ADDvantage Technologies Group, Inc. (NASDAQ:AEY) has earned a reputation as a one-stop-shop in the cable TV (CATV) industry. The company, based in Broken Arrow, Oklahoma, has made a name for itself selling and servicing new, surplus and refurbished cable television equipment to CATV operators. Many of its customers are multiple system operators (MSOs) of CATV franchises and other large outfits that sell to these customers. And although mainly concentrated in the domestic market, the company has customers in Canada, Central America, South America and throughout the world.
However, current trends in CATV are like the fare to be seen on Chiller TV, which specializes in horror. A recent story on Ars Technica (http://nnw.fm/wiN7d) relates the tale that every major cable TV company lost subscribers last quarter. Citing a report from industry analysts Leichtman Research Group, “the 11 biggest pay-TV providers in the U.S., representing 95 percent of the market, lost 665,000 net video subscribers in Q2 2016.” This appears to be an accelerating trend. In the second quarter of 2013, these very same operators lost 350,000 subscribers while the comparable figures for 2014 and 2015 were 300,000 and 545,000, respectively.
However, CATV and its cousins are far from dead. The Pay-TV business, as a whole, according to Leichtman, counted 93.7 million subscribers as of June 30, 2016. There were still almost 49 million Americans with CATV accounts, and satellite TV companies like DirecTV and DISH Network Corp. (NASDAQ: DISH) are beaming their channels to about 34 million subscribers and phone companies like AT&T (NYSE: T) and Verizon (NYSE: VZ) had close to 11 million on the line.
Various reasons have surfaced to explain the demise of the cable TV industry. There are indications that less than half of those in the age group 18 to 36 have cable, just slightly more than the number who subscribe to Netflix (NASDAQ: NFLX). For older folk, five times as many have CATV accounts as watch Netflix. However, although some users drop traditional cable TV packages because they use Netflix or other streaming services, those customers still need a good Internet connection. Consequently, CATV operators are fighting a rearguard action as ISP providers.
The sunny outlook in the telecommunications market is in direct contrast to the dismal picture in the CATV market. A glowing report (http://nnw.fm/9v1eQ) from industry consultants Deloitte Touche Tohmatsu narrates that:
“The telecom sector continues to be at the epicenter for growth, innovation and disruption for virtually any industry. Mobile devices and related broadband connectivity continue to be more and more embedded in the fabric of society today and they are key in driving the momentum around some key trends such as video streaming, Internet of Things (IoT), and mobile payments.”
These developments bode well for ADDvantage Technologies. The company aims to repeat in telecommunications the success it has had in the CATV industry. It has a strong balance sheet, a history of profits, positive free cash flow and management that has been forthcoming on all issues, even when negative.
Seeking to pivot away from reliance on CATV, ADDvantage Technologies acquired Nave Communications in February 2014. Now the company is poised to establish itself as a leading provider of telecommunications equipment. Its Telco division is already making a positive impact, contributing about 40 percent of revenues for the last reported quarter ended June 30, 2016.
As the Internet of Things (IoT) takes off, it’s likely that ADDvantage Technologies won’t be too far behind.
For more information, visit their website at www.AddvantageTechnologies.com.
