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CST: 22/07/2019 01:52:17   

SMTC Corporation Reports Fourth Quarter and Fiscal Year 2018 Results

129 Days ago

Q4 2018 revenue more than doubled vs. Q4 2017

2018 revenue increased 55% over 2017

Q4 2018 revenue increased 48% vs. Q4 2017 excluding the impact of the MC Assembly

2018 revenue increased 38% vs. 2017 excluding the impact of the MC Assembly

TORONTO, March 14, 2019 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX), a global electronics manufacturing services provider, today announced fourth quarter and fiscal year 2018 results.

Q4 Financial Highlights

  • Revenue increased $42.2 million, or 109.3% to $80.9 million, compared to $38.6 million in the fourth quarter of 2017, with $23.5 million attributable to the November 2018 acquisition of MC Assembly
  • On a proforma basis, assuming MC Assembly had been part of SMTC for the full three months of the quarter in 2018 and 2017, the combined revenue of both companies in in the fourth quarter of 2018 would have been $96.3 million, up 24.6% from $77.3 million in 2017
  • Gross profit was $8.3 million or 10.3% of revenue, compared to $2.9 million or 7.5% of revenue reported in the fourth quarter of 2017, representing a 280-basis point improvement in gross margin
  • Net loss of $(1.2) million or $(0.05) per share, compared to a net loss of $(0.9) million or $(0.05) per share reported in the fourth quarter of 2017
  • Adjusting for merger and acquisition expenses of $1.7 million, Adjusted Net Income was $0.5 million, or $0.02 per share compared to a net loss of $(0.9) million in the fourth quarter of 2017, an improvement of $1.4 million
  • Net Debt at the end of the quarter was $92.3 million compared to $14.7 million at the end of 2017 with the increase primarily due to $68.0 million of term debt and assumed capital leases incurred related to the acquisition of MC Assembly
  • Adjusted EBITDA was $5.3 million, which represents a $4.1 million improvement compared to $1.2 million in the fourth quarter of 2017

2018 Financial Highlights

  • Revenue increased 55.2% to $216.1 million, compared to $139.2 million in fiscal 2017, with $23.5 million attributable to the November 2018 acquisition of MC Assembly
  • On a proforma basis, assuming MC Assembly had been part of SMTC for 12 months in 2018 and 2017, the combined revenue of both companies in 2018 would have been $345.2 million, up 22.6% from $281.5 million in 2017
  • Gross profit was $21.7 million or 10.0% of revenue, representing an increase over $10.9 million or 7.8% of revenue reported in fiscal 2017
  • Net loss of $(0.4) million or $(0.02) per share, which represents a $7.4 million improvement, compared to a net loss of $(7.8) million or $(0.47) per share reported in fiscal 2017
  • Adjusting for merger and acquisition expenses of $1.7 million, Adjusted Net Income was $1.2 million, or $0.06 per share compared to a loss of $(7.8) million in 2017, an improvement of $9.1 million
  • Adjusted EBITDA was $10.2 million, which represents an $11.8 million improvement compared to $(1.5) million in fiscal 2017

“Our 2018 results reflect the commitment and rigorous actions we have taken in the past six quarters to relaunch the company. Our efforts have resulted in year-over-year organic growth of nearly 50% driven by exceptional customer retention, new program wins at existing customers and the addition of new customers. Our expertise in supply chain management allowed us to navigate through a tight supply environment that negatively impacted many others in our industry. As a result of our disciplined execution and exceptional growth, our margins and adjusted EBITDA are up significantly over last year as well, with our adjusted EBITDA increasing year-over-year by approximately $11.8 million,” said Ed Smith, SMTC’s President and Chief Executive Officer. “We also earned new industry accreditations at SMTC and in November we completed a transformational acquisition that provides us with a stronger combined platform, new properties and capabilities enabling us to expand within important end-markets, that will accelerate our growth trajectory. I am pleased with the combined teams' progress integrating MC Assembly and we have already realized a significant portion of the $6 million of synergies that we previously identified as opportunity,” added Smith.

Q1 Outlook

“We continue see strong demand from our customers in the first quarter of 2019 and anticipate another year-over-year of top-line growth and EBITDA improvements,” said Ed Smith, SMTC’s President and Chief Executive Officer.

