Investor Conference Call on August 10, 2023 at 8:00
a.m. ET
TORONTO, Aug. 9, 2023
/CNW/ - Baylin Technologies Inc. (TSX: BYL) (the "Company" or
"Baylin"), a diversified global wireless technology company focused
on the research, design, development, manufacture, and sale of
passive and active radio frequency
products, satellite communications products, and supporting
services, today announced its financial results for the three and
six months ended June 30, 2023. All amounts are stated in
Canadian dollars unless otherwise indicated.
SECOND QUARTER SUMMARY
- Revenue of $25.3 million in the
second quarter of 2023, a decrease of $4.8
million or 16.1% compared to the second quarter of 2022. The
decrease was primarily due to a significant reduction in orders
from our principal customer in the Mobile and Network ("M&N")
business line, partially offset by stronger sales in the Embedded
Antenna and Satcom business lines.
- Gross margin was 32.5% in the second quarter of 2023 compared
to 29.9% in the second quarter of 2022, despite gross profit of
$8.2 million being $0.8 million less than the second quarter of
2022. The improved gross margin resulted from a balanced product
mix due to sales from newly launched products, changes in pricing
strategy, and a data driven focus on contribution margin at the
business line level. In the second quarter of 2023, the improvement
was primarily generated by: (i) stronger revenue recovery in the
Satcom business line despite supply chain constraints; (ii)
favourable product mix, including new multibeam and innovative
antenna portfolio in the Wireless Infrastructure business line;
and, (iii) consistent operational efficiency in the Embedded
Antenna business line.
- Adjusted EBITDA(2) of $0.1
million in the second quarter of 2023, the seventh
consecutive quarter of positive Adjusted EBITDA. Adjusted EBITDA
decreased by $0.2 million compared to
the second quarter of 2022. The decrease in Adjusted EBITDA was
mainly due to the decrease in gross profit as a result of lower
revenue, partially offset by the decrease in operating expenses
compared to the prior year period.
- Net loss of $1.2 million in the
second quarter of 2023 compared to a net loss of $4.3 million in the second quarter of 2022. The
net loss in the second quarter of 2023 was primarily attributable
to an operating loss of $1.3 million.
On a per share basis, a net loss of $0.01 per share in the second quarter of 2023
compared to a net loss of $0.05 per
share in the second quarter of 2022.
- Net debt(3) was $23.6
million as at June 30, 2023,
an increase of $2.1 million from
December 31, 2022, primarily due to
debt interest payments and lease payments.
- Backlog(4) was $34.5
million at June 30, 2023
compared to $38.1 million at
December 31, 2022 and $37.7 million at June 30,
2022. The decrease was mainly due to a significantly lower
level of backlog in M&N business as a result of
across-the-board production volume reductions at its principal
customer.
RECENT DEVELOPMENTS
Products
Multibeam Antennas
We have had several notable successes over the past three months
with the placement of patented multibeam antennas by our Galtronics
subsidiary at various events and venues, including:
- Circuit Gilles-Villeneuve in Montreal, for the 2023 Formula 1 Canadian
Grand Prix/Grand Prix du Canada;
- The "Greatest Outdoor Show on Earth", the 2023 Calgary
Stampede;
- Throughout Lisbon, Portugal
for the Pope's visit earlier in August to celebrate World Youth
Day;
- Phoenix Park in Dublin,
Ireland for the Bord Bia Bloom festival, one of Ireland's largest events;
- Slane Castle, near Dublin, Ireland, for a Harry Styles concert; and,
- Various concert venues in locations around Rome and Milan,
Italy.
Our multibeam antennas are capable of handling high capacity and
highspeed throughput in dense customer environments.
Ka-Band Amplifiers
In July 2023, our Advantech
Wireless Technologies subsidiary launched a new family of Ka-band
solid state power amplifiers (SSPA) and block up converters (SSPB),
badged as the K-2 Series. These SSPAs and SSPBs are based on a
novel, ground-up design that employs the latest in Gallium Nitride
device technology to deliver the highest RF performance of any
amplifier in its class.
The K-2 Series is the first major product led by Advantech's
Quebec-based engineering team and
is based on Advantech's Genesis platform.
Private Placement of Common Shares
On May 26, 2023, the Company
completed a private placement of 8,000,000 common shares to its
principal shareholder, 2385796 Ontario Inc., a corporation over
which our Chairman, Jeffery C.
