SMTC Reports Fourth Quarter and Fiscal Year 2017 Results

TORONTO, March 07, 2018 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX), a global electronics manufacturing services provider, today announced fourth quarter 2017 and fiscal year 2017 results.

Fourth Quarter Fiscal 2017 Results Summary:

  • Revenue of $38.6 million
  • Gross Profit of $2.9 million or 7.5%
  • Net Loss of ($0.9) million
  • Adjusted EBITDA of $1.2 million

Fiscal Year 2017 Results Summary:

  • Revenue of $139.2 million
  • Gross Profit of $10.9 million or 7.8%
  • Net Loss of ($7.9) million
  • Adjusted EBITDA of ($1.6) million
  • Debt, net of cash of $14.9 million

Revenue for the fourth quarter was $38.6 million compared to $39.7 million in the fourth quarter of 2016. Sequentially, revenue increased 12.2% from $34.4 million in the third quarter of 2017. The increase from the prior quarter is due to revenue opportunities from both existing customers and new customers increasing production during the quarter.

Gross profit for the fourth quarter of 2017 was $2.9 million or 7.5% of revenue compared with $3.4 million or 8.6% of revenue for the same period in 2016. Adjusted gross profit, which excludes the impact of unrealized foreign exchange gains or losses, was $3.4 million or 8.9% as a percentage of revenue in the fourth quarter of 2017 compared to $3.6 million or 9.0% in the same period of the prior year. Gross profit in the third quarter of 2017 was $3.0 million or 8.6% and adjusted gross profit was $3.1 million or 9.0%. The increase in adjusted gross profit in the fourth quarter of 2017 compared to the prior quarter was primarily due to the increase in revenues.

Net loss was $(0.9) million for the fourth quarter of 2017 compared to a net loss of $(0.6) million in the fourth quarter of 2016 and the third quarter of 2017. Adjusted EBITDA was $1.2 million in the fourth quarter of 2017 compared to $1.1 million for both the fourth quarter of 2016 and the third quarter of 2017. The increase in the fourth quarter of 2017 compared to the prior quarter is due to the improvement in adjusted gross profit from higher revenue, partially offset by additional selling, general and administrative expenses to support the revenue growth.

Chief Financial Officer Roger Dunfield stated, “While our net loss has fluctuated in part due to swings in unrealized foreign exchange gains and losses, we have stabilized our Adjusted EBITDA and improved over the prior quarter. We will continue to focus on incremental improvements and the need to drive down our working capital, specifically with respect to collections of accounts receivable, which in turn will reduce our net debt.”

Chief Executive Officer Edward Smith stated, “There is momentum building with our company as we have ended the year strong with two quarters of incremental revenue growth. While I do expect revenue to decrease in the first quarter of 2018 from the fourth quarter of 2017 due to seasonality, I am excited about our 2018 Plan.”

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 (http://www.smtc.com/).

Investor Relations Information:
Blair McInnis
Corporate Controller
Telephone: (289) 378.5851
Email: blair.mcinnis@smtc.com



Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
Three months ended Twelve months ended
(Expressed in thousands of U.S. dollars, except number of shares and per share amounts)December 31, 2017 October 1, 2017 January 1, 2017 December 31, 2017 January 1, 2017
Revenue $ 38,641 $ 34,417 $ 39,650 $ 139,231 $ 167,868
Cost of sales 35,741 31,443 36,226 128,380 152,841
Gross profit 2,900 2,974 3,424 10,851 15,027
Selling, general and administrative expenses 3,136 2,952 3,607 13,960 14,013
Impairment of property,plant and equipment - - - 1,601 -
(Gain) loss on sale of property, plant and equipment - (60) 20 (60) (5)
Restructuring charges 55 326 - 1,732 176
Operating earnings (loss) (291) (244) (203) (6,382) 843
Interest expense 278 229 190 903 788
Earnings (loss) before income taxes (569) (473) (393) (7,285) 55
Income tax expense (recovery)
Current 171 173 (39) 639 161
Deferred 164 (95) 222 (79) 126
335 78 183 560 287
Net loss, also being comprehensive loss $ (904) $ (551) $ (576) $ (7,845) $ (232)
Basic loss per share $ (0.05) $ (0.03) $ (0.03) $ (0.47) $ (0.01)
Diluted loss per share $ (0.05) $ (0.03) $ (0.03) $ (0.47) $ (0.01)
Weighted average number of shares outstanding
Basic 16,860,155 16,824,538 16,510,180 16,788,231 16,504,106
Diluted 16,860,155 16,824,538 16,510,180 16,788,231 16,504,106

