SMTC Reports Third Quarter Fiscal 2017 Results

Print
| Source: SMTC Corporation

TORONTO, Nov. 02, 2017 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX), a global electronics manufacturing services provider, today announced third quarter 2017 results.

Third Quarter Fiscal 2017 Results Summary:

  • Revenue of $34.4 million
  • Gross Profit of $3.0 million
  • Net loss of $(0.6) million
  • Adjusted EBITDA of $1.1 million
  • Debt, net of cash of $11.8 million

Revenue for the third quarter was $34.4 million compared to $42.7 million in the third quarter of 2016. Sequentially, revenue increased 4.2% from $33.0 million in the second quarter of 2017. The increase from the prior quarter is primarily due to revenue from new and existing customers serviced and our embedded business.

Gross profit for the third quarter of 2017 was $3.0 million or 8.6% of revenue compared with $3.6 million or 8.5% of revenue for the same period in 2016.  Adjusted gross profit was $3.1 million or 9.0% as a percentage of revenue in the third quarter of 2017 compared to 8.5% in the same period of the prior year.  The decrease in gross profit dollars was due to the decrease in revenue compared to the same period in prior year, however, the increase in gross profit percentage was due to improved product mix, a lower fixed cost structure as a result of our restructuring plan, and more favorable exchange rates.

Gross profit for the third quarter of 2017 increased by $1.6 million to $3.0 million when compared with $1.4 million or 4.3% of revenue in the prior quarter.  Adjusted gross profit was $3.1 million or 9.0% as a percentage of revenue in the third quarter of 2017 compared to 3.4% in the prior quarter. The increase in adjusted gross profit in the third quarter of 2017 compared to the prior quarter is due to higher revenues, a lower cost structure as a result of the restructuring plan and additional charges recorded in the second quarter of 2017.

Net loss was $(0.6) million for the third quarter of 2017 compared to a net loss of $(0.02) million in the third quarter of 2016 and a net loss of $(6.0) million in the second quarter of 2017. Adjusted EBITDA was $1.1 million in the third quarter of 2017 compared to $1.3 million for the same period in the prior year. The reduction in the third quarter of 2017 is due to the lower revenue compared to the same quarter in the prior year, however, adjusted EBITDA increased when compared to $(3.6) million in the second quarter of 2017 partially due to the improved gross profit discussed above and additional charges included in the second quarter of 2017.

Chief Financial Officer Roger Dunfield stated “I am encouraged by the revenue growth from the second quarter of 2017 and a return to positive Adjusted EBITDA when compared to the two prior quarters.  We now have benefited from a full quarter of cost savings as a result of the global restructuring plan, which has contributed to our positive Adjusted EBITIDA. We will continue our relentless focus on incremental improvements quarter over quarter.”

Chief Executive Officer Edward Smith stated “We have started to realize the results of our initiatives communicated previously in our Plan.  We have shown incremental revenue growth quarter over quarter as a result of new opportunities with both existing customers and some great new customers we are partnering with.  We are optimistic that we will continue our positive revenue and financial momentum for the fourth quarter.”

Non-GAAP information

Adjusted EBITDA, Adjusted Gross Profit and Adjusted Gross Profit percentage are non-GAAP measures.  Adjusted EBITDA is computed as net income (loss) from operations excluding depreciation and amortization, restructuring charges, unrealized foreign exchange gains/losses on unsettled forward foreign exchange contracts, stock based compensation, interest and income tax expense.  SMTC Corporation has provided in this release a non-GAAP calculation of Adjusted EBITDA as supplemental information regarding the operational performance of SMTC’s core business. A reconciliation of Adjusted EBITDA to net earnings (loss) is included in the attachment.  Adjusted Gross Profit is computed as gross profit excluding unrealized gains or losses on unsettled forward foreign exchange contracts.  Adjusted Gross Profit percentage is computed as Adjusted Gross Profit divided by revenue.  A reconciliation of Adjusted Gross Profit to gross profit is included in the attachment. Management uses these non-GAAP financial measures internally in analyzing SMTC’s financial results to assess operational performance and liquidity as well as to provide a consistent method of comparison to historical periods and to the performance of competitors and peer group companies.  SMTC believes that these non-GAAP financial measures are useful for management and investors in assessing SMTC’s performance and when planning, forecasting and analyzing future periods.  SMTC believes these non-GAAP financial measures are useful to investors because it allows for greater transparency with respect to key financial metrics we use in making operating decisions and because investors and analysts use it to help assess the health of our business.  Non-GAAP measures are subject to limitations as these measures are not in accordance with, or an alternative for, United States Generally Accepted Accounting Principles (US GAAP) and may be different from non-GAAP measures used by other companies. Because of these limitations, investors should consider Adjusted EBITDA, Adjusted Gross Profit and Adjusted Gross Profit percentage along with other financial performance measures, including revenue, gross profit and net income (loss), as reflected in SMTC’s consolidated financial statements prepared in accordance with US GAAP.

