ARC Group Worldwide, Inc. (“ARC” or the “Company”) (NASDAQ: ARCW),
a leading global provider of advanced manufacturing, today reported
its results for the second fiscal quarter ending December 30, 2018.
Highlights for the second quarter of fiscal year 2019 compared
to the second quarter fiscal year 2018 for Continuing
Operations:
- Sales of $20.9 million, an increase of 19.9%;
- Gross Profit of $1.5 million, an increase of 602.3%;
- EBITDA of $0.8 million, an increase of 168.4%
Highlights for the first six months ended December 30, 2018,
compared to the first six months ended December 31, 2017 for
Continuing Operations:
- Sales of $41.4 million, an increase of 13.6%;
- Gross Profit of $4.6 million, an increase of 414.1%;
- EBITDA of $3.3 million, an increase of 508.8%
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.
We experienced continued sales growth, with an increase of
approximately $3.5 million as compared to the prior period last
year. This was primarily driven by higher metal injection
molding (“MIM”) and plastics sales, which was due to the
combination of sales with higher order volumes in the aerospace,
medical, and firearms and defense markets. Furthermore, the
Company submitted for customer approval an additional two aerospace
components and acquired a new aerospace customer. These two
components have an annual expected volume of 0.2 million pieces and
$1.0 million in sales. The sales increases were magnified by
the effectiveness of the cost reduction initiatives in the
Precision Components Group that continue to provide
benefit.
Fiscal second quarter 2019 Revenue was $20.9 million, compared
to $17.4 million in our fiscal second quarter 2018. The
increase in revenue was primarily driven by higher MIM and plastics
sales, as noted above.
Fiscal second quarter 2019 Gross Profit was $1.5 million,
compared to a gross deficit of $(0.3) million in our fiscal second
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. As a result, the sales increase of
approximately $3.5 million was 19.9%, while Gross Profit increase
was approximately $1.8 million, or 602.4% over the prior comparable
period.
EBITDA was $0.8 million in the fiscal second quarter 2019
compared to $(1.2) million in the fiscal second quarter 2018.
Like Gross Profit, EBITDA was positively impacted by the increased
revenues, aerospace and medical part profit margins, and lower
costs.
Fiscal YTD 2019 Revenues was $41.5 million, compared to $36.5
million for fiscal YTD 2018. The increase in revenue was
primarily driven by higher MIM and plastics sales, as discussed
above.
Gross Profit was $4.6 million YTD 2019 compared to $0.9 million
for YTD 2018. The increase in gross profit was due to the
increase in sales, cost reduction initiatives, and the continued
diversification into aerospace, as noted above.
EBITDA was $3.3 million for YTD 2019, compared to $(0.8) for YTD
2018. The increase in EBITDA is due to the cost reduction
initiatives and diversification, as noted above.
Further, the Company’s planned sale of 3D Material Technologies
(“3DMT”) has been progressing. We expect to be able to sell
3DMT prior to the end of third quarter of fiscal year 2019 with the
funds being used to pay down debt. For the fiscal second
quarter 2019, 3DMT had EBITDA loss of ($0.6) million. 3DMT
has been recorded as discontinued operations in the financial
statements
ARC’s CEO, Alan Quasha, commented, “I am generally pleased with
our progress, particularly in our critically important Colorado
facilities. At this time last year, we were incurring
significant losses there. We have made operational
improvements in Colorado that we expect to drive continued improved
results. Additionally, Colorado has continued to successfully
increase its aerospace business and prospects. This quarter
we added another aerospace customer, and launched two new aerospace
parts, with an additional two new parts to be launched in fiscal
third quarter 2019. While we still have more work to do, I am
confident in the new leadership team we have in place to continue
to drive their success.
“Our Florida facility remains our strongest performer. Its
ability to make the difficult, intricate medical parts gives them a
strong niche market that continues to do well. They are working on
some promising new parts, which we hope to be able to highlight in
the coming quarters.
“Unfortunately, we got hit with some sins of the past and did
stumble this quarter. For example, we settled a past lawsuit
related to the sale of Tekna Seal, and Hungary and Stamping had
some disruptions and self-inflicted wounds. Hungary
encountered high scrap and a material contamination issue that we
caught early and disposed of before it was too late.
