TESSCO Technologies Inc (TESS) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2021 TESSCO Technologies, Inc. Earnings Conference Call. (Operator Instructions) Please be advised today's conference is being recorded. (Operator Instructions)

I would like to now hand the conference over to your speaker today, David Calusdian from Sharon Merrill. Please go ahead, sir.

Good morning, everyone, and thank you for joining TESSCO's Q1 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. Good morning, and thank you all for joining us. I hope you and your families are staying safe during the ongoing pandemic. Our #1 priority continues to be the health and safety of our employees, our customers and our suppliers. TESSCO is an essential business, helping our customers provide vital communication services to fill the needs of telecommunications companies, service providers, emergency responders, law enforcement, defense and security personnel and many, many more. We have done this by maintaining the integrity of our operations, specifically, the continued delivery of our products and services, the sustainability of our supply chain, our liquidity and our financial flexibility. This is how we serve, and I'm proud of the commitment, determination and resourcefulness our people have shown in rising to the challenges posed by this terrible health crisis.

As our Q1 numbers indicate, the financial impact on our business has been significant. But we are moving ahead in executing our overarching strategy to: number one, grow our value-added distribution business and ensure that we are the easiest company to do business with; number two, industrialize our Ventev operations, scale our capabilities and be an industry innovator; and three, invest in value-added and managed services offerings to resolve complexity and pain points for our customers. This strategy is based on a thorough examination of our business and the way we utilize our assets. The result has been a reallocation of key assets as we focus on our VAR and our carrier businesses and improve our overall value proposition. This new focus will enable us to capitalize on the incredible changes occurring in the wireless industry. As we execute our long-term strategy, we are focused on 4 immediate initiatives to improve our performance in fiscal 2021. First, we are managing the decline of our retail business. Second, we are completing the necessary IT transformation to enable us to securely position TESSCO to take advantage of the growth opportunities that lie ahead of us. Third, we are improving our tessco.com website. And finally, we are improving our overall profitability through cost reductions and other efficiencies.

I will now walk you through our performance in the Retail, VAR and Integrator and Public Carrier markets. As I do so, I will highlight the unique value we are providing to our customers in each area. That value is the foundation of our overarching strategy and the reason we will be able to capitalize on the exciting growth trends in the wireless industry.

Let's start with the retail business. Our Retail segment has historically been a sizable and profitable business. By the end of 2019, however, the global retail market began contracting rapidly, and we faced the same challenges contracting the global retail ecosystem. In Q4 of fiscal 2019, one of our largest Retail customers was acquired. And as a result, TESSCO was no longer their distributor. This created a ripple effect in which TESSCO's Retail inventory levels increased, including excess and obsolete inventory. When I arrived at TESSCO in Q3 of fiscal 2020, I immediately embarked on a thorough review of our assets and investments. As a result of that study, we implemented several guardrails and fiscal discipline measures in our Retail business. Then, in Q4 FY '20, the global pandemic hit us and Retail came to a virtual standstill. In response, we've taken or otherwise accelerated the following measures: tightening our inventory management and being highly conservative in our purchasing practices by focusing on the highest turning SKUs; significantly reducing excess and obsolete inventory; exercising return rights with our suppliers; renegotiating many customer contracts; reducing outbound freight expenses; and lowering overall SG&A expenses. These measures are yielding tangible results.

This quarter, we reduced retail inventory by more than $7 million, and direct retail expenses were down by almost 40% on a year-over-year basis. These all resulted in a significantly improved operating margin for this segment as compared with the previous 2 quarters, while we maintained a keen focus on serving our customers and performing for our suppliers.

Looking at the demand picture, we've started to see an increase in Retail segment sales since the beginning of May. Our recent Retail business development strategy has been to focus on grocery stores, mass consumer electronic stores and the insurance vertical. These markets have performed relatively well during the pandemic. We have traditionally focused on independent agent channels, many of which have remained open through the pandemic. This is in sharp contrast to the stores owned and operated by the carriers. Sprint and T-Mobile closed approximately 80% of their corporate stores. And AT&T and Verizon shutdown most of theirs as well. Additionally, the airport segment has remained shut down and we have yet to see any meaningful improvements there. Encouragingly, in our Ventev mobile device accessory business, we won a nationwide launch in one of the nation's largest membership warehouses and launched nationwide with another one this past quarter. Also, after a successful trial, Ventev has been launched nationwide in Home Depot stores. On the international front, after widespread shutdowns due to the pandemic, Europe has begun to reopen with several of the stores we had sold into reopening in mid-June, with the remainder expected to be opened by the end of this month.

