DELAND, FL / ACCESSWIRE / December 10, 2021 / ARC Group Worldwide, Inc. ("ARC" or the "Company"), a leading global provider of advanced manufacturing, today reports its results for the first fiscal quarter ending September 26, 2021. ARC reports large improvements across all major financial metrics for the organization.
First Quarter Fiscal Year 2022 Results
- Net sales were $15.2 million, up 32.7% from the prior-year period;
- Gross profit was $3.3 million, up 56.9% from the prior-year period;
- Operating expenses were $1.7 million, up 3.7% from the prior-year period however down 3.2% as a percentage of revenue;
- Income from operations was $1.6 million, up 259.3% from the prior-year period;
- Interest and financing costs were $0.5 million, up 55.7% from the prior-year period;
- EBITDA was $2.9 million, increasing by 57.1%;
- Adjusted EBITDA for the three months ended September 26, 2021 was also $2.9 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.
Quarterly Financial Summary
The following analysis is performed over Sales, Gross Profit, and EBITDA from operations for the comparative periods identified unless otherwise noted.
Fiscal first quarter net sales were $15.2 million, compared to $11.4 million in our fiscal first quarter of 2021. The increase in revenue was driven by a recovery in medical product sales post COVID-19 along with strong growth in turnkey assembled products in the defense sector. Automotive sector revenue remained flat year over year due to continued chip shortages.
Fiscal first quarter gross profit was $3.3 million, compared to $2.1 million in our fiscal first quarter of 2021. Gross profit increases were primarily driven by increased volume, the return of medical device component sales and operational productivity gains in our Hungarian operations.
EBITDA was $2.9 million for the fiscal first quarter, compared to $1.8 million in our fiscal first quarter of 2021. The increase was due to the upturn in overall sales, the return to pre-pandemic medical sales levels and overall business productivity improvements.
During the quarter ARC generated $2.1 million in cash provided from operating activities and utilized it to pay down long term debts, strengthening balance sheet position.
Mr. Jed Rust, CEO of ARC Group Worldwide said, "There has been a tireless effort on improving our core business. The results continue to indicate that the efforts are yielding meaningful gains on both our financial metrics and customer growth." He went on to say, "I am encouraged by the recovery in the medical industry and am excited to see that segment continue to grow. I also see a renewed sense of focus in the aerospace industries to drive cost out and have found that metal injection molding is providing an excellent solution for our clients and expect extensive growth as a result. While I remain optimistic toward these sectors, we are seeing a slowdown in our defense sector, particularly in plastic injection molding and assemblies. We believe this slowdown will overshadow the gains we are seeing in the alternate sectors for the remainder of the fiscal year."
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):
| Sept. 26, 2021 | Sept. 27, 2020 | |||||||
Net Income/(Loss) | $ | 1,037 | $ | 93 | ||||
Interest expense, net | 509 | 327 | ||||||
Income taxes | 32 | 29 | ||||||
Depreciation and amortization | 1,312 | 1,391 | ||||||
Stock based compensation | 47 | 55 | ||||||
Adjusted EBITDA from Continuing Operations | $ | 2,937 | $ | 1,895 | ||||
Adjusted EBITDA Margin from Continuing Operations | 19.3 | % | 16.6 | % | ||||
Net Income/(Loss) | $ | 1,037 | $ | 93 | ||||
Earnings Per Share | $ | 0.04 | $ | 0.00 | ||||
Weighted Average Common Shares Outstanding | 24,671,623 | 23,548,442 | ||||||
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: InvestorRelations@arcw.com
ARC Group Worldwide, Inc.
