TESSCO Technologies Inc (TESS) 2021 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the Q3 2021 TESSCO Technologies Inc. Earnings Conference Call. (Operator Instructions)

It is now my pleasure to turn the call over to your speaker today, Mr. David Calusdian. Sir, please go ahead.

Good morning, everyone, and thank you for joining TESSCO's Q3 2021 conference call. Joining me today are Sandip Mukerjee, TESSCO's President and Chief Executive Officer; and Aric Spitulnik, the company's CFO.

Please note that management's discussions today will contain forward-looking statements about anticipated results and future prospects. Forward-looking statements involve a number of risks and uncertainties, and TESSCO's results may differ materially from those discussed today. Information concerning factors that may cause such a difference can be found in TESSCO's public disclosures, including the company's most recent Form 10-K and other periodic reports filed with the Securities and Exchange Commission.

With that introduction, I'd like to turn the call over to Sandip Mukerjee, TESSCO's President and CEO. Sandip?

Thank you, David, and good morning, everyone. Thank you all for joining us. And I hope you and your families are continuing to stay safe during this ongoing pandemic. Our TESSCO team continues to show great dedication and tireless effort in navigating this public health crisis to provide customers with communications solutions to meet critical needs. While we are still seeing significant pandemic-related project delays, the ongoing vaccine rollout provides us with some optimism.

As you know, at the beginning of our fiscal year, we embarked on a 3- pillar strategy to drive growth and improve profitability. This strategy includes: first, simplifying and growing our value-added distribution business; second, industrializing our Ventev operations while scaling our capabilities as an industry innovator; and third, investing in value-added and managed services offerings to results complexity and pain points for our customers.

In the third quarter, we continued to make substantive progress on all aspects of the strategy, while significantly improving our year-over-year bottom line performance. During the quarter, we completed the sale and subsequent exit from our retail business, an important step in our turnaround. We continue to capture share in our carrier ecosystem business. We grew certain VAR and Integrator market verticals sequentially, such as utilities, mining, oil and gas and created new relationships with community wireless and industrial IoT partners. However, the overall market remained sluggish due to the pandemic. We advanced product innovation in our Ventev business and have announced additional packing. And finally, we made progress on our value-added and managed services offering as we entered customer beta testing.

As a result of the retail sales, and the completed consent solicitation this quarter includes 2 unique, significant amounts that essentially offset each other. The sale of retail resulted in a $3 million gain which is included in income from discontinued operations. This exit allows TESSCO to focus solely on the higher margin, faster-growing wireless infrastructure construction industry. In doing so, we are deploying all our assets to capitalize on the widely recognized unprecedented rollout of new technologies, including 5G, private LTE, CBRS and IoT.

As a result of the consent solicitation, which wrapped up in December, we incurred $3 million worth of expense, which is included in continuing operations. The consent solicitation was a long and difficult process, and unfortunately, approximately one. However, the resulting board is now unified in optimism about the future. And we are executing on the strategy to capitalize on TESSCO's exciting growth opportunities.

Before I speak further regarding our progress in our strategy during the third quarter, I will walk you through our Q3 performance in each of our reported markets. Let me start with our VAR and Integrator business.

Our VAR and Integrator business includes all wireless infrastructure business outside the carrier ecosystem. This market continues to be significantly impacted by the pandemic, and our business was uneven, as some verticals experienced a return to growth, while others have yet rebound. Many of our key VAR customers have temporarily reduced their workforces in light of the challenges caused by delayed projects, limited access to key venues and government approval delays. It is difficult to predict exactly when these issues will be resolved, but our team is aggressively working with customers to continue providing them with exceptional service. On the positive side, we are also seeing some very encouraging drivers that we believe will lead the post pandemic rebound. I'll highlight a few.

