Investor Conference Call on March 12, 2020 at 8:00
a.m. ET
- Revenue for the twelve months ended December 31, 2019 was $153.3 million, an increase of 12.6% over the
prior year.
- Gross profit grew to $54.9
million in fiscal 2019, compared to $50.8 million in fiscal 2018.
TORONTO, March 11, 2020 /CNW/ - Baylin Technologies Inc.
(TSX: BYL) (the "Company" or "Baylin"), a leading, diversified,
global wireless technology company focused on research, design,
development, manufacturing and sales of passive and active radio
frequency products and services, today announced its financial
results for the three and twelve months ended December 31,
2019. All amounts are stated in Canadian dollars unless otherwise
indicated.
Key highlights for the twelve months ended December 31,
2019 include the following:
- Revenue grew to $153.3 million in
fiscal 2019, an increase of $17.1
million or 12.6% compared to fiscal 2018. The increase was
primarily attributable to higher revenue from Asia Pacific and Satcom products somewhat
offset by lower sales for Embedded Antenna and Wireless
Infrastructure products compared to fiscal 2018.
- Gross profit was $54.9 million in
fiscal 2019, an increase of $4.1
million over fiscal 2018. Gross margin(3) was
35.8% in fiscal 2019 compared to 37.3% in fiscal 2018. Gross margin
was negatively impacted in fiscal 2019 by sales mix – Asia Pacific revenue as a percentage of total
revenue was higher than anticipated and its products generate lower
gross margin than the other product lines.
- Adjusted EBITDA(2) was $12.5
million in fiscal 2019 compared to $15.3 million in fiscal 2018. Adjustments to
EBITDA in fiscal 2019 amounted to $16.3
million and were comprised primarily of expenses related to
a goodwill impairment charge, consulting fees paid to Advantech
Wireless Inc. (the consulting agreement expired on December 31, 2019 and was not extended), the
closure of the Galtronics' New
Jersey office, legal fees related to the ongoing litigation
with the vendors of Advantech Wireless, severance related to the
permanent headcount reduction at Advantech Wireless and
professional fees for a corporate reorganization of an inactive
part of the Galtronics business.
- Net cash at December 31, 2019
decreased from December 31, 2018
primarily due to repayment of a portion of the Crown Capital Fund
IV, LP loan, capital expenditures, debt servicing, cash taxes, an
earnout payment related to the Alga Acquisition, settlement of
stock options and an increase in non-cash working capital.
Key highlights for the three months ended December 31, 2019
include the following:
- Revenue was $30.0 million in the
fourth quarter of 2019, a decrease of $6.0
million or 16.6% compared to the fourth quarter of 2018. The
decrease was primarily due to lower sales for Asia Pacific and Embedded Antenna products
somewhat offset by higher revenue from Wireless Infrastructure and
Satcom products compared to the fourth quarter of 2018.
- Gross profit was $10.8 million in
the fourth quarter of 2019, a decrease of $0.3 million compared to the fourth quarter of
2018. Gross margin was 35.8% in the fourth quarter of 2019, an
increase of five percentage points compared to 30.7% in the fourth
quarter of 2018. Gross margin was positively impacted in the fourth
quarter of 2019 by the improvement in sales mix – Asia Pacific revenue as a percentage of total
revenue was lower compared to the prior year period.
- Adjusted EBITDA was $2.0 million
in the fourth quarter of 2019 compared to $3.9 million in the fourth quarter of 2018.
- In the fourth quarter of 2019, as a result of the annual
goodwill impairment test, a goodwill impairment charge of
$12.7 million was recorded related to
the Company's 2018 acquisitions. Net loss in the fourth quarter of
2019, including the goodwill impairment charge, was $14.6 million compared to net income of
$0.7 million in the fourth quarter of
2018.
- Net cash at December 31, 2019
decreased from September 30, 2019
primarily due to interest and principal payments and capital
expenditures.
"The issues that the Company faced in the third quarter of 2019,
which were previously reported, continued to have an impact in the
fourth quarter. While we remain convinced that the issues are
transitory, we are focused on improving financial performance and
we implemented cost reduction initiatives in the fourth quarter of
2019 that resulted in a decrease in operating
expenses(4) of $2.2
million in the fourth quarter compared to the third
quarter", stated Randy Dewey,
Baylin's President and Chief Executive Officer.
"In the fourth quarter of 2019, we reduced the Company's
revolving credit facility by $4.1
million and decreased total debt by $5.6 million", stated Michael Wolfe, Baylin's Chief Financial Officer.
"Our cash balances combined with our available credit facilities
are expected to provide the Company with sufficient liquidity to
continue to make investments in all areas of the business and to
meet all financial obligations", added Mr. Wolfe.
