Raven Industries, Inc. (the Company; NASDAQ:RAVN) today
reported financial results for the third quarter that ended October
31, 2020.
Third Quarter Fiscal 2021 Noteworthy Items:
- Company reported earnings of $0.24 per share while investing in
Raven Autonomy™, Raven Composites™ and Thunderhead Balloon
Systems;
- Net sales in Applied Technology increased 22 percent versus the
prior year, driven by growth in the OEM channel;
- Company invested $4.6 million, or $0.10 per share after-tax,
primarily in incremental research and development activities, to
advance Raven Autonomy™;
- Aerostar achieved year-over-year revenue growth of 15 percent
driven by the delivery of aerostat systems and the execution of a
record number of customer flight campaigns;
- Company generated $21 million in free cash flow1 led by strong
profitability and management of net working capital;
- Engineered Films' net sales declined 22 percent versus the
prior year as the division's end-markets continued to face economic
challenges resulting from the global pandemic;
- Company announced executive leadership changes to accelerate
execution of its growth strategy and to further position itself for
long-term success;
- Applied Technology was recognized for top innovative new
products, receiving awards from the American Society of
Agricultural and Biological Engineers for VSN® and the Hawkeye® 2
Nozzle Control System.
Third Quarter Results:
Consolidated net sales for the third quarter of fiscal 2021 were
$96.6 million, down 3.9 percent versus the third quarter of fiscal
2020. Applied Technology and Aerostar achieved significant
year-over-year growth, but this was offset by a decline in
Engineered Films. Strong growth in OEM sales drove the increase in
Applied Technology. Aerostar achieved year-over-year growth by
executing on a record number of successful stratospheric balloon
flight campaigns and completing the delivery of aerostats on its
current contract. The global pandemic continued to present
challenges for Engineered Films' end-markets, leading to the
year-over-year decline in revenue.
Consolidated operating income for the third quarter of fiscal
2021 was $9.3 million, versus operating income of $11.3 million in
the third quarter of fiscal 2020. Included in the results for the
third quarter of fiscal 2021 were $4.6 million of incremental
research and development and selling expenses to advance Raven
Autonomy™. The strong profitability performance in this year's
third quarter was driven by improved gross profit margin, which
increased from 30.1 percent to 35.7 percent year-over-year. Applied
Technology and Engineered Films improved gross profit margins
materially versus the prior year, on improved volume and overhead
reduction measures, respectively. Prudent cost containment actions,
outside of committed investments in platforms for growth, also
contributed to the strong profit performance in this year's third
quarter. Prior year third quarter operating income included a
pre-tax gain of $1.9 million on the sale of an Applied Technology
facility in Austin, Texas.
Net income for the third quarter of fiscal 2021 was $8.7
million, or $0.24 per diluted share, compared to $9.9 million, or
$0.28 per diluted share, in last year's third quarter. The
Company's investment in Raven Autonomy™ reduced net income
attributable to Raven by $3.6 million, or $0.10 per diluted share,
in the third quarter of fiscal 2021. Prior year net income included
a $1.5 million, or $0.04 per diluted share, gain on sale of a
facility in Austin, Texas.
Balance Sheet and Cash Flow:
At the end of the third quarter of fiscal 2021, cash and cash
equivalents totaled $38.2 million, increasing $22.4 million versus
the previous quarter. The sequential increase in cash was led by
improved profitability and a reduction in net working capital
requirements. Total liquidity4 at the end of the third quarter
totaled $138.2 million.
Applied Technology Division:
Net sales for Applied Technology in the third quarter of fiscal
2021 were $34.8 million, increasing $6.3 million or 22.2 percent
versus the third quarter of the prior year. The year-over-year
sales growth was primarily driven by higher volumes to OEMs, both
domestically and internationally. This growth included last-time
buy activity associated with the division's strategic decision to
exit a commercial relationship. Excluding the benefit of the
last-time buy activity, the division achieved growth over the prior
year while overcoming certain production inefficiencies caused by
process changes in response to the pandemic.
Division operating income in the third quarter of fiscal 2021
was $5.8 million, down $1.2 million or 17.6 percent versus the
third quarter of fiscal 2020. The profitability of the division was
very strong and included an incremental investment of $4.5 million
year-over-year into Raven Autonomy™. The prior year results
included a pre-tax gain of $1.9 million on the sale of the
division's facility in Austin, Texas.