The utility segment continues to rebound, driven by both the distribution automation and grid modernization initiatives as well as adoption of distributed energy resources and the drive for clean energy in the United States. We leveraged our vertically focused sales force to drive a sequential growth of 48%. Key utility wins this quarter include a variety of products and solutions, such as providing both Ventev and other key brands for modems, power and antenna solutions, enclosures and mounting hardware, several mobile-fleet solutions where we are outfitting fleets with mobile data mounting products and base station infrastructure products, such as custom floaters and base station antennas for land-mobile radio installation.

The CARES Act funding and other digital initiatives are driving projects with community wireless, coverage for K-12 education communities and bringing broadband to underserved geographies. Our Ventev portfolio, OEM partnerships, and our recently announced partnership with Federated Wireless is helping TESSCO gain relevance in these solutions.

In upcoming quarters, we expect to see strong customer spend in public safety DAS installations. Public safety DAS is a federal mandate, reinforced by increased regulations in a growing number of states. This combination of growth and increasing complexity, presents the ideal opportunity for TESSCO to bring our truly differentiated value to building owners, construction companies and value-added resellers. We're working with the top DAS VARs to provide the solutions that will meet with strict guidelines. We anticipate demand for remote monitoring projects, many of which will include Ventev enclosure. Demand for both distribution automation and remote monitoring solutions will continue to be strong, and TESSCO will play a key role.

Turning to the public carrier market. The public carrier ecosystem has not been as impacted as the VAR and Integrator market. And I'm pleased to say that TESSCO is consistently capturing share in this part of our business. Our sales grew 14% year-over-year and 4% year-to-date this quarter, despite some pandemic delays. While this market will continue to be subject to significant quarterly fluctuations, our market share gains and long-term growth opportunity in this market are exciting. Our strength in the carrier ecosystem is due to our recognized logistics and supply chain management expertise, our proprietary engineering and production capabilities, which address needs that are unmet by our competitors, and the outstanding relationships we have developed with companies engaged in the construction of the nation's wireless infrastructure.

Our share growth with AT&T turf vendors this quarter included a new 2-year contract with one of the largest turf vendors, a new prominent position with a top-tier AT&T turf vendor and increased share with another top-tier vendor. We also successfully maintained our share with other top turf vendors. This quarter, we saw increased opportunity directly with OEMs by providing 5G installation kits and expect continued demand for these kits over the next few years.

We continue to make good progress with our tower customers. During this quarter, we provided lighting solutions for the tops of towers, prototype Ventev enclosures for on-site monitoring and prototype Ventev enclosures integrated with OEM equipment for site survey. We're also gaining market share among rural carriers working closely with our top manufacturer partners. We have long discussed the opportunity that we see from the adoption of new technologies, and we are excited to see 5G spending continuing to increase. In fact, we estimate that approximately 20% of our third quarter carrier revenues relate to 5G projects. With our improving market share and ongoing investments by carriers on 5G, we expect that number to increase.

Regarding our retail business, as I mentioned earlier, and as announced last month, in December we closed the sale of most of the company's retail inventory and the Ventev brand as it relates to mobile device accessory products. Prior to that, we executed very well on the managed decline of our retail business, which we have discussed in prior quarters. You should note that we will continue to own and operate the Ventev brand outside of retail. Aric will give you more color on the retail results later in the call.

We have previously stated that we are undergoing an IT transformation, consisting of enhancing and modernizing our core systems and enhancing our digital platform. Our work on enhancing and modernizing our core systems is progressing well. And we expect to launch many elements shortly after the end of our fiscal year. The updated system will ultimately allow us to streamline our procedures and produce efficiencies in many parts of our back-end operations. We also expect benefits in improved customer service.

We have made several improvements to our digital platforms. For example, we created 3-new landing pages related to the vertical industry initiatives I referenced earlier. As part of our content expansion efforts, we have published new market and solution-specific guides. We piloted several marketing campaigns to a select group of small and inactive customers, and this effort resulted in significant sales gains with those customers. We continue to conduct customer interviews to gain greater insight into what our customers require and how they want our website to best service their needs. This input has been invaluable as we refine and enhance our website.

Regarding our 3-pillar strategy, we continue to progress on each area. The first pillar relates to our core distribution business. As I have discussed, we are seeing strong market share gains in the carrier business, and we believe we also expect the progress to impact our results once the VAR market rebounds.

