Inscape (TSX: INQ), a leading designer and manufacturer of
furnishings and movable wall systems for the workplace, today
announced its results of operations for the fourth quarter and full
year ended April 30, 2022 and announces the addition of a new Board
Member.
“Fourth quarter fiscal 2022 sales levels
represented our third successive quarter over quarter sales
improvement since the beginning of the fiscal year. This remains an
encouraging trend but must materially improve to higher quarterly
sales levels ongoing to sustain the business over the long term. We
are seeing sales pipeline levels build momentum quarter over
quarter in line with management’s expectations given the continued
relative strength of the U.S. economy. During the fiscal year,
management completed its efforts to monetize non-core assets, raise
cash and retire debt in order to allow us to continue our work
improving the efficiency of the Company’s operations and improve
core profitability once our sales levels return to pre-pandemic
levels,” said Eric Ehgoetz, CEO.
Total sales for the fourth quarter of fiscal
2022 were $11.0 million, compared to $8.1 million for the same
period of fiscal 2021. During the fiscal year, the Company
experienced quarter on quarter revenue growth at an annualized
growth rate of 11.8% as the economic recovery from the COVID-19
pandemic continued.
Total sales for the full year 2022 were
relatively flat at $38.7 million, compared to $38.2 million for
fiscal 2021. The Company’s performance during fiscal 2022 was
impacted by the continued effects of the pandemic on supply chain
which triggered shortage of production materials, such as height
adjustable bases and medium density fibre board, resulting in
customer project delays and lower margins. The Company also
experienced input cost increases for steel, aluminium,
petroleum-based products and freight.
“During the fourth quarter, management
continued its efforts to improve the business and its cost
base. The successful renewal of the
collective bargaining agreement with our unionized hourly furniture
plant employees for a three-year term and elimination of both an
incentive-based compensation system and a defined benefit pension
plan will result in material operational savings in the current and
future fiscal years. Coupled with the existing labour agreement
secured with our unionized hourly walls plant workers last June
2021, the Company is now assured of stability for both of its
manufacturing operations for the next three years. We wish to thank
our valued hourly plant employees for their important contributions
to the Company’s success and their commitment to our
business,” said Eric Ehgoetz, CEO.
Net income after taxes for the fourth quarter of
fiscal 2022 of $0.3 million or 2 cents per share was in line with
the same period of the prior year. During the current quarter, the
Company completed the sale of surplus property located at 70 Toll
Road in Holland Landing, Ontario for a selling price of $1.7
million. Non-GAAP Adjusted EBITDA for the fourth quarter was
negative $3.4 million, compared to negative $3.9 million, for
fiscal 2021.
Net loss after taxes for the full year ended
April 30, 2022, was $0.8 million or negative 6 cents per diluted
share, compared to net loss of $0.9 million or negative 6 cents per
diluted share for fiscal 2021. Gross profit of $6 million, disposal
gains of $14.6 million from the sale and leaseback of the
properties in Holland Landing, Ontario, and selling, general and
administrative (SG&A) expenses of $21.0 million were the main
components of the current year’s results. Non-GAAP Adjusted EBITDA
for the full year ended April 30, 2022 was negative $11.8 million
compared to negative $8.7 million for fiscal 2021.
Fourth Quarter Financial Highlights
(All comparisons are relative to the three-month
period ended April 30, 2021 unless otherwise stated.)
- Total cash on-hand and short-term investments as of April 30,
2022 was $8.3 million versus $3.7 million for prior fiscal year-end
close.
- Total sales of $11.0 million, an increase of 36.5%.
- Gross profit margin of 15.7%, with a gross profit increase of
$1.1 million, versus gross profit margin of 7.6%.
- EBITDA of negative $1.9 million, compared to EBITDA of negative
$1.3 million.
- Adjusted EBITDA of negative $3.4 million, compared to adjusted
EBITDA of negative $3.9 million.
- Net loss before taxes of $3.1 million compared to net loss
before taxes of $2.4 million.
- Non-operating net gain of $1.1 million largely due to the gain
of $1.6 million from the sale of surplus land at 70 Toll Road in
Holland Landing, Ontario, partially offset by interest expense
associated with outstanding lease obligations of $0.4 million.
