ARC Group Worldwide, Inc. (“ARC” or the “Company”) (NASDAQ: ARCW),
a leading global provider of advanced manufacturing, today reported
its results for the first fiscal quarter ending September 30, 2018.
Highlights for the first quarter of fiscal year 2019 compared to
the first quarter fiscal year 2018 for Continuing Operations:
- Sales of $20.6 million, an increase of 7.7%;
- Gross Profit of $3.1 million, an increase of 160.9%;
- EBITDA of $2.4 million, an increase of 1464.4%
Highlights for the first quarter of fiscal year 2019, compared
to the fourth quarter fiscal year 2018 for Continuing
Operations:
- Sales of $20.6 million, a decrease of 8.4%;
- Gross Profit of $3.1 million, an increase of 15.4%;
- EBITDA of $2.4 million, an increase of 13.7%
Quarterly Financial Summary
The following analysis is performed over Sales, Gross profit,
and EBITDA from Continuing Operations for the comparative periods
identified unless otherwise noted.
While many factors contributed to the Company’s first quarter
results, two initiatives yielded significant results. First, the
Company’s cost reduction plan. This plan included reductions in
labor, variable and fixed expenses, and the divestiture of select
unprofitable or low margin customers. Second, the Company’s
targeted sales and marketing plan. In fiscal year 2018, the
Company launched a new sales and marketing plan, which included a
targeted sales effort to grow our market share of aerospace and
medical customers. Combined, these actions contributed to
gains in Sales, Gross Profit and EBITDA, as noted below.
These industries will provide better visibility and margins over
the economic cycle. They also will open up a much larger
total available market. With early success on receiving
orders, the consolidated growth in aerospace and medical, the
Company is projecting an increase of 58.1% and 6.6%, respectively,
for our fiscal year 2019 revenues over our fiscal year 2018
revenues, which combined is approximately $2M of new
revenues.
Fiscal first quarter 2019 Revenue was $20.6 million, compared to
$19.1 million in our fiscal first quarter 2018. The increase
in revenue was primarily driven by higher metal injection molding
(“MIM”) and plastics sales, which was due to the combination of
higher sales with higher order volumes in the aerospace, medical
and firearms and defense markets.
Fiscal first quarter 2019 Gross Profit was $3.1 million,
compared to a gross profit of $1.2 million in our fiscal first
quarter 2018. This increase was primarily the result of the
cost reduction initiatives that were completed during fiscal year
2018 and the continued diversification into higher margin aerospace
and medical parts sales. The effectiveness of the cost
reduction initiatives can be seen from both the Precision
Components Group and Stamping Group, as sales increased by
approximately $1.5 million in fiscal first quarter 2019 over fiscal
first quarter 2018; however, Gross profit increased by
approximately $1.9 million over the same periods.
Contributing to the increase in gross profit was an adjustment
decreasing cost of sale by $1.0 million for an out-of-period
adjustment identified during fiscal first quarter 2019 and recorded
in the same period.
EBITDA was $2.4 million in the fiscal first quarter 2019
compared to $0.2 million in the fiscal first quarter 2018.
Like Gross Profit, EBITDA was positively impacted by the increased
revenues, aerospace and medical part profit margins, and lower
costs.
Fiscal first quarter 2019 Revenue was $20.6 million, compared to
$22.5 million in the fiscal fourth quarter 2018. The decrease
in revenue was primarily seasonal, following historical patterns
where our fiscal first quarter of a new fiscal year has lower sales
volumes than our fiscal fourth quarter of the prior year.
Despite the seasonal fluctuation, the strong customer orders noted
in fiscal fourth quarter 2018, carried over into fiscal first
quarter 2019, and are anticipated to continue in fiscal second
quarter 2019 based upon customer forecasts.
Gross Profit was $3.1 million in the fiscal first quarter,
compared to $2.7 million in the fiscal fourth quarter 2018.
Additionally, Precision Components operating income was $0.9
million for the fiscal first quarter 2019, compared to operating
loss of ($0.2) million for fiscal fourth quarter 2018. This
improvement is related to the cost reduction initiatives referred
to above and the continued diversification into aerospace and
medical. Stamping operations are not accurately comparable in
these periods due to the seasonality in their customer base, and to
most of their customer base taking no shipments due to a one to
two-week annual shutdown.