The second pillar of our strategy is to industrialize our Ventev operation, scaling our capabilities and driving innovation. Recent progress includes our Ventev road map, now contains modular, flexible and agile product designs. Ventev product has been utilized in a large number of WiFi deployments, many related to community wireless projects driven by the CARES Act funding. We launched the unreceived wedge enclosure and have sold this in numerous sports facilities, including professional football and soccer stadiums. We introduced an outdoor broadband antenna supporting LTE, 4G, 5G and CBRS spectrum. We provided antennas and mounts for the U.S. headquarters of one of the world's largest logistics company. Our warehouse antenna is 1 of the 5 finalists nominated for the Product of The Year by WiFi Awards. We're gaining traction with our Cisco design-in program, with the greatest impact coming from community wireless and industrial IoT project.

This progress was obscured by some project delays that resulted in lower year-over-year Ventev revenues this quarter, which impacted the gross margin in the VAR market. However, our pipeline is very strong, and we expect a rebound in Ventev revenues in the fourth quarter.

Our third pillar is our development of value-added and managed service offering to resolve complexity and pain points for our customers. We're building out an array of services that will ultimately generate high-margin and recurring revenue. We're also expanding our focus on broader utilization of our industry-leading design services, and this has resulted in a number of high-profile wins, such as highly reliable and resilient network design to provide 2-way communication between county-wide fire agencies and their dispatch centers, innovators power solution for a DAS system in a large football stadium and RF designs for large enterprises.

With that, I will turn the call over to Aric for the financial review. Aric?

Thank you, Sandip, and good morning, everyone. As you have seen, our reporting this quarter looks very different than in previous quarters. The retail business exit requires that we report any activity from retail, and this in any comparable period shown is discontinued operations. The expenses charged to discontinued operations represent only direct expenses and no allocations of any support or corporate expenses. I will begin by discussing the retail activity.

Retail revenues were $27 million this quarter compared with $38.7 million last quarter. Since we closed on the retail sale on December 2, this was about 2/3 of the normal quarter. Gross profit was $4.9 million and SG&A charged to discontinued operations was $3.2 million. Additionally, the sale from retail generated a gain of $3 million. Therefore, pretax income from discontinued operations was $4.7 million, and the net income was $4.8 million.

Going forward, we will have some revenue from retail as we sell-through the remaining retail-related inventory that was not part of the sale, but we do not expect that to be material. We will account for any additional retail transaction ins and outs as discontinued operations as well. For the most part, that will represent customer returns and payments to you from voice-com on inventory and inventive sell-through.

Turning to the continuing operations of the business. Revenue from continuing operations totaled $99.2 million this quarter compared with $100.8 million in the third quarter of fiscal 2020. The strong growth in the public carrier market was offset by continued pandemic related challenges in the VAR and Integrator market. Gross profit for the quarter was $17.3 million compared with $19.6 million in the prior year quarter. Gross margin was 17.4% for the third quarter of fiscal 2021 compared with 19.5% in the third quarter of last year. The decrease was due to product and customer mix.

Lower margin carrier revenue represented a larger portion of overall revenues, while gross margins in the VAR market were down due to lower Ventev sales. Ventev sales were down due to project timing and delays, but we expect to see a rebound in the fourth quarter. SG&A expenses were $23.6 million compared to $22 million from 1 year ago. As we mentioned in the release, this quarter did include $3 million of incremental consent solicitation costs. Excluding those costs, SG&A was down 6%.

In the third quarter of fiscal 2021, the loss before income taxes was $6.4 million compared with a loss before income taxes of $2.3 million 1 year ago. The vast majority of this increased loss is related to the consent cost. The remainder can be attributed to the lower gross profit I discussed earlier.