- Inventory was $4.9 million compared to $4.6 million in the
third quarter, an increase of $0.3 million in the quarter, and $1.4
million over same quarter last year. The latter primarily related
to $1.5 million increase in the Furniture business.
Full Year Financial Highlights(All comparisons
are relative to the full year ended April 30, 2021 unless otherwise
stated.)
- The Company fully repaid and terminated the revolving credit
facility with its lender, and as of April 30, 2022 the Company had
no outstanding loans or restrictive covenants.
- EBITDA of positive $3.9 million, compared to EBITDA of negative
$0.5 million.
- Total sales of $38.7 million, relatively flat with prior year
of $38.2 million. However, the current fiscal showed progressive
quarterly improvement in sales.
- Gain on disposal of $14.6 million, compared to $0.2 million.
Current year gain is from the sale and leaseback of the head office
and manufacturing facilities at Holland Landing, Ontario and the
sale of surplus land at the same location.
- Adjusted EBITDA of negative $11.8 million, compared to adjusted
EBITDA of negative $8.7 million.
- Net loss before taxes of $0.8 million compared to net loss
before taxes of $3.7 million.
- Gross profit margin of 15.5% compared unfavorably to 18.2% of
prior year, largely due to increasing costs for steel, MDF,
aluminium and petroleum-based products, and increasing freight
charges, which had to be absorbed by the Company for previously
agreed contracts and other competitive pricing considerations.
- Government assistance from subsidies of $2.0 million, compared
to $5.3 million.
Inscape
Corporation Summary of Condensed Consolidated
Financial Results (in thousands except
EPS)
| |
Three Months Ended April 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Sales |
$ |
10,992 |
|
|
$ |
8,051 |
|
|
Gross profit |
|
1,723 |
|
|
|
614 |
|
|
Selling, general & administrative expenses(i) |
|
5,939 |
|
|
|
5,513 |
|
| Unrealized gain (loss) on
foreign exchange |
|
15 |
|
|
|
(488 |
) |
| Other income |
|
(2 |
) |
|
|
(1,916 |
) |
| Unrealized loss (gain) on
derivatives |
|
52 |
|
|
|
(581 |
) |
| (Gain) loss on sale of
PP&E and intangible assets |
|
(1,624 |
) |
|
|
23 |
|
| Interest expense |
|
417 |
|
|
|
7 |
|
| Stock-based
compensation(i) |
|
(136 |
) |
|
|
(110 |
) |
| Severance(i) |
|
127 |
|
|
|
522 |
|
|
Net loss before taxes |
$ |
(3,065 |
) |
|
$ |
(2,356 |
) |
|
Income tax expense |
|
(3,397 |
) |
|
|
(2,855 |
) |
| Net
income |
$ |
332 |
|
|
$ |
499 |
|
| |
|
|
|
|
| Basic and diluted income
(loss) per share |
$ |
0.02 |
|
|
$ |
(0.03 |
) |
| Weighted average number of
shares: |
|
|
|
|
|
for basic EPS calculation |
|
14,381 |
|
|
|
14,381 |
|
|
for diluted EPS calculation |
|
14,398 |
|
|
|
14,381 |
|
|
|
|
|
|
|
|
|
|
| |
Full Year Ended April 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Sales |
$ |
38,741 |
|
|
$ |
38,203 |
|
|
Gross profit |
|
6,007 |
|
|
|
6,934 |
|
|
Selling, general & administrative expenses(i) |
|
20,678 |
|
|
|
19,880 |
|
| Unrealized gain on foreign
exchange |
|
(20 |
) |
|
|
(377 |
) |
| Other income – government
grant |
|
(1,979 |
) |
|
|
(5,308 |
) |
| Unrealized loss (gain) on
derivatives |
|
713 |
|
|
|
(3,997 |
) |
| Gain on sale of PP&E and
intangible assets |
|
(14,609 |
) |
|
|
(209 |
) |
| Interest expense |
|
1,811 |
|
|
|
6 |
|
| Stock-based
compensation(i) |
|
28 |
|
|
|
90 |
|
| Severance(i) |
|
151 |
|
|
|
566 |
|
|
Net loss before taxes |
$ |
(766 |
) |
|
$ |
(3,717 |
) |
|
Income tax expense (recovery) |
|
73 |
|
|
|
(2,826 |
) |
| Net
loss |
$ |
(839 |
) |
|
$ |
(891 |
) |
| |
|
|
|
|
| Basic and diluted loss per
share |
$ |
(0.06 |
) |
|
$ |
(0.06 |
) |
| Weighted average number of
shares: |
|
|
|
|
|
for basic EPS calculation |
|
14,381 |
|
|
|
14,381 |
|
|
for diluted EPS calculation |
|
14,381 |
|
|
|
14,381 |
|
|
|
|
|
|
|
|
|
|
(i) Stock-based compensation and severance are displayed
separately from selling, general and administrative (SG&A)
expenses for the purpose of these tables.
