DELAND, FL / ACCESSWIRE / May 10, 2021 / ARC Group Worldwide, Inc. ("ARC" or the "Company"), a leading global provider of advanced manufacturing, today announced its operating results for the third quarter ended March 28, 2021.
Highlights for the third quarter of fiscal year 2021 compared to the third quarter fiscal year 2020 for Continuing Operations:
|
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Net sales were $16.4 million, increasing by 28.2%; |
|
● |
Gross profit was $4.0 million, increasing by 117.9%; |
|
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Operating expenses were $1.9 million, decreasing by 2.0%; |
|
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Interest and financing costs were $0.3 million, decreasing by 54.9%; |
|
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Income from continuing operations was $1.8 million. |
|
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EBITDA and Adjusted EBITDA was $3.5 million. Adjusted EBITDA is a non-GAAP financial measure, which is reconciled to the most directly comparable GAAP financial measure and more fully defined in the enclosed table. |
Highlights for the nine months ended March 28, 2021, compared to the nine months ended March 29, 2020 for Continuing Operations:
|
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Net sales were $42.3 million, increasing by 20.4%; |
|
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Gross profit was $9.2 million, increasing by 106.9%; |
|
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Operating expenses were $5.3 million, decreasing by 18.7%; |
|
● |
Interest and financing costs were $0.9 million, decreasing by 63.5%; |
|
● |
Income from continuing operations was $2.9 million. |
|
● |
EBITDA was $8.1 million. |
Prior year financials for the fiscal third quarter include the results of ARC Metal Stamping, LLC ("AMS"), which was divested in December 2019 and are presented as discontinued operations.
Quarterly Financial Summary
The following analysis is performed over Sales, Gross Profit, and EBITDA from Continuing Operations for the comparative periods identified unless otherwise noted.
Current year fiscal third quarter net sales were $16.4 million, compared to $12.8 million in our prior year same period. Revenue by industry for our precision injection molded components continued to see a shift year over year on a quarterly basis but manufacturing agility has allowed ARC to further drive profitable growth.
Despite all the market volatility, ARC ended its' fiscal third quarter with its highest recorded firm order backlog of $21.1 million.
Current fiscal third quarter gross profit was $4.0 million, compared to $1.8 million in our prior fiscal year quarter. Gross profit increases were driven by increased output via operational productivity, fixed cost drop through and disciplined cost controls at facilities heavily hit by COVID-19 driven industry fluctuations.
Current fiscal third quarter EBITDA was $3.5 million, compared to $1.3 million in our prior year same quarter, again driven by business related cost and productivity related improvements and continued cost control.
Fiscal Year to Date Financial Summary
Fiscal year to date 2021 net sales were $42.3 million, compared to $35.1 million in our fiscal year to date 2020.
Fiscal year to date 2021 gross profit was $9.2 million, compared to $4.4 million in our fiscal year to date 2020.
Fiscal year to date EBITDA was $8.1 million for the fiscal year to date 2021, compared to $6.0 million in our prior year to date. The $6.0 million from prior year to date included non-cash transaction related gain on the sale of an asset for $3.7 million, which skewed results. With that transaction gain excluded, Adjusted EBITDA for the fiscal year to date 2021 as compared prior fiscal year to date increased by 234.4%.
CEO Statement
Mr. Jed Rust, CEO of ARC Group Worldwide said, "The past year of the pandemic has been ripe with challenges and opportunities. The flexibility and efforts of the ARC team have yielded robust increases in revenue and profitability in the face of a multimarket headwind." Further he noted, "I am pleased to see the continued quarterly trend in revenue and net income showing off the true nature of our customer relationships and operations. Seeing the backlog hit over $21M and our customers trusting us with more value add work reminds us of the continued and unending work of improving our daily operations."
Strategic Restructuring
ARC initiated strategic restructuring at the end of the fiscal third quarter 2019 in order to streamline its operating model, increase profitability, reduce debt, strengthen the balance sheet and enhance financial flexibility. The Company has taken the following steps over the last several fiscal quarters:
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Right sized of headcount to match level of operations; |
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Delisted from the NASDAQ; |
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Implemented leadership changes in order execute business directives; |
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Evaluated lower or negative margin business and identified ways to make profitable. |
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Divested underperforming, non-core subsidiaries; |
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Implemented cost savings initiatives; |
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Focused on achievement of higher sales volume by optimizing engineering, tooling, quality, procurement, planning and other support areas. |
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Relocated the medical clean room to Florida, which serves the medical industry; |
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Relocated the plastics molding and tool room operations to the Longmont, Colorado campus; |
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Renegotiated prior subordinated debt agreements in order to convert their remaining respective balances to preferred equity; |
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Entered into a new Senior ABL Credit Facility with Fifth Third Bank. |
The Company completed its restructuring during the fiscal quarter ended December 27, 2020.
