Firan Technology Group Corporation (TSX: FTG) today announced
financial results for the second quarter of 2023.
- Second quarter bookings of $40.3M
were up 48% over Q2 2022 and up 22% over Q1 2023. This was the 10th
sequential quarter of bookings growth.
- FTG second quarter revenues of
$34.0M were up 52% over Q2 2022, as FTG ramps up production to meet
customer demand. Revenue included $3.4M from the newly acquired
Circuits sites in Minnetonka, MN and Haverhill, MA.
- FTG achieved Net Earnings in Q2
2023 of $2.4M, which was up $2.4M from Q2 2022.
- Net debt on the balance sheet as of
Q2 2023 is $6.4M, which is 0.46x Adjusted EBITDA for the trailing
12 months period ended June 2, 2023.
Business Highlights
FTG continued to play offence in the first half
of 2023. The company has invested in technology in existing sites,
grown the business organically, and completed two acquisitions.
Through all these actions, FTG is strategically deploying its
capital in ways that will drive increased shareholder returns for
the future in both the near term and long term.
Specifically, FTG accomplished many goals in Q2
2023 that continue to improve the Corporation and position it for
the future, including:
- On April 28, 2023, the Corporation
completed the acquisition of Holaday Circuits, LLC based in
Minnetonka, Minnesota, a suburb of Minneapolis. FTG acquired 100%
of Holaday for cash consideration of approximately $24.4M and
contingent consideration up to $6.0M, subject to final closing
adjustments. The business is operating as FTG Circuits Minnetonka
LLC.
- Also on April 28, 2023, the
Corporation completed the acquisition IMI, Inc. (“IMI”) based in
Haverhill, Massachusetts, north of Boston. FTG acquired 100% of the
common shares of IMI for cash consideration of $1.8M, subject to
final closing adjustments. The business is operating as FTG
Circuits Haverhill Inc.
- Achieved a 1.19:1 book-to-bill
ratio for Q2 2023 resulting in increased backlog of $98.2M compared
to $65.5M at the end of 2022. Backlog as of Q2 2023 includes $18.2M
at the newly acquired sites.
- FTG added 17 staff in Q2 2023,
including operations leadership, to help increase throughput. FTG
now employs approximately 680 people across its nine operating
sites.
- FTG received $0.3M in Employee
Retention Credits (ERC) for its U.S. sites as they retained their
staff through the pandemic for a total of $3.8M received during
2023.
- FTG received funding of $1.1
million in the quarter for a total of $3.7M received to-date under
the Canadian Aerospace Regional Recovery Initiative (ARRI)
program.
- FTG received $0.5M as the initial
draw on a conditional loan provided by the Ontario Ministry of
Economic Development, Job Creation and Trade pursuant to the
Advanced Manufacturing and Innovation Competitiveness (AMIC)
program.
- On June 1, 2023, FTG announced the
acceptance by the Toronto Stock Exchange (the
“TSX”) of FTG’s Notice of Intention to Make a
Normal Course Issuer Bid (“NCIB”). Pursuant to the
NCIB, FTG is authorized to purchase over the next 12 months, up to
an aggregate of 1,195,550 Common Shares, being approximately 5% of
its Common Shares outstanding.
Table 1 / Key Financial
Metrics
|
Three months ended |
Six months ended |
|
June 2, |
June 3, |
June 2, |
June 3, |
|
2023 |
2022 |
2023 |
2022 |
|
|
|
|
|
Sales |
$33,959 |
$22,318 |
$58,598 |
$42,779 |
|
|
|
|
|
Gross
Margin |
9,985 |
5,624 |
19,770 |
9,866 |
Gross Margin
(%) |
29.4% |
25.2% |
33.7% |
23.1% |
|
|
|
|
|
Net Earnings to FTG Equity Holders |
$2,403 |
$14 |
$6,475 |
($719) |
|
|
|
|
|
Adjusted Net
Earnings(1) |
|
|
|
|
Government assistance |
(318) |
(57) |
(3,758) |
(314) |
Acquisition and divesture expenses |
179 |
8 |
536 |
8 |
|
$2,264 |
($35) |
$3,253 |
($1,025) |
|
|
|
|
|
Earnings (Loss) Per
Share |
|
|
|
|
Basic |
$0.10 |
$0.00 |
$0.27 |
($0.03) |
Diluted |
$0.10 |
$0.00 |
$0.27 |
($0.03) |
|
|
|
|
|
Adjusted Earnings
(Loss) Per Share |
|
|
|
|
Basic |
$0.09 |
($0.00) |
$0.14 |
($0.04) |
Diluted |
$0.09 |
($0.00) |
$0.13 |
($0.04) |
(1) Adjusted Net Earnings is not a measure recognized under
International Financial Reporting Standards (“IFRS”). Management
believes that this measure is important to many of the
Corporation’s shareholders, creditors and other stakeholders.The
Corporation’s method of calculating Adjusted Net Earnings may
differ from other corporations and accordingly may not be
comparable to measures used by other corporations. |
|
For FTG in Q2 2023, overall sales increased by
$11.6M or 52.2% from $22.3M in Q2 2022 to $34.0M in Q2 2023.
