Inscape (TSX: INQ), a leading designer and manufacturer of
furnishings for the workplace, today announced its second quarter
financial results ended October 31, 2019. Sales in the second
quarter of fiscal year 2020 were $23.3 million and adjusted EBITDA
was $1.0 million.
Second Quarter Highlights:
- Second quarter sales were 7% higher than the same quarter of
the previous year. This is the sixth consecutive quarter of year
over year growth, excluding sales from an exited business unit
- Furniture sales for the second quarter are 32% higher than the
previous year quarter
- Sales order pipeline remains solid.
- Gross profit for the second quarter increased to $6.8 million
compared to $6.6 million in the previous year quarter
- SG&A declined by $2.1 million compared to the previous year
quarter due to completion of investment in sales and marketing
initiatives in fiscal 2019 and cost reduction initiatives
implemented in fiscal 2020. We continue to analyze opportunities to
further reduce SG&A expenses.
- Adjusted EBITDA for the second quarter improved by $2.6 million
compared to the prior year
“We are pleased with the results as it
reinforces our commitment to deliver profitable growth. Our
investments to grow the topline are starting to generate the return
we expect,” said Brian Mirsky, CEO. “We remain
focussed on sustaining our profitable growth
performance.”
| |
|
Inscape Corporation |
|
Summary of Consolidated Financial Results |
|
(Unaudited) (in thousands except EPS) |
| |
|
|
|
Three Months Ended October 31 |
|
|
|
|
Fiscal 2020 |
|
|
Fiscal 2019 |
|
|
|
|
|
|
|
|
|
|
Sales |
$ |
23,322 |
|
$ |
21,850 |
|
| Gross
Profit |
|
6,765 |
|
|
6,560 |
|
| Selling,
general & administrative expenses |
|
6,507 |
|
|
8,650 |
|
|
Unrealized loss (gain) on foreign exchange |
|
25 |
|
|
(327 |
) |
|
Unrealized (gain) loss on derivatives |
|
(184 |
) |
|
668 |
|
| Loss on
disposal of capital assets & intangibles |
|
24 |
|
|
- |
|
|
Interest income |
|
(2 |
) |
|
(10 |
) |
| Income
(loss) before taxes |
$ |
395 |
|
$ |
(2,421 |
) |
|
Income tax |
|
3 |
|
|
- |
|
|
Net income (loss) |
$ |
392 |
|
$ |
(2,421 |
) |
| Basic
and diluted income (loss) per share |
$ |
0.03 |
|
$ |
(0.17 |
) |
| Weighted
average number of shares (in thousands) |
|
|
|
|
|
|
| for
basic EPS calculation |
|
14,381 |
|
|
14,381 |
|
| for
diluted EPS calculation |
|
14,381 |
|
|
14,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Six Months Ended October 31 |
|
| |
|
Fiscal 2020 |
|
|
Fiscal 2019 |
|
| |
|
|
|
|
|
|
|
Sales |
$ |
43,999 |
|
$ |
43,076 |
|
| Gross Profit |
|
12,543 |
|
|
12,052 |
|
| Selling, general &
administrative expenses |
|
13,770 |
|
|
16,669 |
|
| Unrealized loss (gain) on
foreign exchange |
|
56 |
|
|
(11 |
) |
| Unrealized (gain) loss on
derivatives |
|
(1,032 |
) |
|
1,336 |
|
| Loss (gain) on disposal of
capital assets & intangibles |
|
52 |
|
|
(295 |
) |
|
Interest income |
|
(7 |
) |
|
(21 |
) |
| Loss before taxes |
$ |
(296 |
) |
$ |
(5,626 |
) |
| Income
tax |
|
56 |
|
|
- |
|
| Net
loss |
$ |
(352 |
) |
$ |
(5,626 |
) |
| Basic and diluted loss per
share |
$ |
(0.02 |
) |
$ |
(0.39 |
) |
| Weighted average number of
shares (in thousands) |
|
|
|
|
|
|
| for basic EPS calculation |
|
14,381 |
|
|
14,381 |
|
| for diluted EPS
calculation |
|
14,381 |
|
|
14,393 |
|
| |
|
|
|
|
|
|
Fiscal 2020 quarterly and year to date net income improved
significantly compared to the previous year.
