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SMTC Corporation experienced robust year-over-year revenue growth, up 104.4% from its reported revenue in the second quarter of 2018 and up 10.9% on a proforma basis which assumes that MC Assembly, acquired in the fourth quarter of 2018, had been part of STMC in the second quarter of 2018. Revenue from Test and Measurement, Industrial, Power and Clean Tech and Aerospace and Defense customers were large contributors to the year-over-year growth in revenue.
As reported and Proforma Adjusted EBITDA both increased significantly over the second quarter of 2018. The improvement in Adjusted EBITDA metrics was due to higher revenue and gains from operational efficiencies resulting from various company initiatives, synergies achieved and increased scale from the completed integration of the of MC Assembly.
“During Q2 we completed the integration of MC Assembly and turned our attention toward executing our strategic growth plans. We invested $1.3 million in capital improvements initiatives that are intended to improve operating efficiencies, enhance service to support our growing customer base, and create value for our shareholders in the second quarter,” said Ed Smith, STMC President and CEO.
“With tariff concerns high on the mind of our customers, we incurred additional costs in the second quarter as we shifted some customer production to Mexico. To address this growing customer concern about tariffs, we have expanded our North American capabilities and production capacity at two facilities acquired in the 2018 acquisition of MC Assembly. This quarter we are adding a new capability in our Billerica, United States location that provides our customers with world-class 'Quick-turn' manufacturing and should enable an accelerated launch timetable for our customers’ products with the flexibility to scale into a low-cost geography that is available from other SMTC sites. We also upgraded and expanded our capacity at its Fresnillo facility in Zacatecas, Mexico enabling a 25% increase in capacity, which we started to ramp up during the third quarter,” added Smith.
“As part of our strategy to improve our capital structure, at the end of June we completed a Rights Offering and Registered Direct Offering that generated aggregate proceeds of approximately $14.6 million. On July 3, 2019 we used $12 million of these proceeds to accelerate pay-off of our outstanding Term B debt. This week we refinanced our credit agreements which reduced the Term A outstanding balance to $40 million from $50 million, reduced our interest costs and expanded borrowing capacity under the asset-based revolver facilities to $65 million to better support our future growth,” Smith commented.
“Customer concerns about the continuing impact of tariffs and macro-economic factors has caused, as we experienced in the second quarter, many customers to review and begin to revise where they outsource their manufacturing. While we believe SMTC is well positioned with our North American facilities, we expect customer demand may be impacted over the second half of the year as customers continue to react and adjust to the ongoing geo-political impacts on global trade. As a result, our current expectation for revenue and Adjusted EBITDA for 2019 will more likely approach the lower end of our prior guidance of $393 to $408 million in revenue and $27 to $29 million for Adjusted EBITDA,” noted Smith.
SMTC Corporation was founded in 1985 and acquired MC Assembly Holdings, Inc. in November 2018. Following this 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 electronics manufacturing services (EMS) provider. With local support and expanded manufacturing capabilities globally, including fully integrated contract manufacturing services with a focus on global original equipment manufacturers 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 EMS, SMTC provides printed circuit boards assemblies 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.