Let me now talk about our VAR and Integrator business. We have previously discussed our plans and improvements with our sales strategy, our reorganization and the progress we are making overall in this segment. While COVID-19 has had a large impact on this business, I'm very pleased with the progress and the discipline that the TESSCO teams are demonstrating. Let me talk about that progress first and then come back and give you some color on the types of impact we have seen related to the spending. First, tessco.com. One of the biggest drivers of success for our VAR and Integrator business are improvements we've been making to our tessco.com website. This is also one of our strategic imperatives for fiscal year 2021. We are seeing some early results, which are very promising. Our renewed focus on end user segments are reflected in these projects, specifically around targeted landing pages customized to specific industry verticals, recommended products and bills of materials and other digital supply chain services, enabling a more complete solution for our VAR and Integrator customers.

We recently conducted a review of our improvements and road map with our largest tessco.com customer, who is also one of the largest VARs in the country. Panion feedback from that review includes our website has significantly improved. Our website is easier to navigate and more helpful. We also received positive feedback on road map items related to cart design, multiuser account self-maintenance and omnichannel quoting capabilities. Unrelated to the review, I'm very pleased to see that the revenues via tessco.com from this large customer are moving in a favorable direction, both from a volume perspective, and also as a percentage of the overall business we do with this customer. Overall, we also see an uptick in registrations to tessco.com. Now registrations equate to eyeballs with interest for this part of our business, and that is among the leading indicators for both purchase and revenue.

Second, let me talk about our design services. Our drive for complete solutions and to enable further value-add has resulted in increased discipline in our design services portfolio. At this time, we provide robust design services for DAS, for power, for tower and for broadband. Our deliverables include RF and other designs, [CAT] loss analysis, tower calculations and recommended bill of materials. DAS design services are being linked to the increased interest received from public safety segment. This is the result of a diverse set of municipal, state and federal regulations for radio coverage related to public safety. We're seeing an uptick in both demand and revenue for these services, and these design deliverables are creating sales pipeline for our sales teams.

Let me now share with you 3 examples of how these improvements are positively impacting sales and our overall progress, all as a result of the increased focus we have brought to, for example, the utilities segment. First, helping a large diversified energy company decommissioned their WiMax network under a very tight schedule and to avoid penalties resulting from new FCC regulations. TESSCO helped this company develop possible migration alternatives; then choose from among those alternatives; and finally, use our supply chain services to bring the necessary equipment to multiple sites to deploy the new technology on time.

Second, working with one of the largest investor-owned utilities in the Southeast via TESSCO webinars for a customized power and enclosure solution. In the past, this large utility would do such design work in-house. Now, as with many utilities, they are reducing expenses by outsourcing that work. TESSCO is in a position to provide the design services that enables them to do more with less. Now, we simply give us the specs of the radio that they are powering and we can design a power solution for them, including an enclosure, all designed and manufactured by Ventev.

Third, a large investor-owned utility needed to retrofit 1,500 vehicles, including the technology and the mounting solutions. They had the appropriate budget allocated but were on a tight deadline. TESSCO fully designed the solution, used our supply chain to procure the equipment, fitted the equipment and delivered it as a single grade, allowing their technicians to easily complete the project in time and on budget.

Now let me tell you about the effects of the pandemic. I don't think I need to add too much color, tell you that during this quarter, our VAR and Integrator customers did not have access to venues, theme parks and many other construction sites. Projects for government integrators, the hospitality industry and hospitals were delayed or reduced. The oil and gas industry has also been hit hard. In addition, our largest national solution provider customers saw a significant reduction in installations. All of this affected our customers' business and therefore ours as well.