The second quarter of fiscal year 2020 ended with net income of
$0.4 million or 3 cents per share, compared with a net loss of $2.4
million or 17 cents per share in the same quarter of last year. Net
income (loss) of both quarters included certain unrealized,
non-cash expenses and one-time items that have significant impact
on the net income per GAAP. With the exclusion of these items, the
second quarter of fiscal 2020 had an adjusted net income before
taxes of $0.2 million, compared with an adjusted net loss before
taxes of $2.1 million in the same quarter of last year. This
represents an improvement in net income of $2.3 million compared to
the prior year driven by lower SG&A expenses.
The six month period of fiscal year 2020 ended
with a net loss of $0.4 million or 2 cents per share, compared with
a net loss of $5.6 million or 39 cents per share for the same
period of last year. Net income (loss) of both periods included
certain unrealized, non-cash expenses and one-time items that have
significant impact on the net income (loss) per GAAP. With the
exclusion of these items, the six month period of fiscal year 2020
had an adjusted net loss before taxes of $1.4 million, compared
with an adjusted net loss before taxes of $4.6 million in the same
period of the previous year. Exit of an unprofitable business unit,
realized manufacturing efficiencies and lower SG&A expense
contributed to the $3.2 million improvement in net income.
Adjusted net income or loss and adjusted EBITDA are non-GAAP
measure, which does not have any standardized meaning prescribed by
GAAP and is therefore unlikely to be comparable to similar measures
presented by other issuers.
The following is a reconciliation of net income (loss)
calculated in accordance with GAAP to the non-GAAP measure:
|
|
|
Three Months Ended October 31 |
|
|
(in thousands) |
|
Fiscal 2020 |
|
|
|
Fiscal 2019 |
|
|
Net income (loss) before taxes |
$ |
395 |
|
|
$ |
(2,421 |
) |
|
adjust non-operating or unusual items: |
|
|
|
|
|
|
Unrealized (gain) loss on derivatives |
|
(184 |
) |
|
|
668 |
|
|
Unrealized loss (gain) on foreign exchange |
|
25 |
|
|
|
(327 |
) |
|
Loss on disposal of capital assets & intangibles |
|
24 |
|
|
|
- |
|
|
Stock based compensation |
|
(80 |
) |
|
|
(18 |
) |
|
Severance obligation |
|
(21 |
) |
|
|
- |
|
|
Adjusted net income (loss) before taxes |
$ |
159 |
|
|
$ |
(2,098 |
) |
|
Depreciation & Amortization |
|
847 |
|
|
|
499 |
|
|
Interest Income |
|
(2 |
) |
|
|
(10 |
) |
|
Adjusted EBITDA |
|
1,004 |
|
|
|
(1,609 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Six Months Ended October 31 |
|
|
(in thousands) |
|
Fiscal 2020 |
|
|
|
Fiscal 2019 |
|
|
Net loss before taxes |
$ |
(296 |
) |
|
$ |
(5,626 |
) |
|
adjust non-operating or unusual items: |
|
|
|
|
|
|
Unrealized (gain) loss on derivatives |
|
(1,032 |
) |
|
|
1,336 |
|
|
Unrealized loss (gain) on foreign exchange |
|
56 |
|
|
|
(11 |
) |
|
Loss (gain) on disposal of capital assets & intangibles |
|
52 |
|
|
|
(295 |
) |
|
Stock based compensation |
|
(350 |
) |
|
|
39 |
|
|
Severance obligation |
|
214 |
|
|
|
- |
|
|
Adjusted net loss before taxes |
$ |
(1,356 |
) |
|
$ |
(4,557 |
) |
|
Depreciation & Amortization |
|
1,687 |
|
|
|
987 |
|
|
Interest Income |
|
(7 |
) |
|
|
(21 |
) |
|
Adjusted EBITDA |
|
324 |
|
|
|
(3,591 |
) |
| |
|
|
|
|
|
|
|
Gross profit as a percentage of sales for the
second quarter of fiscal year 2020 at 29% was 100 basis points
lower than the same quarter of the last year’s gross profit of
30.0%. Manufacturing efficiencies realized were more than
offset by unfavourable product mix and increase in sales
discount.