COVID-19
While ARC's fiscal year to date revenues grew by 20.4% through March 28, 2021, the Company continues to see slow recovery in Medical, Aerospace, General Industry and Consumer Products sectors that have been significantly impacted by COVID-19.
While ARC has been proactive and implemented a number of measures to keep cost in line with business levels, due to the global scope and uncertain duration and impact of the COVID-19 pandemic, ARC cannot reasonably estimate the pace of recovery in its end markets, nor the related impact on financial results for the remainder of the fiscal year.
ARC's role providing customers with trusted solutions is as important in the current environment as it has ever been. The company remains focused on the safety of its employees and serving customer needs, even in the face of unprecedented challenges posed by COVID-19.
GAAP to Non-GAAP Reconciliation
The Company uses Adjusted EBITDA, a Non-GAAP financial measure as defined by the SEC, as a supplemental profitability measure because management finds it useful to understand and evaluate results, excluding the impact of non-cash depreciation and amortization charges, stock based compensation expenses, and nonrecurring expenses and outlays, prior to consideration of the impact of other potential sources and uses of cash, such as working capital items. This calculation may differ in method of calculation from similarly titled measures used by other companies and may be different than the EBITDA calculation used by our lenders for purposes of determining compliance with financial covenants. This Non-GAAP measure may have limitations when understanding performance as it excludes the financial impact of transactions such as interest expense necessary to conduct the Company's business and therefore is not intended to be an alternative to financial measures prepared in accordance with GAAP. The Company has not quantitatively reconciled its forward looking Adjusted EBITDA target to the most directly comparable GAAP measure because such items such as amortization of stock-based compensation and interest expense, which are specific items that impact these measures, have not yet occurred, are out of the Company's control, or cannot be predicted. For example, quantification of stock-based compensation is not possible as it requires inputs such as future grants and stock prices, which are not currently ascertainable.
Adjusted EBITDA from Continuing Operations, Adjusted Earnings, and Adjusted Earnings Per Share are non-GAAP financial measures. Adjusted EBITDA Margin from Continuing Operations is calculated by dividing EBITDA from Continuing Operations by sales.
The reconciliation to GAAP is as follows (dollars in thousands):
|
For the three months ended:
|
March 28, 2021
|
March 29, 2020
|
|
Net Income
|
$1,803
|
$(708)
|
|
Interest expense, net
|
283
|
627
|
|
Income taxes
|
30
|
27
|
|
Depreciation and amortization
|
1,360
|
1,395
|
|
Stock based compensation
|
43
|
43
|
|
Gain/loss from sale of asset
|
-
|
-
|
|
Adjustment to exclude loss from Discontinued Operations
|
-
|
-
|
|
Adjusted EBITDA from Continuing Operations
|
$3,519
|
$1,384
|
|
Adjusted EBITDA Margin from Continuing Operations
|
24.3%
|
11.8%
|
|
|
|
|
|
Net Income
|
$1,803
|
$(708)
|
|
Adjustment to exclude gain from sale of asset
|
-
|
-
|
|
Adjustment to exclude loss from discontinued operations, net of tax
|
-
|
-
|
|
Adjusted Earnings
|
$1,803
|
$(708)
|
|
Adjusted Earnings Per Share
|
$0.07
|
$(0.03)
|
|
Weighted Average Common Shares Outstanding
|
24,110,468
|
23,474,819
|
|
For the nine months ended: |
March 28, 2021
|
March 29, 2020
|
|
Net Income/(Loss)
|
$2,932
|
$(1,378)
|
|
Interest expense, net
|
918
|
2,523
|
|
Income taxes
|
85
|
98
|
|
Depreciation and amortization
|
4,139
|
4,466
|
|
Stock based compensation
|
160
|
147
|
|
(Gain)/loss from sale of asset
|
-
|
(3,700)
|
|
Adjustment to exclude loss from Discontinued Operations
|
-
|
306
|
|
Adjusted EBITDA from Continuing Operations
|
$8,234
|
$2,462
|
|
Adjusted EBITDA Margin from Continuing Operations
|
31.8%
|
11.0%
|
|
|
|
|
|
Net Income/(Loss)
|
$2,932
|
$(1,378)
|
|
Adjustment to exclude gain from sale of asset
|
-
|
(3,700)
|
|
Adjustment to exclude loss from discontinued operations, net of tax
|
-
|
306
|
|
Adjusted Earnings
|
$2,932
|
$(4,772)
|
|
Adjusted Earnings Per Share
|
$0.12
|
$(0.20)
|
|
Weighted Average Common Shares Outstanding
|
23,727,865
|
23,462,265
|
About ARC Group Worldwide, Inc.
