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SMTC Corporation Reports Fourth Quarter and Fiscal Year 2018 Results

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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