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SMTC Corporation, a global electronics manufacturing services provider, has announced its first quarter 2019 results.
First Quarter Financial Highlights
- Revenue was $102.6 million, up $65.5 million or 177%, compared to $37.1 in the first quarter of 2018, and up 27% or $21.7 million from $80.9 million in the fourth quarter of 2018. On a proforma basis, assuming MC Assembly had been part of SMTC in the first quarter of 2018, revenue increased 45.2% from $70.7 million in the first quarter of 2018. Approximately $3.8 million of the revenues reported in the first quarter of 2019 was due to the impact of the revenue accounting standard ASC 606 compared to $1.7 million of the revenues in the same period in the prior year.
- Gross profit was $8.6 million or 8.4% of revenues, compared to $3.9 million or 10.4% of revenues in the first quarter of 2018, and $8.3 million or 10.3% of revenue in the fourth quarter of 2018. The year-over-year and quarter-over-quarter declines in the gross margin percentage in the first quarter of 2019 were due to higher labor expenses and $1.8 million of amortization of intangibles relating to the acquisition of MC Assembly. Adjusted Gross Profit was $10.5 million or 10.2% of revenues, compared to $3.5 million or 9.5% of revenue for the same period in the prior year.
- Net income was $1.2 million or $0.05 per share, compared to net income of $0.08 million or $0.00 per share reported in the first quarter of 2018, and a net loss of $(1.2) million or $(0.05) per share reported in the fourth quarter of 2018. Net Income in the first quarter of 2019 included a $3.1 million non-cash gain for a contingent consideration which reflected a reversal of an accrual recorded in the prior quarter for an earn-out provision associated with the MC Assembly acquisition.
- Adjusted EBITDA was $5.5 million, increased 494% from $0.9 million reported in the first quarter of 2018, and up 2.9% from $5.3 million reported in the fourth quarter of 2018. On a proforma basis, assuming MC Assembly had been part of SMTC in the first quarter of 2018, adjusted EBITDA increased 116% from $2.5 million in the first quarter of 2018.
- Net Debt at the end of the first quarter was $95.9 million, compared to $92.3 million at the end of 2018. Effective January 1, 2019, with the adoption of the new lease standard (ASC 842 – Leases), the Company recorded $5.4 million of operating lease obligations as at March 31, 2019. Net Debt at the end of the first quarter, excluding finance and operating lease obligations was $ 79.4, compared to $80.8 million at the end of 2018. A higher than anticipated level of revenue in the first quarter of 2019, together with strong collection activities, eliminated the need for a Senior Debt Leverage Covenant waiver that SMTC secured during the quarter.
“With the strong start to 2019 and a growing funnel of business opportunities from existing and new customers in key markets, we anticipate another year of solid revenue growth. We expect to complete the integration of MC Assembly during the second quarter and have implemented steps to attain additional synergies which we believe will increase production efficiencies and improve our operating results,” said Ed Smith, SMTC’s president and chief executive officer.
“Our priorities over the next several quarters are to continue to grow the top line, become more efficient, make progress towards achieving our long-term the gross margin targets of 12% to 14%, and strengthen our balance sheet through working capital improvements and debt reduction. As I look ahead, I am excited about the opportunities for our company to achieve best-in-class operating and financial metrics among our EMS peers,” added Smith.
About SMTC Corporation
SMTC Corporation was founded in 1985 and acquired MC Assembly Holdings, Inc. in November 2018. Following the MC Assembly acquisition, SMTC has more than 50 manufacturing and assembly lines in United States, China and Mexico which creates a powerful low-to-medium volume, high-mix, end-to-end global EMS provider. With local support and expanded manufacturing capabilities globally, including fully integrated contract manufacturing services with a focus on global original equipment manufacturers (OEMs) and emerging technology companies, including those in the Defense and Aerospace, Industrial, Power and Clean Technology, Medical and Safety, Retail and Payment Systems, Semiconductors and Telecom, Networking and Communications; and Test and Measurement industries. As a mid-size provider of end-to-end electronics manufacturing services (EMS), SMTC provides printed circuit boards assemblies (PCB) production, systems integration and comprehensive testing services, enclosure fabrication, as well as product design, sustaining engineering and supply chain management services. SMTC services extend over the entire electronic product life cycle from the development and introduction of new products through to the growth, maturity and end-of-life phases.