Nevertheless, it was costly. Hungary is putting in place new
equipment and taking other actions to curb their scrap and
contamination issues going forward, so we expect these glitches to
be a onetime event. Stamping experienced leadership and
growing pains. Stamping missed Mr. Willman's strong and tight reins
when he was promoted to CFO in Colorado. It also suffered a delay
in a major program. Both Mr. Eli Davidai, Board Member, and Mr.
Willman have spent significant time there this quarter, and we have
a solid plan in place to get them back on track. Like
Florida, they also have a very promising new program in the works
that has been verbally awarded and will diversify them away from
their high automotive concentration.
“In all, while the bottom-line results for the quarter were
disappointing, they masked continued significant progress at the
Company. I am encouraged by a number of positive developments. By
fiscal year end, we expect to be finally done with all the sins of
the past. We have improved operational efficiencies and
coordination throughout the company and have put in place programs
and procedures for continued improvements. We have increased our
sales growth and prospects, particularly in medical and aerospace,
both of which will improve margins and stability. While
disappointing we will exit the 3D printing business, the sale of
3DMT will allow us to begin to make small but meaningful
investments in our core business and generate the cash flow to
begin to pay down debt.
“The lead time for new orders in our business is frustratingly
long, but we believe that the underlying improvements we have been
making will begin to become clearer and that shareholders who have
patience will be rewarded.”
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):
|
|
|
|
|
|
|
|
|
|
December 30 |
|
December 31 |
For the three months ended: |
|
|
2018 |
|
2017 |
Net
Loss |
|
$ |
(3,542 |
) |
|
$ |
(4,322 |
) |
Interest
Expense, Net |
|
|
898 |
|
|
|
912 |
|
Income
Taxes |
|
|
33 |
|
|
|
(366 |
) |
Depreciation and Amortization |
|
|
2,624 |
|
|
|
2,534 |
|
Adjustment to Exclude Loss from Discontinued Operations |
|
|
822 |
|
|
|
287 |
|
EBITDA from
Continuing Operations |
|
$ |
835 |
|
|
$ |
(955 |
) |
EBITDA Margin
from Continuing Operations |
|
|
4.0 |
% |
|
|
(5.5 |
)% |
Corporate
Expenses |
|
|
905 |
|
|
|
1,073 |
|
Facility EBITDA
from Continuing Operations |
|
$ |
1,740 |
|
|
$ |
118 |
|
Facility EBITDA
Margin from Continuing Operations |
|
|
8.3 |
% |
|
|
0.7 |
% |
|
|
|
|
|
|
|
Net
Loss |
|
$ |
(3,542 |
) |
|
$ |
(4,322 |
) |
Adjustment to Exclude Loss from Discontinued Operations, Net of
Tax |
|
|
822 |
|
|
|
287 |
|
Adjusted
Earnings |
|
$ |
(2,720 |
) |
|
$ |
(4,035 |
) |
Adjusted
Earnings Per Share |
|
$ |
(0.12 |
) |
|
$ |
(0.22 |
) |
Weighted Average Common
Shares Outstanding |
|
|
23,349,478 |
|
|
|
18,265,323 |
|
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 |
|
|
December 30, |
|
December 31, |
|
|
2018 |
|
2017 |
Sales |
|
$ |
20,907 |
|
|
$ |
17,428 |
|
Cost of sales |
|
|
19,415 |
|
|
|
17,725 |
|
Gross profit |
|
|
1,492 |
|
|
|
(297 |
) |
Selling,
general and administrative |
|
|
3,345 |
|
|
|
3,357 |
|
Income from
operations |
|
|
(1,853 |
) |
|
|
(3,654 |
) |
Other
(expense) income, net |
|
|
64 |
|
|
|
165 |
|
Interest
expense, net |
|
|
(898 |
) |
|
|
(912 |
) |
Loss before income
taxes |
|
|
(2,687 |
) |
|
|
(4,401 |
) |
Income
tax benefit (expense) |
|
|