Adjusted net loss and adjusted EBITDA are
non-GAAP measures, which do not have any standardized meaning
prescribed by GAAP and are therefore unlikely to be comparable to
similar measures presented by other issuers.
The following is a reconciliation of net loss
before taxes calculated in accordance with GAAP to adjusted net
loss before taxes, the non-GAAP measure:
|
|
Three Months EndedApril 30, |
|
Full Year EndedApril 30, |
|
|
(in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Net loss before taxes |
$ |
(3,065 |
) |
$ |
(2,356 |
) |
$ |
(766 |
) |
$ |
(3,717 |
) |
|
Adjust non-operating or unusual items: |
|
|
|
|
|
Unrealized loss (gain) on derivatives |
|
52 |
|
|
(581 |
) |
|
713 |
|
|
(3,997 |
) |
|
Unrealized loss (gain) on foreign exchange |
|
15 |
|
|
(488 |
) |
|
(20 |
) |
|
(377 |
) |
|
(Gain) loss on disposal of PP&E & intangibles |
|
(1,624 |
) |
|
23 |
|
|
(14,609 |
) |
|
(209 |
) |
|
Other income – government grant |
|
(2 |
) |
|
(1,916 |
) |
|
(1,979 |
) |
|
(5,308 |
) |
|
Stock-based compensation |
|
(136 |
) |
|
(110 |
) |
|
28 |
|
|
90 |
|
|
Severance |
|
127 |
|
|
522 |
|
|
151 |
|
|
566 |
|
|
Adjusted net loss before taxes |
$ |
(4,633 |
) |
$ |
(4,906 |
) |
$ |
(16,482 |
) |
$ |
(12,952 |
) |
The following is a reconciliation of net loss
before taxes calculated in accordance with GAAP to EBITDA and
adjusted EBITDA, the non-GAAP measures:
|
|
Three Months EndedApril 30, |
|
Full Year EndedApril 30, |
|
|
(in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
2021 |
|
|
Net loss before taxes |
$ |
(3,065 |
) |
$ |
(2,356 |
) |
$ |
(766 |
) |
$ |
(3,717 |
) |
|
Interest |
|
417 |
|
|
149 |
|
|
1,811 |
|
|
303 |
|
|
Depreciation |
|
378 |
|
|
496 |
|
|
1,521 |
|
|
1,972 |
|
|
Amortization |
|
409 |
|
|
385 |
|
|
1,342 |
|
|
1,963 |
|
|
EBITDA |
$ |
(1,861 |
) |
$ |
(1,326 |
) |
$ |
3,908 |
|
$ |
521 |
|
|
Adjust non-operating or unusual items: |
|
|
|
|
Unrealized loss (gain) on derivatives |
$ |
52 |
|
$ |
(581 |
) |
$ |
713 |
|
$ |
(3,997 |
) |
|
Unrealized loss (gain) on foreign exchange |
|
15 |
|
|
(488 |
) |
|
(20 |
) |
|
(377 |
) |
|
(Gain) loss on disposal of PP&E & intangibles |
|
(1,624 |
) |
|
23 |
|
|
(14,609 |
) |
|
(209 |
) |
|
Other income – government grant |
|
(2 |
) |
|
(1,916 |
) |
|
(1,979 |
) |
|
(5,308 |
) |
|
Stock-based compensation |
|
(136 |
) |
|
(110 |
) |
|
28 |
|
|
90 |
|
|
Severance |
|
127 |
|
|
522 |
|
|
151 |
|
|
566 |
|
|
Adjusted EBITDA |
$ |
(3,429 |
) |
$ |
(3,876 |
) |
$ |
(11,808 |
) |
$ |
(8,714 |
) |
Gross profit margin as a percentage of sales was
15.7% for the fourth quarter of fiscal year 2022, a 805 basis point
increase over prior year’s gross margin of 7.6%. The improved
margins are attributable to a higher level of sales for fixed
manufacturing cost absorption and lower write-downs during the
period. The Company expects continued gross margin improvements due
to the impact of the April price increases and further production
efficiency gains.
