Firan Technology Group Corporation (“FTG”) Announces First Quarter 2023 Financial Results
TORONTO, April 12, 2023 (GLOBE NEWSWIRE) — Firan Technology Group Corporation (TSX: FTG) today announced financial results from its first quarter 2023.
Financial Highlights
- First quarter bookings of $33.0M were up 28% over Q1 2022 and up 2% over Q4 2022. This was the 9th sequential quarter of bookings growth.
- FTG first quarter revenues of $24.6M were up 20% over Q1 2022, as FTG ramps up production to meet customer demand.
- FTG achieved Net Earnings in Q1 2023 of $4.1M, which was up $4.8M from Q1 2022. Earnings included $3.4M of U.S. government support in Q1 2023 compared to $0.3M in Q1 2022.
- FTG has net cash on the balance sheet of $20.6M as of Q1 2023 as compared to $12.3M as at Q4 2022.
Business Highlights
Starting last year, FTG went on offence after two years of playing defence, and this has continued in the first quarter of 2023. The company has invested in technology in our existing sites, grown the business organically, announced two acquisitions and bought back stock. Through all these actions, FTG is strategically deploying its strong cash balance in ways that will drive increased shareholder returns for the future in both the near-term and long-term.
Specifically, FTG accomplished many goals in Q1 2023 that continue to improve the Corporation and position it for the future, including:
- Achieved a 1.34:1 book-to-bill ratio for Q1 2023 resulting in increased backlog of $74.2M compared to $65.5M at the end of 2022.
- FTG added 12 staff in Q1 2023, including operations leadership, to help increase throughput.
- On November 17, 2022, the Corporation entered into an agreement to acquire IMI, Inc. (“IMI”) based in Haverhill, Massachusetts, north of Boston. The closing of the acquisition is subject to approval by the Committee on Foreign Investment in the United States (CFIUS) and other customary closing conditions. FTG will acquire 100% of the common shares of IMI for cash consideration of approximately $2.0M, subject to typical closing adjustments. It is expected that the CFIUS review will be complete in Q2 2023.
- On December 24, 2022, the Corporation entered into an agreement to acquire Holaday Circuits, Inc based in Minnetonka, Minnesota, a suburb of Minneapolis. The closing of the acquisition is subject to approval by CFIUS and other customary closing conditions. FTG will acquire 100% of Holaday for cash consideration of approximately $24.0M and contingent consideration up to $6.0M, subject to typical closing adjustments. It is expected that the CFIUS review will be complete in Q2 2023.
- FTG received $3.4 million in Employee Retention Credits (ERC) for its U.S. sites as they retained their staff through the pandemic.
- FTG received funding of $0.6 million in the quarter for a total of $2.5M received to-date under the Canadian Aerospace Regional Recovery Initiative (ARRI) program.
- In the quarter, FTG was awarded up to $2.6M of funding from the Ontario Ministry of Economic Development, Job Creation and Trade pursuant to the Advanced Manufacturing and Innovation Competitiveness (AMIC) program. This funding will be a conditional loan against qualifying investments made by FTG during a 33-month period ending November 30, 2024. The conditional loan will be non-interest bearing through November 30, 2024, with up to $0.5M forgivable upon achievement of specified objectives. The loan is repayable in quarterly instalments, with interest, from February 2025 through November 2028.
Table 1 / Key Financial Metrics
| Three months ended | ||||||
| March 3, | March 4, | |||||
| (in thousands of dollars except per share amounts) | 2023 | 2022 | ||||
| Sales | $24,639 | $20,461 | ||||
| Gross Margin | 9,785 | 4,242 | ||||
| Gross Margin (%) | 39.7 | % | 20.7 | % | ||
| Net Earnings to FTG Equity Holders | $4,072 | ($733 | ) | |||
| Adjusted Net Earnings (Loss)(1) | ||||||
| Government Assistance | (3,441 | ) | (256 | ) | ||
| Acquisition and divestiture expenses | 358 | – | ||||
| $989 | ($989 | ) | ||||
| Earnings (Loss) Per Share | ||||||
| Basic | $0.17 | ($0.03 | ) | |||
| Diluted | $0.17 | ($0.03 | ) | |||
| Adjusted Earnings (Loss) Per Share | ||||||
| Basic | $0.04 | ($0.04 | ) | |||
| Diluted | $0.04 | ($0.04 | ) | |||
| (1) | Adjusted Net Earnings (Loss) is not a measure recognized under International Financial Reporting Standards (“IFRS”). Management believes that this measure is important to many of the Corporation’s shareholders, creditors and other stakeholders. The Corporation’s method of calculating Adjusted Net Earnings may differ from other corporations and accordingly may not be comparable to measures used by other corporations. |
For FTG in Q1 2023, overall sales increased by $4.2M or 20.4% from $20.5M in Q1 2022 to $24.6M in Q1 2023. Increased revenue in Q1 2023 is the result of robust demand across our markets and specifically increased Simulator product activity. The average foreign exchange rate in Q1 2023 was 6% (8 cents) higher than in Q1 2022, with a positive impact on sales of $1.0M.