Royer, exercises control and direction over investment
decisions. The proceeds of $3.12
million are being used to fund working capital in the
business, including for use in the M&N business line.
China Credit Facility
The Company's Chinese subsidiary arranged a new 30 million
Chinese Yuan multiple tranche credit facility with Bank of
Ningbo. The facility, which is
secured by the subsidiary's building, replaced a 17 million Chinese
Yuan secured facility with Shanghai Pudong Development Bank.
SELECTED FINANCIAL INFORMATION
The table below discloses selected financial information for the
periods indicated.
|
(in $000's except
per share amounts)
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
Change
|
Change
|
2023
|
2022
|
Change
|
Change
|
|
$
|
|
$
|
$
|
%
|
$
|
$
|
$
|
%
|
|
Profit and
Loss
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
25,271
|
|
30,134
|
(4,863)
|
(16.1 %)
|
50,398
|
61,108
|
(10,710)
|
(17.5 %)
|
|
Gross profit
|
8,206
|
|
9,015
|
(809)
|
(9.0 %)
|
15,871
|
17,071
|
(1,200)
|
(7.0 %)
|
|
Gross margin
|
32.5 %
|
|
29.9 %
|
2.6 %
|
N/A
|
31.5 %
|
27.9 %
|
3.6 %
|
N/A
|
|
Net loss
|
(1,243)
|
|
(4,308)
|
3,065
|
(71.1 %)
|
(2,409)
|
(7,381)
|
4,972
|
(67.4 %)
|
|
Basic and diluted net
loss per share
|
($0.01)
|
|
($0.05)
|
$0.04
|
(80.0 %)
|
($0.03)
|
($0.09)
|
$0.06
|
(66.7 %)
|
|
EBITDA(1)
|
410
|
|
(546)
|
956
|
N/A
|
2,731
|
(792)
|
3,523
|
N/A
|
|
Adjusted
EBITDA(2)
|
82
|
|
323
|
(241)
|
(74.6 %)
|
959
|
547
|
412
|
75.3 %
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
As at
|
|
|
As at
|
As at
|
|
|
|
June 30,
2023
|
|
June 30,
2022
|
Change
|
Change
|
June 30,
2023
|
December
31,
2022
|
Change
|
Change
|
|
$
|
|
$
|
$
|
%
|
$
|
$
|
$
|
%
|
|
Balance Sheet and
Other
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
49,667
|
|
54,344
|
(4,677)
|
(8.6 %)
|
49,667
|
50,453
|
(786)
|
(1.6 %)
|
|
Total assets
|
70,643
|
|
81,751
|
(11,108)
|
(13.6 %)
|
70,643
|
74,384
|
(3,741)
|
(5.0 %)
|
|
Current
liabilities
|
63,522
|
|
59,395
|
4,127
|
6.9 %
|
63,522
|
65,505
|
(1,983)
|
(3.0 %)
|
|
Non-current
liabilities
|
9,418
|
|
17,505
|
(8,087)
|
(46.2 %)
|
9,418
|
12,139
|
(2,721)
|
(22.4 %)
|
|
Total
liabilities
|
72,940
|
|
76,900
|
(3,960)
|
(5.1 %)
|
72,940
|
77,644
|
(4,704)
|
(6.1 %)
|
|
Net
debt(3)
|
23,551
|
|
21,354
|
2,197
|
10.3 %
|
23,551
|
21,437
|
2,114
|
9.9 %
|
|
Backlog(4)
|
34,456
|
|
37,702
|
(3,246)
|
(8.6 %)
|
34,456
|
38,067
|
(3,611)
|
(9.5 %)
|
|
(1) See "Non-IFRS
Measures". EBITDA refers to operating income (loss) plus
depreciation and amortization.
|
|
(2) See "Non-IFRS
Measures". Adjusted EBITDA refers to EBITDA plus the sum of: a)
acquisition expenses; b) fair value step-up of inventory acquired
as part of an acquisition; c) expenses for litigation relating to
acquisition agreements; d) expenses relating to planned
restructuring following an acquisition; e) impairment of fixed and
intangible assets (including goodwill) following an acquisition;
f)
expenses to permanently close or relocate a facility, shut down a
line of business, eliminate positions; g) expenses related to
corporate re-organization; and, h) non-cash
compensation.
|
|
(3) See "Non-IFRS
Measures". Net debt refers to total bank indebtedness less cash and
cash equivalents.
|
|
(4) See "Non-IFRS
Measures". Backlog refers to the value of unfulfilled purchase
orders placed by customers.
|
A copy of the Company's unaudited interim condensed consolidated
financial statements for the three and six months ended
June 30, 2023 and corresponding
management's discussion and analysis (the "MD&A") are available
under the Company's profile on SEDAR+ at www.sedarplus.ca.
