Executive Summary

Q2 2023 revenue fell 57% year over year to $12.1M with gross margin at 27%; the quarter swung to a net loss of $(2.8)M and $(0.20) EPS from $0.9M and $0.07 EPS a year ago, driven by Telco destocking and a late-quarter 5G build slowdown in Wireless .
Management emphasized cost reductions and inventory drawdown with SG&A down 21% YoY and inventories down versus year-end; liquidity was bolstered by $2.8M net proceeds from 13% senior secured convertible notes, but the company flagged going concern language in its unaudited financials .
Strategic positioning highlighted BEAD/RDOF rural broadband funding tailwinds and a new CRO (Brian Davidson) to expand wireless opportunities and carrier projects; a strategic WTS partnership targets a multi-year wireless program .
S&P Global Wall Street consensus estimates were unavailable for AEY; comparisons to Street estimates could not be performed (attempted retrieval failed; data unavailable via S&P Global). Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well

Management reduced operating and SG&A expenses, helping to partially offset revenue declines: operating expenses down 23% YoY to $2.0M and SG&A down 21% YoY to $3.3M in Q2 .
Strategic initiatives: “Our efforts to expand our addressable market in the wireless segment are accelerating, and under the leadership of Brian Davidson, our new Chief Revenue Officer, we are optimistic that we can secure additional projects from wireless carriers over the next few quarters” — Joe Hart, CEO .
Policy tailwinds: “We are also very encouraged by the Federal Government’s funding of the Rural Broadband Program (BEAD) and the Rural Digital Opportunity Fund (RDOF)…We are aggressively pursuing opportunities to design and build fiber networks across multiple regions” — Joe Hart, CEO .

What Went Wrong

Telco segment demand drop: Orders for used/refurbished equipment were “drastically reduced” due to 2022 overstocking; Telco revenue declined $14.8M YoY (−72%) in Q2 .
Wireless segment slowdown: “a sudden downturn in 5G-related build activity by two major industry customers” late in Q2 and broader carrier slowdown, cutting Wireless revenue by $0.9M YoY (−13%) .
Liquidity and going concern: Debt rose to $3.8M; company raised $2.8M via 13% senior secured notes and disclosed an explanatory paragraph regarding ability to continue as a going concern in unaudited financial statements .

Financial Results

Consolidated P&L and EPS (oldest → newest)

Metric	Q4 2022	Q1 2023	Q2 2023
Revenue ($USD Millions)	$19.554	$14.720	$12.088
Gross Profit ($USD Millions)	$5.341	$3.417	$3.272
Gross Margin %	27%	23%	27%
Operating Income ($USD Millions)	$(0.296)	$(2.553)	$(2.300)
Net Income ($USD Millions)	$(0.493)	$(2.748)	$(2.834)
Diluted EPS ($USD)	$(0.04)	$(0.21)	$(0.20)
Adjusted EBITDA ($USD Millions, total)	$0.083	$(1.837)	$(1.784)

Notes: Adjusted EBITDA is non-GAAP; see company reconciliations .

Segment Adjusted EBITDA (oldest → newest)

Segment Adjusted EBITDA ($USD Millions)	Q2 2022	Q1 2023	Q2 2023
Wireless	$(1.225)	$(1.764)	$(1.371)
Telco	$2.786	$(0.073)	$(0.413)
Total	$1.561	$(1.837)	$(1.784)

KPIs and Balance Sheet Snapshot (oldest → newest)

Metric	Dec 31, 2022	Mar 31, 2023	Jun 30, 2023
Cash and Cash Equivalents ($USD Millions)	$2.552	$2.555	$2.832
Restricted Cash ($USD Millions)	$1.101	$1.473	$0.739
Accounts Receivable, net ($USD Millions)	$1.682	$1.635	$1.385
Unbilled Revenue ($USD Millions)	$5.005	$3.124	$1.831
Inventories, net ($USD Millions)	$9.563	$8.469	$8.076
Total Debt/Notes/Leases (selected) ($USD Millions)	Debt $1.9 (vehicle leases)	Debt $1.7 (vehicle leases)	Outstanding debt $3.8; notes payable $2.210 current
Shareholders’ Equity ($USD Millions)	$12.047	$9.698	$7.448

Additional liquidity actions: $2.8M net proceeds from issuance of 13% senior secured convertible notes with warrants/commitment shares .