Consolidated Balance Sheets
(Unaudited)
(Expressed in thousands of U.S. dollars) December 31,
2017
January 1,
2017
Assets
Current assets:
Cash $ 5,536 $ 8,503
Accounts receivable - net 29,093 22,624
Inventories 22,363 20,674
Prepaid expenses and other assets 2,142 2,453
Derivative assets 37 -
Income taxes receivable 17 17
Deferred income taxes - net - -
59,188 54,271
Property, plant and equipment - net 10,269 14,437
Deferred financing costs - net 94 70
Deferred income taxes - net 305 226
$ 69,856 $ 69,004
Liabilities and Shareholders' Equity
Current liabilities:
Revolving credit facility $ 12,191 $ 2,731
Accounts payable 25,028 23,078
Accrued liabilities 4,877 4,604
Derivative liabilities 375 1,256
Income taxes payable 48 190
Current portion of long-term debt 2,000 2,000
Current portion of capital lease obligations 174 389
44,693 34,248
Long-term debt 6,000 8,000
Capital lease obligations 89 269
Shareholders’ equity:
Capital stock 396 391
Additional paid-in capital 265,355 264,928
Deficit (246,677) (238,832)
19,074 26,487
$ 69,856 $ 69,004

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 31,
2017
January 1,
2017
December 31,
2017
January 1,
2017
Operations:
Net loss $ (904) $ (576) $ (7,845) $ (232)
Items not involving cash:
Depreciation 799 1,044 3,588 4,110
Unrealized foreign exchange loss (gain) on unsettled forward
exchange contracts 520 164 (918) (831)
Impairment of property, plant and equipment - - 1,601 -
Loss (gain) on sale of property, plant and equipment - 20 (60) (5)
Deferred income taxes (recovery) 164 222 (79) 126
Amortization of deferred financing fees 8 43 27 69
Stock-based compensation 159 80 432 423
Change in non-cash operating working capital:
Accounts receivable (5,928) 1,041 (6,469) 7,261
Inventories (1,146) 2,317 (1,689) 5,203
Prepaid expenses and other assets (453) (510) 311 (470)
Income taxes payable 2 112 (142) 132
Accounts payable 4,740 (2,754) 2,159 (7,998)
Accrued liabilities (942) (185) 237 (927)
(2,981) 1,018 (8,847) 6,861
Financing:
Net (repayment) advances of revolving credit facility 6,282 (5,309) 9,460 (7,990)
(Repayment) advances of long-term debt (500) 5,500 (2,000) 5,000
Principal payment of capital lease obligations (43) (182) (395) (611)
Proceeds from sales leaseback - - - 509
Deferred financing costs - (71) (51) (71)
5,739 (62) 7,014 (3,163)
Investing:
Change in restricted cash - 537 - 805
Purchase of property, plant and equipment (157) (361) (1,471) (2,225)
Proceeds from leaseholding improvement - 56 -
Proceeds from sale of property, plant and equipment - - 281 126
(157) 176 (1,134) (1,294)
Increase (decrease) in cash 2,601 1,132 (2,967) 2,404
Cash, beginning of period 2,935 7,371 8,503 6,099
Cash, end of the period $ 5,536 $ 8,503 $ 5,536 $ 8,503

Supplementary Information:
Reconciliation of Adjusted EBITDA
Three months ended Twelve months ended
December 31,
2017
October 1,
2017
January 1,
2017
December 31,
2017
January 1,
2017
Net loss $ (904) (551) $ (576) $ (7,845) $ (232)
Add (deduct):
Depreciation 799 839 1,044 3,588 4,110
Interest 278 229 190 903 788
Income tax expense 335 78 183 560 287
EBITDA $ 508 $ 595 $ 841 $ (2,794) $ 4,953
Add (deduct):
Stock compensation expense 159 77 80 432 423
Restructuring charges 55 326 - 1,732 176
Unrealized foreign exchange loss (gain)
on unsettled forward exchange contracts 520 118 164 (918) (831)
Adjusted EBITDA 1,242 1,116 1,085 (1,548) 4,721

Supplementary Information:
Reconciliation of Adjusted Gross Profit
Three months ended Twelve months ended
December 31,
2017
October 1,
2017
January 1,
2017
December 31,
2017
January 1,
2017
Gross Profit $ 2,900 2,974 $ 3,424 $ 10,851 $ 15,027
Add (deduct):
Unrealized foreign exchange loss (gain)
on unsettled forward exchange contracts 520 118 164 (918) (831)
Adjusted Gross Profit 3,420 3,092 3,588 9,933 14,196
Adjusted Gross Profit Percentage 8.9% 9.0% 9.0% 7.1% 8.5%



Source:SMTC Corporation