FTG Announces Second Quarter 2023 Financial Results

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Firan Technology Group Corporation announced financial results for the second quarter of 2023. 

• Second quarter bookings of $40.3M were up 48% over Q2 2022 and up 22% over Q1 2023. This was the 10th sequential quarter of bookings growth.
• FTG second quarter revenues of $34.0M were up 52% over Q2 2022, as FTG ramps up production to meet customer demand. Revenue included $3.4M from the newly acquired Circuits sites in Minnetonka, MN and Haverhill, MA.
• FTG achieved Net Earnings in Q2 2023 of $2.4M, which was up $2.4M from Q2 2022.
• Net debt on the balance sheet as of Q2 2023 is $6.4M, which is 0.46x Adjusted EBITDA for the trailing 12 months period ended June 2, 2023.

Business Highlights

FTG continued to play offence in the first half of 2023. The company has invested in technology in existing sites, grown the business organically, and completed two acquisitions. Through all these actions, FTG is strategically deploying its capital 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 Q2 2023 that continue to improve the Corporation and position it for the future, including:

• On April 28, 2023, the Corporation completed the acquisition of Holaday Circuits, LLC based in Minnetonka, Minnesota, a suburb of Minneapolis. FTG acquired 100% of Holaday for cash consideration of approximately $24.4M and contingent consideration up to $6.0M, subject to final closing adjustments. The business is operating as FTG Circuits Minnetonka LLC.
• Also on April 28, 2023, the Corporation completed the acquisition IMI, Inc. (“IMI”) based in Haverhill, Massachusetts, north of Boston. FTG acquired 100% of the common shares of IMI for cash consideration of $1.8M, subject to final closing adjustments. The business is operating as FTG Circuits Haverhill Inc.
• Achieved a 1.19:1 book-to-bill ratio for Q2 2023 resulting in increased backlog of $98.2M compared to $65.5M at the end of 2022. Backlog as of Q2 2023 includes $18.2M at the newly acquired sites.
• FTG added 17 staff in Q2 2023, including operations leadership, to help increase throughput. FTG now employs approximately 680 people across its nine operating sites.
• FTG received $0.3M in Employee Retention Credits (ERC) for its U.S. sites as they retained their staff through the pandemic for a total of $3.8M received during 2023.
• FTG received funding of $1.1 million in the quarter for a total of $3.7M received to-date under the Canadian Aerospace Regional Recovery Initiative (ARRI) program.
• FTG received $0.5M as the initial draw on a conditional loan provided by the Ontario Ministry of Economic Development, Job Creation and Trade pursuant to the Advanced Manufacturing and Innovation Competitiveness (AMIC) program.
• On June 1, 2023, FTG announced the acceptance by the Toronto Stock Exchange (the “TSX”) of FTG’s Notice of Intention to Make a Normal Course Issuer Bid (“NCIB”). Pursuant to the NCIB, FTG is authorized to purchase over the next 12 months, up to an aggregate of 1,195,550 Common Shares, being approximately 5% of its Common Shares outstanding.

For FTG in Q2 2023, overall sales increased by $11.6M or 52.2% from $22.3M in Q2 2022 to $34.0M in Q2 2023. Increased revenue in Q2 2023 is the result of robust demand across our markets and specifically increased Simulator product activity, acquisitions and favourable foreign exchange rates. The average foreign exchange rate in Q2 2023 was 7% (8.5 cents) higher than in Q2 2022, with a positive impact on sales of $1.6M. On a year-to-date basis, sales increased by $15.8M or 37.0% from 2022.

The Circuits segment sales in Q2 2023 were up $5.7M, or 36.8% compared to last year. The sales increase included a $3.4M contribution from the newly acquired Circuits sites in Minnetonka and Haverhill for the five-week period following close of the acquisitions. On a year-to-date basis, the Circuits segment sales were up $7.1M or 24.0%.

For the Aerospace segment, sales in Q2 2023 were up $5.7M or 71.4% compared to last year. Aerospace segment sales in Q2 2023 included $4.9M of revenue from Simulator products as compared to $0.7M in Q2 2022. On a year-to-date basis, the Aerospace segment sales were up $8.0M or 50.6%.

Gross margin in Q2 2023 was $10.0M or 29.4% as compared to $5.6M or 25.2% in Q2 2022. Excluding government assistance, the gross margin rate improved to 28.6% in Q2 2023 up from 24.9% in Q2 2022. The increase in the gross margin rate is due to the operating leverage of increased sales volumes, operational improvements including favourable pricing actions, and favourable exchange rates.

Net earnings after tax at FTG in Q2 2023 was $2.4M or $0.10 per diluted share compared to a net income of $0.0M or nil per diluted share in Q2 2022. The acquisitions did not materially impact earnings in the quarter. Adjusted net earnings was $2.3M or $0.09 per diluted share in Q2 2023 as compared to an adjusted net loss of ($0.0M) or nil per diluted share in the prior year quarter. The $2.2M increase in adjusted net earnings is the result of higher sales volume, operational improvements and a more favourable foreign exchange rate. On a year-to-date basis adjusted net earnings after tax was $3.3M or $0.13 per diluted share compared to a net loss of ($1.0M) or ($0.04) per diluted share in the prior year period.

The Circuits segment earnings before interest and income taxes was $1.7M in Q2 2023 as compared to $0.8M in Q2 2022. Higher sales drove the increase in earnings. The acquisitions did not materially impact earnings for this segment.

The Aerospace segment earnings before interest and income taxes was $2.7M in Q2 2023 versus $0.5M in Q2 2022. The increase in earnings was driven by higher sales including Simulator products, and improved pricing on a range of products.

The trailing twelve month earnings before interest, tax, depreciation and amortization (EBITDA) was $16.8M or $13.7M for adjusted EBITDA as compared to approximately $9M for the full year 2022.

EBITDA for FTG in Q2 2023 was $5.3M or 15.7% of sales compared to $2.1M or 9.4% of sales in Q2 2022. On a year-to-date basis, EBITDA in 2023 was $11.6M or 19.8% compared to $3.4M or 8.0% in 2022.

Adjusted EBITDA for Q2 2023, which excludes government assistances, and expenses related to the acquisitions, was $5.2M or 15.3% of net sales, as compared to $2.1M or 9.2% of net sales in Q2 2022. The increase in profitability is driven by increased operating leverage from higher sales, operational improvements and a favourable foreign exchange impact. For the trailing twelve months period ended June 2, 2023, adjusted EBITDA was $13.7M or 13.0% of sales.

As at June 2, 2023, the Corporation’s net working capital was $34.5M, compared to $30.5M at year-end in 2022.

Net debt at the end of Q2 2023 was ($6.4M) compared to net cash of $12.3M at the end of 2022, after the combined impact of a net cash outlay of $26.3M for acquisitions, net proceeds of $8.5M from the Aerospace Chatsworth facility sale leaseback transaction, and receiving $3.8M from the U.S. Employment Retention Credit program (“ERC”). In addition, FTG has access to committed credit lines of approximately $21.5M.