Netting the retail discontinued operations with the continuing operations, the net loss per share was $0.11 this quarter compared with $0.59 last year. We continue to maintain a healthy balance sheet. Inventory is down significantly due to the sale of retail. Accounts receivable is up slightly as we still have $12 million of retail accounts receivable to collect. We expect the majority of that to happen during the fourth quarter. Excluding the line of credit, current liabilities are also up slightly. We had about $5 million in retail-related liabilities at the end of the quarter that will mostly be paid in Q4. We ended the quarter with a balance on our line of credit of $26 million, down from $32 million last quarter. We also expect to receive a $4 million cash refund this quarter related to our fiscal year 2020 tax return.

In closing, this was a critical quarter for us with respect to our strategic roadmap. Exiting and monetizing retail as a key step, and we are now fully focused on the commercial business. Our goal now is to improve our sales run rate and overall profitability. I will now turn this over to Sandip for further commentary.

Thank you, Aric. Visibility regarding the pace of a macroeconomic recovery continues to be a challenge. However, we expect the continued gradual easing of project delays and anticipate additional growth coming from 5G in calendar year 2021. We continue to make progress with respect to each pillar of our 3 pillar strategy, and the team is doing a good job in managing our near term performance under market conditions that no one would have imagined a year ago. At the same time, we are setting TESSCO up to capitalize on the technological advances and the exponential growth that will drive our industry in the years ahead.

Looking ahead to fiscal year 2022, we expect growth with respect to all 3-pillars of our strategy: distribution, Ventev and services. I am confident that we have the right strategy in place to seize this opportunity and look forward to reporting our continued progress to you.

With that, we will open the call for questions. Operator? Please go ahead.

(Operator Instructions) Your first question comes from Maggie Nolan from William Blair.

Thanks for the update. So you say you're capturing share in the carrier ecosystem business. What do you think it takes to continue that momentum and capture additional share?

Maggie, thanks for joining, and thanks for the question. We're pleased with our efforts so far. We've largely focused, for obvious reasons, over the last few quarters, on carriers that have had a spend going build out underway. I'm sure you're all aware of other consolidation that has happened in the carrier market that provides an opportunity for us and some new entrants. Plus also not to just speak -- refrain this discussion to the top carriers. There's a large number of rural regional carriers. So in terms of opportunity, it is exciting, Maggie. We have created what I believe and what we've been told is a very competitive offer, including our supply chain logistics, our program management, our -- the completeness of our bill of materials. And our distribution systems. So I'm confident we will continue down this path.

And then VAR -- in VAR and Integrator, there have been some projects that have been on hold for a while. Do you have a sense for what the level of backlog of projects is?

We don't provide specific numbers, Maggie, for backlog, as you know, but I'll give you qualitative color. I mean it's not that specific projects have been hold -- on hold for many, many months. It's just that the pace of funding the availability to sites, those are challenged. So progress is slow, but there is progress. So that's point one.

Point two, as I outlined on the call, in some sectors, we are actually seeing some positive rebound, right? Utility, driven by some of the dynamics in that industry, grid modernization, drive for clean energy and bringing alternate sources of power to the grid. That is unblocking a lot of projects. So we are seeing progress there. We're seeing progress in mining. Oil and gas is beginning to rebound. So there are positive signs. But from a broader perspective, this is still sluggish compared to what the market used to be 1 year ago. And we're optimistic that this pace, it may be slow, but it will -- we are definitively seeing positive signs.

Okay. And then now that you've exited the retail business, what is the kind of longer-term vision for the percentage of the business that comes from carrier versus VAR and Integrator?

We expect growth in both, Maggie. I mean, to be candid with you, the exit from retail simplifies our company in -- not just from a focus attention perspective, but it un-complicates a lot of our IT investment. It simplifies how we apply capital, how we improve our processes. So that will have a thrust for us going forward.

From a VAR and Integrator perspective as well as a -- let me talk about each market segment on its own. Just being able to cut the cord, drive wireless into business processes, drive wireless adoption in business practices, we see that across the board, in every industry vertical that we participated. So I'm confident we will see growth there. And it's not just our distribution business, but it's also our Ventev, our proprietary products, mounds and closures, power supplies that makes some of this deployment much, much simpler. And then to be able to manage all of this construction and manage all of these devices post construction is where we see opportunity for our software and software-driven services business. So that's the growth qualitatively, Maggie, from a VAR and industries perspective.