However, the examples I shared with you earlier illustrate the diverse nature of problems our teams are now solving and how we are knitting together our reunited portfolio of design services, creating packs to market and demonstrating our ability to tackle complex logistics using our supply chain services. While there is still uncertainty in the VAR and Integrator market due to the pandemic, we are encouraged by growth in the transportation channel, near-term opportunities in education and in providing critical communications equipment to help in COVID recovery efforts. Our ability to provide a full complement of services to VAR, contractors and private systems operators in numerous industries is what differentiates us. I'm confident that we are on the right track to drive market share and revenue growth in this segment for the long term.

Turning to our carrier ecosystem. While we did see some mild COVID-19-related impact, our carrier segment was up 17% year-over-year, primarily due to the market share gains in the AT&T and Verizon ecosystems. Our AT&T turf business grew more than 12% in Q1 despite AT&T CapEx spending for 2020 projected to be down from 2019. The impact of the pandemic on our carrier business was related primarily to restricted access in certain venues for DAS installations and delays due to the closure of government and municipal permitting offices. We've sharpened our overall carrier offer, not simply in terms of sufficiently moving inventory, but through our supply chain services, our program management expertise and by leaning forward with our software services offering. One example of our software service offering is our proprietary OASIS platform, which enables us to integrate with our contractor or carrier ERP systems and allows our customers to better manage their inventory approval process and then to control and direct inventory placement and to create and manage bills of material.

Our operational capabilities and software services, when combined with our proprietary offerings and strong vendor relationships creates a superior offer and clearly distinguishes us from our competition. I mentioned in previous quarters that we won an award with a large tower company that would effectively double our business with them. This award enabled us to grow 105% year-over-year this quarter with this customer. They have indicated that their partnership with TESSCO has been a key component in their ability to deliver best-in-class communication infrastructure. TESSCO has provided them with a reliable supply chain, engineering support, bill of materials enhancement and product guidance. Each of these contribute to their lower total cost of operations and provide labor savings. We've also enabled them to optimize inventories investment by minimizing excess and obsolete inventory risk and by managing the demand planning process. Our relationship with this customer dates back over a decade and has continued to evolve as we expand into new areas of wireless infrastructure construction and win new projects.

Finally, while just 10% to 15% of our overall revenue in this segment is related to 5G, we should note that in June, we started shipping 5G kits for new site construction in the New York and New England geographies. You will remember that these geographies were highly impacted by the pandemic earlier in the quarter. We're excited about this development because the multipliers for 5G are very large.

I would like to now give you a brief update on the key performance initiatives we have for fiscal 2021 that I mentioned earlier in the call. The first is the managed decline of the retail business, as we continue to service our customers and support our suppliers. As I mentioned in details earlier, we have improved our bottom line results due to these efforts.

The second is completing our IT transformation project this fiscal year. For years, TESSCO has been burdened with the legacy and largely homegrown technology platform. We have embarked on an enterprise transformation journey that started with technology infrastructure and customer-facing digital platforms. In fiscal 2021, we will complete the deployment of an industry standard proven core technology platform. This will enable us to streamline transactions, deliver improved user experience and simplify data flows. Taken together, this new functionality will unlock competitive advantages and enable us to capitalize on near-term industry growth trends.

The third is our website, tessco.com. This website supports thousands of customers every month. We plan to continue to invest in this asset and make it a best-in-class B2B website. Numerous improvements were made to the site during the past quarter, I talked about a few of them earlier. Others include a redesign to make the purchasing process far more intuitive and efficient. The addition of a 24/7 chat bot function to facilitate customer self-service and enhancements that enable buyers to view more detailed information regarding backorder releases and freight carriers.

And lastly, we are improving our profitability run rate. To do so, we are: one, redirecting investments to our more profitable and growing commercial business. Second, we are driving more revenue from our e-commerce site, which is fundamentally more profitable for us. Third, we are reinvigorating our efforts in our proprietary higher-margin Ventev business. And finally, we are improving the profitability of the Retail segment. These key performance initiatives will enable us to improve our balance sheet, reduce debt and also create a much better structural, operational and financial foundation for us as we head into the next fiscal year.

I will now turn it over to Aric for a discussion on our financial performance.

Thank you, Sandip, and good morning, everyone. Our overall results reflect the significant impact of the pandemic on the retail and VAR markets. But digging deeper into the numbers, you can see the success of our near-term initiatives to improve our cost structure and operating performance and our long-term strategy to drive growth and profitability from our commercial segment.