Engineered Films Division:
Net sales for Engineered Films in the third quarter of fiscal
2021 were $43.8 million, down $12.6 million or 22.4 percent
year-over-year. Increased demand and a recapture of market share in
the industrial market led to year-over-year growth within this
market. However, Engineered Films continued to face weak demand
across a majority of its end-markets, resulting in the
year-over-year decline in revenue. Engineered Films serves the
following markets: geomembrane (including the energy sub-market),
agriculture, construction and industrial. Geomembrane (including
the energy sub-market) experienced the largest decline, as rig
counts in the Permian Basin were down approximately 70 percent
year-over-year. The construction market also experienced reduced
demand as non-residential construction starts decreased
significantly versus the prior year. Partially offsetting these
declines was the delivery of the remaining $2.4 million of
film-based medical supplies associated with a FEMA contract to aid
in the pandemic response.
Division operating income in the third quarter of fiscal 2021
was $7.3 million, down $1.2 million or 13.6 percent versus the
third quarter of fiscal 2020. Engineered Films achieved an improved
operating margin year-over-year from 15.0 percent to 16.7 percent,
driven by operational efficiency improvements and expense
reductions, as the division mitigated the impact of negative
operating leverage on division profit margin and continued to
invest in Raven Composites™. Additionally, the division generated
strong cash flows as it continues to effectively manage working
capital levels.
Aerostar Division:
Net sales for Aerostar in the third quarter of fiscal 2021 were
$18.0 million, up $2.3 million or 15.0 percent versus the third
quarter of fiscal 2020. The year-over-year growth in net sales was
driven by the delivery of aerostat systems and the completion of a
record number of successful stratospheric flight campaigns for the
Department of Defense throughout the quarter. Momentum continues to
build for the division's Thunderhead Balloon Systems as it further
develops and demonstrates the capabilities and technology
offering.
Division operating income in the third quarter of fiscal 2021
was $2.8 million, up $0.3 million or 11.6 percent versus the third
quarter of fiscal 2020. The year-over-year increase in operating
income was driven by increased sales volume.
Update on Strategic Platforms for Growth:
In the third quarter, the Company continued to aggressively and
strategically invest in Raven Autonomy™, the Company's strategic
platform for growth within the Applied Technology Division. Field
testing continues to progress, preparing for initial product
launches for both the Raven Dot® Power Platform and tractor
autonomous power units (APUs) next year. Raven is commercializing
its first available solutions in driverless ag technology, allowing
ag professionals to be safer, more efficient and run their
operations with less reliance on human variability. The Company
plans to introduce additional smart implements leveraging these
APUs as it continues to advance agriculture solutions.
In Raven Composites™, the Company invested in research and
development equipment to support new product development efforts.
This specialty equipment was installed and became operational
subsequent to the end of the third quarter. Additionally, the
Company continues to develop new products and strengthen strategic
relationships in targeted markets while building out greenfield
operations. Larger scale manufacturing equipment to advance Raven
Composites™ is on order and expected to be operational during the
first quarter of fiscal 2022.
For Raven Thunderhead, Aerostar continues to develop and
demonstrate the functionalities of the technology. The Company
achieved milestones throughout the quarter on flight durations,
mission functionalities and successful flight campaigns. The
stratosphere is the next frontier, and Aerostar is at the forefront
of capitalizing on the significant opportunity.
Supplemental Raven Autonomy™ Financial Information:
The financial impact of Raven Autonomy™ in the third quarter of
fiscal 2021 was as follows:
Third Quarter Fiscal 2021
Financial Impact of Raven Autonomy™
Increase (Decrease)
(dollars in millions, except
per share amounts)
Three Months Ended October 31,
2020
Nine Months Ended October 31,
2020
Net sales
$
—
$
0.9
Gross profit
—
(0.2)
Applied Technology Operating income
(4.5)
(12.3)
Consolidated Operating income
(4.6)
(12.4)
Consolidated EBITDA3
(4.2)
(11.7)
Net income attributable to Raven
Industries, Inc.
(3.6)
(9.6)
Net income per common share - Diluted
$
(0.10)
$
(0.26)
Fiscal 2021 Outlook:
"The third quarter of fiscal 2021 was strong, from both a
financial performance perspective and taking into account the key
steps we took to advance our strategic platforms for growth," said
Dan Rykhus, President and CEO. "We achieved strong profitability
and cash flows while investing aggressively in Raven Autonomy™,
advancing our greenfield operations in Raven Composites™ and
executing on contracts for Thunderhead Balloon Systems.
"Applied Technology generated significant profitability while
aggressively investing in Raven Autonomy™ during the third quarter.