From a 5G perspective -- from a carrier perspective, 5G is just beginning, right? I should say we are still seeing spend in 4G. But beginning to see very optimistically request demand for 4G to 5G conversion kits and 5G stand-alone kits. And as you and others on the call know, the 5G deployment evolution will be a decade-long project as 4G was and 3G before it. So I'm very positive about both these markets.

Very good. And so does that positivity in that growth narrative, is that the kind of preliminary expectation for fiscal 2022?

We expect growth, as I said earlier, Maggie, from all 3 of our strategic initiatives, distribution, Ventev, we're excited about where we are from a services perspective. We expect to see that contribute to the business in FY '22. And from a market segment perspective, I just shared how I feel about the VAR and industries and the carrier market.

So yes, you expect fiscal '22 with a little bit of help from the vaccine rollout and easing of pressures on the macro economy to be very different than what this year has been.

Your next question comes from Bill Dezellem from Tieton Capital.

I'll start my questions with Ventev. You discussed in the press release your wins with Cisco. Could you please go into more detail about those and just how significant that market could be?

Bill, thanks for joining, and thanks for the question. I will take you back to an announcement we made 2-quarters ago with the Cisco design-in program. This is a program that's run by Cisco, and they selected Ventev to be one of the partners as part of their overall solution to address needs in the IoT world across most VAR and Integrator places that we play. This was, Bill, an announcement we did 2-quarters ago. You will remember last quarter, I said that I was very pleased at how quickly these initial announcements were translated into purchase orders. And this quarter, we're actually reporting revenue. So from a pace and progress with this partnership, I think you see the quarter-over-quarter progress and why we are optimistic. So that's point one.

Point two, from where we are seeing demand today, it's essentially 2 segments: one segment being the community-wireless applications. We are not announcing or giving color to specific projects, but think of underserved geographies from a digitization from internet access perspective, where we are seeing a lot of demand. And the second is from an industrial IoT. So driving automation in warehouses, in large enterprises, where they need routing, wireless and aesthetic enclosure and environmentally-friendly enclosure perspective, that's where we are seeing a lot of demand. And we think this is just the beginning. Bill, I hope that answers your question.

It does to a degree. Do you want to scale how large you believe that market could be for you?

Yes. We are not giving guidance, Bill, from a revenue and timing of revenue perspective, but I expect this adoption to continue not just -- and not just be contained within the verticals where we are achieving success in, but beyond that.

Great. Thank you. Let me switch, if I may, to the utility market. How big is that market? Because you're describing with your opening remarks, it sounds like could be quite large.

We believe so, Bill. We're certainly excited about it. The underlying dynamics here are around grid modernization, being for the large independent and regulated utility carriers to be able to adopt alternate sources of energy. And part of the grid modernization effort includes overlay wireless networks to be able to quickly detect false to be able to reroute how energy flows through the grid and to be able to provide just-in-time response to their customers. So the grid, as you might imagine, in the United States, is fairly large. A lot of this is infrastructure that is going through upgrades. So the opportunity in front of us, we're excited about.

Is this one that you believe will be lumpy? Or is it something that has almost a continuous flow of business and we should be thinking about to stay continuing solid growth each quarter going forward?

So 2 remarks, Bill. First, from a business opportunity perspective, we see this to be a continuum, right? And if the grid is just getting started, I talked about the IoT overlay to manage the grid, there are mobile fleet and dispatch solutions that are also part of this industry. So from a business perspective, this will be a continuum.

The second point I will make is, I mean, like all construction projects, I mean these projects tend to cross water boundaries. So if that is what you mean by lumpy? Yes. Revenue and project completion will be completed, not based on our fiscal quarter boundaries by -- but by the demands and needs of the customers. But I need to underscore the first point that I see continuity in this business.