EBITDA was $2.4 million in the fiscal fourth quarter compared to
$2.2 million in the fiscal fourth quarter 2018. EBITDA was
positively impacted by lower costs from the 2018 cost reduction
initiative and the continued diversification into aerospace and
medical.
Further, the Company’s planned sale of 3D Material Technologies
(“3DMT”) has been progressing as expected. Management
presentations have begun to the interested parties and will
continue throughout November. Based on current projections,
we expect that we will be able to sell 3DMT prior to the end of
third-quarter fiscal year 2019 with the funds being used to pay
down debt. For the fiscal first quarter 2019, 3DMT had EBITDA
loss of ($0.5) million.
ARC’s CEO, Alan Quasha, commented, “I am pleased that the
Company continues on its path to increased profitability,
particularly as compared to the prior year. We expect this
trend to continue. Our first quarter of fiscal year 2019 has
vastly improved over our first quarter of fiscal 2018, with sales
up $1.5 million and Gross Profit and EBITDA up approximately $2
million. We have been able to grow in an efficient and
targeted manner while improving our bottom line. Regarding
our quarter one of fiscal 2019 compared to our quarter four of
fiscal 2018, again we see the FY 2018 $9.8 million cost reduction
plan paying off, despite the seasonality of sales. Gross
Profit and EBITDA of our first quarter fiscal 2019 both improved
and were in excess of our fiscal quarter four of 2018, despite an
approximately $2 million seasonal decline in sales. This
clearly highlights the hard work the Company has done to reduce
expenses and continue to diversify our customer base.”
Mr. Quasha continued, “The previous shift in internal goals will
continue to focus our core divisions on making sound business
decisions that lead to profitable growth for our future. The
quarterly results demonstrate progress towards these goals, and
illustrate how we are driving the Company forward.”
GAAP to Non-GAAP Reconciliation
The Company has provided non-GAAP financial information to
provide additional, meaningful comparisons of current results to
prior periods’ results by excluding items that the Company does not
believe are representative or indicative of its results of
operations. Non-GAAP financial measures are not in accordance
with, or an alternative for, generally accepted accounting
principles in the United States. The Company’s non-GAAP
financial measures are not meant to be considered in isolation or
as a substitute for comparable GAAP financial measures and should
be read only in conjunction with the Company’s consolidated
financial statements prepared in accordance with GAAP.
Specifically, EBITDA from Continuing Operations, EBITDA Margin from
Continuing Operations, Facility EBITDA from Continuing Operations,
Facility EBITDA Margin from Continuing Operations, Adjusted
Earnings, and Adjusted Earnings Per Share are non-GAAP financial
measures. EBITDA Margin from Continuing Operations and
Facility EBITDA Margin from Continuing Operations are calculated by
dividing EBITDA from Continuing Operations and Facility EBITDA from
Continuing Operations, respectively, by sales.
The reconciliation to GAAP is as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30 |
|
October 1 |
|
For the three months ended: |
|
|
2018 |
|
|
2017 |
|
|
Net
Loss |
|
$ |
(1,696 |
) |
|
$ |
(3,555 |
) |
|
Interest
Expense, Net |
|
|
931 |
|
|
|
976 |
|
|
Income
Taxes |
|
|
35 |
|
|
|
172 |
|
|
Depreciation and Amortization |
|
|
2,446 |
|
|
|
2,516 |
|
|
Adjustment to Exclude Loss (Gain) from Discontinued Operations |
|
|
732 |
|
|
|
247 |
|
|
EBITDA from
Continuing Operations |
|
$ |
2,448 |
|
|
$ |
356 |
|
|
EBITDA Margin
from Continuing Operations |
|
|
11.9 |
|
% |
|
1.9 |
|
% |
Corporate
Expenses |
|
|
833 |
|
|
|
1,086 |
|
|
Facility EBITDA
from Continuing Operations |
|
$ |
3,281 |
|
|
$ |
1,442 |
|
|
Facility EBITDA
Margin from Continuing Operations |
|
|
16.0 |
|
% |
|
7.6 |
|
% |
|
|
|
|
|
|
|
|
Net
Loss |
|
$ |
(1,696 |
) |
|
$ |
(3,555 |
) |
|
Adjustment to Exclude Loss from Discontinued Operations, Net of
Tax |
|
|
732 |
|
|
|
247 |
|
|
Adjusted
Earnings |
|
$ |
(964 |
) |
|
$ |
(3,308 |
) |
|
Adjusted
Earnings Per Share |
|
$ |
(0.04 |
) |
|
$ |
(0.18 |
) |
|
Weighted Average Common
Shares Outstanding |
|
|
23,336,610 |
|
|
|
18,194,091 |
|
|
EBITDA from Continuing Operations excludes interest expense, net
and income taxes as these items are associated with our
capitalization and tax structures. EBITDA from Continuing
Operations also excludes depreciation and amortization expense as
these non-cash expenses reflect the impact of prior capital
expenditure decisions, which may not be indicative of future
capital expenditure requirements. EBITDA from Continuing
Operations excludes the (income) or loss associated with
discontinued operations.
