Investor Conference Call on November 12, 2020 at 8:00
a.m. ET
TORONTO, Nov. 11, 2020 /CNW/ - Baylin Technologies Inc.
(TSX: BYL) (the "Company" or "Baylin"), a leading, diversified,
global wireless technology company focused on research, design,
development, manufacturing and sales of passive and active radio
frequency products and services, today announced its financial
results for the three and nine months ended September 30,
2020. All amounts are stated in Canadian dollars unless otherwise
indicated.
QUARTERLY HIGHLIGHTS
Key highlights for the three months ended September 30,
2020 include the following:
- Second consecutive quarter over quarter improvement in revenue,
gross profit, EBITDA(1) and Adjusted
EBITDA(2).
(in
$000's)
|
|
|
|
|
Three Months
Ended
|
|
September 30,
2020
|
June 30,
2020
|
March 31,
2020
|
|
$
|
$
|
$
|
Revenue
|
36,577
|
30,629
|
26,942
|
%
Increase
|
19.4%
|
13.7%
|
|
Gross
profit
|
10,399
|
9,678
|
8,599
|
% of
Revenue
|
28.4%
|
31.6%
|
31.9%
|
EBITDA(1)
|
2,278
|
1,905
|
(195)
|
Adjusted
EBITDA(2)
|
3,582
|
2,658
|
555
|
- The decrease in gross margin(3) in the third quarter
of 2020 compared to the second quarter of 2020 was due to product
mix.
- Continued reduction in operating expenses. Operating expenses
in the third quarter of 2020 decreased by $3.3 million compared to the third quarter of
2019.
- Net cash as at September 30, 2020
decreased from December 31, 2019 due
to ongoing capital expenditures to complete the new facility in
Vietnam, debt servicing and cash
taxes, offset by a decrease in non-cash working capital.
RECENT DEVELOPMENTS
Revenue and EBITDA have increased quarter-over-quarter in 2020.
We have continued to feel the impact of the coronavirus (COVID-19)
pandemic in our margins and sales mix. In particular,
Infrastructure and Satcom sales volumes in the third quarter of
2020 were softer than expected with Asia
Pacific revenue surpassing the third quarter expectations.
COVID-19 impacted Infrastructure revenue with the delays in small
cell site approvals due to municipality shutdowns and slower than
expected services. Additionally, the 5G C-band spectrum auction
delay impacted both Infrastructure and Satcom revenue. We continue
to experience delays in the completion of the Massive MIMO (MMU)
factory in Vietnam, but recently
we have the chamber specialist scheduled to go to the facility in
the first quarter of 2021 to finish the final calibration.
Management is continuing to focus on securing new long-term
contracts and reducing costs in order to drive profitability. The
cost reduction initiatives implemented over the last year have
resulted in reduced expenses of approximately $10 million. In the third quarter of 2020,
operating expenses were $3.3 million
lower than the third quarter of 2019. Management expects to
implement further operating expense reductions over the next four
quarters which should show improvements in financial performance in
the fourth quarter of 2020 and through 2021.
SELECTED FINANCIAL INFORMATION
The table below discloses selected financial information for the
periods indicated.
(in $000's
except per share amounts)
|
|
|
|
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2020
|
2019
|
2020
|
2019
|
|
$
|
$
|
$
|
$
|
Revenue
|
36,577
|
36,430
|
94,148
|
123,294
|
Gross
profit
|
10,399
|
12,212
|
28,676
|
44,187
|
Loss before income
taxes
|
(2,169)
|
(567)
|
(9,529)
|
(4,379)
|
Income tax expense
(recovery)
|
(1,804)
|
151
|
(1,996)
|
586
|
Net loss
|
(365)
|
(718)
|
(7,533)
|
(4,965)
|
Basic and diluted net
loss per share
|
($0.01)
|
($0.02)
|
($0.18)
|
($0.12)
|
EBITDA(1)
|
2,278
|
824
|
3,988
|
8,829
|
Adjusted
EBITDA(2) (2019: revised to include non-cash
compensation)
|
3,582
|
1,442
|
6,795
|
11,661
|
Current
assets
|
67,860
|
77,786
|
67,860
|
77,786
|
Total
assets
|
151,292
|
173,457
|
151,292
|
173,457
|
Current
liabilities
|
48,110
|
50,838
|
48,110
|
50,838
|
Non-current
liabilities
|
49,146
|
49,300
|
49,146
|
49,300
|
Total
liabilities
|
97,256
|
100,138
|
97,256
|
100,138
|
|
(1) See "Non-GAAP
Measures". EBITDA refers to operating income (loss) plus
depreciation and amortization.
