The Quarter Represents a 24% Increase in
Revenue and a 36% Increase in Gross Profit compared to the Fourth
Quarter of 2023
Investor Conference Call on May 9, 2024 at 8:00 a.m.
ET
TORONTO, May 8, 2024
/CNW/ - Baylin Technologies Inc. (TSX: BYL) (the "Company" or
"Baylin"), a diversified global wireless technology company focused
on the research, design, development, manufacture, and sale of
passive and active radio frequency
products, satellite communications products, and supporting
services, today announced its financial results for the three
months ended March 31, 2024. All amounts are stated in
Canadian dollars unless otherwise indicated.
FIRST QUARTER SUMMARY
Continuing Operations
- Revenue of $20.1 million in the
first quarter of 2024, an increase of $1.3
million or 7.0% compared to the first quarter of 2023. This
also represents an increase of $3.9
million or 23.8% compared to the fourth quarter of 2023. The
increase was primarily due to sales volume increase in the Embedded
Antenna business line. Revenue in the first quarter of 2024 for
both Embedded Antenna and Wireless Infrastructure business lines
was significantly higher than in the fourth quarter of 2023.
Revenue in the Satcom business line was largely consistent with the
same prior year period.
- Gross profit of $7.7 million in
the first quarter of 2024, an increase of $0.1 million compared to the first quarter of
2023. Gross margin of 38.5% in the first quarter of 2024 compared
to 40.6% in the first quarter of 2023 and compared to 35.2% in the
fourth quarter of 2023. Compared to the same prior year period, the
lower gross margin in the first quarter of 2024 was primarily due
to product mix. Wireless Infrastructure revenue as a percentage of
total revenue was higher in the first quarter of 2023 and most of
its products generate higher gross margins than the other product
lines.
- Adjusted EBITDA(2) of $0.5
million in the first quarter of 2024, a decrease of
$1.1 million compared to the first
quarter of 2023. This also represents an increase of $2.6 million compared to the fourth quarter of
2023. Compared to the same prior year period, the decrease in
Adjusted EBITDA in the first quarter of 2024 was due to combination
of operating expenses, lower relative margins, along with not
having the benefit of specific one-time government incentives.
Operating expenses in the first quarter of 2023 were lower due to
the recognition of the US Employee Retention Tax Credit in the
amount of $0.8 million, of which
$0.7 million was recorded as a
reduction of operating expenses.
- Net loss of $2.0 million in the
first quarter of 2024 compared to a net income of $0.9 million in the first quarter of 2023. This
also represents an increase of $4.9
million compared to a net loss of $6.9 million in the fourth quarter of 2023. The
net loss in the first quarter of 2024 was primarily due to an
operating loss of $1.4 million as
well as interest and other finance expenses. The positive net
income in the first quarter of 2023 was mainly due to a gain on
lease termination and sale of non-current assets in the amount of
$2.7 million as a result of
completing the transfer of the MMU facility lease in Vietnam. On a per share basis, a net loss of
$0.01 per share in the first quarter
of 2024 compared to a net income of $0.02 per share in the first quarter of
2023.
- Net debt(3) from continuing operations of
$15.7 million at March 31, 2024, an increase of $2.9 million from December
31, 2023, primarily due to an increase in working capital
investment as a result of increasing sales and order backlog during
the three months ended March 31,
2024.
- Backlog(4) from continuing operations of
$30.3 million at March 31, 2024 compared to $31.2 million at March 31,
2023. The decrease was mainly due to a lower level of
backlog in the Satcom business line, partially offset by an
increase in backlog in the Wireless Infrastructure business line as
a result of new global opportunities from expansion into new
markets. Backlog increased to $33.2
million at April 29, 2024 as a
result of an increase in new order intake across all business lines
at the start of the second quarter of 2024.