Starting with the top line. Revenues totaled $119.8 million compared with $130.8 million (sic) [$130.7 million] in the first quarter of fiscal 2020 and $128.2 million in the sequential fourth quarter. Almost all of the year-over-year decline was related to the Retail segment. Gross profit for the quarter was $18.8 million compared with $25.3 million for the same quarter of fiscal 2020. Gross margin was 15.7% in the first quarter compared with 19.3% a year ago. Gross profit and gross margin both improved from the sequential fourth quarter despite the decline in sales. This was mostly a result of the return to historical levels of charges related to inventory and returns. Year-over-year decline in gross profit and gross margin are a result of a couple of items. First, retail sales were down 27%, primarily a result of retail store closures and lower foot traffic due to COVID-19. And second, the Public Carrier market represents a larger percentage of overall sales this quarter as we continue to grow market share in this sector, but it does come at lower than historical margins.

SG&A expenses were down 16% from a year ago to $23.7 million, reflecting the success of our aggressive cost reduction initiatives that Sandip mentioned earlier. The cost reductions led to lower compensation costs both in operations and nonoperations areas as well as lower freight costs. Finally, marketing and travel costs were down significantly due to COVID-related cancellations of both corporate and industry events. In the first quarter of fiscal 2020, the loss before income taxes was $5 million compared with the loss before income taxes of $3.5 million a year ago. Our tax benefit was also much lower this quarter, which had a significant impact on our EPS. This reduction resulted from several discrete items, including changes associated with the state adjustments related to the CARES Act. We do expect the tax rate to increase for the rest of this fiscal year.

We continue to maintain a healthy balance sheet, with the balance on our line of credit of $25.3 million, down slightly from $25.6 million at the end of the fiscal year. While overall inventory was essentially flat from year-end, this does not reflect our continued efforts to reduce retail inventory, which did go down by approximately $7 million this quarter. That decline was offset in investments we made in our commercial segment to build inventory strategic areas to support our Tier 1 carrier customers and VARs. We also reduced accounts receivable by $9 million. We did not see any significant increases in customer payment issues associated with COVID. And in fact, we reduced our COVID reserves slightly during the quarter. We generated cash flow from operations for the second straight quarter. We will also be following our fiscal year 2020 tax return shortly, which we expect to generate a $4 million to $5 million cash refund later this fiscal year.

As I mentioned at the outset, we are executing on our near-term performance initiatives, while at the same time, investing in our long-term strategy, and this is reflected in some initial improvement in the operating performance of our Retail business and on the balance sheet.

Looking beyond fiscal 2021, we the majority of opportunities for TESSCO's growth and profitability are on the commercial side of the business, and we will continue to invest to take advantage of those while also managing the Retail business very tightly.

And now I'll turn it back to Sandip to provide additional context on our strategy to capitalize on that opportunity. Sandip?

Thanks, Aric. Let me share the basis of my optimism for the future of TESSCO. There is simply no denying that we are witnessing a once-in-a-generation opportunity in the wireless industry. The world is on the verge of being able to knit together, innovations in cloud computing, silicon, MIMO and other technologies to realize the advantages of wireless everywhere. Now it's fair to say that we have seen technology refreshers in this industry a few times before, with 2G, 3G and 4G being most recent examples. This time, however, is different. As we are seeing not only the next generation that being 5G but an unprecedented concurrent rollout of other new technologies like private LTE, CBRS and IoT. Each of these technologies and solutions are projected to drive significant growth over the coming years. And they all require the implementation of small cells, mobile edge computing and RF distribution capabilities to realize the promised lower latency and higher speeds.

TESSCO sits at the nexus of these opportunities as we possess the subject matter expertise, operational capabilities, technology provider partnerships and customer reach. The examples I have provided you offer a glimpse into the breadth of what we are able to do for our customers, and in turn, provide an effective route to market for our suppliers. As I've discussed in previous earnings calls, we have begun to implement our 3-pronged strategy, meant to help us capitalize on these growth opportunities. Our value-added distribution business is core to this. And we are reallocating capital to maximize our ability to succeed. An important factor is ensuring that we are the easiest company to do business with for both our suppliers and our customers.