Note for Investors: The statements contained in this release that are not purely historical are forward-looking statements which involve risk and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. These statements may be identified by their use of forward-looking terminology such as "believes," "expect," "may," "should," "would," "will," "intends," "plans," "estimates," "anticipates" and similar words, and include, but are not limited to, statements regarding the expectations, intentions or strategies of SMTC. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Risks and uncertainties that may cause future results to differ from forward looking statements include the challenges of managing quickly expanding operations and integrating acquired companies, fluctuations in demand for customers' products and changes in customers' product sources, competition in the EMS industry, component shortages, and others risks and uncertainties discussed in SMTC's most recent filings with the SEC. The forward-looking statements contained in this release are made as of the date hereof and SMTC assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ materially from those projected in the forward-looking statements. 

About SMTC Corporation: SMTC Corporation, founded in 1985, is a mid-size provider of end-to-end electronics manufacturing services (EMS) including PCBA production, systems integration and comprehensive testing services, enclosure fabrication, as well as product design, sustaining engineering and supply chain management services. SMTC manufacturing facilities span a broad footprint in the United States, China and Mexico. SMTC services extend over the entire electronic product life cycle from the development and introduction of new products through to the growth, maturity and end-of-life phases. SMTC offers fully integrated contract manufacturing services with a distinctive approach to global original equipment manufacturers (OEMs) and emerging technology companies primarily within industrial, networking and computing, power and energy and medical market segments. SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX. For further information on SMTC Corporation, please visit our website at www.smtc.com.  

 

     
Consolidated Statements of Operations and Comprehensive Income (Loss)    
(Unaudited)          
  Three months ended Nine months ended
           
(Expressed in thousands of U.S. dollars, except number of shares and per share amounts)October 1,
2017
 July 2,
2017
 October 2,
2016
 October 1,
2017
 October 2,
2016
           
Revenue $34,417  $32,995  $42,683  $100,590  $128,218 
Cost of sales  31,443   31,575   39,049   92,639   116,615 
Gross profit  2,974   1,420   3,634   7,951   11,603 
Selling, general and administrative expenses  2,952   4,110   3,493   10,824   10,406 
Impairment of property,plant and equipment  -   1,601   -   1,601   - 
Gain on sale of property,plant and equipment  (60)  -   (20)  (60)  (25)
Restructuring charges  326   1,351   -   1,677   176 
Operating earnings (loss)  (244)  (5,642)  161   (6,091)  1,046 
Interest expense  229   217   164   625   598 
Earnings (loss) before income taxes  (473)  (5,859)  (3)  (6,716)  448 
Income tax expense (recovery)          
Current  173   168   97   468   200 
Deferred  (95)  (14)  (81)  (243)  (96)
   78   154   16   225   104 
Net earnings (loss), also being comprehensive income (loss)$(551) $(6,013) $(19) $(6,941) $344 
           
Basic earnings (loss) per share $(0.03) $(0.36) $(0.00) $(0.41) $0.02 
Diluted earnings (loss) per share $(0.03) $(0.36) $(0.00) $(0.41) $0.02 
           
Weighted average number of shares outstanding          
Basic  16,824,538   16,807,333   16,510,180   16,764,257   16,502,081 
Diluted  16,824,538   16,807,333   16,510,180   16,764,257   17,550,155 
           

 

      
Consolidated Balance Sheets     
(Unaudited)     
      
(Expressed in thousands of U.S. dollars)  October 1,
2017
 January 1,
2017
Assets     
      
Current assets:     
Cash  $2,935  $8,503 
Accounts receivable - net   23,165   22,624 
Inventories   21,217   20,674 
Prepaid expenses and other assets   1,689   2,453 
Derivative assets   182   - 
Income taxes receivable   17   17 
    49,205   54,271 
Property, plant and equipment - net   10,962   14,437 
Deferred financing costs - net   102   70 
Deferred income taxes - net   469   226 
   $60,738  $69,004 
      