Facility EBITDA from Continuing Operations consists of EBITDA
from our operating segments, which excludes Corporate
Expenses. We believe this is a meaningful measurement of the
operating performance of our manufacturing facilities.
Corporate Expenses primarily consist of costs not allocated to our
manufacturing facilities, such as compensation related costs for
employees assigned to corporate, board of directors’ fees and
expenses, professional fees, insurance costs, and marketing
costs.
Adjusted Earnings removes the impact of
reorganization/transaction related expenses and the impact of
discontinued operations. Reorganization expenses are
primarily labor and labor related costs associated with the
termination of employees. Transaction expenses are primarily
professional fees related to the refinancing of debt and the sale
of non-core assets.
About ARC Group WorldwideARC Group Worldwide,
Inc. is a global advanced manufacturing provider focused on
accelerating speed to market for its customers. ARC provides
a holistic set of precision manufacturing solutions, from design
and prototyping through full run production. These solutions
include metal injection molding, metal 3D printing, metal stamping,
plastic injection molding, clean room injection molding,
thixomolding, and rapid and conformal tooling. Further, ARC
utilizes technology to improve automation in manufacturing through
robotics, software and process automation, and lean manufacturing
to improve efficiency.
Forward Looking StatementsThis press release
may contain "forward-looking" statements as defined in the Private
Securities Litigation Reform Act of 1995, which are based on ARC's
current expectations, estimates, and projections about future
events. These include, but are not limited to, statements, if
any, regarding business plans, pro-forma statements, and financial
projections, including ARC's ability to expand its services and
realize growth. These statements are not historical facts or
guarantees of future performance, events, or results. Such
statements involve potential risks and uncertainties, and the
general effects of financial, economic, and regulatory conditions
affecting our industries. Accordingly, actual results may
differ materially. ARC does not have any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise.
For further information on risks and uncertainties that could
affect ARC’s business, financial condition and results of
operations, readers are encouraged to review Item 1A. – Risk
Factors and all other disclosures appearing in ARC’s Form 10-K for
the fiscal year ended June 30, 2018, as well as other documents ARC
files from time to time with the Securities and Exchange
Commission.
CONTACT:
Investor Relations
PHONE: (303) 467-5236Email:
InvestorRelations@arcw.com
ARC Group
Worldwide, Inc.Consolidated Statements of
Operations(in thousands, except for share and per
share amounts)
|
|
For the three months ended |
|
|
September 30, |
|
October 1, |
|
|
2018 |
|
|
2017 |
|
Sales |
|
$ |
20,566 |
|
|
$ |
19,085 |
|
Cost of sales |
|
|
17,456 |
|
|
|
17,893 |
|
Gross profit |
|
|
3,110 |
|
|
|
1,192 |
|
Selling,
general and administrative |
|
|
3,134 |
|
|
|
3,315 |
|
Income from
operations |
|
|
(24 |
) |
|
|
(2,123 |
) |
Other
(expense) income, net |
|
|
26 |
|
|
|
(37 |
) |
Interest
expense, net |
|
|
(931 |
) |
|
|
(976 |
) |
Loss before income
taxes |
|
|
(929 |
) |
|
|
(3,136 |
) |
Income