(33 |
) |
|
|
366 |
|
Net loss from
continuing operations |
|
|
(2,720 |
) |
|
|
(4,035 |
) |
Loss on sale of
subsidiaries and loss from discontinued operations, net of tax |
|
|
(822 |
) |
|
|
(287 |
) |
Net loss |
|
$ |
(3,542 |
) |
|
$ |
(4,322 |
) |
|
|
|
|
|
|
|
Net loss per common
share, basic and diluted: |
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.12 |
) |
|
$ |
(0.22 |
) |
Discontinued operations |
|
$ |
(0.04 |
) |
|
$ |
(0.02 |
) |
Attributable to ARC
Group Worldwide, Inc. |
|
$ |
(0.15 |
) |
|
$ |
(0.24 |
) |
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
Basic and
diluted |
|
|
23,349,478 |
|
|
|
18,265,323 |
|
ARC Group
Worldwide, Inc.Consolidated Balance
Sheets(in thousands, except share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2018 |
|
June 30, 2018 |
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash |
|
$ |
249 |
|
|
$ |
365 |
|
Accounts
receivable, net |
|
|
10,044 |
|
|
|
11,103 |
|
Inventories, net |
|
|
14,815 |
|
|
|
12,102 |
|
Prepaid
expenses and other current assets |
|
|
1,105 |
|
|
|
2,781 |
|
Current
assets of discontinued operations |
|
|
3,444 |
|
|
|
547 |
|
Total current
assets |
|
|
29,657 |
|
|
|
26,898 |
|
Property and equipment,
net |
|
|
36,067 |
|
|
|
36,879 |
|
Goodwill |
|
|
6,412 |
|
|
|
6,412 |
|
Intangible assets,
net |
|
|
14,582 |
|
|
|
16,270 |
|
Other |
|
|
353 |
|
|
|
347 |
|
Long-term assets of
discontinued operations |
|
|
— |
|
|
|
3,127 |
|
Total assets |
|
$ |
87,071 |
|
|
$ |
89,933 |
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
11,050 |
|
|
$ |
11,345 |
|
Accrued
expenses and other current liabilities |
|
|
2,121 |
|
|
|
2,000 |
|
Deferred
revenue |
|
|
561 |
|
|
|
825 |
|
Bank
borrowings, current portion of long-term debt |
|
|
1,704 |
|
|
|
1,721 |
|
Capital
lease obligations, current portion |
|
|
1,278 |
|
|
|
456 |
|
Accrued
escrow obligations, current portion |
|
|
776 |
|
|
|
943 |
|
Current
liabilities of discontinued operations |
|
|
1,364 |
|
|
|
1,422 |
|
Total current
liabilities |
|
|
18,854 |
|
|
|
18,712 |
|
Long-term debt, net of
current portion |
|
|
38,892 |
|
|
|
37,013 |
|
Capital lease
obligations, net of current portion |
|
|
1,273 |
|
|
|
617 |
|
Other long-term
liabilities |
|
|
967 |
|
|
|
965 |
|
Long-term liabilities
of discontinued operations |
|
|
— |
|
|
|
462 |
|
Total liabilities |
|
|
59,986 |
|
|
|
57,769 |
|
|
|
|
|
|
|
|
Commitments and
contingencies (Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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
December 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 December 30, 2018 and
June 30, 2018 |
|
|
(94 |
) |
|
|
(94 |
) |
Additional paid-in capital |
|
|
42,027 |
|
|
|
41,829 |
|
Accumulated deficit |
|
|
(14,866 |
) |
|
|
(9,627 |
) |
Accumulated other comprehensive income |
|
|
6 |
|
|
|
44 |
|
Total
stockholders' equity |
|
|
27,085 |
|
|
|
32,164 |
|
Total liabilities and
stockholders' equity |
|
$ |
87,071 |
|
|
$ |
89,933 |
|
ARC Group
Worldwide, Inc.Consolidated Statements of
Cash Flows(in thousands)
|
|
|
|
|
|
|
|
|
For the six months ended |
|
|
December 30, 2018 |
|
December 31, 2017 |
Cash flows from
operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(5,239 |
) |
|
$ |
(7,876 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
5,468 |
|
|
|
5,051 |
|
Share-based compensation expense |
|
|
199 |
|
|
|
397 |
|
Loss on
sale of asset |
|
|
34 |
|
|
|
— |
|
Loss on