The Circuits segment sales in Q1 2023 were up $1.4M, or 10.0% compared to last year. The sales increase was mainly driven by the commercial aerospace market.
For the Aerospace segment, sales in Q1 2023 were up $2.3M or 29.1% compared to last year. Aerospace segment sales in Q1 2023 included $3.2M of revenue from Simulator products as compared to $0.2M in Q1 2022.
Gross margin in Q1 2023 was $9.8M or 39.7% as compared to $4.2M or 20.7% in Q1 2022. Excluding government assistance, the gross margin rate improved to 28.0% in Q1 2023 from 19.5% in Q1 2022. The increase in the gross margin rate is due to the operating leverage of increased sales volumes, favourable exchange rate from Canadian to U.S. dollars and operational efficiencies.
Net earnings after tax at FTG in Q1 2023 was $4.1M or $0.17 per diluted share compared to a net loss of $0.7M or ($0.03) per diluted share in Q1 2022. Adjusted net earnings was $1.0M or $0.04 per diluted share in Q1 2023 as compared to an adjusted net loss of $1.0M or $0.04 per diluted share in the prior year quarter. The $2.0M increase in adjusted net earnings is the result of higher sales volume, operational efficiencies and a more favourable foreign exchange rate.
The Circuits segment earnings before income taxes and interest was $3.4M in Q1 2023 as compared to $0.2M in Q1 2022. Higher sales and higher government subsidies for the U.S. sites drove the increase in earnings.
The Aerospace segment earnings before income taxes was $2.2M in Q1 2023 versus $0.1M in Q1 2022. The increase in earnings was driven by higher sales of Simulator products and increased government assistance for our Chatsworth site.
Table 2 / EBITDA
| Three months ended | Trailing 12 Months | ||||||||
| March 3, | March 4, | ||||||||
| (in thousands of dollars) | 2023 | 2022 | |||||||
| EBITDA(2) | |||||||||
| Net earnings to equity holders of FTG | $4,072 | ($733 | ) | $5,503 | |||||
| Add: | |||||||||
| Interest, accretion | (8 | ) | 117 | 318 | |||||
| Income taxes | 763 | 332 | 2,005 | ||||||
| Depreciation/Amortization/Stock Comp. | 1,470 | 1,613 | 5,724 | ||||||
| $6,297 | $1,329 | $13,550 | |||||||
| Adjusted EBITDA(2) | |||||||||
| Government Assistance | (3,441 | ) | (256 | ) | (3,498 | ) | |||
| Acquisition and divestiture expenses | 358 | – | 881 | ||||||
| $3,214 | $1,073 | $10,933 | |||||||
| (2) | EBITDA and Adjusted EBITDA are not measures recognized under International Financial Reporting Standards (“IFRS”). Management believes that these measures are important to many of the Corporation’s shareholders, creditors and other stakeholders. The Corporation’s method of calculating EBITDA and Adjusted EBITDA may differ from other corporations and accordingly may not be comparable to measures used by other corporations. |
Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG in Q1 2023 was $6.3M or 25.6% of sales compared to $1.3M or 6.5% of sales in Q1 2022. Adjusted EBITDA for Q1 2023, which excludes the ERC government assistance and expenses related to the two pending acquisitions, was $3.2M or 13.0% of net sales, as compared to $1.1M or 5.2% of net sales in Q1 2022. The increase in profitability is driven by increased operating leverage from higher sales and a favourable foreign exchange impact. For the trailing twelve months, EBITDA increased to $13.6M due to the improving results each quarter since Q1 2022.
As at March 3, 2023, the Corporation’s net working capital was $42.6M, compared to $30.5M at year-end in 2022.
Net cash at the end of Q1 2023 was $20.6M compared to net cash of $12.3M at the end of 2022, after completing the Aerospace Chatsworth facility sale leaseback transaction for net proceeds of $8.5M and receiving $3.4M from the U.S. Employment Retention Credit program (“ERC”), receiving an additional $0.6M in ARRI funding from the Canadian Government, partially offset by increased working capital usage to meet customer commitments.