We continue to advance our core technology, as evidenced by
enhancements and new product releases - including Hawkeye® 2 and
VSN® full canopy guidance - that solve problems for our customers
and generate strong returns for end users. In Raven Autonomy™, our
team continues to perform field validation trials with farmers
while development proceeds with our Raven Autonomy™ platform
framework to enhance customer value with autonomous applications.
The momentum and our position in the market continues to improve,
and the outlook for this initiative is revolutionary for the
Company.
"In Engineered Films, our end markets continued to be suppressed
by adverse economic challenges related to the pandemic. We expect
these conditions to persist throughout the remainder of the current
fiscal year and into the next fiscal year, especially in the
geomembrane market due to low oil prices. However, I am confident
in our ability to effectively manage through these challenges. The
health and long-term prospects of Engineered Films' core business
and our Raven Composites™ platform is very strong.
"Aerostar achieved mission success on a record number of flight
campaigns, leading to strong financial performance in the quarter.
We continue to see growing momentum surrounding our Thunderhead
Balloon Systems, and we believe this market will grow substantially
over the coming years. We are the clear leader in this space, and
our team continues to enhance the capabilities of our
technology.
"We are well-positioned for substantial long-term growth across
all three of our operating divisions. This confidence stems from
the opportunities in front of us combined with our performance
throughout the first three quarters of fiscal 2021. In Applied
Technology, we generated strong margins in our underlying business,
and economic conditions in the ag market appear to be improving for
the first time in several years. In Engineered Films, our
operational discipline and ability to generate significant cash
flows in the midst of this pandemic is evidence of our strong
business model. Additionally, Aerostar continues to prove the value
of Thunderhead, creating momentum for strong growth in both the
short-term and the long-term," concluded Rykhus.
Regulation G:
The information presented in this earnings release regarding
consolidated and segment earnings before interest, taxes,
depreciation, and amortization (EBITDA), do not conform to
generally accepted accounting principles (GAAP) and should not be
construed as an alternative to the reported results determined in
accordance with GAAP. Additionally, management has included this
non-GAAP information to assist in understanding the operating
performance of the Company and its operating segments as well as
the comparability of results. The non-GAAP information provided may
not be consistent with the methodologies used by other companies.
All non-GAAP information is reconciled with reported GAAP results
in the tables below.
About Raven Industries, Inc.:
Raven Industries (NASDAQ: RAVN) provides innovative, high-value
products and systems that solve great challenges throughout the
world. Raven is a leader in precision agriculture, high-performance
specialty films, and aerospace and defense solutions, and the
company's groundbreaking work in autonomous systems is unlocking
new possibilities in areas like farming, national defense, and
scientific research. Since 1956, Raven has designed, produced, and
delivered exceptional solutions, earning the company a reputation
for innovation, product quality, high performance, and unmatched
service. For more information, visit http://ravenind.com.
Forward-Looking Statements:
This news release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including statements regarding the expectations, beliefs,
intentions or strategies regarding the future. The Company intends
that all forward-looking statements be subject to the safe harbor
provisions of the Private Securities Litigation Reform Act.
Generally, forward-looking statements can be identified by words
such as "may," "will," "plan," "believe," "expect," "intend,"
"anticipate," "potential," "should," "estimate," "predict,"
"project," "would," and similar expressions, which are generally
not historical in nature. However, the absence of these words or
similar expressions does not mean that a statement is not
forward-looking. All statements that address operating performance,
events or developments that we expect or anticipate will occur in
the future - including statements relating to our future operating
or financial performance or events, our strategy, goals, plans, and
projections regarding our financial position, our liquidity and
capital resources, and our product development - are
forward-looking statements.
Management believes that these forward-looking statements are
reasonable as and when made. However, caution should be taken not
to place undue reliance on any such forward-looking statements,
because such statements speak only as of the date when made. Our
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. In addition,
forward-looking statements are subject to certain known risks, as
described in the Company’s 10K under Item 1A, and unknown risks and
uncertainties that may cause actual results to differ materially
from our Company’s historical experience and our present
expectations or projections.