Great. And then also in the press release, you referenced your design service strategy. Would you talk more to that? What you are doing in that bucket? And I guess the remedial question is how do we make money with that strategy?

So there are 2 discrete items we referenced in the press release and during the call earlier. So the first effort from our side is to innovate and create software based services that our customers can either consume or resell to their customers. We are going through beta testing. What that means is we are getting customer feedback, having real utilization on real infrastructure by our customers to finalize our data models, our business flows, dashboards, et cetera. We expect this part of the project to complete by the end of this fiscal year and then be able to roll out these services in FY '22. So that is one aspect.

The second aspect is attached design services. Attached, meaning attached to the products we distribute. So if you are trying to light up a warehouse, you typically require RF design services. These are capabilities that TESSCO had previously that we've shed a light on, and we are getting much more aggressive about getting those to market and attaching those to our products. And I'm just giving you an example of an RF-design service, but we also have power design services or tower design services. So these are configurations helping customers create a bomb, helping customers create an RF design, we're doing all of the above. And from a revenue perspective, they contribute positively to and are attached to the products we sell.

And then you were paid separately for that service? Or is that something that just gives customers a reason to come to TESSCO to buy the products?

Both. It definitely differentiates our distribution capability, distribution of products and how we add value to certain products, but we're also paid for these services. This decision is kind of made on a deal-by-deal basis, customer-by-customer basis. Our objective is to monetize this portfolio.

Great. I know I've asked a few questions. I have a few more. Would you like me to continue or step back in queue?

I don't have visibility into the queue, Bill. I mean, your questions are always interesting and help shed light into our business. So I will ask the operator to help us here.

Currently, we have 2 questions on the queue.

I'll step back into the queue then.

Thank you, Bill.

Your next question comes from Tim Call from Capital Management Corporation.

Congratulations on the successful Board reorganization and the retail divestiture.

Thank you, Tim.

In the previous-3 calendar years, there was a normal sequential revenue decline in both public carrier and VAR and Integrator. Having sequential growth in revenue in both of these divisions this year reflects unusual strength. Do you think this is from the early stages of 5G cycle or market share gains? Or just expanding in new markets and adding new products?

Well, first, I'm going to take your question and take the opportunity to thank the TESSCO team. For the focus, for staying with it and helping turn this business around. Never underestimate the power of a team, which I believe in, and I'm proud of the team we have. So that's point one.

Second, Tim, is market opportunity, right? The increasing emphasis and the increasing attractiveness for larger businesses, enterprises, industries, for adoption of wireless, IoT technologies, a number of things have come together, availability of spectrum, technologies from WiFi 6, now to WiFi 6E that are being adopted. And on the carrier side, I mean, the advent of a new technology like 5G, brings in new business model, new construction. In this case, as we've discussed earlier on these calls, this will be a different type of construction with small cells and far more intense than what we have seen with 4G and 3G prior. So I think it's -- Tim, it's a mix of all 3. It's our focus, the simplicity of our strategy. I believe we have a differentiated offer. And market opportunity from all the things you alluded to and I highlighted.

It is terrific to see sequential growth before we even get the pandemic recovery and vaccine recovery in full swing. With the divestiture of retail, SG&A should moderate, should go down, absent growth in the other areas. How much should we expect SG&A to go down because of retail being divested?

I think we've broken this out in the discontinued operations. Tim, I'm going to ask Aric to help me shed more color to your question. Aric?

Yes. The SG&A that you see in the financial statements we presented yesterday is without the direct expenses related to retail. So there is about $3 million of SG&A for retail that's in the discontinued operations line. So that's already been pulled out of the number. That being said, ongoing, as the business gets simpler and more streamlined, and we gain more efficiencies. We do expect to continue to chip away at that SG&A number, looking for other areas that we can streamline the company and reduce expenses going forward on current run rate standpoint.

Well, congratulations again. I don't know if any other companies that can go through a Board reorganization, a major divestiture and show sequential growth when they usually don't in the December quarter, that's just amazing. And hopefully, that portends an even stronger future as we exit this pandemic.