The second component of our strategy is to industrialize our Ventev operations, focused on scaling our capabilities as an engineering-led, road map-driven industry innovator, particularly around aesthetics and environmentally tailored enclosures and with quality.

And third, we seek to resolve complexity and pain points for our customers by providing advanced software and services. Our domain expertise in the construction and deployment of wireless networks, along with our existing customer relationships, differentiates us in this market. I provided a few examples of how we enable the implementation of wireless solutions in our VAR and private system customers. And our investments in software and services will make these capabilities even more powerful and expand the value of these relationships. Moreover, this aligns with our determination to develop, sustain and incremental revenue streams with more attractive margins. As a result of the successful implementation of this strategy, TESSCO will become a disruptive force in the wireless industry and drive long-term value for our shareholders.

With that, Aric and I will be very happy to take your questions.

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

Sandip, it's Ted on for Maggie. Exciting to hear the startup of shipping the 5G sites to New York and New England. Just curious what your anticipation is for that over the quarter here and maybe for the remainder of fiscal 2021. Do you anticipate that to accelerate? And I guess you mentioned it was 10% to 15% of revenue now. Where do you think that can get to at the end of fiscal 2021?

Ted, good to hear from you. Maggie is on the line. Good morning to her as well. Ted, as we said on the call, we think this is just the beginning. Second, we've talked previously about the intensity of 5G, not really picking up towards later this calendar year. What we had said earlier is second half of this calendar year based on the pandemic that may have shifted out by a quarter, but in general, we still believe that it will be later this calendar year, where we will see intensity around 5G.

From an overall market perspective, I'm sure you're seeing the carriers line up in terms of their own organization, their M&A work. One has been completed. There's been announcements around vendors that DISH has made. So a lot of this will be either back-end loaded in the calendar year or into next year. But we are definitely and pretty excited to see some of our work paying off, and we're beginning to see revenue now.

That's great. So on the carrier business, with some of the project delays, and it sounds like maybe some slight delay in push out further in '21 of 5G. What areas of spending are you anticipating to drive that continued growth within the carrier segment?

So first, I want to refer you back to the market share growth. We focused on, achieved and demonstrated in the fourth quarter of our last fiscal year. Looking forward, with the bigger carriers and their announced CapEx and 5G rollout plans, that's an area of growth for us. We're also encouraged by working with some of the radio OEMs directly. We actually have a proof point and that's the source of one of our revenue streams around 5G. We are not at liberty to mention names, but we are helping OEMs complete their radio kits with minor materials and ancillary equipment so that they can ship a complete kit to their carrier customers. We will focus down on this segment and put in place more biz dev efforts. So in terms of the overall market taxonomy, there are the carrier plans itself, which will give us a boost. Second, our existing play in the AT&T and Verizon ecosystem that we have talked about on this call and prior. We are going to focus on expanding that. And then partnering with other OEMs in terms of helping them complete a full kit that they can sell to their customers. The market share we have today, we believe, will give us a lift going forward. I mean, the timing to be determined by the actual 5G rollouts relative to your first question, Ted. So we are focusing on both market share and growth going forward as well as volume growth from existing market share.

Okay. That's helpful. And then maybe switching gears here to the margin front. You gave great color on some of the levers you have available within the Retail segment. Curious within Public Carrier gross margins that dipped to about 9.5% this quarter, can you maybe talk about some of the levers that you have available within the carrier segment related to gross margin there? And maybe just in terms of SG&A levers going forward for the business as well.

For -- Ted, it's Aric. On the carrier side, largely, that's a function of customer mix. So some of the good news of some of the new customers coming in and growing their market share with us are at slightly lower than the historical margins. I think we're getting close to the fact to that bottoming out of that, and we should start to see that leveling off fairly soon. And this quarter was a little bit lower than previous quarters because of some newer deals that were at some lower margins, but were incremental to what we've done in the past. So we think that this quarter, while it was definitely a little bit lower, we hope we'll see a little bit of growth there. There's not that much we can do to improve the margins there, the carrier business with these larger customers is what it is. There's limited potential for us to get Ventev into this space. So we're working on that. Our new Ventev leader is putting resources in place to try to get some spec into some of these carrier deals, both in the larger ones and the mid- and smaller tier. So that can help us down the road. So that's a focus for us as well. And then on the SG&A side, right now, we had a 60% decline this quarter in SG&A. So we're certainly managing that very well, we think. We don't want to overreact and reduce our ability to grow this business down the road later this year, as Sandip handled a lot of things in his presentation around opportunities in both the VAR and the carrier space, and we don't want to lose those opportunities. So we want to make sure that our team is well staffed and ready to take on all of these new opportunities.