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(Dollars and shares in
thousands, except earnings per share) (Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2020
2019
Fav (Un) Change
2020
2019
Fav (Un) Change
Net sales
$
96,607
$
100,533
(3.9)
%
$
268,282
$
296,769
(9.6)
%
Cost of sales
62,083
70,229
175,159
200,061
Gross profit
34,524
30,304
13.9
%
93,123
96,708
(3.7)
%
Gross profit percentage
35.7
%
30.1
%
34.7
%
32.6
%
Research and development expenses
10,949
7,662
32,262
22,000
Selling, general, and administrative
expenses
14,284
11,310
41,488
37,685
Operating income
9,291
11,332
(18.0)
%
19,373
37,023
(47.7)
%
Operating income percentage
9.6
%
11.3
%
7.2
%
12.5
%
Other income (expense), net
(423
)
84
(514
)
398
Income before income taxes
8,868
11,416
(22.3)
%
18,859
37,421
(49.6)
%
Income tax expense
140
1,483
363
5,512
Net income
8,728
9,933
(12.1)
%
18,496
31,909
(42.0)
%
Net loss attributable to the
noncontrolling interest
—
(1
)
(98
)
(1
)
Net income attributable to Raven
Industries, Inc.
$
8,728
$
9,934
(12.1)
%
$
18,594
$
31,910
(41.7)
%
Net income per common share:
- Basic
$
0.24
$
0.28
(14.3)
%
$
0.52
$
0.89
(41.6)
%
- Diluted
$
0.24
$
0.28
(14.3)
%
$
0.51
$
0.88
(42.0)
%
Weighted average common shares:
- Basic
36,001
35,914
35,975
36,014
- Diluted
36,151
36,091
36,118
36,251
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands)
(Unaudited)
October 31
January 31
October 31
2020
2020
2019
ASSETS
Cash and cash equivalents
$
38,217
$
20,707
$
77,094
Accounts receivable, net
54,224
62,552
62,057
Inventories, net
44,674
53,899
51,981
Other current assets
4,938
5,436
5,095
Total current assets
142,053
142,594
196,227
Property, plant and equipment, net
104,596
100,850
101,487
Goodwill
105,925
106,509
50,834
Intangible assets, net
44,083
46,217
14,933
Other assets
11,123
7,087
8,795
TOTAL ASSETS
$
407,780
$
403,257
$
372,276
LIABILITIES AND SHAREHOLDERS'
EQUITY
Accounts payable
$
19,314
$
14,893
$
11,045
Accrued and other liabilities
25,927
23,030
23,083
Total current liabilities
45,241
37,923
34,128
Long-term debt
1,900
225
—
Other liabilities
32,944
29,161
21,969
Total liabilities
80,085
67,309
56,097
Redeemable noncontrolling interest
—
21,302
—
Shareholders' equity
327,695
314,646
316,179
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
407,780
$
403,257
$
372,276
Net Working Capital and Net
Working Capital Percentage2
Accounts receivable, net
$
54,224
$
62,552
$
62,057
Plus: Inventories, net
44,674
53,899
51,981
Less: Accounts payable
19,314
14,893
11,045
Net working capital2
$
79,584
$
101,558
$
102,993
Annualized net sales
$
386,428
$
343,044
$
402,132
Net working capital percentage2
20.6
%
29.6
%
25.6
%
RAVEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended October
31,
2020
2019
Cash flows from operating activities:
Net income
$
18,496
$
31,909
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
12,829
12,124
Other operating activities, net
23,775
3,045
Net cash provided by operating
activities
55,100
47,078
Cash flows from investing activities:
Capital expenditures
(10,931)
(6,143)
Proceeds from sale or maturities of
investments
586
993
Purchases of investments
(227)
(934)
Proceeds from sale of assets
251
3,459
Other investing activities, net
(272)
(3,208)
Net cash used in investing activities
(10,593)
(5,833)
Cash flows from financing activities:
Dividends paid
(9,318)
(14,001)
Payments for common shares repurchased
—
(10,781)
Proceeds from debt
51,685
—
Repayments of debt
(50,000)
—
Payments for redeemable noncontrolling
interest
(17,853)
—
Payment of acquisition-related contingent
liabilities
—
(1,308)
Other financing activities, net
(1,169)
(3,780)
Net cash used in financing activities
(26,655)
(29,870)
Effect of exchange rate changes on
cash
(342)
(68)
Net increase in cash and cash
equivalents
17,510
11,307
Cash and cash equivalents at beginning of
period
20,707
65,787
Cash and cash equivalents at end of
period
$
38,217
$
77,094
RAVEN INDUSTRIES, INC.