|
(2) See "Non-GAAP
Measures". Adjusted EBITDA refers to EBITDA plus the sum of: a)
acquisition expenses, fair value step up of inventory acquired as
part of an acquisition, expenses for litigation relating to
acquisition agreements, expenses relating to planned restructuring
post an acquisition, impairment on fixed and intangible assets
(including goodwill) post an acquisition; b) expenses to
permanently close/relocate a facility, shut down a line of
business, eliminate positions; c) corporate re-organization
expenses; and, d) non-cash compensation.
|
(3) See "Non-GAAP
Measures". Gross margin refers to gross profit divided by
revenue.
|
A copy of the Company's unaudited interim condensed consolidated
financial statements for the three and nine months ended
September 30, 2020 and corresponding management's
discussion and analysis (the "MD&A") are available under the
Company's profile on SEDAR at www.sedar.com.
OUTLOOK
The Embedded Antenna business line is expected to continue to
perform well with gross margin expected to improve in the first
quarter of 2021 due to a capital investment which will automate a
portion of the manufacturing process of one of its highest volume
products. The increase in consumer demand for Wi-Fi 6 products
coupled with recent large platform wins in this market have this
division expecting growth for 2021. Furthermore, we have moved into
the automotive antenna market, resulting in two long-term
automotive contracts that are expected to start in mid-2021.
The Satcom business line has seen a significant increase in
military proposals and contract wins to new and existing customers
for large opportunities that are expected to commence shipments in
early 2021. The launch of our new Summit Series II has achieved
early success and our first system is expected to be delivered in
the first quarter of 2021 with other awards to be delivered
afterwards.
The Company has seen continuing financial improvements across
its business lines, however, there remains uncertainty due to the
COVID-19 pandemic. The Asia
Pacific business line had a very strong third quarter of
2020, however, the COVID-19 lockdowns in Europe in the fourth quarter of 2020 have
impacted cellular stores, resulting in a decline in the order book
for this quarter.
Although COVID-19 is continuing to have an impact on financial
results in the fourth quarter of 2020 which will likely result in a
softer quarter than the third quarter of 2020, we
nevertheless expect the financial performance in the second half of
2020 to be better than the first half.
Year to date, the Wireless Infrastructure business line has been
impacted from COVID-19. While activity with customers has been
steadily improving, with a lot of planning for 2021 taking place,
it is causing some delays in product deliveries in the fourth
quarter of 2020. The outlook for 2021 with this business line has
improved significantly for three major reasons:
- The new 5G spectrum auction will be concluded by the U.S.
Federal Communications Commission in December 2020;
- 2020 projects that were delayed but are now scheduled for 2021;
and,
- The new carrier supplier status win for small cells for which
revenue is expected to commence in the first quarter of 2021.
The recent development of the chamber specialist scheduled to
start the final commissioning at the new Vietnam factory in the first quarter of 2021
could put us on track to commence operations in the second quarter
of 2021. Although MMU industry volumes were affected by COVID-19
and the delayed C-band auction in the U.S., it is expected that
volumes will recover to historic highs starting in the second half
of 2021.
To summarize, while the impact of the COVID-19 pandemic is
expected to create near-term volatility in our business,
particularly the fourth quarter of 2020, the long-term outlook for
Baylin is robust:
- Wi-Fi 6 | Next generation Wi-Fi 6 brings new technology,
and therefore has expanded our opportunities with existing and new
customers. Additionally, we have secured automotive contracts with
two key OEMs and we expect these long-life programs to begin volume
production in the second half of 2021. Combined, these wins should
accelerate organic growth of our Embedded Antenna products.
- 5G and C-Band | The reallocation of C-band from
satellite operators to telecom providers towards 5G spectrum is
driving an unprecedented product refresh across both Satcom (C-band
filters) and Infrastructure (small cell, base station and
distributed antenna systems).
- Small Cell | While small cell deployments stalled in the
U.S. due to COVID-19, this industry is expected to trend steadily
upward beginning in 2021 through to 2025. Now, having secured a
second large carrier, we expect our Infrastructure products to
enjoy more robust growth and less volatility in deployments.
- Base Station | After years of investment and an
expanding product portfolio, our base station product group
continues to gain significant traction with customers.