Liabilities and Shareholders' Equity     
      
Current liabilities:     
Revolving credit facility  $5,909  $2,731 
Accounts payable   20,344   23,078 
Accrued liabilities   5,814   4,604 
Derivative liabilities   -   1,256 
Income taxes payable   46   190 
Current portion of long-term debt   2,000   2,000 
Current portion of capital lease obligations   171   389 
    34,284   34,248 
Long-term debt   6,500   8,000 
Capital lease obligations   135   269 
      
Shareholders’ equity:     
Capital stock   394   391 
Additional paid-in capital   265,198   264,928 
Deficit   (245,773)  (238,832)
    19,819   26,487 
   $60,738  $69,004 
      

 

         
Consolidated Statements of Cash Flows         
(Unaudited)        
  Three months ended Nine months ended
(Expressed in thousands of U.S. dollars)        
Cash provided by (used in): October 1,
2017
 October 2,
2016
 October 1,
2017
 October 2,
2016
Operations:        
Net earnings (loss) $(551) $(19) $(6,941) $344 
Items not involving cash:        
Depreciation  839   1,045   2,789   3,066 
Unrealized foreign exchange loss (gain) on unsettled forward        
exchange contracts  118   4   (1,438)  (995)
Impairment of property, plant and equipment  -   -   1,601   - 
Gain on sale of property, plant and equipment  (60)  (20)  (60)  (25)
Deferred income taxes (recovery)  (95)  (81)  (243)  (96)
Amortization of deferred financing fees  8   9   19   26 
Stock-based compensation  77   119   273   343 
Change in non-cash operating working capital:        
Accounts receivable  (1,625)  2,834   (541)  6,220 
Inventories  3,878   1,761   (543)  2,886 
Prepaid expenses and other assets  328   (46)  764   40 
Income taxes payable  7   71   (144)  20 
Accounts payable  (4,268)  (941)  (2,581)  (5,244)
Accrued liabilities  358   344   1,179   (742)
   (986)  5,080   (5,866)  5,843 
Financing:        
Net (repayment) advances of revolving credit facility  421   (932)  3,178   (2,681)
Repayment of long-term debt  (500)  -   (1,500)  (500)
Principal payment of capital lease obligations  (44)  (177)  (352)  (429)
Proceeds from sales leaseback  -   -   -   509 
Deferred financing costs  -   -   (51)  - 
   (123)  (1,109)  1,275   (3,101)
Investing:        
Change in restricted cash  -   (6)  -   268 
Purchase of property, plant and equipment  (400)  (501)  (1,314)  (1,864)
Proceeds from leaseholding improvement  56   -   56   - 
Proceeds from sale of property, plant and equipment  281   57   281   126 
   (63)  (450)  (977)  (1,470)
Increase (decrease)  in cash  (1,172)  3,521   (5,568)  1,272 
Cash, beginning of period  4,107   3,850   8,503   6,099 
Cash, end of the period $2,935  $7,371  $2,935  $7,371 
         

 

           
Supplementary Information:          
           
Reconciliation of Adjusted EBITDA           
           
  Three months ended Nine months ended
  October 1,
2017
 July 2,
2017
 October 2,
2016
 October 1,
2017
 October 2,
2016
           
Net earnings (loss) $(551)  (6,013) $(19) $(6,941) $344 
Add (deduct):          
Depreciation  839   971   1,045   2,789   3,066 
Interest  229   217   164   625   598 
Income tax expense  78   154   16   225   104 
           
EBITDA $595  $(4,671) $1,206  $(3,302) $4,112 
           
Add (deduct):          
Stock compensation expense (reversal)  77   (7)  119   273   343 
Restructuring charges  326   1,351   -   1,677   176 
Unrealized foreign exchange loss (gain)          
on unsettled forward exchange contracts  118   (284)  4   (1,438)  (995)
           
Adjusted EBITDA  1,116   (3,611)  1,329   (2,790)  3,636 
           

 

           
Supplementary Information:          
           
Reconciliation of Adjusted Gross Profit          
           
  Three months ended Nine months ended
  October 1,
2017
 July 2,
2017
 October 2,
2016
 October 1,
2017
 October 2,
2016
           
Gross Profit $2,974  1,420  $3,634  $7,951  $11,603 
Add (deduct):          
Unrealized foreign exchange loss (gain)          
on unsettled forward exchange contracts  118  (284)  4   (1,438)  (995)
           
Adjusted Gross Profit  3,092  1,136   3,638   6,513   10,608 
           
Adjusted Gross Profit Percentage  9.0% 3.4%  8.5%  6.5%  8.3%
    


Investor Relations Information: 

Blair McInnis 

Corporate Controller  

Telephone: (289) 378.5851 

Email: blair.mcinnis@smtc.com