OUTLOOK
The Company has now achieved seven consecutive quarters of
positive Adjusted EBITDA and has consistently improved gross
margins since the first quarter of 2022. This, despite a continuing
difficult business environment. We had expected financial
performance in the second quarter to be weaker than the first, and
the most challenging quarter of the year, but we now expect the
third quarter will be similarly challenging. Although the North
American business lines continue to perform well generally, our
overall performance is being significantly negatively affected by
the results of our M&N business line.
We continue to prioritize product mix, emphasizing products that
generate higher margins and gross profit, with a view to
maintaining and growing Adjusted EBITDA, even at the expense of
higher revenue. The macro-economic environment, shortages in
materials and increased material costs due to supply chain
challenges and chipset shortages remain an issue for our business.
These factors are expected to continue to cause delays in both the
production and the delivery of our products as well as pushouts of
orders from customers. We had expected these disruptions would
begin to ease in the first half of 2023, but now anticipate that
they will continue for the remainder of 2023. The ongoing war in
Ukraine could continue to
exacerbate supply chain disruptions. As a result of these
continuing challenges, particularly in our M&N business line,
we now expect that our 2023 results will be below our 2022 results
for revenue and Adjusted EBITDA.
Embedded Antenna Business Line
The Embedded Antenna business line is currently being impacted
by lower volumes driven by the macro-economic environment, as well
as slightly lower margins caused by changes in product mix. We
expect the Embedded Antenna business line will continue to perform
reasonably well in 2023 but at reduced levels from 2022, which was
an exceptionally strong year. Its performance depends on the
ability of the home networking, public safety and automotive
markets to remain resilient in the face of the economic slowdown
and inflationary pressures. The number of active bids for 2024
projects is, however, at a record level for the business.
Wireless Infrastructure Business Line
We expect the Wireless Infrastructure business line will
continue its performance for the remainder of 2023 with small
improvements in revenue but materially higher Adjusted EBITDA
compared to 2022. This reflects the sales success of our higher
margin multibeam and innovative small cell antennas as well as the
strong pace of DAS and stadium deployments, particularly for use in
stadiums and other venues requiring in-building wireless. We expect
that our new higher margin multibeam and innovative small cell
antennas will open up new global opportunities to drive sales with
wireless carriers and third-party operators who operate wireless
mobile networks for their customers. We are seeing some pull-back
on spending by wireless carriers and infrastructure customers
broadly but have managed to grow and take market share by focusing
on our unique competitive advantages. We do expect to see carriers
begin spending on small cells by 2024, which will drive further
volumes for the business.
Satcom Business Line
The commercial side of the Satcom business line continues to
demonstrate consistent demand with capital spending by our
customers continuing the momentum seen at the end of 2022. Given
the capital build cycles of satellite operators and others in the
Satcom ecosystem, we expect this will continue to benefit the
business in 2023. We expect that our new Genesis line of
solid-state power amplifiers will generate significant interest
from commercial clients, particularly those in the aviation and
maritime industries. However, there are indications that satellite
internet access through low earth orbit satellites provided by
satellite installation constellations is having a disruptive effect
on some services provided by our customers, particularly in the
cruise and maritime industries. In addition, the interest rate
environment is having an impact on expenditures by some commercial
satcom companies.
Sales for military and other government-related uses, which
represents the balance of this business line, will continue and
potentially increase during the second half of 2023, as many
western countries continue to maintain high levels of defence
spending. We have recently completed multiple technology upgrades
within our product portfolio, which are expected to generate
additional sales.
Overall, we expect revenue and Adjusted EBITDA in 2023 will be
stronger than 2022. The Satcom business line continues to
demonstrate a strong order book with improving margins, but
production continues to be affected by supply chain constraints,
chipset shortages and component delays. In the meantime, we
continue to take steps to improve production efficiencies in our
facilities in order to address the backlog and improve overall
revenue attainment. In order to alleviate some of the production
backlog in our Kirkland, Quebec
facility, we have begun production of high-power amplifiers in our
State College, Pennsylvania
facility.
