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Firan Technology Group Corporation has announced financial results for the first quarter 2021.
FTG continues to manage through the COVID-19 pandemic by focusing on three key strategies:
- FTG’s long-term market diversification strategy enables the Company to mitigate the dramatic downturn in the commercial aerospace market through its involvement in the defense market and other aerospace sectors
- - FTG continues to carefully manage costs across the Company, balancing decisions on cost reductions with a goal to retain critical skills to ensure the Company is positioned for a faster recovery in the future
- - FTG continues to carefully manage investments and has a stronger balance sheet than before the pandemic
- - FTG was approved for an additional $1M in Canada Emergency Wage Subsidy (CEWS) in the quarter which we used to help maintain our workforce in the face of revenue reductions due to COVID-19. The funds were paid to FTG subsequent to quarter end as a result of administrative delays within the government
- FTG received forgiveness of $1.3M in US Paycheck Protection Program funds in the United States as a result of FTG maintaining our workforce for the required period of time
- FTG achieved $14.5M EBITDA for the trailing 12 months, the highest since mid 2019
- FTG increased our net cash on the balance sheet to $13.4M, an increase of $0.8M in Q1 2021
FTG accomplished many goals in Q1 2021 that continue to improve the Corporation and position it for the future, including:
- Achieved a 0.96:1 book-to-bill ratio for Q1 2021 and increased bookings by 11% compared to Q4 2020
- Received a new development contract from a major Tier 1 Aerospace company for a family of cockpit assemblies that leads to significant future revenues in 2022 and beyond
- Received a significant new customer approval from a major Tier 1 Aerospace company for our Aerospace Tianjin facility opening up significant new revenue opportunities
- Received a new customer approval from a major Airframe company for our Aerospace Toronto and Aerospace Tianjin facilities opening up significant new revenue opportunities and first production parts were shipped within the quarter
- Continued efforts to pivot towards the defense market and have substantially completed qualification/approval at 5 new customers for our sites in both Canada and the US Supported customers’ efforts to begin to re-shore some procurement of aerospace printed circuit boards in support of new US regulations
- Installed Averatek semi-additive circuit board manufacturing equipment in our Circuits Fredericksburg facility and will begin process development in Q2
- Was approved for an additional $1M in Canada Emergency Wage Subsidy (CEWS) which we used to help maintain our workforce in the face of revenue reductions due to COVID-19 however receipt of the funding was delayed until after the end of Q1 due to administrative delays within the government
- Received forgiveness of $1.3M in PPP loans in the US in the quarter as we achieved the requirements for forgiveness under that program
- Managed cost by extending Christmas holiday shutdowns at sites most impacted by the drop in commercial aerospace activities
Overall for FTG, sales decreased by $5.6M or 23% from $24.5M in Q1 2020 to $19M in Q1 2020. The COVID-19 pandemic has negatively impacted commercial aerospace activity and this impacted FTG’s sites predominantly focused on this market, which include Circuits Toronto and the facilities in China.
The Circuits Segment sales in Q1 2021 were down $4.5M, or 27% in Q1 2021 versus Q1 2020. All sites were down but the largest decline was seen in the Circuits Toronto plant which is more heavily exposed to the Commercial Aerospace market. Circuits Chatsworth had a serious COVID-19 event in December and January, and this combined with organizational transitions to strengthen the management team, hurt production and shipments in the quarter.
For the Aerospace Segment, sales in Q1 2021 were $7.0M compared to $8.1M in Q1 last year, a decrease of $1.1M or 14%. Simulator related sales increased by $1.3M in Q1 2021 compared to the same quarter last year, helping to mitigate the downturn in the commercial aerospace market. The Aerospace Tianjin site was down the most at it is exclusively focused on commercial aerospace.
Gross margins in Q1 2021 were $3.7M or 19.3% compared to $4.0M or 16.1% in Q1 2020. The lower sales impacted the overall margin. The Canadian Emergency Wage Subsidy added $0.9M to gross margin or 4.7 percentage points.
Trailing twelve month (TTM) Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG was $14.5M. Lower sales and the operational challenges in Circuits Chatsworth, were offset by wage subsidies in Canada and the PPP forgiveness in the US.
Net loss after tax at FTG in Q1 2021 was $0.4M or $0.02 per diluted share compared to a net loss of $2.6M or $0.11 per diluted share in Q1 2020. Revenues were reduced due to the decline in the Commercial Aerospace market as a result of the COVID-19 pandemic. The impairment of intangible assets in Q1 2020 reduced earnings by $1.1M compared to nil in Q1 2021. The CEWS funding in Canada and the PPP forgiveness in the US in Q1 2021 increased earnings by $2.3M. The COVID-19 event and the organizational transitions in Chatsworth negatively impacted earnings in Q1 2021.
The Circuits Segment net earnings before corporate and interest and other costs was $0.6M in Q1 2021 compared to $0.7M in Q1 2020. The lower sales was the most significant impact on the segment profitability offset by CEWS funding and PPP forgiveness. The COVID-19 event in Chatsworth and the transitions in the management team negatively impacted that site’s results in Q1 2021.
The Aerospace net earnings before corporate and interest and other costs increased to $0.2M in Q1 2021 from a loss of $2.0M in Q1 2020. Increased activity in the simulator related business, improved overall operating performance and PPP forgiveness of $0.7M were partially offset by reduced activity in commercial Aerospace. The impairment of the intangible asset in Q1 2020 reduced earnings by $1.1M in that quarter.
As at March 5, 2021, the Corporation’s net working capital was $39.6M, compared to $39.4M at year-end in 2020.
FTG ended Q1 2021 with $13.4M in net cash as compared to $12.6M at the end of 2020. Cashflow would have been $1M higher in the quarter if the CEWS funding had been received before the end of the quarter.