tax benefit (expense) |
|
|
(35 |
) |
|
|
(172 |
) |
Net loss from
continuing operations |
|
|
(964 |
) |
|
|
(3,308 |
) |
Loss on sale of
subsidiaries and loss from discontinued operations, net of tax |
|
|
(732 |
) |
|
|
(247 |
) |
Net loss |
|
$ |
(1,696 |
) |
|
$ |
(3,555 |
) |
|
|
|
|
|
|
|
Net loss per common
share, basic and diluted: |
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.04 |
) |
|
$ |
(0.18 |
) |
Discontinued operations |
|
$ |
(0.03 |
) |
|
$ |
(0.02 |
) |
Attributable to ARC
Group Worldwide, Inc. |
|
$ |
(0.07 |
) |
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
Basic and
diluted |
|
|
23,336,610 |
|
|
|
18,194,091 |
|
|
|
|
|
|
|
|
|
|
ARC Group
Worldwide, Inc.Consolidated Balance
Sheets(in thousands, except share
data)
|
|
September 30, 2018 |
|
June 30, 2018 |
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash |
|
$ |
348 |
|
|
$ |
365 |
|
Accounts
receivable, net |
|
|
11,532 |
|
|
|
11,103 |
|
Inventories, net |
|
|
13,743 |
|
|
|
12,102 |
|
Prepaid
expenses and other current assets |
|
|
3,529 |
|
|
|
2,781 |
|
Current
assets of discontinued operations |
|
|
1,953 |
|
|
|
547 |
|
Total current
assets |
|
|
31,105 |
|
|
|
26,898 |
|
Property and equipment,
net |
|
|
37,276 |
|
|
|
36,879 |
|
Goodwill |
|
|
6,412 |
|
|
|
6,412 |
|
Intangible assets,
net |
|
|
15,426 |
|
|
|
16,270 |
|
Other |
|
|
336 |
|
|
|
347 |
|
Long-term assets of
discontinued operations |
|
|
— |
|
|
|
3,127 |
|
Total assets |
|
$ |
90,555 |
|
|
$ |
89,933 |
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
10,099 |
|
|
$ |
11,345 |
|
Accrued
expenses and other current liabilities |
|
|
2,393 |
|
|
|
2,000 |
|
Deferred
revenue |
|
|
870 |
|
|
|
825 |
|
Bank
borrowings, current portion of long-term debt |
|
|
1,718 |
|
|
|
1,721 |
|
Capital
lease obligations, current portion |
|
|
1,339 |
|
|
|
456 |
|
Accrued
escrow obligations, current portion |
|
|
943 |
|
|
|
943 |
|
Current
liabilities of discontinued operations |
|
|
1,639 |
|
|
|
1,422 |
|
Total current
liabilities |
|
|
19,001 |
|
|
|
18,712 |
|
Long-term debt, net of
current portion |
|
|
38,609 |
|
|
|
37,013 |
|
Capital lease
obligations, net of current portion |
|
|
1,487 |
|
|
|
617 |
|
Other long-term
liabilities |
|
|
977 |
|
|
|
965 |
|
Long-term liabilities
of discontinued operations |
|
|
— |
|
|
|
462 |
|
Total liabilities |
|
|
60,074 |
|
|
|
57,769 |
|
|
|
|
|
|
|
|
Commitments and
contingencies (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity: |
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 2,000,000 shares authorized, no shares
issued and outstanding |
|
|
— |
|
|
|
— |
|
Common
stock, $0.0005 par value, 250,000,000 shares authorized; 23,357,879
shares issued and 23,349,478 shares issued and outstanding at
September 30, 2018, and 23,324,316 shares issued and
23,315,915 shares issued and outstanding at June 30, 2018 |
|
|
12 |
|
|
|
12 |
|
Treasury
stock, at cost; 8,401 shares at September 30, 2018 and
June 30, 2018 |
|
|
(94 |
) |
|
|
(94 |
) |
Additional paid-in capital |
|
|
41,890 |
|
|
|
41,829 |
|
Retained
earnings (accumulated deficit) |
|
|
(11,324 |
) |
|
|
(9,627 |
) |
Accumulated other comprehensive income |
|
|
(3 |
) |
|
|
44 |
|
Total
stockholders' equity |
|
|
30,481 |
|
|
|
32,164 |
|
Total liabilities and
stockholders' equity |
|
$ |
90,555 |
|
|
$ |
89,933 |
|
|
|
|
|
|
|
|
|
|
ARC Group
Worldwide, Inc.Consolidated Statements of