For the six month period of fiscal year 2020
gross profit as a percentage of sales of 28.5%, was 50 basis points
higher than the same period of the previous year. Exit of an
unprofitable business unit and improved manufacturing efficiencies
contributed to the gross profit increase.
Selling, general and administrative expenses
(“SG&A”) in the second quarter of fiscal year 2020 were 27.9%
of sales, compared to 39.6% in the same quarter of last year. The
dollar amount decreased by $2.1 million compared to the same
quarter of last year as the previous year included incremental
investments in marketing, sales coverage and supply chain
initiatives.
SG&A for the six month period of fiscal year
2020 were 31.3% of sales, compared to 38.7% in the same period of
the previous year. The current six month period SG&A of $13.8
million was $2.9 million lower than the same period of last year,
mainly due to incremental investments in marketing, sales coverage
and supply chain initiatives, which were incurred in prior year and
additional cost savings implemented in fiscal 2020.
At the end of the quarter, the company was
debt-free and had cash totaling $2.7 million.
Financial StatementsFinancial
statements are available from our website as of this press
release.
Inscape announces the resignation of Aziz Hirji as
Inscape, CFOAziz Hirji has resigned as the Chief Financial
Officer and Secretary of the Company effective January 10,
2020. Mr. Hirji has accepted a position with a privately held
Pharmaceutical Company.
“We wish to thank Aziz for his commitment and guidance since he
joined us in November, 2016” commented Brian Mirsky, CEO of
Inscape.
The Company will immediately start a search for his
replacement.
Second Quarter Call
DetailsInscape will host a conference call at 8:30 AM EST
on Friday, December 13, 2019 to discuss the company’s quarterly
results. To participate, please call 1-800-920-4316 five minutes
before the start time. A replay of the conference call will also be
available from December 13, 2019 after 10:30 AM EST until 11:59 PM
EST on January 13, 2020. To access the rebroadcast, please dial
1-800-558-5253 (Reservation Number 21934709).
Forward-looking
StatementsCertain of the above statements are
forward-looking statements that involve risks and uncertainties.
Actual results could differ materially as a result of many factors
including, but not limited to, further changes in market conditions
and changes or delays in anticipated product demand. In addition,
future results may also differ materially as a result of many
factors, including: fluctuations in the company’s operating results
due to product demand arising from competitive and general economic
and business conditions in North America; length of sales cycles;
significant fluctuations in international exchange rates,
particularly the U.S. dollar exchange rate; restrictions in access
to the U.S. market; changes in the company’s markets, including
technology changes and competitive new product introductions;
pricing pressures; dependence on key personnel; and other factors
set forth in the company’s Ontario Securities Commission reports
and filings.
About InscapeSince 1888,
Inscape has been designing products and services that are focused
on the future, so businesses can adapt and evolve without
investing in their workspaces all over again. Our versatile
portfolio includes systems furniture, storage, and walls – all of
which are adaptable and built to last. Inscape’s wide dealer
network, showrooms in the United States and Canada, along with full
service and support for all of our clients, enable us to stand out
from the crowd. We make it simple. We make it smart. We make our
clients wonder why they didn’t choose us sooner.
For more information, visit www.myinscape.com
ContactAziz Hirji, CPA, CAChief
Financial Officer Inscape CorporationT 905 952 4102
ahirji@myinscape.com
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