Segment revenue context (YoY changes, Q2 2023)

Telco: −$14.8M YoY (−72%); Wireless: −$0.9M YoY (−13%); total sales $12.1M vs $27.8M in Q2 2022 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Quarterly	N/A	No formal quantitative guidance issued	Maintained: N/A
Margins/OpEx	FY/Quarterly	N/A	Directional cost-reduction commentary; SG&A reductions executed	N/A
Segment-specific	FY/Quarterly	N/A	Directional outlook: wireless construction “expected to pick back up later in the year and in 2024”	Directional (no numeric)
Dividends/Tax/OI&E	FY/Quarterly	N/A	None provided	N/A

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2022 and Q1 2023)	Current Period (Q2 2023)	Trend
Telco demand / supply chain	Q1: “rapid normalization of the supply chain” drove abrupt Telco revenue decline; customers working off inventory . Q4: Telco growth in 2022; December quarter typically slower .	Severe destocking; Telco orders “drastically reduced” post-2022 overstocking .	Negative near-term; recovery timing uncertain .
Wireless 5G build activity	Q4: 5G work supported wireless revenue YoY . Q1: Weather delays; continued new wins .	Late-Q2 downturn in 5G build from two major customers; broader carrier slowdown; construction expected to resume later in 2023/2024 .	Short-term headwind; medium-term recovery expected .
Cost actions	Q4: OpEx down YoY; SG&A reduced . Q1: Continued cost reductions .	Operating expenses down 23%; SG&A down 21% YoY; inventory reduction underway .	Positive execution .
Policy tailwinds (BEAD/RDOF)	Not highlighted in Q4/Q1 press releases .	Management “very encouraged” by BEAD/RDOF funding; pursuing fiber design/build opportunities .	Emerging positive catalyst .
Leadership / go-to-market	Q1: Appointment of CRO Brian Davidson to accelerate growth .	CRO leadership noted; WTS partnership progressing on a multi-year wireless program .	Strengthening commercial execution .
Liquidity / capital	Q4: Debt $1.9M (vehicle leases); paid off line of credit . Q1: Debt $1.7M; announced Mast Hill notes post-quarter .	$2.8M net proceeds from 13% senior secured convertible notes; total debt $3.8M; going concern paragraph disclosed .	Tighter liquidity; elevated financing costs .

Management Commentary

“Both segments of our business were impacted by macro-headwinds during the quarter...Orders for used and refurbished equipment in our Telco segment have been drastically reduced due to the overstocking done in 2022...Our Wireless segment was hit late in the second quarter by a sudden downturn in 5G-related build activity by two major industry customers” — Joe Hart, CEO .
“Our efforts to expand our addressable market in the wireless segment are accelerating, and under the leadership of Brian Davidson, our new Chief Revenue Officer, we are optimistic that we can secure additional projects from wireless carriers over the next few quarters” — Joe Hart, CEO .
“We are also very encouraged by the Federal Government’s funding of the Rural Broadband Program (BEAD) and the Rural Digital Opportunity Fund (RDOF)...We are aggressively pursuing opportunities to design and build fiber networks across multiple regions” — Joe Hart, CEO .
Q1 context: “Weather-related delays impacted [Wireless] results…[Telco] rapid normalization of the supply chain had a significant and abrupt impact” — Joe Hart, CEO .
Q4 2022 context: “This was a milestone year…Wireless segment grew 49% year-over-year…[December quarter] typically slow due to weather and holidays” — Joe Hart, CEO .

Q&A Highlights

The Q2 2023 earnings call was scheduled for August 14, 2023 at 5 p.m. Eastern; transcript retrieval was unavailable due to a database inconsistency, so detailed Q&A themes, analyst questions, and clarifications could not be synthesized from the call record .
Replay information and webcast archive were provided in the press release and 8-K filings .

Estimates Context

S&P Global Wall Street consensus estimates for AEY Q2 2023 and Q1 2023 were unavailable (attempted retrieval failed due to missing CIQ mapping for AEY). As a result, comparisons to consensus on revenue and EPS could not be performed. Values retrieved from S&P Global.*

Key Takeaways for Investors

Revenue contraction and margin pressure were sharp in Q2, driven by Telco overstocking/destocking and a late-quarter Wireless 5G slowdown; monitor evidence of Telco inventory “burn-off” and resumption of carrier build activity as the key near-term recovery catalysts .
Cost control is tangible (OpEx and SG&A reductions); sustaining these savings while volumes recover is critical to restoring profitability and cash generation (Adjusted EBITDA improved sequentially vs Q1) .
Liquidity enhanced via high-cost convertible notes; debt rose to $3.8M and unaudited financials included a going concern explanatory paragraph—watch financing terms, covenants, and working capital management closely for risk mitigation .
Policy tailwinds (BEAD/RDOF) and WTS partnership could drive multi-year Wireless opportunities; the new CRO may accelerate pipeline conversion—track contract wins and backlog formation across H2’23–2024 .
Absent formal guidance and with estimates unavailable, trading will be driven by tangible inflections in segment activity (new awards, resumption of 5G builds) and liquidity updates (funding, inventory turns); volatility may persist near-term until operational momentum returns .
For medium-term thesis, operating leverage from volume recovery plus cost cuts can swing profitability if Wireless activity normalizes and Telco demand stabilizes; execution against BEAD/RDOF opportunities could become a structural growth driver .

Citations:

ADDVANTAGE TECHNOLOGIES GROUP INC (AEY)·Q2 2023 Earnings Summary