ARC Group Worldwide, Inc. (OTCM: ARCW) is a leading global advanced manufacturing service provider. Founded in 1987, the Company offers its customers a compelling portfolio of advanced manufacturing technologies and cutting-edge capabilities to improve the efficiency of traditional manufacturing processes and accelerate their time to market. In addition to being a world leader in metal injection molding, ARC has significant expertise in prototyping, advanced tooling, automation, machining, plastic injection molding, lean manufacturing, and robotics. ARC's mission is to bring innovation and technology to manufacturing. Learn more at arcw.com.
Forward Looking Statements
This release includes certain forward-looking statements and projections of ARC Group Worldwide, Inc. Such statements are subject to risks and uncertainties that could cause results to differ materially from the Company's expectations. While the Company makes these statements in good faith, neither the Company nor its management can guarantee that anticipated future results will be achieved. The Company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the Company, whether as a result of new information, future events, or otherwise. All forward-looking statements attributable to the Company or persons acting on the Company's behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
CONTACT:
Investor Relations
Phone: (303)467-5236
Email: [email protected]
Unaudited Consolidated Statement of Operations
(in thousands, except for share and per share amounts)
|
|
For the three months ended | For the nine months ended | ||||||||||||||
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March 28, | March 29, | March 28, | March 29, | ||||||||||||
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2021 | 2020 | 2021 | 2020 | ||||||||||||
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Sales
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$ | 16,412 | $ | 12,804 | $ | 42,310 | $ | 35,140 | ||||||||
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Cost of sales
|
12,396 | 10,961 | 33,106 | 30,691 | ||||||||||||
|
Gross profit
|
4,016 | 1,843 | 9,204 | 4,449 | ||||||||||||
|
Selling, general and administrative
|
1,900 | 1,938 | 5,294 | 6,513 | ||||||||||||
|
Income/(loss) from operations
|
2,116 | (95) | 3,910 | (2,064) | ||||||||||||
|
Other income, net
|
- | 41 | 25 | 3,607 | ||||||||||||
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Interest expense, net
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(283) | (627) | (918) | (2,517) | ||||||||||||
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Income/(loss) before income taxes
|
1,833 | (681) | 3,017 | (974) | ||||||||||||
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Income tax expense
|
(30) | (27) | (85) | (98) | ||||||||||||
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Net income/(loss) from continuing operations
|
1,803 | (708) | 2,932 | (1,072) | ||||||||||||
|
Loss from discontinued operations, net of tax
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- | - | - | (306) | ||||||||||||
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Net income/(loss)
|
$ | 1,803 | $ | (708) | $ | 2,932 | $ | (1,378) | ||||||||
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||||||||||||||||
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Net income/(loss) per common share, basic and diluted:
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||||||||||||||||
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Continuing operations
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$ | 0.07 | $ | (0.03) | $ | 0.12 | $ | (0.05) | ||||||||
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Discontinued operations
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$ | - | $ | - | $ | - | $ | (0.01) | ||||||||
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ARC Group Worldwide, Inc.
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$ | 0.07 | $ | (0.03) | $ | 0.12 | $ | (0.06) | ||||||||
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Weighted average common shares outstanding:
|
||||||||||||||||
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Basic and diluted
|
24,110,468 | 23,474,819 | 23,737,865 | 23,462,265 | ||||||||||||
Unaudited Consolidated Balance Sheets
(in thousands, except for share and per share amounts)
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|
March 28, 2021 | June 30, 2020 | ||||||
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ASSETS
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||||||||
|
Current assets:
|
||||||||
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Cash
|
$ | 1,749 | $ | 3,942 | ||||
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Accounts receivable, net
|
7,886 | 5,876 | ||||||
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Inventories, net