"Since the closing of the acquisitions of Advantech and Alga, we
have experienced a number of challenges dealing with ongoing,
historical legacy issues, an industry wide shortage of a key
component and integrating the two businesses. As a result, we have
a more prolonged path to achieving the financial performance that
we believe these two businesses are capable of generating. We,
therefore, have concluded that the recoverable amount of the cash
generating unit ("CGU") which has been determined by a value-in-use
calculation using a discount cash flow model for Advantech and Alga
is less than the carrying value, resulting in a goodwill impairment
charge", stated Mr. Dewey.
SELECTED FINANCIAL INFORMATION
The table below discloses selected financial information for the
periods indicated.
(in $000's except
per share amounts)
|
|
|
|
|
Twelve Months
Ended December 31,
|
|
2019
|
2018
|
2017
|
|
$
|
$
|
$
|
Revenue
|
153,323
|
136,214
|
91,642
|
Gross
profit
|
54,939
|
50,841
|
28,345
|
Loss before income
taxes (2019: including goodwill
impairment $12,693)
|
(18,601)
|
(10,624)
|
(3,773)
|
Income tax expense
(recovery)
|
1,013
|
(5,180)
|
436
|
Net loss (2019:
including goodwill impairment $12,693)
|
(19,614)
|
(5,444)
|
(4,209)
|
Basic and diluted net
loss per share
|
($0.49)
|
($0.13)
|
($0.17)
|
EBITDA(1)
|
(3,853)
|
2,733
|
2,306
|
Adjusted
EBITDA(2)
|
12,482
|
15,293
|
4,954
|
Current
assets
|
64,293
|
79,937
|
64,666
|
Total
assets
|
147,557
|
170,517
|
84,882
|
Current
liabilities
|
36,848
|
35,077
|
26,873
|
Non-current
liabilities
|
51,828
|
53,613
|
2,183
|
Total
liabilities
|
88,676
|
88,690
|
29,056
|
The table below discloses selected financial information for the
three months ended December 31, 2019 compared to the
prior year period.
(in $000's
except per share amounts)
|
|
|
Three Months Ended
December 31,
|
|
2019
|
2018
|
|
$
|
$
|
Revenue
|
30,029
|
36,009
|
Gross
profit
|
10,752
|
11,063
|
Loss before income
taxes (2019: including goodwill impairment $12,693)
|
(14,222)
|
(5,693)
|
Income tax expense
(recovery)
|
427
|
(6,363)
|
Net income (loss)
(2019: including goodwill impairment $12,693)
|
(14,649)
|
670
|
Basic and diluted net
income (loss) per share
|
($0.36)
|
$0.02
|
EBITDA(1)
|
(12,682)
|
(2,522)
|
Adjusted
EBITDA(2)
|
2,007
|
3,858
|
|
(1) See "Non-GAAP
Measures". EBITDA refers to operating income (loss) plus
depreciation and amortization.
|
(2) See "Non-GAAP
Measures". Adjusted EBITDA refers to EBITDA plus the sum of: a)
acquisition expenses, fair value step up of inventory acquired as
part of an acquisition, expenses for litigation relating to
acquisition agreements, expenses relating to planned restructuring
post an acquisition, impairment on fixed and intangible assets
(including goodwill) post an acquisition; b) expenses to
permanently close/relocate a facility, shut down a line of
business, eliminate positions; and, c) expenses relating to
corporate re-organization.
|
(3) See "Non-GAAP
Measures". Gross margin refers to gross profit divided by
revenue.
|
(4) Refers to
operating expenses before depreciation, amortization and
adjustments to EBITDA.
|
A copy of the Company's consolidated financial statements for
the three and twelve months ended December 31, 2019 and
corresponding management's discussion and analysis (the "MD&A")
are available under the Company's SEDAR profile on
www.sedar.com.
OUTLOOK
The issues the Company faced in the third and fourth quarters of
2019, specifically a combination of expenses incurred to build our
new factory in Vietnam (that were
not anticipated in the 2019 budget), softer demand from several of
our primary customers due to changes in their capital expenditure
plans, and slower progress in addressing legacy issues at Advantech
Wireless, are expected to continue to impact the Company through
the end of the second quarter of 2020. Management believes these
issues are transitory. We continue to focus on improving financial
performance, including through further cost reduction initiatives.
In the first and second quarters of 2019, we reduced annual
expenses by approximately $2.5
million. That reduction, combined with cost reductions
implemented in the third and fourth quarters of 2019, and, current
initiatives, once fully implemented, are expected to decrease costs
by over $8.0 million annually of
which approximately $6.0 million are
operating expenses with the balance being expenses included in cost
of sales.