The Corporation will host a live conference call on Thursday, April 13, 2023 at 8:45am (Eastern) to discuss the results of Q1 2023.
Anyone wishing to participate in the call should dial 416-764-8646 or 1-888-396-8049, Conference ID 33407347 and identify that you are calling to participate in the FTG conference call. The Chairperson is Mr. Brad Bourne. A replay of the call will be available until May 13, 2023 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 416-764-8692 or 1-877-674-7070, Playback Passcode 407347#.
ABOUT FIRAN TECHNOLOGY GROUP CORPORATION
FTG is an aerospace and defense electronics product and subsystem supplier to customers around the globe. FTG has two operating units:
FTG Circuits is a manufacturer of high technology, high reliability printed circuit boards. Our customers are leaders in the aviation, defense, and high technology industries. FTG Circuits has operations in Toronto, Ontario, Chatsworth, California, Fredericksburg, Virginia and a joint venture in Tianjin, China.
FTG Aerospace manufactures and repairs illuminated cockpit panels, keyboards and sub-assemblies for original equipment manufacturers of aerospace and defense equipment. FTG Aerospace has operations in Toronto, Ontario, Chatsworth, California and Tianjin, China.
The Corporation’s shares are traded on the Toronto Stock Exchange under the symbol FTG.
FORWARD-LOOKING STATEMENTS
This news release contains certain forward-looking statements. These forward-looking statements are related to, but not limited to, FTG’s operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains words such as “anticipate”, “believe”, “expect”, “plan” or similar words suggesting future outcomes. Such statements are based on the current expectations of management of the Corporation and inherently involve numerous risks and uncertainties, known and unknown, including economic factors and the Corporation’s industry, generally. The preceding list is not exhaustive of all possible factors. Such forward-looking statements are not guarantees of future performance and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Corporation. The reader is cautioned to consider these and other factors carefully when making decisions with respect to the Corporation and not place undue reliance on forward-looking statements. Other than as may be required by law, FTG disclaims any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.
For further information please contact:
Bradley C. Bourne, President and CEO
Firan Technology Group Corporation
Tel: (416) 299-4000 x314
bradbourne@ftgcorp.com
Jamie Crichton, Vice President and CFO
Firan Technology Group Corporation
Tel: (416) 299-4000 x264
jamiecrichton@ftgcorp.com
Additional information can be found at the Corporation’s website www.ftgcorp.com
| FIRAN TECHNOLOGY GROUP CORPORATION | ||||||
| Interim Condensed Consolidated Statements of Financial Position | ||||||
| (Unaudited) | March 3, | November 30, | ||||
| (in thousands of Canadian dollars) | 2023 | 2022 | ||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 24,290 | $ | 15,666 | ||
| Accounts receivable | 16,586 | 16,615 | ||||
| Contract assets | 486 | 504 | ||||
| Inventories | 23,040 | 19,664 | ||||
| Prepaid expenses and other | 1,361 | 1,201 | ||||
| 65,763 | 53,650 | |||||
| Non-current assets | ||||||
| Non-current assets held for sale | – | 8,471 | ||||
| Property, Plant and equipment, net | 11,212 | 11,015 | ||||
| Right-of-use assets | 11,916 | 9,463 | ||||
| Intangible and other assets, net | 360 | 399 | ||||
| Deferred tax assets | 835 | 748 | ||||
| Total assets | $ | 90,086 | $ | 83,746 | ||
| LIABILITIES AND EQUITY | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | $ | 16,257 | $ | 14,906 | ||
| Provisions | 1,157 | 823 | ||||
| Contract liabilities | 2,924 | 4,423 | ||||
| Current portion of bank debt | 736 | 866 | ||||
| Current portion of government loan | 72 | 47 | ||||