Thank you.

Thank you, Tim, for attending in for your question.

Your questions your next question comes from [Steve Cole] from [Mangrove].

Yes. I had a couple. I'm curious if you could speak a little bit about -- if you look over this last year from really the additions, you had a couple of key people that you've added on the -- business different parts of your business. And I'm curious how that's translated into you're building out kind of the sales engine in these businesses and how it's different today than what it might have looked like 1 year or 2 ago? And what that might also look like for the future?

So thanks for staying up to attend our call. Appreciate your support. So I believe the 2 people you are referring to are 2 of our vice presidents that we brought on around April, May of calendar 2020. Eddie Franklin, who leads our sales team; and Thad Lowe, who heads up Ventev and has taken on some additional responsibilities. Let me take you through -- you asked about sales strategies and sales progress. So let me address that first, and I'll broaden the remarks to include Ventev and our overall solutions as well.

So first, from a sales perspective, you will remember the company had gone down a path of regionalization focus on resellers and VARs and not as much focus on direct end users, the private system operators, self maintained users, et cetera. About 1 year ago, we talked on these calls about reversing that strategy, bringing focus to the end users directly. So we have an early lens on projects, we have a chance to drive specifications. We have a chance to build early inventory and have more complete bombs whether we sell directly to the end user or through our partners with VARs.

So we have embarked on that particular strategy with Eddy coming on board, we have doubled down. It's unfortunate that all of these things, from a timing perspective, lined up very nicely with once in a century pandemic. So the results, I believe, are ahead of us. But from a progress perspective, I mean, that is the critical thing we have changed.

Second thing is we've brought a lot more focus to business development, just in terms of steam makeup, in terms of where we've allocated resources and governance within the company. So winning new logos, breaking into spaces that TESSCO has not been in the past. I mean, those are important for us, and we've given it all the right attention, bandwidth and resources. Broadening -- and by the way, Tim, this -- [Steve], this is not just for VAR and Integrator, it's sort of the carrier segment as well. From a Ventev perspective, our strategy, as we outlined a few quarters ago is to focus on productization. So that when we go out and sell an enclosure of our system, we're building on top of existing capability as opposed to driving things by project.

So Thad Lowe has been instrumental in driving that strategy. As we discussed on the call, we now have a road map. A pretty agile road map of industry-leading products. I get very good feedback from our customers in terms of the makeup of that portfolio and increasingly under Thad's leadership, we are driving to what we call full solutions, our end-to-end solutions, which means it's Ventev and value-add from an enclosure, power supply, antenna or cable perspective, together with products from third parties that we distribute, that bring differentiation, stickiness, from a customer relationship perspective. And over time, we want to augment that stickiness with other value-add from services, software and design capability.

So these 2 gentlemen, together with the rest of the leadership team, I mean it's always a team effort, we are fundamentally reshaping how we go-to-market and what we go-to-market with. Steve , I hope that helped.

No, that's excellent. Very comprehensive answer. Let me just add one more. You've spoken to some of the areas that you've seen growth. You kind of called out oil and gas and mining. And I know you're looking at IoT and some other things. I'm just curious, as the teams have looked at these different industry verticals, are there some things that you're seeing let's say, even not now, but even intermediate to longer term that TESSCO might be pushing into where there's greater growth potential? Or how are you looking at the end market stratification today?

Well, the short answer I will give you on this call, [Steve], is we are going deep into every vertical industry. I mean on this call, the way we discuss is VAR and Integrator as one large segment and carrier as our second market. Within the VAR and Integrator market, I mean, every vertical, as I think you're pointing out, oil and gas, mining, utilities, federal government, government, each have its own unique requirements and characteristics. So I alluded to during the call vertical focus from a sales perspective and from an engineering perspective. That's what we are bringing to the table. And we'll continue to sharpen and deepen that focus to capture the uniqueness and domain knowledge on a per industry basis. I mean that's the essence of our strategy of going back to the end user directly to be focused on the ultimate consumers of these solutions and technologies. That helps us understand better and build more complete solutions.