Like many other companies doing business in China, the coronavirus (COVID-19) outbreak has
had a disruptive effect on our business. Although our manufacturing
facility in Wuxi, China was
delayed in reopening after Chinese New Year, it reopened on
February 10, 2020 following approval
of the local authorities. We are currently operating at a reduced
rate and face some labour shortages, although we expect
substantially all our employees to be back at work by the end of
March 2020. Our customers and
suppliers are also facing disruptions. All this has affected
Wireless Infrastructure and Embedded Antenna sales. Asia Pacific sales have also been affected
because other smartphone component suppliers in Vietnam have faced shortages of materials from
China. To date, Satcom sales have
not been affected. The virus has also resulted in a delay in the
installation of a test chamber in our Vietnamese factory, which
will affect the timing of final certification as well as the
commencement of volume production of Massive MIMO antennas,
previously expected to begin in the second quarter of 2020.
We continue to monitor the situation closely and are taking
measures to mitigate the effect of the outbreak on our business. At
this stage, it is too early to tell the full extent of the impact,
given the uncertainty around containment of the virus (both in
China and elsewhere) and how much
our mitigation efforts will minimize the financial impact, however,
it could have a material impact on our operations and operating
results in China and other
countries where we do business.
"While it has been a challenging time for the Company and we
have further work to do to address the issues we are currently
facing, we are confident that we will be able to capitalize on the
many opportunities that we are working on", stated Mr. Dewey.
INVESTOR CONFERENCE CALL
Baylin will hold a conference call on March 12, 2020 at 8:00
a.m. (ET) to discuss its financial results for the three and
twelve months ended December 31, 2019. The call will be hosted
by Randy Dewey, President and Chief
Executive Officer, Michael Wolfe,
Chief Financial Officer and Daniel
Kim, Executive Vice President of Corporate Development. All
interested parties are invited to participate using the dial-in
details provided below.
Date:
|
March 12,
2020
|
Time:
|
8:00 a.m.
(ET)
|
Dial-in
Number:
|
88-231-8191 or
647-427-7450
|
Conference
ID#:
|
1275618
|
Webcast: https://event.on24.com/wcc/r/2170083/D5ADB4BF667631EBC0D3E35559AEA6A5
FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release constitute
"forward-looking information and statements" that involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance, objectives or achievements of the
Company, or industry results, to be materially different from any
future results, performance, objectives or achievements (expressed
or implied) by such forward-looking information or statements.
Forward-looking statements are frequently, but not always,
identified by words such as "expects," "anticipates," "believes,"
"intends," "estimates,", "predicts," "potential," "targeted,"
"plans," "possible" and similar expressions, or statements that
events, conditions or results "will," "may," "could" or "should"
occur or be achieved. The forward-looking statements in this
press release include, but are not limited to, statements regarding
the effect on the Company and its customers and suppliers of the
COVID-19 outbreak in China and
elsewhere, the timing of Massive MIMO antenna production in the
Company's new factory in Vietnam,
expected cost savings, expected levels of liquidity for future
business and to meet financial obligations, the Company's ability
to achieve organizational efficiencies, and other statements
regarding the Company's plans, objectives and expectations. These
statements reflect the Company's current views regarding future
events and operating performance and are based on information
currently available to the Company as of the date of this press
release. These forward-looking statements involve a number of
risks, uncertainties and assumptions and should not be read as
guarantees of future performance or results and will not
necessarily be accurate indications of whether or not such
performance or results will be achieved. Those assumptions and
risks include, but are not limited to, the Company's ability to
successfully allocate capital as needed and to develop new
products, as well as the fact that the Company's results of
operations and business outlook are subject to significant risk,
volatility and uncertainty. Additional factors that could cause
actual results, performance or achievements to differ materially
include, but are not limited to, the risk factors discussed in the
Company's Annual Information Form dated March 11, 2020 which is available on the
Company's profile at www.sedar.com. All of the forward-looking
statements made in this press release are qualified by these
cautionary statements and other cautionary statements or factors
contained herein, and there can be no assurance that the actual
results or developments will be realized or, even if substantially
realized, that they will have the expected consequences to, or
effects on, the Company. Unless required by applicable securities
law, the Company does not intend and does not assume any obligation
to update these forward-looking statements.
NON-GAAP MEASURES
This press release includes a number of measures that are not
prescribed by Canadian generally accepted accounting principles
("GAAP") and as such may not be comparable to similar measures
presented by other companies. We believe these measures are
commonly employed to measure performance in our industry and are
used by analysts, investors, lenders and interested parties to
evaluate financial performance and our ability to incur and service
debt to support our business activities. While management of the
Company believes that non-GAAP measures are helpful supplemental
information, they should not be considered in isolation as an
alternative to net income, cash flows generated by operating,
investing or financing activities, or other financial statement
data presented in accordance with GAAP. See "Non-GAAP Measures" on
page 2 of the MD&A for further information.
ABOUT BAYLIN
Baylin Technologies Inc. (TSX: BYL) is a leading, diversified,
global wireless technology company. Baylin focuses on research,
design, development, manufacturing and sales of passive and active
radio-frequency products and services. Baylin aspires to meet its
customers' needs and anticipate the direction of the market. For
further information, please visit www.baylintech.com.
SOURCE Baylin Technologies Inc.