized a $0.3 million gain on the sale of company-owned and leased vehicles from our wireless segment in connection with our cost-cutting measures mentioned earlier in the year. Net income for the quarter was a record $1.5 million or $0.11 per basic and diluted share based on 13.6 million shares, compared with net income of $0.6 million or $0.05 per basic and diluted share based on 12.5 million shares for the same quarter last year. The period ended September 30, 2021 included a $3 million gain from the forgiveness of our PPP loan.
Year to date, for the period from January 1, 2022 to September 30, 2022, sales were $77.5 million, an increase of 57% compared to $49.4 million for the same period last year. Wireless segment revenue increased 48% to $22.9 million, and telco segment revenue increased 61% to $54.6 million. Gross profit was $22.4 million or 29% gross margin compared to a gross profit of $12.5 million or 25% gross margin for the same period last year. Operating expenses increased $300,000 to $7.6 million from $7.3 million in the same period last year. Year-to-date net income was $1 million or $0.07 per basic and diluted share, compared to a net loss of $4.5 million or $0.36 per diluted share last year.
This includes a gain of $300,000 for the sale of the company-owned and leased vehicles from our wireless segment in the current nine-month period. The nine-month period ended September 30, 2021, included a $3 million gain from the forgiveness of our PPP loan. Turning to our balance sheet, cash and cash equivalents were $4.9 million at September 30, 2022, compared to $1.8 million at December 31, 2021. We generated $5.2 million in cash from operations year to date. During the nine months, we paid down our working line of credit, and as of September 30, 2022, we have $1.7 million of outstanding debt consisting of vehicle financing leases. As of September 30, 2022, we had net inventories of $8.7 million.
We continue to believe we are sufficiently capitalized with appropriate backstops to support near-term business conditions until more normalized business conditions return. This concludes the financial overview segment of our remarks. I will now turn the call over to the Operator to facilitate any questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. One moment. Once again, ladies and gentlemen, if you'd like to ask a question, please press star one. We'll take our first question from the line of George Gaspar, a Private Investor.
Thank you, and good afternoon there, and congratulations on the great quarter. Just like to see if you can give us some kind of a comparison of your employment on the telecom side in your facility north of Miami. Do you have enough service facility to carry out what you're trying to expand on? Can you give us an idea of how many personnel you have involved in that operation, maybe, let's say, on a quarterly basis going forward since the beginning of this year, and what your thoughts are going forward on the operation there?
Hello. Hi, George. This is Joe. That's a pretty detailed question, George.
Okay.
Yeah. Look, Triton Datacom is a, it's a small operation. It's a small refurbished switches, routers, telephone sets, desktops, speaker phones, et cetera. It's a great operation, but it's small.
Yes.
It typically runs a little north of about 30 people. The turnover is probably two or three people a year. It doesn't have high turnover. And it's a small local group that has been working together now for almost probably 10 years. We moved it to a brand-new facility in the middle of, well, it was probably late 2018. We tripled the floor space and expanded it, and added a lot of extra space in a brand-new manufacturing building in Pembroke Pines, Florida. It's got plenty of room for growth. It has you know a very modern operating facility. It's got a good management team, and we feel confident in its operating performance, the quality of its products, and I think they do a great job.
Okay. All right. I'd just like to point out something that you might be interested in getting a hold of. There is a Bottom Line Personal. I don't know if you've ever heard of it. It's a monthly release. They have just the latest copy as this year. Don't be afraid to buy refurbished. It's a tremendous commentary on telecommunications equipment and how much the opportunity is in the refurbished, refurbishing smartphones and other types of equipment that's going into telecommunications. It would seem like this kinda highlights maybe what you're experiencing as you're moving forward. It's amazing. It's a couple of pages in it.
It's very bullish on the outlook for the whole area. That should be pretty good for you all. On the wireless area, can you identify what your crew count is internally at this point and how it's changed since, say, quarter to quarter in the first three quarters this year? What has happened on your crew count exterior of what you have within the company? Can you give us a little bit of a sense of how that's going?
Sure. To some extent, George, I always try to be a little bit vague, just because it is a competitive issue amongst-
I see.
wireless construction companies. I would say back mid-year of calendar 2021, we were probably at around a 20 crew level. We ramped up in the second half of last year to plus minus 40 crews, and then we're currently running at about 30. In Q3, our revenue went up about $700,000 Q3 over Q2 with fewer crews. We weeded out some less productive teams. We added some much more experienced, higher quality teams, and I think our management team in the wireless segment is doing a great job of improving efficiency and productivity. So it's not just about the gross crew count, it's about doing good quality work on the first trip, and not having to waste money on second and third trips to fix any kind of defects.