We have time for one last question. That will be from Bill Dezellem.

I'd like to circle back to tessco.com. In previous calls, you've provided an update there. Would you do the same this quarter in terms of what you are doing to enhance tessco.com and the results that, that is leading to?

Yes. Last quarter, Bill, we actually shared some exhibits about our quarterly revenue on tessco.com. It was a onetime thing. We wanted to give some illustration to the progress. We don't intend to do that every quarter, but I absolutely will take your question and address some of the things we've done to tessco.com.

So just as a reference, I mean we talked during the earlier part of the call about investments and progress we are making with our digital platforms. So we've made significant progress with our overall catalog. The underlying infrastructure that we use to store the catalog will be further improved once we have our IT transformation project completed. We talked earlier in the call about modifications and business processes, we've wrapped around our cart and just the overall end-user experience. And then in terms of being able to follow-up more intimately with customers to understand their buying behavior, their concerns to better attach tessco.com to our customers' business processes is where we are headed. So I'm capturing at a high level.

In terms of details, the team has made substantive progress. And we're excited about what this recovery turnaround also means for TESSCO, right? It's like another -- like Eddie Franklin says, it's like another member of the sales team that continues to sell. And we're giving it that appropriate and due attention.

Last quarter, Carrier was a bit slow. This quarter, carrier was up 32% sequentially. Would you please discuss that growth this quarter? And how it may or may not relate to what you experienced last quarter?

So a few remarks, Bill. So I'm very proud, and I think that should have come through in the earlier commentary of what we've been able to do in terms of market share growth. We continue to push that pedal, if you will. So that's one remark.

The second thing, I think I said this in response to a question from either Tim Call or Maggie Nolan earlier, I mean these construction projects are always lumpy, right? I mean, our customers get a particular construction project exercise, we participate in one part of it. And then they get paid when the project is complete. That is based on a larger schedule that the carriers themselves maintained that really aren't tied to our financial quarters. So this will always be lumpy. But as we grow our share, we will try to minimize the lumpiness just based on the number of projects we will participate in.

So quarter-over-quarter is not the best harbinger. But in this particular quarter, you are seeing improved results. And as Aric said, improved margins, not like VAR and Integrator, but definitively better than historical in terms of what we are achieving in the carrier segment.

And that sequential growth, is that specifically tied to the a traditional lumpiness? Or is it also a function of some of the market share gains that you've referenced throughout this call?

It is both, Bill.

Great. And then you'd mentioned that 5G is roughly 20% of revenues this quarter. Just looking at road maps, what's your speculation as to when 5G will be greater than or at 50% of the Carrier segment revenues?

Difficult to predict, Bill. I mean, I will tell you what I am seeing today, what the company is seeing. And just -- I'm being told that this should be the last question. So let me address this in a complete way. So today, within the carrier segment, we are definitively seeing a continuation of 4G-related revenues. So that construction has not gone down dramatically.

Second thing we are seeing, and this is business with OEMs directly, plus with the carrier construction ecosystem of projects related to 4G to 5G upgrades. I mean these are sites where carriers are sharing sites between 4G and 5G and upgrading equipment, radios, distribution systems, et cetera.

And then third, there is the 5G-only site. I mean these are smaller sites made up of small cells, which I think, over time, will have a larger density, larger construction intensity. And this will continue, as I've said, for the next decade, right? I've been through, as you know, both the 4G, 2G, 3G cycles, and these are decade-long projects.

So difficult to predict. When one technology becomes more dominant than the others. But based on what we see today, we're excited, and we're excited about how much of our revenue comes from newer technology, which is the largest growth CAGR, if you will.

Great. Thank you for the time.

Thank you. Operator, if -- I'm assuming there are no questions, I'm also looking at the clock, so I'm going to head towards concluding this call. First, I want to thank all of you, especially those of you who had a chance to ask questions. I want to thank the TESSCO team for the focus and the progress we're making overall as a company, and I look forward to speaking with all of you soon, next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.