SMTC’s current expectations for the first quarter of 2019:

  Q1 2019 Revenue Q1 2019 Adjusted EBITDA Range (1)  
  $96 - $100 million $5.3 - $5.8 million  
       
(1) Adjusted EBITDA is calculated based on net income (loss) adjusted to exclude stock-based compensation, interest, restructuring charges, unrealized foreign exchange gain (loss) on unsettled forward exchange contracts, income taxes and depreciation of property plant and equipment and amortization of intangible assets, merger and acquisition related expenses.  SMTC 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 shown below in this press release.


Revenue for the fourth quarter was $80.9 million, up 109.3% from $38.6 million in the fourth quarter of 2017. Sequentially, revenue increased 50.6% from $53.7 million during the third quarter of 2018. The year-over-year increase from the fourth quarter of 2017 was driven by organic growth of 48.4% percent and an additional 52 days of revenue from the acquisition of MC Assembly.  

Gross profit for the fourth quarter of 2018 was $8.3 million or 10.3% of revenue, compared with $2.9 million or 7.5% of revenue for the fourth quarter in 2017. Gross profit for the third quarter of 2018 was $5.2 million or 9.7% of revenue while adjusted gross profit was $5.1 million or 9.6% of revenue.

Adjusted EBITDA was $5.3 million in the fourth quarter of 2018, compared to $1.2 million for the fourth quarter of 2017 and $ 2.4 million in the third quarter of 2018. The increase in the fourth quarter of 2018 compared to the prior quarter was primarily due to the acquisition of MC Assembly.

Net loss was $(1.2) million for the fourth quarter of 2018, compared to a net loss of $(0.9) million in the fourth quarter of 2017. The company reported net earnings of $0.9 million for the third quarter of 2018.

Financial Results Conference Call

The company will host a conference call which will start at 8:30 a.m. Eastern Time on Friday, March 15, 2019 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 join the SMTC Corporation’s Fourth Quarter and Fiscal Year 2018 Results Conference Call.

The conference call will be available for rebroadcast 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 income (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. Adjusted Net income (Loss) is computed as net income (loss) excluding mergers and acquisitions related expenses.  A reconciliation of Adjusted Net Income (loss) it to Net Income (Loss) 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 was founded in 1985 and acquired MC Assembly Holdings, Inc. in November 2018.  Following this acquisition, SMTC has more than 50 manufacturing and assembly lines in United States, China and Mexico which creates a powerful low-to-medium volume, high-mix, end-to-end global EMS provider. With local support and expanded manufacturing capabilities globally, including fully integrated contract manufacturing services with a focus on global original equipment manufacturers (OEMs) and emerging technology companies, including those in the Defense and Aerospace, Industrial, Power and Clean Technology, Medical and Safety, Retail and Payment Systems, Semiconductors and Telecom, Networking and Communications; and Test and Measurement industries. As a mid-size provider of end-to-end electronics manufacturing services (EMS), SMTC provides printed circuit boards assemblies (PCB) production, systems integration and comprehensive testing services, enclosure fabrication, as well as product design, sustaining engineering and supply chain management services. 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 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.

 

Consolidated Balance Sheets      
(Unaudited)      
       
(Expressed in thousands of U.S. dollars) December 30,
2018
  December 31,
2017
Assets      
       
Current assets:      
Cash $   1,601     $   5,536  
Accounts receivable - net     72,986         29,093  
Unbilled contract assets     20,405         -  
Inventories - net     53,203         22,363  
Prepaid expenses and other assets      5,548         2,142  
Derivative assets     15         37  
Income taxes receivable     160         17  
      153,918         59,188  
Property, plant and equipment - net     28,160         10,269  
Goodwill     18,165         -  
Intangible assets     19,935         -  
Deferred financing costs - net     668         94  
Deferred income taxes - net     380         305  
  $   221,226     $   69,856  
       
Liabilities and Shareholders' Equity      
       
Current liabilities:      
Revolving credit facility     25,020     $   12,191  
Accounts payable     76,893         25,028  
Accrued liabilities     13,040         4,877  
Warrant liability     2,009         -  
Contingent consideration     3,050         -  
Derivative liabilities     -         375  
Income taxes payable     12         48  
Current portion of long-term debt     1,368         2,000  
Current portion of capital lease obligations     1,547         174  
      122,939         44,693  
Long-term debt     56,039         6,000  
Capital lease obligations     9,947         89  
       