You know, I think our team is in a good place now. It's been a fast and furious 18 months as we ramped up last year, and we got smarter. We reduced some expenses, a few unnecessary headcount, and I think we're in a much better place. If you look at the improvement on the loss from operations of the wireless segment, you'll see that we've improved over $2 million a quarter from the start of the year. You know, we're making great progress, and I feel like the wireless segment through Fulton Technologies is really poised to have a great 2023.
I see. Well, it's very impressive to hear the fact that your crew count dropped in the latest quarter and you're getting good improvement, and that's very impressive. Can you identify if you're getting more opportunity to do things on high towers? As 5G is continuing to expand now and get further deployed, are you able to do more on high towers and or are you able to do things away from high towers now?
Yeah, I'm not sure exactly what you mean by high towers, George. In our industry, a high tower is about 1,000-2,000 feet tall, and it's used for broadcast for TV and radio.
Okay. All right.
Our towers typically run from about 150 feet to about 400 feet.
Yes.
All of our work is basically on towers. We do maybe about 15%-20% of our work on rooftops of buildings, because rooftops probably make up about 30%. Well, in a metropolitan area, rooftops make up maybe 40% of the cell sites. We do both rooftops and tower sites.
Okay. Do you sense that there's a technology change that's coming about on towers, tower and replacement of equipment that's up there that potentially in the past has had more China product installs and maybe more concern about not wanting to have those associated with what's being transmitted? Maybe this is a pretty high technical comment. I'm asking for some comment on it.
Well, I think.
Can you relate to that?
Yeah. It's widely published that, you know, the U.S. has slapped restrictions on a company called Huawei. It's a Chinese manufacturer. It's one of the two big ones from China.
Right.
You know, they are very densely populated throughout the Midwest and Northwest states. You know, the federal government is actually subsidizing the rip and replace of the Huawei equipment with approved, I'll say defense industry qualified contractors. You know, the typical Ericsson, Nokia, Samsung, et cetera. We haven't seen any of that work ourselves yet. It's still in the very formative stages. You know, anything that's sort of government related has a different set of contractual requirements to it. We're watching it. We're waiting for it. You know, we stay in touch with the industry and what the opportunities are to come up. Yeah, there's gonna be probably $ a few billion worth of replacement that takes place. It's widely publicized, so it's easy to read about.
Okay. All right. The going forward process overall looks pretty favorable from here. I noticed that you reduced further your debt situation to a pretty modest level. Is there any thought that you might be looking to try to expand the company's operations through maybe an acquisition that would add further to what the company can do?
Well, I think this year we set out on a definite hard path to get the company back to profitability. We've accomplished that in these last two quarters. We're heading into both a high holiday season as well as the beginning of winter weather up north. You know, we'll see some slight decline in revenues because of that as we enter you know head into the fourth quarter. You know, I think we're always open. You know, from a strategic perspective, we're always open to expanding our business both organically, which I think we've done a nice job of this year, almost you know probably 50%-60% growth rate this year over last in total.
You know, if we find the right acquisition that has a decent price or maybe a merger with a couple other companies, we'll look forward to it both opportunistically and, you know, very carefully. Right now we're still on the mission to make this company a profitable investment for folks like yourselves who invested over the years.
Okay. Finally, just reviewing the number of shares outstanding in the company, which is what? 13 and less than 14 billion shares out. It looks like you're gonna have a shot at it with the fourth quarter year for the fiscal year or for the calendar year. You're gonna be in the mid-100 million range, I assume. That's gonna be pretty impressive. With this modest number of shares outstanding, I would think that the more you can leverage now, that Wall Street's gonna become more interested in what you're accomplishing, no doubt about it. Any comment on that? He certainly hopes so.
I always listen to the advice of investors, George.
Okay. All right. Well, congratulations. Super trend here, and it's exciting looking at what could possibly emerge for the company over the coming years. Take care.
Thank you very much, George Gaspar.
Once again, ladies and gentlemen, if you would like to ask a question, please press star one. There appears to be no further questions at this time. I'd like to turn the conference back over to the speakers. Please go ahead.
All right. Well, I guess I would like to conclude this call with thank you for the interest of investors and investment advisors. We think we're on a good path with ADDvantage Technologies. We appreciate your interest and participation in the call today, and look forward to future conversations. Thank you.
That concludes today's conference. Thank you for your participation, and you may now disconnect.