Increased revenue in Q2 2023 is the result of robust demand across
our markets and specifically increased Simulator product activity,
acquisitions and favourable foreign exchange rates. The average
foreign exchange rate in Q2 2023 was 7% (8.5 cents) higher than in
Q2 2022, with a positive impact on sales of $1.6M. On a
year-to-date basis, sales increased by $15.8M or 37.0% from
2022.
The Circuits segment sales in Q2 2023 were up
$5.7M, or 36.8% compared to last year. The sales increase included
a $3.4M contribution from the newly acquired Circuits sites in
Minnetonka and Haverhill for the five-week period following close
of the acquisitions. On a year-to-date basis,
the Circuits segment sales were up $7.1M or 24.0%.
For the Aerospace segment, sales in Q2 2023 were
up $5.7M or 71.4% compared to last year. Aerospace segment sales in
Q2 2023 included $4.9M of revenue from Simulator products as
compared to $0.7M in Q2 2022. On a year-to-date basis, the
Aerospace segment sales were up $8.0M or 50.6%.
Gross margin in Q2 2023 was $10.0M or 29.4% as
compared to $5.6M or 25.2% in Q2 2022. Excluding government
assistance, the gross margin rate improved to 28.6% in Q2 2023 up
from 24.9% in Q2 2022. The increase in the gross margin rate is due
to the operating leverage of increased sales volumes, operational
improvements including favourable pricing actions, and favourable
exchange rates.
Net earnings after tax at FTG in Q2 2023 was
$2.4M or $0.10 per diluted share compared to a net income of $0.0M
or nil per diluted share in Q2 2022. The acquisitions did not
materially impact earnings in the quarter. Adjusted net earnings
was $2.3M or $0.09 per diluted share in Q2 2023 as compared to an
adjusted net loss of ($0.0M) or nil per diluted share in the prior
year quarter. The $2.2M increase in adjusted net earnings is the
result of higher sales volume, operational improvements and a more
favourable foreign exchange rate. On a year-to-date basis adjusted
net earnings after tax was $3.3M or $0.13 per diluted share
compared to a net loss of ($1.0M) or ($0.04) per diluted share in
the prior year period.
The Circuits segment earnings before interest
and income taxes was $1.7M in Q2 2023 as compared to $0.8M in Q2
2022. Higher sales drove the increase in earnings. The acquisitions
did not materially impact earnings for this segment.
The Aerospace segment earnings before interest
and income taxes was $2.7M in Q2 2023 versus $0.5M in Q2 2022. The
increase in earnings was driven by higher sales including Simulator
products, and improved pricing on a range of products.
Table 2 / EBITDA
|
Three months ended |
Six months ended |
Trailing |
|
June 2, |
June 3, |
June 2, |
June 3, |
12 |
|
2023 |
2022 |
2023 |
2022 |
Months |
EBITDA(2) |
|
|
|
|
|
Net earnings to equity holders of FTG |
$2,403 |
$14 |
$6,475 |
($719) |
$7,892 |
Add: |
|
|
|
|
|
Interest, accretion |
$237 |
$98 |
$229 |
$215 |
$457 |
Income taxes |
$986 |
$498 |
$1,749 |
$830 |
$2,493 |
Depreciation/Amortization/Stock Comp. |
$1,695 |
$1,489 |
$3,165 |
$3,102 |
$5,930 |
|
$5,321 |
$2,099 |
$11,618 |
$3,428 |
$16,772 |
Adjusted EBITDA(2) |
|
|
|
|
|
Government assistance |
($318) |
($57) |
($3,758) |
($314) |
($3,758) |
Acquisition and divesture expenses |
$179 |
$8 |
$536 |
$8 |
$697 |
|
$5,182 |
$2,050 |
$8,396 |
$3,122 |
$13,711 |
(2) EBITDA and Adjusted EBITDA are not measures recognized
under International Financial Reporting Standards (“IFRS”).