Aric, if I may, and Ted, if I may add some color to a couple of things Aric said, I just want to amplify a couple of points. The first on the carrier margin side. A lot of what we are distributing today, a lot of what we are providing is very standardized and therefore, has lower margins than the other parts of our business. And I want to point to our longer-term strategy, right, of 2 things: the Ventev industrialization and growth. If you link that, Ted, to the millimeter wave deployments that carriers have announced, the small cells that have also been announced, these will all require enclosures. So we have an opportunity to do similar things that we do in our VAR and Integrator space around enclosures, power, aesthetical -- aesthetics and environmentally-tailored antennas, et cetera. So we will definitely and we are hunkering down in that. That's part of our Ventev industrialization strategy. And second, when you have more cells that are more pain points and more complexity that our customers will face in overall construction. So from a mix perspective, that is the third prong of our strategy to insert some software and services capabilities so that we create a mix of Ventev, software and the products that we distribute today to essentially help us improve our margins and our run rate.

That's great. That's really helpful. And if I can just slip in one more question here. So it was great to hear a lot of the color around tessco.com. Curious how much of the business today, I guess, revenue would you tie to tessco.com and just kind of origination there? And what does the general margin profile of that look like compared to some of your other sales channels?

Yes, Ted, we don't disclose. So I'm not able to break out for you exactly the volume that we do through tessco.com. The preponderance of it is reported as part of our VAR and Integrator segment because that's where much of the intensity lies. It's self-service. It provides TESSCO with an opportunity to customize [bonds] to industries. We are linking that with our refocus in terms of the end user segment, so we can be very customized, very specific to industry verticals and tailor landing pages and get more stickiness that way. So those are the things we are doing, along with the list of things I talked about. But we don't break out the revenue to your -- I believe the thrust of your question. So not able to answer that directly.

Your next question comes from the line of Bill Dezellem from Tieton Capital.

I'd actually like to follow up on one of your last answers. You made reference to Ventev and having an opportunity to create enclosures for the 5G cells. But then you said beyond that, there might be an opportunity -- or you see an opportunity to bring software and service into your offering. Would you please talk about that further? And what it is that you would be doing? And if that's -- if that would be something brand new for the industry or if you would be [replacing] someone else who is already supplying those software and service offerings that you're referencing?

Bill, thank you for the question. I will go back to an example I used during the presentation. We talked about our OASIS software offering. We've had this offer in place for a few years now, but we are more aggressively linking it to our overall distribution system. And let me give you an illustration of how one of our customers uses this. I mean this particular customer has a hierarchy of construction companies and construction grew that both order equipment, product, other things on their behalf. So 2 things. From an approval perspective, there's a hierarchy of controls that people can use using our software, so that people are more disciplined, that their compliance -- financial compliance, et cetera, are followed. That's one benefit. Second, benefit in standardizing bill of materials across a broad geography. And when you have a broad geography, there's a wide variety and companies and crew that do the construction. So standardization is a benefit. And then third, from an inventory overall spend management perspective, when you think of an overall program around site construction, there's many complexities around getting a permit, getting the right crew in place, getting the right site clearance and the inventory. So there are normal delays and challenges in site construction. What we allow through our software is allow the customer to redirect the equipment to where it's most likely to be used and soonest. So they don't have inventory sitting around and having inventory sitting around is having their capital and cash being held on stitch to a particular program. So if you can think of that taxonomy that I just described, I mean, that is what we do with OASIS. We are linking it much more to our offers going forward. And we will -- I mean, like all software suites, we plan to continue to build value and build features and capabilities on our road map going forward. Well, I hope that helped and gave you color.