| Current portion of lease liabilities | 1,875 | 1,360 | ||||
| Income tax payable | 174 | 712 | ||||
| Income tax payable | – | – | ||||
| 23,195 | 23,137 | |||||
| Non-current liabilities | ||||||
| Bank debt | 401 | 532 | ||||
| Government loan | 2,466 | 1,883 | ||||
| Lease liabilities | 10,888 | 8,899 | ||||
| Total liabilities | 36,950 | 34,451 | ||||
| Equity | ||||||
| Retained earnings | $ | 23,579 | $ | 19,521 | ||
| Accumulated other comprehensive income | (1,182 | ) | (867 | ) | ||
| 22,397 | 18,654 | |||||
| Share capital | ||||||
| Common Shares | 21,343 | 21,357 | ||||
| Contributed surplus | 8,363 | 8,319 | ||||
| Total equity attributable to FTG’s shareholders | 52,103 | 48,330 | ||||
| Non-controlling interest | 1,033 | 965 | ||||
| Total equity | 53,136 | 49,295 | ||||
| Total liabilities and equity | $ | 90,086 | $ | 83,746 | ||
| FIRAN TECHNOLOGY GROUP CORPORATION | ||||||
| Interim Condensed Consolidated Statements of Earnings (Loss) | ||||||
| Three months ended | ||||||
| (Unaudited) | March 3, | March 4, | ||||
| (in thousands of Canadian dollars, except per share amounts) | 2023 | 2022 | ||||
| Sales | $ | 24,639 | $ | 20,461 | ||
| Cost of sales | ||||||
| Cost of sales | 13,576 | 14,734 | ||||
| Depreciation of plant and equipment | 969 | 1,128 | ||||
| Depreciation of right-of-use assets | 309 | 357 | ||||
| Total cost of sales | 14,854 | 16,219 | ||||
| Gross margin | 9,785 | 4,242 | ||||
| Expenses | ||||||
| Selling, general and administrative | 3,786 | 3,018 | ||||
| Research and development costs | 1,332 | 1,392 | ||||
| Recovery of investment tax credits | (150 | ) | (177 | ) | ||
| Depreciation of property, plant and equipment | 51 | 57 | ||||
| Depreciation of right-of-use assets | 16 | 10 | ||||
| Amortization of intangible assets | 33 | 31 | ||||
| Interest (income) expense, net | (153 | ) | 9 | |||
| Notional interest expense on government loan | 24 | – | ||||
| Accretion on lease liabilities | 121 | 108 | ||||
| Stock based compensation | 107 | 24 | ||||
| Foreign exchange (gain) loss | (246 | ) | 169 | |||
| Total expenses | 4,921 | 4,641 | ||||
| Earnings (loss) before income taxes | 4,864 | (399 | ) | |||
| Current income tax expense | 733 | 296 | ||||
| Deferred income tax expense | 30 | 36 | ||||
| Total income tax expense | 763 | 332 | ||||
| Net earnings (loss) | $ | 4,101 | $ | (731 | ) | |
| Attributable to: | ||||||
| Non-controlling interest | $ | 29 | $ | 2 | ||
| Equity holders of FTG | $ | 4,072 | $ | (733 | ) | |
| Earnings (loss) per share, attributable to the equity holders of FTG | ||||||
| Basic | $ | 0.17 | $ | (0.03 | ) | |
| Diluted | $ | 0.17 | $ | (0.03 | ) | |
| FIRAN TECHNOLOGY GROUP CORPORATION | ||||||
| Interim Condensed Consolidated Statements of Comprehensive Income (Loss) | ||||||
| Three months ended | ||||||
| (Unaudited) | March 3, | March 4, | ||||
| (in thousands of Canadian dollars) | 2023 | 2022 | ||||
| Net earnings (loss) | $ | 4,101 | $ | (731 | ) | |
| Other comprehensive earnings (loss) to be reclassified to | ||||||
| net earnings (loss) in subsequent periods: | ||||||
| Change in foreign currency translation adjustments | 71 | (60 | ) | |||
| Net gain (loss) on valuation of derivative financial instruments | ||||||
| designated as cash flow hedges | (463 | ) | 637 | |||
| Deferred income taxes on change in valuation of | ||||||
| derivative financial instruments designated as cash flow hedges | 116 | (160 | ) | |||
| (276 | ) | 417 | ||||
| Total comprehensive income (loss) | $ | 3,825 | $ | (314 | ) | |
| Attributable to: | ||||||
| Equity holders of FTG | $ | 3,727 | $ | (320 | ) | |
| Non-controlling interest | $ | 98 | $ | 6 | ||
| FIRAN TECHNOLOGY GROUP CORPORATION | |||||||||||||||||||||
| Interim Condensed Consolidated Statements of Changes in Equity | |||||||||||||||||||||
| Three months ended March 3, 2023 | Attributed to the equity holders of FTG | ||||||||||||||||||||
| Accumulated | |||||||||||||||||||||