sale of subsidiaries |
|
|
— |
|
|
|
109 |
|
Bad debt
expense and other |
|
|
59 |
|
|
|
84 |
|
Changes in working
capital: |
|
|
|
|
|
|
Accounts
receivable |
|
|
986 |
|
|
|
(137 |
) |
Inventory |
|
|
(2,706 |
) |
|
|
(138 |
) |
Prepaid
expenses and other assets |
|
|
1,897 |
|
|
|
609 |
|
Accounts
payable |
|
|
(227 |
) |
|
|
1,486 |
|
Accrued
expenses and other current liabilities |
|
|
(18 |
) |
|
|
(1,472 |
) |
Deferred
revenue |
|
|
(265 |
) |
|
|
222 |
|
Net cash provided by
(used in) operating activities |
|
|
188 |
|
|
|
(1,665 |
) |
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
Purchases
of property and equipment |
|
|
(760 |
) |
|
|
(1,500 |
) |
Proceeds
from sale of subsidiary |
|
|
— |
|
|
|
3,000 |
|
Net cash (used in)
provided by investing activities |
|
|
(760 |
) |
|
|
1,500 |
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
Proceeds
from debt issuance |
|
|
38,417 |
|
|
|
49,533 |
|
Repayments of long-term debt and capital lease obligations |
|
|
(37,858 |
) |
|
|
(50,040 |
) |
Issuance
of common stock under employee stock purchase plan and exercise of
stock options |
|
|
— |
|
|
|
155 |
|
Net cash provided by
(used in) financing activities |
|
|
559 |
|
|
|
(352 |
) |
Effect of
exchange rates on cash |
|
|
(103 |
) |
|
|
311 |
|
Net decrease in
cash |
|
|
(116 |
) |
|
|
(206 |
) |
Cash, beginning of
period |
|
|
365 |
|
|
|
593 |
|
Cash, end of
period |
|
$ |
249 |
|
|
$ |
387 |
|
Supplemental
disclosures of cash flow information: |
|
|
|
|
|
|
Cash paid
for interest |
|
$ |
1,052 |
|
|
$ |
1,244 |
|
Cash paid
for income taxes, net of refunds |
|
$ |
87 |
|
|
$ |
48 |
|
ARC Group Worldwide,
Inc.Consolidated Segment
Information(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
|
December 30, |
|
December 31, |
|
December 30, |
|
December 31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Precision
Components Group |
|
$ |
15,951 |
|
|
$ |
13,069 |
|
|
$ |
31,636 |
|
|
$ |
27,402 |
|
Stamping
Group |
|
|
4,956 |
|
|
|
4,359 |
|
|
|
9,837 |
|
|
|
9,112 |
|
Consolidated
sales |
|
$ |
20,907 |
|
|
$ |
17,428 |
|
|
$ |
41,473 |
|
|
$ |
36,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs: |
|
|
|
|
|
|
|
|
|
|
|
|
Precision
Components Group |
|
$ |
16,146 |
|
|
$ |
15,353 |
|
|
$ |
30,935 |
|
|
$ |
30,622 |
|
Stamping
Group |
|
|
5,634 |
|
|
|
4,746 |
|
|
|
10,571 |
|
|
|
9,748 |
|
Consolidated
operating costs |
|
$ |
21,780 |
|
|
$ |
20,099 |
|
|
$ |
41,506 |
|
|
$ |
40,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Precision
Components Group |
|
$ |
(195 |
) |
|
$ |
(2,284 |
) |
|
$ |
701 |
|
|
$ |
(3,220 |
) |
Stamping
Group |
|
|
(678 |
) |
|
|
(387 |
) |
|
|
(734 |
) |
|
|
(636 |
) |
Corporate
(1) |
|
|
(980 |
) |
|
|
(983 |
) |
|
|
(1,845 |
) |
|
|
(1,920 |
) |
Total segment
operating loss |
|
$ |
(1,853 |
) |
|
$ |
(3,654 |
) |
|
$ |
(1,878 |
) |
|
$ |
(5,776 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net |
|
|
(898 |
) |
|
|
(912 |
) |
|
|
(1,829 |
) |
|
|
(1,889 |
) |
Other income, net |
|
|
64 |
|
|
|
165 |
|
|
|
90 |
|
|
|
129 |
|
Non-operating
expense |
|
|
(834 |
) |
|
|
(747 |
) |
|
|
(1,739 |
) |
|
|
(1,760 |
) |
Consolidated
loss before income taxes and non-controlling interest |
|
$ |
(2,687 |
) |
|
$ |
(4,401 |
) |
|
$ |
(3,617 |
) |
|
$ |
(7,536 |
) |
Arc Grp. Worldwide, Inc. (NASDAQ:ARCW)
Historical Stock Chart
From Mar 2024 to Apr 2024
Arc Grp. Worldwide, Inc. (NASDAQ:ARCW)
Historical Stock Chart
From Apr 2023 to Apr 2024