- Satcom | Our Summit II Solid State Power Amplifier
(SSPA) system continues to drive new opportunities:
-
- A previously announced 5G backhaul program is expected to move
into volume production beginning in 2021;
- A recently announced multi-year agreement to supply a major
system integrator is likewise expected to move into volume
production beginning in 2021;
- Finally, new low-earth orbit (LEO) constellations are being
deployed by several large global players. These constellations will
require a significant investment in new technologically advanced
ground infrastructure, for which our Summit II SSPA is well
suited.
- MMU | Due to COVID-19, many field operations for MMU
deployments were shut down completely by many governments in 2020.
A recent study from Allied Market Research forecasts a robust 35%
CAGR from US$1.9 billion in 2020 to
US$15.8 billion in 2027.
INVESTOR CONFERENCE CALL
Baylin will hold a conference call on November 12, 2020 at 8:00
a.m. (ET) to discuss its financial results for the three and
nine months ended September 30, 2020. The call will be hosted
by Randy Dewey, President and Chief
Executive Officer, Michael Wolfe,
Chief Financial Officer and Daniel
Kim, Executive Vice President of Corporate Development. All
interested parties are invited to participate using the dial-in
details provided below.
Date:
|
November 12,
2020
|
Time:
|
8:00 a.m.
(ET)
|
Dial-in
Number:
|
888-231-8191 or
647-427-7450
|
Conference
ID#:
|
2184306
|
Webcast:
https://produceredition.webcasts.com/starthere.jsp?ei=1290186&tp_key=e8634b70ea
FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release constitute
"forward-looking information and statements" that involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance, objectives or achievements of the
Company, or industry results, to be materially different from any
future results, performance, objectives or achievements (expressed
or implied) by such forward-looking information or statements.
Forward-looking statements are frequently, but not always,
identified by words such as "expects," "anticipates," "believes,"
"intends," "estimates,", "predicts," "potential," "targeted,"
"plans," "possible" and similar expressions, or statements that
events, conditions or results "will," "may," "could" or "should"
occur or be achieved. The forward-looking statements in this
press release include, but are not limited to, statements regarding
the effect on the Company and its customers and suppliers of the
COVID-19 pandemic, the timing of completion of the Company's new
factory in Vietnam and timing and
amount of any expected future revenue from that factory, the timing
and amount of expected improvements in revenue, expected
opportunities for new business, the timing and amount of expected
cost reduction initiatives, and, other statements regarding the
Company's plans, objectives and expectations. These statements
reflect the Company's current views regarding future events and
operating performance and are based on information currently
available to the Company as of the date of this press release.
These forward-looking statements involve a number of risks,
uncertainties and assumptions and should not be read as guarantees
of future performance or results and will not necessarily be
accurate indications of whether or not such performance or results
will be achieved. Those assumptions and risks include, but are not
limited to, the Company's ability to successfully allocate capital
as needed and to develop new products, as well as the fact that the
Company's results of operations and business outlook are subject to
significant risk, volatility and uncertainty. Additional factors
that could cause actual results, performance or achievements to
differ materially include, but are not limited to, the risk factors
discussed in the Company's Annual Information Form dated
March 11, 2020 which is available
under the Company's profile on SEDAR at www.sedar.com. All of the
forward-looking statements made in this press release are qualified
by these cautionary statements and other cautionary statements or
factors contained herein, and there can be no assurance that the
actual results or developments will be realized or, even if
substantially realized, that they will have the expected
consequences to, or effects on, the Company. Unless required by
applicable securities law, the Company does not intend and does not
assume any obligation to update these forward-looking
statements.
NON-GAAP MEASURES
This press release includes a number of measures that are not
prescribed by Canadian generally accepted accounting principles
("GAAP") and as such may not be comparable to similar measures
presented by other companies. We believe these measures are
commonly employed to measure performance in our industry and are
used by analysts, investors, lenders and interested parties to
evaluate financial performance and our ability to incur and service
debt to support our business activities. While management of the
Company believes that non-GAAP measures are helpful supplemental
information, they should not be considered in isolation as an
alternative to net income, cash flows generated by operating,
investing or financing activities, or other financial statement
data presented in accordance with GAAP. See "Non-GAAP Measures" on
page 2 of the MD&A for further information.
ABOUT BAYLIN
Baylin Technologies Inc. (TSX: BYL) is a leading, diversified,
global wireless technology company. Baylin focuses on research,
design, development, manufacturing and sales of passive and active
radio-frequency products and services. Baylin aspires to meet its
customers' needs and anticipate the direction of the market.
SOURCE Baylin Technologies Inc.