SALES AND OPERATING INCOME BY
SEGMENT
(Dollars in thousands)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2020
2019
Fav (Un) Change
2020
2019
Fav (Un) Change
Net sales
Applied Technology
$
34,838
$
28,500
22.2
%
$
112,347
$
97,596
15.1
%
Engineered Films
43,765
56,406
(22.4)
%
113,415
158,214
(28.3)
%
Aerostar
18,010
15,661
15.0
%
42,626
41,040
3.9
%
Intersegment eliminations
(6
)
(34
)
(106
)
(81
)
Consolidated net sales
$
96,607
$
100,533
(3.9)
%
$
268,282
$
296,769
(9.6)
%
Operating income
Applied Technology
$
5,797
$
7,035
(17.6)
%
$
21,247
$
25,120
(15.4)
%
Engineered Films
7,321
8,474
(13.6)
%
13,393
24,987
(46.4)
%
Aerostar
2,777
2,488
11.6
%
4,821
7,427
(35.1)
%
Intersegment eliminations
9
(12
)
60
(10
)
Total segment income
$
15,904
$
17,985
(11.6)
%
$
39,521
$
57,524
(31.3)
%
Corporate expenses
(6,613
)
(6,653
)
0.6
%
(20,148
)
(20,501
)
1.7
%
Consolidated operating income
$
9,291
$
11,332
(18.0)
%
$
19,373
$
37,023
(47.7)
%
Operating income percentages
Applied Technology
16.6
%
24.7
%
(810)bps
18.9
%
25.7
%
(680)bps
Engineered Films
16.7
%
15.0
%
170bps
11.8
%
15.8
%
(400)bps
Aerostar
15.4
%
15.9
%
(50)bps
11.3
%
18.1
%
(680)bps
Consolidated operating income
9.6
%
11.3
%
(170)bps
7.2
%
12.5
%
(530)bps
RAVEN INDUSTRIES, INC.
EBITDA REGULATION G
RECONCILIATION3
(Dollars in thousands)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
Fav (Un)
Fav (Un)
2020
2019
Change
2020
2019
Change
Applied Technology
Reported Operating income
$
5,797
$
7,035
(17.6)
%
$
21,247
$
25,120
(15.4)
%
Plus: Depreciation and amortization
1,335
957
39.5
%
3,656
2,956
23.7
%
ATD EBITDA
$
7,132
$
7,992
(10.8)
%
$
24,903
$
28,076
(11.3)
%
ATD EBITDA % of Net Sales
20.5
%
28.0
%
22.2
%
28.8
%
Engineered Films
Reported Operating income
$
7,321
$
8,474
(13.6)
%
$
13,393
$
24,987
(46.4)
%
Plus: Depreciation and amortization
2,384
2,397
(0.5)
%
7,220
7,121
1.4
%
EFD EBITDA
$
9,705
$
10,871
(10.7)
%
$
20,613
$
32,108
(35.8)
%
EFD EBITDA % of Net Sales
22.2
%
19.3
%
18.2
%
20.3
%
Aerostar
Reported Operating income
$
2,777
$
2,488
11.6
%
$
4,821
$
7,427
(35.1)
%
Plus: Depreciation and amortization
278
240
15.8
%
765
680
12.5
%
Aerostar EBITDA
$
3,055
$
2,728
12.0
%
$
5,586
$
8,107
(31.1)
%
Aerostar EBITDA % of Net Sales
17.0
%
17.4
%
13.1
%
19.8
%
Consolidated
Net income attributable to Raven
Industries Inc.
$
8,728
$
9,934
(12.1)
%
$
18,594
$
31,910
(41.7)
%
Interest (income) expense, net
103
(210
)
383
(644
)
Income tax expense
140
1,483
363
5,512
Plus: Depreciation and amortization
4,351
4,002
12,829
12,124
Consolidated EBITDA
$
13,322
$
15,209
(12.4)
%
$
32,169
$
48,902
(34.2)
%
Consolidated EBITDA % of Net Sales
13.8
%
15.1
%
12.0
%
16.5
%
1 Free cash flow is defined as Net cash
provided by operating activities, less capital expenditures, less
dividends paid.
2 Net working capital is defined as
accounts receivable, (net) plus inventories, (net) less accounts
payable. Net working capital percentage is defined as net working
capital divided by four times quarterly sales for each respective
period.
3 EBITDA is a non-GAAP financial measure
defined on a consolidated basis as net income attributable to Raven
Industries, Inc., plus income taxes, plus depreciation and
amortization expense, plus interest (income) expense, (net). On a
segment basis, it is defined as operating income plus depreciation
expense and amortization expense. EBITDA margin is defined as
EBITDA divided by net sales.
4 Total liquidity is defined as Cash and
cash equivalents plus the available balance on the Company's
revolving credit facility
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201124005952/en/
Jared Stearns Investor Relations Manager Raven Industries, Inc.
+1(605) 336-2750
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