Shareholders’ equity:      
Capital stock     457         396  
Additional paid-in capital     278,649         265,355  
Deficit     (246,805 )       (246,677 )
      32,301         19,074  
  $   221,226     $   69,856  
       

 

         
Consolidated Statements of Operations and Comprehensive Income (Loss)        
(Unaudited)                  
  Three months ended   Twelve months ended
                   
(Expressed in thousands of U.S. dollars, except number of shares and per share amounts) December 30,
2018
  September 30,
2018
  December 31,
2017
  December 30,
2018
  December 31,
2017
                   
Revenue $   80,855     $   53,677     $   38,641     $   216,131     $   139,231  
Cost of sales     72,564         48,440         35,741         194,470         128,380  
Gross profit     8,291         5,237         2,900         21,661         10,851  
Selling, general and administrative expenses      7,335         3,682         3,136         18,173         13,960  
Impairment of property,plant and equipment     -         -         -         -         1,601  
(Gain) loss on sale of property,plant and equipment     (33 )       3         -         (30 )       (60 )
Restructuring charges     18         58         55         172         1,732  
Loss on extinguishment of debt                  
Operating earnings (loss)     971         1,494         (291 )       3,346         (6,382 )
Interest expense     1,922         485         278         3,117         903  
Earnings (loss) before income taxes     (951 )       1,009         (569 )       229         (7,285 )
Income tax expense (recovery)                  
Current     156         290         171         752         639  
Deferred     116         (145 )       164         (75 )       (79 )
      272         145         335         677         560  
Net income (loss), also being comprehensive income (loss) $   (1,223 )   $   864     $   (904 )   $   (448 )   $   (7,845 )
                   
Basic loss per share $   (0.05 )   $   0.04     $   (0.05 )   $   (0.02 )   $   (0.48 )
Diluted loss per share $   (0.05 )   $   0.04     $   (0.05 )   $   (0.02 )   $   (0.48 )
                   
Weighted average number of shares outstanding                  
Basic     23,105,597         19,335,253         16,860,155         19,176,198         16,504,106  
Diluted     23,105,597         19,335,253         16,860,155         19,176,198         16,504,106  
                   

  

               
Consolidated Statements of Cash Flows              
(Unaudited)              
  Three months ended   Twelve months ended
(Expressed in thousands of U.S. dollars)              
Cash provided by (used in): December 30,
2018
  December 31,
2017
  December 30,
2018
  December 31,
2017
Operations:              
Net loss $   (1,223 )   $   (904 )   $   (448 )   $   (7,845 )
Items not involving cash:              
Depreciation     1,365         799         3,791         3,588  
Amortization of acquired Intangible assets     1,065         -         1,065         -  
Unrealized foreign exchange loss (gain) on unsettled forward              
  exchange contracts     (15 )       520         (353 )       (918 )
Impairment of property, plant and equipment     -         -         -         1,601  
Loss (gain) on sale of property, plant and equipment     (33 )       -         (30 )       (60 )
Deferred income taxes (recovery)     116         164         (75 )       (79 )
Amortization of deferred financing fees     160         8         194         27  
Stock-based compensation     129         159         407         432  
Stock Revaluation of Warrant     111         -         111         -  
               