Cash Flows(in thousands)
|
|
For the three months ended |
|
|
September 30, 2018 |
|
October 1, 2017 |
Cash flows from
operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(1,696 |
) |
|
$ |
(3,555 |
) |
Adjustments to
reconcile net loss to net cash (used in) provided by operating
activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
2,644 |
|
|
|
2,516 |
|
Share-based compensation expense |
|
|
61 |
|
|
|
287 |
|
Loss on
sale of asset |
|
|
23 |
|
|
|
— |
|
Loss on
sale of subsidiaries |
|
|
— |
|
|
|
109 |
|
Bad debt
expense and other |
|
|
6 |
|
|
|
83 |
|
Changes in working
capital: |
|
|
|
|
|
|
Accounts
receivable |
|
|
(461 |
) |
|
|
(1,645 |
) |
Inventory |
|
|
(1,624 |
) |
|
|
(253 |
) |
Prepaid
expenses and other assets |
|
|
900 |
|
|
|
546 |
|
Accounts
payable |
|
|
(1,196 |
) |
|
|
820 |
|
Accrued
expenses and other current liabilities |
|
|
440 |
|
|
|
(437 |
) |
Deferred
revenue |
|
|
44 |
|
|
|
3 |
|
Net cash used in
operating activities |
|
|
(859 |
) |
|
|
(1,526 |
) |
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
Purchases
of property and equipment |
|
|
(44 |
) |
|
|
(957 |
) |
Proceeds
from sale of subsidiary |
|
|
— |
|
|
|
3,000 |
|
Net cash (used in)
provided by investing activities |
|
|
(44 |
) |
|
|
2,043 |
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
Proceeds
from debt issuance |
|
|
19,094 |
|
|
|
27,073 |
|
Repayments of long-term debt and capital lease obligations |
|
|
(18,130 |
) |
|
|
(28,073 |
) |
Issuance
of common stock under employee stock purchase plan and exercise of
stock options |
|
|
— |
|
|
|
92 |
|
Net cash provided by
(used in) financing activities |
|
|
964 |
|
|
|
(908 |
) |
Effect of
exchange rates on cash |
|
|
(78 |
) |
|
|
195 |
|
Net decrease in
cash |
|
|
(17 |
) |
|
|
(196 |
) |
Cash, beginning of
period |
|
|
365 |
|
|
|
593 |
|
Cash, end of
period |
|
$ |
348 |
|
|
$ |
397 |
|
Supplemental
disclosures of cash flow information: |
|
|
|
|
|
|
Cash paid
for interest |
|
$ |
732 |
|
|
$ |
955 |
|
Cash paid
for income taxes, net of refunds |
|
$ |
1 |
|
|
$ |
27 |
|
|
|
|
|
|
|
|
|
|
ARC Group Worldwide,
Inc.Consolidated Segment
Information(in thousands)
|
|
Three months ended |
|
|
September 30, |
|
October 1, |
|
|
2018 |
|
|
2017 |
|
Sales: |
|
|
|
|
|
|
Precision Components
Group |
|
$ |
15,685 |
|
|
$ |
14,333 |
|
Stamping
Group |
|
|
4,881 |
|
|
|
4,752 |
|
Consolidated
sales |
|
$ |
20,566 |
|
|
$ |
19,085 |
|
|
|
|
|
|
|
|
Operating
costs: |
|
|
|
|
|
|
Precision
Components Group |
|
$ |
14,789 |
|
|
$ |
15,270 |
|
Stamping
Group |
|
|
4,938 |
|
|
|
5,001 |
|
Consolidated
operating costs |
|
$ |
19,727 |
|
|
$ |
20,271 |
|
|
|
|
|
|
|
|
Segment
operating income (loss): |
|
|
|
|
|
|
Precision
Components Group |
|
$ |
896 |
|
|
$ |
(937 |
) |
Stamping
Group |
|
|
(57 |
) |
|
|
(249 |
) |
Corporate
(1) |
|
|
(863 |
) |
|
|
(937 |
) |
Total segment
operating loss |
|
$ |
(24 |
) |
|
$ |
(2,123 |
) |
|
|
|
|
|
|
|
Interest expense,
net |
|
|
(931 |
) |
|
|
(976 |
) |
Other income, net |
|
|
26 |
|
|
|
(37 |
) |
Non-operating
expense |
|
|
(905 |
) |
|
|
(1,013 |
) |
Consolidated
loss before income taxes and non-controlling interest |
|
$ |
(929 |
) |
|
$ |
(3,136 |
) |
Arc Grp. Worldwide, Inc. (NASDAQ:ARCW)
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From Mar 2024 to Apr 2024
Arc Grp. Worldwide, Inc. (NASDAQ:ARCW)
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From Apr 2023 to Apr 2024