Unaudited Consolidated Statement of Operations
(in thousands, except for share and per share amounts)
| For the three months ended | ||||||||
| Sept. 26, | Sept. 27, | |||||||
| 2021 | 2020 | |||||||
Sales | $ | 15,189 | $ | 11,442 | ||||
Cost of sales | 11,907 | 9,350 | ||||||
Gross profit | 3,282 | 2,092 | ||||||
Selling, general and administrative | 1,719 | 1,657 | ||||||
Income from operations | $ | 1,563 | $ | 435 | ||||
Other expense, net | 15 | 14 | ||||||
Interest expense, net | (509 | ) | (327 | ) | ||||
Income before income taxes | 1,069 | 122 | ||||||
Income tax expense | (32 | ) | (29 | ) | ||||
Net income | $ | 1,037 | $ | 93 | ||||
Net income per common share, basic and diluted: | ||||||||
ARC Group Worldwide, Inc. | $ | 0.04 | $ | 0.00 | ||||
Weighted average common shares outstanding: | ||||||||
Basic and diluted | 24,671,623 | 23,548,442 | ||||||
ARC Group Worldwide, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except for share and per share amounts)
| Sept. 26, 2021 | June 30, 2021 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 1,139 | $ | 2,517 | ||||
Accounts receivable, net | 8,682 | 7,260 | ||||||
Inventories, net | 6,843 | 7,042 | ||||||
Prepaid expenses and other current assets | 1,057 | 2,970 | ||||||
Total current assets | $ | 17,721 | $ | 19,789 | ||||
Property and equipment, net | 21,857 | 22,769 | ||||||
Right of use assets, net | 735 | 756 | ||||||
Goodwill | 6,412 | 6,412 | ||||||
Intangible assets, net | 4,168 | 4,579 | ||||||
Other | 163 | 167 | ||||||
Total assets | $ | 51,056 | $ | 54,472 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | 2,796 | 4,708 | ||||||
Accrued expenses and other current liabilities | 2,265 | 2,130 | ||||||
Deferred revenue | 1,312 | 893 | ||||||
Current portion of long-term debt, net of unamortized financing costs | 4,404 | 4,413 | ||||||
Operating lease liability, current portion | 64 | 71 | ||||||
Finance lease liability, current portion | 883 | 874 | ||||||
Total current liabilities | $ | 11,724 | $ | 13,089 | ||||
Long-term debt, net of current portion and net of unamortized financing costs | 18,404 | 21,627 | ||||||
Operating lease liability, net of current portion | 706 | 716 | ||||||
Finance lease liability, net of current portion | 9,524 | 9,732 | ||||||
Other long-term liabilities | 95 | 95 | ||||||
Total liabilities | $ | 40,453 | $ | 45,259 | ||||
Commitments and contingencies | ||||||||
Stockholders' Equity: | ||||||||
Common stock, $0.0005 par value, 225,000,000 shares authorized; 24,703,307 shares issued and 24,688,376 shares issued and outstanding at September 26, 2021, and 24,486,172 shares issued and 24,477,771 shares issued and outstanding at June 30, 2021 | 13 | 13 | ||||||
Treasury stock, at cost; 14,931 shares at September 26, 2021 and June 30, 2021 | (94 | ) | (94 | ) | ||||
Additional paid-in capital | 43,554 | 43,226 | ||||||
Accumulated deficit | (32,689 | ) | (33,726 | ) | ||||
Accumulated other comprehensive loss | (181 | ) | (206 | ) | ||||
Total stockholders' equity | 10,603 | 9,213 | ||||||
Total liabilities and stockholders' equity | $ | 51,056 | $ | 54,472 | ||||
ARC Group Worldwide, Inc.
Unaudited Consolidated Statement of Cash Flows
(in thousands)
| For the three months ended | ||||||||
Cash flows from operating activities: | Sept. 26, 2021 | Sept. 27, 2020 | ||||||
Net income | $ | 1,037 | $ | 93 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 1,312 | 1,391 | ||||||
Share-based compensation expense | 47 | 54 | ||||||
Amortization of debt discount | 51 | - | ||||||
Bad debt expense and other | 4 | 4 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (1,422 | ) | (869 | ) | ||||
Inventory | 199 | (1,174 | ) | |||||
Prepaid expenses and other assets | 1,917 | 404 | ||||||
Accounts payable | (1,912 | ) | 1,192 | |||||
Accrued expenses and other liabilities | 416 | (1,611 | ) | |||||
Deferred revenue | 433 | 933 | ||||||
Net cash provided by operating activities | 2,082 | 417 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (4 | ) | (408 | ) | ||||
Net cash used in investing activities | (4 | ) | (408 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from debt issuance | 15,737 | 4,644 | ||||||
Repayments of long-term debt and capital lease obligations | (19,191 | ) | (5,641 | ) | ||||
Net cash used in financing activities | (3,454 | ) | (997 | ) | ||||
Effect of exchange rates on cash | (2 | ) | (23 | ) | ||||
Net decrease in cash | (1,378 | ) | (1,011 | ) | ||||
Cash, beginning of quarter | 2,517 | 3,942 | ||||||
Cash, end of quarter | $ | 1,139 | $ | 2,931 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | 215 | $ | 152 | ||||
Cash paid for income taxes, net of refunds | $ | 3 | $ | - | ||||
SOURCE: ARC Group Worldwide, Inc.
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