So we should not think of software as one offering, service as a separate offering. It's ultimately that the software is allowing enhanced service capability for your customers. Would that be a correct assessment?

Enhancing and enabling are the 2 words I would use. So the ambition, just going back and reiterating our strategy, long-term strategy going forward. And Bill, we've talked both on this call and in prior earnings calls about a 3-pronged strategy. These 3 things, we don't see a stand-alone plays. We see as these being combined plays, enhancing our overall value proposition, all built around our value-added core distribution model. So we continue to distribute products to the entities we serve. We want to continue to enhance that with things like design services that I mentioned on the call today. The Ventev industrialization helps us -- help our customers be more environmentally friendly, drive more aesthetics, and this will be needed more and more based on the types of cells, being small cells, being more in building, trying to get closer to the user, so that will be needed. So it helps us with our core distribution business as well. And in turn, when you think of all of this and the overall intensity this places on construction of these types of networks, you will need these types of software capabilities, these types of program management, inventory management, asset management capabilities to be linked with overall distribution and construction. So we see the 3 pillars working in tandem giving us uniqueness and more stickiness with our customers.

And then last quarter, you spoke about some important wins in the carrier market. Were those wins part of what helped you drive the revenues this quarter? Or are those still to come in future quarters?

We saw revenue, Bill, from the market share expansion that we embarked on and demonstrated in our last fiscal quarter.

And were those market share expansion wins entirely -- what's the word I'm looking for, and not utilized, but entirely realized this quarter? Or is there still more growth to come from them?

Yes. So the short answer would be yes. But let me elaborate. So, Bill, as we discussed this quarter, and you would have picked up from our narrative, I mean this growth expansion was in essentially the AT&T and Verizon ecosystems. Some of the construction companies that operate in those ecosystems also do work for other ecosystems, right? So we expect volume growth to come as they expand their business. Beyond that, we are also focused. As Aric mentioned, we are investing in very surgical ways to expand our market share beyond where we play today.

Great. And then are you starting now to see in the VAR and Integrator segment the delays lessening here in July and maybe even June for that matter? Or are those delays continuing at the pace that they were previously?

We are seeing improvements in spots. And when I say spots, Bill, we think of the world both as geography, for instance, New York state, and most of the VARs in New York states were unable to conduct any business for much of the first part of the quarter. We see that being lifted. So from a geography perspective, I gave you the example of New York state. There's similar narrative across the whole country. So that's point one. Point two, in terms of access to places like venues, right? So you will have heard us talk about in prior quarters about Ventev projects we've done at theme parks. Those theme parks were closed for the early part of the pandemic. These are slowly opening up, but geography by geography. So it's a slow recovery, like everything else. Outside our industry that we are gearing of. But we are seeing things open up. Very difficult to predict, however, how this will turn out and overall how the country will open up. Not anything that's particular to our industry or our business. I'm just repeating general commentary. But I hope that gives you the color you are looking for.

That does and I would like to ask one more question before I turn it over. In the VAR and Integrator segment of the press release, in the commentary, there was a reference to the transportation market and the education channels and the opportunities that you see there. Would you please expand on what it is that you see in those 2 industries?

It's around, Bill, for the transportation industry. It's around process improvement, being able to utilize the particular industry and particular players in the industry, their own assets. You could think of it as IoT applications for their own operating benefits and improvements, probably as much as I can say at this point in time.

These are railroads and trucking companies and shipping companies.

Correct. Thank you, Aric. If you heard that. I'm assuming you heard that, Bill, what Aric just said. And from an education perspective, we see a lot of educational institutions upgrading wireless infrastructure or frankly, deploying wireless infrastructure as people continue to be cut the cord, if you will.

(Operator Instructions) Your next question comes from the line of Steve Cole from Mangrove.

Had a couple of things. I wanted to turn back to the VAR integration channel for a second. I know you've had 2 leadership -- beside yourself, Sandip, you've had new leadership there with Eddie. And I'm curious, I know he's only been here 2 months. But wondering if you can maybe expand on what some of his early insights are? And what are you seeing? And how is that dovetailing in with what you're speaking of today? I'm just curious that he is pretty much targeting certain end markets like education and transportation that you just alluded to. Or what is he bringing incrementally from an outside perspective that might be helpful?

