FTG Announces Q3 2024 Financial Results; Revenues Up 18%

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Firan Technology Group Corporation (FTG) announced financial results for the third quarter of 2024.

• Third quarter bookings of $45.9M were up 29% over Q3 2023.
• Third quarter revenues of $43.1M were up 18% over Q3 2023.
• FTG achieved Adjusted EBITDA in Q3 2024 of $7.2M, which was up 45% over Q3 2023.
• FTG achieved Net Earnings in Q3 2024 of $2.8M, which was up 109% over Q3 2023.

Business Highlights

In Q3 2024, FTG once again had strong bookings because of increasing demand from all segments of the Aerospace and Defence market. This, combined with strong operating performance and continued progress in integrating last year’s acquisitions, resulted in the Corporation achieving its best-ever quarterly financial results for revenue, Adjusted EBITDA and Adjusted Net Earnings, and also strong cash flow from operating activities.

During Q3 2024, the Corporation has continued to invest in technology in existing sites, grow the business organically, and integrate the two acquisitions completed last year. 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 the following in Q3 2024, which continues to improve the Company and position it for the future:

Integration activities in Circuits Minnetonka progressed well in the quarter with continued improvements in throughput and shipments. Demand remained strong across its customer base and new customer activity progressed well. The site is fully operational in the FTG standard ERP system they transitioned to in Q2 of this year. As the quarter ended, a new General Manager was hired to lead this site into 2025 and beyond.

Integration activities in Circuits Haverhill advanced with the installation of new drills and electrical test equipment. The expansion of the customer base continued in the quarter. The implementation of the FTG ERP system also progressed in the quarter.

Customer orders received in Q3 2024 totaled $45.9M, resulting in a book-to-bill ratio of 1.07:1, and over the trailing 12 months period ended Q3 2024, FTG has achieved a book-to-bill ratio of 1.15:1.

As of August 30, 2024, FTG had total backlog of $121.4M, which is a 24% increase over the Q3 2023 backlog of $98.0M.

FTG's sales increased by $6.5M, or 17.7%, from $36.6M in Q3 2023 to $43.1M in Q3 2024. The revenue increase in Q3 2024 was driven by organic growth, including an increase in Simulator products sales of $1.2M, and favourable foreign exchange rates. Year-to-date, sales have increased by $21.6M, or 22.7%, compared to year-to-date 2023. Year-to-date sales growth was driven by the acquisitions and organic growth, partially offset by lower simulator product sales and the strike at Aerospace Toronto in Q1 2024.

The Circuits segment sales in Q3 2024 were up $3.6M, or 13.3%, compared to last year as a result of strong customer demand and improved throughput. On a year-to-date basis, the Circuits segment sales were up $22.3M, or 34.9%, with $16.9M from acquisitions and $5.4M of organic growth. Circuits sites in Minnetonka and Haverhill were acquired in April 2023, and year-to-date 2024 includes nine months of operating results for these sites, as compared to four months in 2023 year-to-date results.

For the Aerospace segment, sales in Q3 2024 increased by $3.4M, or 34.2%, compared to last year, due to a $1.2M increase in Simulator products sales and a $2.2M increase in other organic sales. On a year-to-date basis, Aerospace segment sales decreased by $0.3M, or 0.8%. This decrease was primarily due to a $6.3M drop in year-to-date Simulator product sales and a $3.0M impact from the Aerospace Toronto strike in Q1 24, which was partially offset by $9.0M in organic growth.

Gross margin in Q3 2024 was $11.6M, or 27.0%, as compared to $8.8M, or 24.0%, in Q3 2023. The increase in gross margin dollars and the gross margin rate primarily stems from higher sales volumes and operational improvements across FTG’s operations. For the year-to-date period, the gross margin rate excluding government assistance is 26.8% for 2024, as compared to 26.7% for 2023. Factors increasing the gross margin rate include leverage from higher sales volumes and productivity improvements, while factors decreasing the gross margin rate include the decrease in sales of Simulator products, which is cyclical in nature, and the strike at Aerospace Toronto in Q1 2024.

Net earnings after tax at FTG in Q3 2024 was $2.8M or $0.11 per diluted share compared to net earnings of $1.3M or $0.05 per diluted share in Q3 2023. The $1.4M increase in net earnings is the result of both higher sales volume and operational improvements. On a year-to-date basis, adjusted net earnings was $6.4M or $0.26 per diluted share compared to adjusted net earnings of $4.7M or $0.19 per diluted share in the prior year period, with the most significant adjustment being the exclusion of Government support in the 2023 results. The increase in adjusted net earnings for the year-to-date period is inclusive of the negative impacts of the decrease in Simulator products sales and the strike at Aerospace Toronto.

The Circuits segment earnings before interest and income taxes (“EBIT”) was $3.5M in Q3 2024 as compared to $2.2M in Q3 2023. The increase in Circuits segment EBIT is primarily driven by higher sales volume and operational improvements. Year-to-date, Circuits segment EBIT was $8.8M as compared to $7.6M in 2023. Excluding the $2.8M of government assistance in 2023, Circuits segment EBIT increased by $4.0M.

The Aerospace segment EBIT was $2.4M in Q3 2024 versus $1.6M in Q3 2023. The increase in earnings was driven by the increase in sales. Year-to-date, Aerospace segment EBIT was $5.8M as compared to $6.7M in 2023 with sales being relatively flat. Excluding $1.0M of government assistance in 2023, Aerospace segment EBIT was up $0.1M. Aerospace segment EBIT in 2024 has been negatively impacted by lower Simulator revenue and the strike in Q1 2024 at Aerospace Toronto.

Adjusted EBITDA for Q3 2024 was $7.2M or 16.7% of sales, as compared to $5.0M or 13.6% of sales in Q3 2023. The increase in profitability is driven by increased operating leverage from higher sales and operational improvements across FTG’s operations. For the trailing twelve months period ended August 30, 2024, adjusted EBITDA was $24.2M or 16.1% of sales as compared to $19.4M or 14.3% of sales for the full year 2023.

As at August 30, 2024, the Corporation’s net working capital was $47.8M, compared to $41.0M at year-end in 2023.

Cash flow from operating activities in Q3 2024 was $5.3M as compared to $3.5M in Q3 2023 primarily due to higher net earnings. Cash used for lease liability payments was $1.0M in Q3 2024 as compared to $0.9M in Q3 2023. Year-to-date cash flow from operating activities was $10.0M in 2024 as compared to $7.3M in the same period in 2023. Excluding $3.8M of Employee Retention Credit included in the year-to-date period in 2023, year-to-date cash flow from operating activities increased by $6.5M.

Net debt at the end of Q3 2024 was $2.2M compared to net debt of $3.6M at the end of 2023. During the quarter, the Corporation paid the holdback on the IMI acquisition of $0.4M. In addition, FTG has access to committed credit lines of approximately $23.8M.