For the full year ended April 30, 2022, gross
profit margin was 15.5%, a decline of 264 basis points from the
18.2% for the same period last year. This was primarily attributed
to the impact of increasing costs of raw material and freight which
could not be passed on to customers, and the impact of unfavourable
exchange rates on the Company’s U.S. denominated sales.
SG&A expenses for the three-month period and
full year ended April 30, 2022, were 53.9% and 53.8% of sales,
compared to 73.6% and 53.8% for the same periods of last year. The
SG&A expenses are primarily fixed costs that do not vary with
sales. The spike in SG&A expenses as a percentage of sales in
the fourth quarter of last year related to lower sales and one-off
expenses related to severance.
Net non-operating income for the three-month
period and full year were $1.1 million and $14.1 million compared
to $2.8 million and $9.9 million for the same periods of last year.
In the current fiscal year, the Company recognized gain on disposal
of $1.6 million and $14.6 million for the three-month period and
full year, respectively.
At the end of the quarter, the Company had cash
and cash equivalents totaling $8.3 million, restricted cash of $3.2
million set as collateral security for certain derivative financial
instruments, and long term deposits with lessors of $2.7 million
classified as other assets in the Consolidated Statements of
Financial Position. At April 30, 2022, the Company had no
outstanding debt or restrictive covenants.
Sale and Leaseback
Transaction
On January 25, 2022, the Company completed a
sale and leaseback of the land and buildings (“the property”) at 67
Toll Road in Holland Landing, Ontario to a third party. The
property, which was included in assets held for sale immediately
prior to sale, had a carrying value of $5.2 million. The
leaseback resulted in the recognition of right-of-use assets of
$2.7 million and lease liabilities of $16.7 million. The
right-of-use assets value reflects the proportion of the property,
plant and equipment retained for a period of ten years, with two
five-year extension periods. The lease liability reflects the net
present value of future lease payments. The sale generated cash
proceeds of $32.8 million and resulted in the recognition of a gain
on disposal of $13.0 million in the Consolidated Statements of
Operations.
The Company used part of the proceeds received
to settle in full its debt obligations under the revolving credit
facility with FrontWell Capital Partners Inc. and close the
facility. Management and the Board remain committed to putting the
Company back on solid, sustainable footing and creating future
stakeholder value.
Sale of Surplus Land
On April 29, 2022, the Company completed a sale
of surplus land located at 70 Toll Road in Holland Landing, Ontario
to a third party. The sale resulted in gross proceeds of $1.7
million and the recognition of a gain on disposal of $1.6 million
in the Consolidated Statements of Operations. The cash related to
the sale was received subsequent to the year end.
Financial Statements
Financial statements are available from our
website as of this press release.
Appointment of a Board
Member
Inscape is also pleased to announce that Neil
McDonnell has joined the Inscape Board of Directors as of July
14, 2022. Neil is an experienced director with demonstrated success
in building successful global businesses during a career spanning
more than thirty years.
Forward-looking Statements
Certain 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 Inscape
Since 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 U.S. and
Canada, along with full service and support for all of our clients,
enables 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
Contact
Jon Szczur, CPA, CMAChief Financial Officer
Inscape Corporation
T 905 952 4102
jszczur@myinscape.com
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