Change in non-cash operating working capital:              
Accounts receivable     (11,917 )       (5,928 )       (24,030 )       (6,469 )
Unbilled contract assets     (11,902 )       -         (7,949 )       -  
Inventories     9,066         (1,146 )       (8,027 )       (1,689 )
Prepaid expensesand other assets     119         (453 )       (883 )       311  
Income taxes payable     (164 )       2         (179 )       (142 )
Accounts payable     7,116         4,740         23,698         2,159  
Accrued liabilities     3,523         (942 )       4,921         237  
      (2,484 )       (2,981 )       (7,787 )       (8,847 )
Financing:              
Net (repayment) advances of revolving credit facility     8,314         6,282         12,829         9,460  
(Repayment) advances of long-term debt     (6,500 )       (500 )       (8,000 )       (2,000 )
Net advances of long-term debt     62,000         -         62,000         -  
Principal payment of capital lease obligations     (298 )       (43 )       (487 )       (395 )
Repayment of equipment facility     (2,629 )       -         -         -  
Proceeds from issuance of common stock (Rights offer)     -         -         12,587         -  
Debt issuance cost     (2,831 )       -         (2,831 )       -  
Proceeds from issuance of Stock options     -         -         361         -  
Deferred financing costs     (584 )       -         (632 )       (51 )
      57,472         5,739         75,827         7,014  
Investing:              
Acquisition of MC Assembly - net of cash acquired     (67,600 )       -         (67,600 )       -  
Acquisition of business, net of cash acquired     -         -         -         -  
Purchase of property, plant and equipment     (511 )       (157 )       (4,410 )       (1,471 )
Proceeds from leaseholding improvement         -         -         56  
Proceeds from sale of property, plant and equipment     35         -         35         281  
      (68,076 )       (157 )       (71,975 )       (1,134 )
Increase (decrease)  in cash     (13,088 )       2,601         (3,935 )       (2,967 )
Cash, beginning of period     14,689         2,935         5,536         8,503  
Cash, end of the period $   1,601     $   5,536     $   1,601     $   5,536  
               

 

Supplementary Information:                  
                   
Reconciliation of Adjusted EBITDA                    
 

Three months ended   Twelve months ended
  December 30,
2018
  September 30,
2018
  December 31,
2017
  December 30,
2018
  December 31,
2017
                   
Net income (loss) $   (1,223 )   $   864     $   (904 )   $   (448 )   $   (7,845 )
Add (deduct):                  
Depreciation of property, plant and equipment     1,365       883       799         3,791         3,588  
Amortization of Intangible assets     1,065         -          -          1,065         -  
Interest     1,922       485       278         3,117         903  
Income tax expense     272       145       335         677         560  
EBITDA $   3,401     $   2,377     $   508     $   8,202     $   (2,794 )
                   
Add (deduct):                  
Stock compensation expense    129       75       159       407         432  
Stock compensation expense - warrant revaluation   111         -          -        111         -  
Restructuring charges     18       58       55         172         1,732  
Merger and acquisitions related expenses     1,676         -          -          1,676         -  
Unrealized foreign exchange loss (gain)    (15 )     (108 )     520       (353 )       (918 )
  on unsettled forward exchange contracts                  
Adjusted EBITDA     5,320         2,402         1,242         10,215         (1,548 )
                   
                   

 

Supplementary Information:                  
                   
Reconciliation of Adjusted Gross Profit                  
 

Three months ended   Twelve months ended
  December 30,
2018
  September 30,
2018
  December 31,
2017
  December 30,
2018
  December 31,
2017
                   
Gross Profit $   8,291     $   5,237     $   2,900     $   21,661     $   10,851  
Add (deduct):                  
Unrealized foreign exchange loss (gain)                   
  on unsettled forward exchange contracts     (15 )       (108 )       520         (353 )       (918 )
                   
Adjusted Gross Profit     8,276         5,129         3,420         21,308         9,933  
                   
Adjusted Gross Profit Percentage   10.2 %     9.6 %     8.9 %     9.9 %     7.1 %
       

 

                   
Supplementary Information:                  
                   
Reconciliation of Adjusted Net Income (Loss)                
 

Three months ended   Twelve months ended
  December 30,
2018
  September 30,
2018
  December 31,
2017
  December 30,
2018
  December 31,
2017
                   
Net income (loss) $ (1,223 )   $ 864   $ (904 )   $ (448 )   $ (7,845 )
Add (deduct):                  
Merger and acquisitions related expenses   1,676       -     -       1,676       -  
                   
Adjusted Net income (loss)   453       864     (904 )     1,228       (7,845 )
                   

   

   
Supplementary Information:  
   
Reconciliation of Adjusted EBITDA    
 

SMTC
  Forecasted
Q1,
2019
   
Net loss $   (2,361 )
Add (deduct):  
Depreciation     1,746  
Amortization of Intangible     1,844  
Interest     2,648  
Income tax expense     312  
EBITDA $   4,189  
   
Add (deduct):  
Stock compensation expense      150  
Restructuring charges     1,131  
Adjusted EBITDA     5,470  
   


Investor Relations Contact

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

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