SMTC Corporation Reports Third Quarter 2018 Results

Year-over-Year Q3 2018 Revenue Up 56% and 34.5% YTD

TORONTO, Nov. 06, 2018 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX), a global electronics manufacturing services provider, today announced third quarter 2018 results.

Q3 Financial Highlights

• Revenues increased 56.0% to $53.7 million, compared to $34.4 million in the third quarter of 2017
• Gross profit was $5.2 million or 9.8% of revenue, representing an increase over $3.0 million or 8.6% of revenue reported in the third quarter of 2017
• Earnings before income taxes of $1.0 million compared to a loss of ($0.5) million in the third quarter of 2017
• Net earnings of $0.9 million or $0.04 per share, which represents a $1.4 million improvement, compared to a net loss of $(0.6) million or $(0.03) per share reported in the third quarter of 2017
• Net Debt at the end of the quarter was $11.8 million compared to $14.9 million at year-end
• Rights Offering closed August 28, 2018 adding $12.6 million in cash to the balance sheet
• Adjusted EBITDA was $2.4 million, which represents a $1.3 million improvement compared to $1.1 million in the third quarter of 2017

“I am pleased to report another strong quarter, again exceeding our business plan and we’re on track for our first profitable year in more than five years,” said Ed Smith, SMTC’s President and Chief Executive Officer. “In Q3 we continued to see strong demand from customers in the industrial, networking and communications, power and energy, and medical market sectors. To better support our growing global customer base,  year to date we have completed capital equipment investment of nearly $5 million dollars in North America, earned AS9100D certification to address the needs of customers in the Avionics, Aerospace, and Defense industries, and received 13485 accreditation that enabled us to move forward with orders from new medical customers,” Smith continued.

“We remain focused on executing both in terms of growing the top-line, as well as keeping our costs in check.  Our nine-month or year-to-date sales were up 34.5% over last year and our SG&A remains flat compared to last year’s same period, a testament to our attention to supply chain management and excellent customer value proposition,” concluded Mr. Smith.

Revenue for the third quarter was $53.7 million, up 56.0% from $34.4 million in the third quarter of 2017. Sequentially, revenue increased 20.7% from $44.5 million during the second quarter of 2018. The year-over-year increase from the third quarter of 2017 was the result of strong demand both from existing and new customers in 2018 and well-diversified among the company’s target end-markets. The adoption of the new revenue recognition standard accounted for $1.7 million or 4.8% of the year-over-year revenue increase.

Gross profit for the third quarter of 2018 was $5.2 million or 9.8% of revenue, compared with $3.0 million or 8.6% of revenue for the third quarter in 2017. Adjusted gross profit for the third quarter of 2018 was $5.1 million or 9.6% as a percentage of revenue, compared to $3.1 million or 9.0% of revenue in the third quarter of 2017. Gross profit for the second quarter of 2018 was $4.3 million or 9.6% of revenue while adjusted gross profit was $4.4 million or 9.8% of revenue.

Net earnings were $0.9 million for the third quarter of 2018, compared to a net loss of $(0.6) million in the third quarter of 2017. The company reported a net loss of $(0.1) million for the second quarter of 2018.

Adjusted EBITDA was $2.4 million in the third quarter of 2018, compared to $1.1 million for the third quarter of 2017 and $1.6 million in the second quarter of 2018. The increase in the third quarter of 2018 compared to the prior quarter was primarily due to higher revenue in addition to improved gross margin and lower administrative expenses relative to the increased revenue.

Financial Results Conference Call

The company will host a conference call which will start at 8:30 a.m. Eastern Time on Wednesday November 7, 2018 by accessing the Investor Relations’ section of SMTC’s web site on the Investor Relations Events Calendar page at https://ir.smtc.com/ir-calendar or dialing 1-877-317-6789  (for U.S. participants) or 1-412-317-6789 (for participants outside of the U.S.) ten minutes prior to the start of the call and request to be joined to the SMTC Corporation’s Third Quarter 2018 Results Conference Call.  A replay webcast of the call will also be available from the Investor Relations’ section of SMTC’s web site on the Investor Relations Events Calendar page.

Non-GAAP information

Adjusted EBITDA, Adjusted Gross Profit and Adjusted Gross Profit percentage are non-GAAP measures. Adjusted EBITDA is computed as net earnings (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 they allow 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 earnings (loss), as reflected in SMTC’s interim consolidated financial statements prepared in accordance with US GAAP.

Forward-Looking Statements

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  “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other 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 electronics manufacturing services (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 printed circuit boards assemblies (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 and was added to the Russell Microcap® Index in 2018. For further information on SMTC Corporation, please visit our website at www.smtc.com (http://www.smtc.com/).

Investor Relations Information

Peter Seltzberg
Managing Director
Darrow Associates, Inc.
516-419-9915
pseltzberg@darrowir.com