|
7,505 | 5,530 | ||||||
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Prepaid expenses and other current assets
|
1,146 | 2,410 | ||||||
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Total current assets
|
$ | 18,286 | $ | 17,758 | ||||
|
Property and equipment, net
|
21,188 | 22,198 | ||||||
|
Right of use assets, net
|
1,320 | 1,869 | ||||||
|
Goodwill
|
6,412 | 6,412 | ||||||
|
Intangible assets, net
|
4,822 | 6,012 | ||||||
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Other
|
171 | 32 | ||||||
|
Total assets
|
$ | 52,199 | $ | 54,281 | ||||
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|
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|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 4,418 | $ | 2,804 | ||||
|
Accrued expenses and other current liabilities
|
1,748 | 3,048 | ||||||
|
Deferred revenue
|
1,156 | 14 | ||||||
|
Borrowings, current portion of long-term debt and net of unamortized financing costs
|
1,805 | 6,806 | ||||||
|
Operating lease liability, current portion
|
477 | 695 | ||||||
|
Finance lease liability, current portion
|
923 | 836 | ||||||
|
Accrued buyer obligations
|
- | 272 | ||||||
|
Total current liabilities
|
$ | 10,527 | $ | 14,475 | ||||
|
Long-term debt, net of current portion and net of unamortized financing costs
|
6,230 | 23,991 | ||||||
|
Operating lease liability, net of current portion
|
870 | 1,188 | ||||||
|
Finance lease liability, net of current portion
|
9,885 | 10,486 | ||||||
|
Other long-term liabilities
|
105 | 168 | ||||||
|
Total liabilities
|
$ | 27,617 | $ | 50,308 | ||||
|
|
||||||||
|
Commitments and contingencies
|
||||||||
|
|
||||||||
|
Stockholders' Equity:
|
||||||||
|
Preferred stock, $0.001 par value, 27,000,000 shares authorized, 17,925,055 shares issued and outstanding at March 28, 2021, and no shares issued and outstanding at June 30, 2020
|
18 | - | ||||||
|
Common stock, $0.0005 par value, 225,000,000 shares authorized; 24,173,040 shares issued and 24,164,639 shares issued and outstanding at March 28, 2021, and 23,556,843 shares issued and 23,548,442 shares issued and outstanding at June 30, 2020
|
12 | 12 | ||||||
|
Treasury stock, at cost; 8,401 shares at March 28, 2021 and June 30, 2020
|
(94) | (94) | ||||||
|
Additional paid-in capital
|
60,265 | 42,468 | ||||||
|
Accumulated deficit
|
(35,411) | (38,343) | ||||||
|
Accumulated other comprehensive income/(loss)
|
(208) | (70) | ||||||
|
Total stockholders' equity
|
$ | 24,582 | $ | 3,973 | ||||
|
Total liabilities and stockholders' equity
|
$ | 52,199 | $ | 54,281 | ||||
Unaudited Consolidated Statement of Cash Flows
(in thousands)
|
|
For the nine months ended | |||||||
|
|
March 28, 2021 | March 29, 2020 | ||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income/(loss)
|
$ | 2,932 | $ | (1,378) | ||||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Depreciation and amortization
|
4,139 | 4,466 | ||||||
|
Share-based compensation expense
|
160 | 147 | ||||||
|
Amortization of debt discount
|
101 | - | ||||||
|
Loss on sale of subsidiary
|
2 | 153 | ||||||
|
Gain on sale of asset
|
- | (3,685) | ||||||
|
Bad debt expense and other
|
74 | 17 | ||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
(2,115) | 1,710 | ||||||
|
Inventory
|
(1,975) | 988 | ||||||
|
Prepaid expenses and other assets
|
517 | 1,291 | ||||||
|
Accounts payable
|
1,615 | (1,717) | ||||||
|
Accrued expenses and other liabilities
|
(1,905) | 1,294 | ||||||
|
Deferred revenue
|
1,142 | 441 | ||||||
|
Net cash provided by operating activities
|
$ | 4,687 | $ | 3,727 | ||||
|
|
||||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property and equipment
|
(1,879) | (1,099) | ||||||
|
Proceeds from sale of assets
|
- | 10,000 | ||||||
|
Proceeds from sale of subsidiary
|
- | 10,500 | ||||||
|
Net cash provided by/(used in) investing activities
|
$ | (1,879) | $ | 19,401 | ||||
|
|
||||||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from debt issuance
|
30,205 | 30,217 | ||||||
|
Principal payments of debt
|
(52,517) | (50,911) | ||||||
|
Repayments of finance lease liability
|
(534) | (1,002) | ||||||
|
Issuance of series A-1 and A-2 preferred stock
|
17,925 | - | ||||||
|
Issuance of common stock under employee stock purchase plan and exercise of stock options
|
- | 24 | ||||||
|
Net cash used in financing activities
|
$ | (4,921) | $ | (21,672) | ||||
|
Effect of exchange rates on cash
|
(80) | (195) | ||||||
|
Net decrease in cash
|
(2,193) | 1,261 | ||||||
|
Cash, beginning of year
|
3,942 | 263 | ||||||
|
Cash, end of year
|
$ | 1,749 | $ | 1,524 | ||||
|
Supplemental disclosures of cash flow information:
|
||||||||
|
Cash paid for interest
|
$ | 2,126 | $ | 680 | ||||
|
Cash paid for income taxes, net of refunds
|
$ | 3 | $ | 6 | ||||
|
|
||||||||
|
Non-cash financing:
|
||||||||
|
Assets acquired through finance leases
|
$ | 19 | $ | 73 | ||||