Management believes that these measures are important to many of
the Corporation’s shareholders, creditors and other
stakeholders.The Corporation’s method of calculating EBITDA and
Adjusted EBITDA may differ from other corporations and accordingly
may not be comparable to measures used by other corporations. |
|
The trailing twelve month earnings before
interest, tax, depreciation and amortization (EBITDA) was $16.8M or
$13.7M for adjusted EBITDA as compared to approximately $9M for the
full year 2022.
EBITDA for FTG in Q2 2023 was $5.3M or 15.7% of
sales compared to $2.1M or 9.4% of sales in Q2 2022. On a
year-to-date basis, EBITDA in 2023 was $11.6M or 19.8% compared to
$3.4M or 8.0% in 2022.
Adjusted EBITDA for Q2 2023, which excludes
government assistances, and expenses related to the acquisitions,
was $5.2M or 15.3% of net sales, as compared to $2.1M or 9.2% of
net sales in Q2 2022. The increase in profitability is driven by
increased operating leverage from higher sales, operational
improvements and a favourable foreign exchange impact. For the
trailing twelve months period ended June 2, 2023, adjusted EBITDA
was $13.7M or 13.0% of sales.
As at June 2, 2023, the Corporation’s net
working capital was $34.5M, compared to $30.5M at year-end in
2022.
Net debt at the end of Q2 2023 was ($6.4M)
compared to net cash of $12.3M at the end of 2022, after the
combined impact of a net cash outlay of $26.3M for acquisitions,
net proceeds of $8.5M from the Aerospace Chatsworth facility sale
leaseback transaction, and receiving $3.8M from the U.S. Employment
Retention Credit program (“ERC”). In addition, FTG has access to
committed credit lines of approximately $21.5M.
The Corporation will host a live conference call
on Thursday, July 13, 2023 at 8:30am (Eastern) to discuss the
results of Q2 2023.
Anyone wishing to participate in the call should
dial 416-764-8658 or 1-888-886-7786 and identify that you are
calling to participate in the FTG conference call. The Chairperson
is Mr. Brad Bourne. A replay of the call will be available until
September 13, 2023 and will be available on the FTG website at
www.ftgcorp.com. The number to call for a rebroadcast is
416-764-8692 or 1-877-674-7070, Playback Passcode 132339#.
ABOUT FIRAN TECHNOLOGY GROUP CORPORATION
FTG is an aerospace and defence electronics
product and subsystem supplier to customers around the globe. FTG
has two operating units:
FTG Circuits is a
manufacturer of high technology, high reliability printed circuit
boards. Our customers are leaders in the aviation, defence, and
high technology industries. FTG Circuits has operations in Toronto,
Ontario, Chatsworth, California, Fredericksburg, Virginia,
Minnetonka, Minnesota, Haverhill Massachusetts and a joint venture
in Tianjin, China.
FTG Aerospace
manufactures and repairs illuminated cockpit panels, keyboards and
sub-assemblies for original equipment manufacturers of aerospace
and defence equipment. FTG Aerospace has operations in Toronto,
Ontario, Chatsworth, California, and Tianjin, China.
The Corporation's shares are traded on the
Toronto Stock Exchange under the symbol FTG.
FORWARD-LOOKING STATEMENTS
This news release contains certain
forward-looking statements. These forward-looking statements are
related to, but not limited to, FTG’s operations, anticipated
financial performance, business prospects and strategies.
Forward-looking information typically contains words such as
“anticipate”, “believe”, “expect”, “plan” or similar words
suggesting future outcomes. Such statements are based on the
current expectations of management of the Corporation and
inherently involve numerous risks and uncertainties, known and
unknown, including economic factors and the Corporation’s industry,
generally. The preceding list is not exhaustive of all possible
factors. Such forward-looking statements are not guarantees of
future performance and actual events and results could differ
materially from those expressed or implied by forward-looking
statements made by the Corporation. The reader is cautioned to
consider these and other factors carefully when making decisions
with respect to the Corporation and not place undue reliance on
forward-looking statements. Other than as may be required by law,
FTG disclaims any intention or obligation to update or revise any
such forward-looking statements, whether as a result of new
information, future events or otherwise.
For further information please
contact:
Bradley C. Bourne, President and CEOFiran
Technology Group CorporationTel: (416) 299-4000
x314bradbourne@ftgcorp.com
Jamie Crichton, Vice President and CFOFiran
Technology Group CorporationTel: (416) 299-4000
x264jamiecrichton@ftgcorp.com
Additional information can be found at the
Corporation’s website www.ftgcorp.com.
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