| other | Non- | ||||||||||||||||||||
| (Unaudited) | Common | Retained | Contributed | comprehensive | controlling | Total | |||||||||||||||
| (in thousands of Canadian dollars) | shares | earnings | surplus | income (loss) | Total | interest | equity | ||||||||||||||
| Balance, November 30, 2022 | $ | 21,357 | $ | 19,521 | $ | 8,319 | $ | (867 | ) | $ | 48,330 | $ | 965 | $ | 49,295 | ||||||
| Net income | – | 4,072 | – | – | 4,072 | 29 | 4,101 | ||||||||||||||
| Stock-based compensation | – | – | 44 | – | 44 | – | 44 | ||||||||||||||
| Repurchase and cancellation of shares | (14 | ) | (14 | ) | – | – | (28 | ) | – | (28 | ) | ||||||||||
| Other comprehensive loss | – | – | – | (315 | ) | (315 | ) | 39 | (276 | ) | |||||||||||
| Balance, March 3, 2023 | $ | 21,343 | $ | 23,579 | $ | 8,363 | $ | (1,182 | ) | $ | 52,103 | $ | 1,033 | $ | 53,136 | ||||||
| Three months ended March 4, 2022 | Attributed to the equity holders of FTG | ||||||||||||||||||||
| Accumulated | |||||||||||||||||||||
| other | Non- | ||||||||||||||||||||
| (Unaudited) | Common | Retained | Contributed | comprehensive | controlling | Total | |||||||||||||||
| (in thousands of Canadian dollars) | shares | earnings | surplus | income | Total | interest | equity | ||||||||||||||
| Balance, November 30, 2021 | $ | 21,881 | $ | 19,391 | $ | 8,352 | $ | 478 | $ | 50,102 | $ | 940 | $ | 51,042 | |||||||
| Net income (loss) | – | (733 | ) | – | – | (733 | ) | 2 | (731 | ) | |||||||||||
| Stock-based compensation | – | – | (7 | ) | – | (7 | ) | – | (7 | ) | |||||||||||
| Other comprehensive income | – | – | – | 413 | 413 | 4 | 417 | ||||||||||||||
| Balance, March 4, 2022 | $ | 21,881 | $ | 18,658 | $ | 8,345 | $ | 891 | $ | 49,775 | $ | 946 | $ | 50,721 | |||||||
| FIRAN TECHNOLOGY GROUP CORPORATION | ||||||
| Interim Condensed Consolidated Statements of Cash Flows | ||||||
| Three months ended | ||||||
| (Unaudited) | March 3, | March 4, | ||||
| (in thousands of Canadian dollars) | 2023 | 2022 | ||||
| Net inflow (outflow) of cash related to the following: | ||||||
| Operating activities | ||||||
| Net earnings (loss) | $ | 4,101 | $ | (731 | ) | |
| Items not affecting cash and cash equivalents: | ||||||
| Stock-based compensation | 107 | 24 | ||||
| Loss on disposal of plant and equipment | 30 | – | ||||
| Effect of exchange rates on U.S. dollar bank debt | (18 | ) | (30 | ) | ||
| Depreciation of plant and equipment | 1,020 | 1,185 | ||||
| Depreciation of right-of-use assets | 325 | 367 | ||||
| Amortization of intangible assets | 33 | 31 | ||||
| Amortization, other | (15 | ) | 6 | |||
| Notional interest expense on government loan | 24 | – | ||||
| Deferred tax expenses | 30 | 236 | ||||
| Accretion on lease liabilities | 121 | 108 | ||||
| Net change in non-cash operating working capital | (4,288 | ) | (1,023 | ) | ||
| 1,470 | 173 | |||||
| Additions to plant and equipment | (1,119 | ) | (1,369 | ) | ||
| Proceeds from sales of property, plant and equipment | 8,382 | – | ||||
| Recovery of contract and other costs | 8 | 3 | ||||
| Proceeds from disposal of plant and equipment | – | – | ||||
| 7,271 | (1,366 | ) | ||||
| Net cash flow from operating and investing activities | 8,741 | (1,193 | ) | |||
| Financing activities | ||||||
| Proceeds from government loan | 603 | – | ||||
| Repayments of bank debt | (246 | ) | (231 | ) | ||
| Lease liability payments | (367 | ) | (427 | ) | ||
| Repurchase and cancellation of shares | (30 | ) | – | |||
| (40 | ) | (658 | ) | |||
| Effects of foreign exchange rate changes on cash flow | (77 | ) | (135 | ) | ||
| Net increase (decrease) in cash flow | 8,624 | (1,986 | ) | |||
| Cash and cash equivalents, beginning of the period | 15,666 | 20,196 | ||||
| Cash and cash equivalents, end of period | $ | 24,290 | $ | 18,210 | ||
| Disclosure of cash payments | ||||||
| Payment for interest | $ | 15 | $ | 25 | ||
| Payments for income taxes | $ | 1,152 | $ | 248 | ||