I mean, first, delighted to have Eddie and Thad on board. They bring new energy and new insights and help us and we are very excited about what they will contribute to TESSCO going forward. In terms of the VAR and Integrator segment, a lot of what we have talked about is becoming real. I mean the pandemic has been unfortunate in terms of being able to demonstrate bottom line results of that. But what Eddie brings to us is a very deep understanding, given his past, how this industry operates, the particular chemistry between VARs and end users. And frankly to take what the team had already done to help them industrialize much, much more. So the set of things we have talked about that will reamplify, and this is what Eddie is deep into and amplifying today. So overall talent and leadership. I mean, these are some changes we had -- I have begun to make since I came in, and we have continued on that. He is doing great work along with the rest of the VAR and Integrator leadership in terms of organization, focus, discipline. We have greatly simplified our sales support structure, which has gotten complex over time. I mean that is work behind us. We are doing things in terms of inventory, things like SKU setup times. This is a result of the simplification we have done with our sales support structure, more to come with our IT transformation project that Aric and I talked about earlier. We are redeploying capital. I mean, I'll repeat what Eddie said. I mean, this year, we did some great things with retail in terms of tightening up our operations, our focus and our inventory management. We reduced, quarter-over-quarter, the retail inventory by $7 million. I mean, in a quarter where the top line wasn't that bridge and we didn't have that much excess and absolute inventories. This was (inaudible) Now we took that $7 million and we redeployed it to essentially our VAR segment, right? So VAR segment is very responsive. We need to be very responsive to what our customers are looking for to reduce the time [between them and the actually completing] to be able to do that. And then finally, the focus on end users and bringing overall improvement from our tessco.com, from design services, curating other services and improving our overall output. Hope that gives you some color, Steve.

No, it does. And one quick follow-up to that, Sandip. I'm just curious, I mean what long-term over '21, '22 and beyond, the margin profile that you look for the total company and the importance of taking the VAR and integrated channel into more specialized areas. Is that really -- there's a cost of what you're trying to do here because it doesn't seem like -- I mean, the carriers obviously will get better, I presume, from 9.5. But just if I'm looking at the numbers and where the growth is going to come from, then we -- I would think we're going to have to see the so far integrated margins uptick and more value-added as you're alluding to and specialized targeting of [in this case] and what have you. Is that more or less what we're doing? Or am I missing there?

We want to get volume growth, right, in VAR and Integrator. And I believe that will come. So that's point one. I mean, the margins that we enjoy today with the VAR and Integrator segments are attractive, much more attractive than what we see in carrier. With the chemistry and mix of our overall offer going forward, I believe you are correct. We will see margin improvement. So margin improvement and overall volume improvement using a more favorable product mix, right, and more volume from an overall industry distribution perspective and what we've done with utilities, what we are talking about doing with transportation and education. There are many, many industry verticals that need the kind of solutions that we provide. So global sales expansion, improved product mix will give us the volume and margin we will need. And that is our long-term value proposition.

There are no further questions at this time. I will turn the call back over to management.

Thank you very much, operator. And thank you, everybody, for joining the call. I'd like to make 5 points in closing. First, needless to say, this has been a tough quarter, not just for us, but the industry as a whole and also the overall country. Second, even though the pandemic has greatly impacted our results, we are very encouraged and I'm repeating a few things that we said in the Q&A session. We are very encouraged by the orders and shipments we are seeing related to early 5G deployments and our overall progress in the VAR and Integrator segment. Third, I want to thank the Retail team. I'm very pleased with how our team is managing the overall decline of the Retail offer. We have significantly reduced the negative impact of Retail to our bottom line when compared to the previous 2 quarters, very happy about that. Number four, I believe we have the right focus, both in terms of our near-term KPIs, the near-term performance indicators that I talked about earlier in the call and the longer-term growth objectives that Aric and I spoke about on the call. And we are making progress. We've made progress on both fronts under these difficult circumstances. And then number five, last but not the least, I want to thank all of you for attending this call. I want to thank our customers and our suppliers for their trust and partnership. And finally, I want to thank the TESSCO team for your spirit, your determination. Please be healthy, everybody. Please stay safe, and we'll talk to you next quarter. Thank you.

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