Mobile and Network (formerly, Asia Pacific) Business Line
The M&N business line continues to face significant
challenges due to large production volume reductions at its
principal customer. Those reductions reflect a contraction in the
customer's smartphone market, due in part to the global economic
slowdown and continuing inflation, as well as competitive pressures
faced by the customer. Global shipments of smartphones are expected
to experience a year-over-year decline in 2023. The customer is
also facing weaker demand for its other products such as tablets,
smart watches, and other wirelessly connected devices.
Management has been taking steps to limit the adverse effect
this has had on the business by reducing or eliminating operating
and other costs. We have also been working to diversify its revenue
base, but other potential revenue-generating projects have been
hampered by the adverse economic environment, and any resulting
benefit is not likely to be seen until 2024.
Given these ongoing challenges, management is continuing to
evaluate its various options for the business, including whether it
should remain part of the Company's core long-term strategy.
INVESTOR CONFERENCE CALL
Baylin will hold a conference call on August 10, 2023 at 8:00
a.m. (ET) to discuss its financial results for the three and
six months ended June 30, 2023. The conference call will be
hosted by Leighton Carroll, Chief
Executive Officer and Dan Nohdomi,
Chief Financial Officer. All interested parties are invited to
participate using the dial-in details provided below.
|
Date:
|
August 10,
2023
|
|
Time:
|
8:00 a.m.
(ET)
|
|
Dial-in Number:
|
888-664-6392 or
416-764-8659
|
|
Conference ID#:
|
59787852
|
|
Rapid
Connect:
|
To instantly join the
conference call by phone, please use the following URL to easily
register
and be connected into the conference call automatically:
https://emportal.ink/3LS6Cib
|
|
Webcast:
|
This call is also on
webcast and can be accessed at:
https://app.webinar.net/lbpzRNvRw2r
|
FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release includes forward-looking information and
forward-looking statements (together, "forward-looking statements")
within the meaning of applicable securities laws.
Forward-looking statements are not statements of historical
fact. Rather, forward-looking statements are disclosure
regarding conditions, developments, events or financial performance
that we expect or anticipate may or will occur in the future
including, among other things, information or statements concerning
our objectives and strategies to achieve those objectives,
statements with respect to management's beliefs, estimates,
intentions and plans, and statements concerning anticipated future
circumstances, events, expectations, operations, performance or
results. Forward-looking statements can be identified generally by
the use of forward-looking terminology, such as "anticipate",
"believe", "could", "should", "would", "estimate", "expect",
"forecast", "indicate", "intend", "likely", "may", "outlook",
"plan", "potential", "project", "seek", "target", "trend" or "will"
or the negative or other variations of these words or other
comparable words or phrases and is intended to identify
forward-looking statements, although not all forward-looking
statements contain these words.
The forward-looking statements in this press release include
statements concerning the effect of the macroeconomic environment
on our business, the outlook for our business lines, particularly
M&N, shortages in materials and increased material costs and
supply chain and other disruptions on their financial performance,
production delays, and reduced spending by our customers.
Forward-looking information and statements are based on certain
assumptions and estimates made by us in light of the experience and
perception of historical trends, current conditions, expected
future developments, including projected growth in sales of passive
and active radio frequency and satellite communications products,
and supporting services, and other factors we believe are
appropriate and reasonable in the circumstances, but there can be
no assurance that such assumptions and estimates will prove to be
correct.
Many factors could cause our actual results, level of activity,
performance or achievements or future events or developments to
differ materially from those expressed or implied by the
forward-looking statements, including the risk factors discussed in
the Company's most recent Annual Information Form, which is
available under the Company's profile on SEDAR+ at
www.sedarplus.ca. All the forward-looking statements made in this
press release are qualified by these cautionary statements and
other cautionary statements or factors in this press release. There
can be no assurance that the actual results or developments will be
realized or, even if substantially realized, 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 any forward-looking statements.
NON-IFRS MEASURES
This press release includes a number of measures that are not
prescribed by International Financial Reporting Standards ("IFRS")
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
business activities. While management of the Company believes that
non-IFRS measures provide 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 IFRS. For further information, see "Non-IFRS
Measures" on page 3 of the MD&A.
ABOUT BAYLIN
Baylin Technologies Inc. is a diversified global wireless
technology company focused on the research, design, development,
manufacture, and sale of passive and active radio frequency
products, satellite communications products, and supporting
services.
SOURCE Baylin Technologies Inc.