Discontinued Operations (representing the Mobile and Network
business line)
- Adjusted EBITDA from discontinued operations of close to $nil
in the first quarter of 2024, an increase of $0.7 million compared to the first quarter of
2023. The increase in Adjusted EBITDA was mainly due to an increase
in gross profit as a result of improved product mix in the Mobile
and Network ("M&N") business line compared to the prior year
period.
- Net loss from discontinued operations of $0.8 million in the first quarter of 2024
compared to a net loss of $2.0
million from discontinued operations in the first quarter of
2023. The net loss from discontinued operations in the first
quarter of 2024 was mainly due to an operating loss of $0.2 million as well as other finance expenses in
the M&N business line. On a per share basis, a net loss of
$0.01 per share in the first quarter
of 2024 compared to a net loss of $0.03 per share in the first quarter of
2023.
RECENT DEVELOPMENTS
Products
In April 2024, the Company
announced that its subsidiary, Advantech Wireless Technologies
Inc., had received an award from Artemis - NASA's Lunar Exploration
and Colonization Initiative to supply high-power solid state power
amplifier ("SSPA") ground station systems to support the Artemis
program. Artemis is a multi-phased program to explore the moon,
with the goal of establishing the first long-term presence on the
moon. Advantech's SSPAs are designed to operate between the earth
and moon over cislunar frequencies and are specifically engineered
to fit in the interior of large-aperture, full motion antennas as
part of NASA's drive to segregate their near space operations
(between the earth's surface and two kilometres away) from their
deep space operations.
The Company also announced that its subsidiary, Galtronics
USA, Inc., had completed a
two-month retrofit of Salt Lake
City International Airport with its leading high-capacity
panel antennas. The airport services over 25 million travellers a
year making its significant capacity and throughput requirements a
challenge. The antennas deal with this challenge by offering
antennas with optimized radiation patterns with optimum range
coverage and low interference.
Galtronics was also selected to supply Distributed Antenna
System (DAS) antennas for an upgrade to improve coverage and
capacity inside London's Heathrow
Airport. This represents the Company's first non-North American
airport award.
Intellectual Property Infringement Claim
Advantech Wireless Technologies Inc. has recently brought an
application in Superior Court in Montreal, Quebec for the issuance of an
injunction and damages against 12209454 Canada Inc. (cob as Nextt
Microwave), a company controlled by Mr. Frank Panarello, a former employee of Alga
Microwave Inc. ("Alga", a predecessor of Advantech), and against
Mr. Michael Perelshtein, also a
former employee of Alga. The application alleges
infringement of Advantech's intellectual property through the use
of Advantech's drawings of certain of its proprietary products,
which the defendants used to sell transceivers identical to those
of Advantech.
SELECTED FINANCIAL INFORMATION
The table below discloses selected financial information for the
periods indicated.
|
(in $000's except
per share amounts)
|
|
Three Months Ended
March 31,
|
|
|
2024
|
|
2023
|
Change
|
Change
|
|
|
|
|
|
$
|
|
$
|
$
|
%
|
|
|
|
|
|
Profit and
Loss
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
20,053
|
|
18,745
|
1,308
|
7.0 %
|
|
|
|
|
|
Gross profit
|
7,722
|
|
7,618
|
104
|
1.4 %
|
|
|
|
|
|
Gross margin
|
38.5 %
|
|
40.6 %
|
(2.1 %)
|
N/A
|
|
|
|
|
|
Net income (loss)
from continuing operations
|
(1,972)
|
|
864
|
(2,836)
|
N/A
|
|
|
|
|
|
Net loss from
discontinued operations
|
(786)
|
|
(2,030)
|
1,244
|
(61.3 %)
|
|
|
|
|
|
Net
loss
|
(2,758)
|
|
(1,166)
|
(1,592)
|
> 100.0%
|
|
|
|
|
|
Basic and diluted
net income (loss) per share from continuing
operations
|
($0.01)
|
|
$0.02
|
($0.03)
|
N/A
|
|
|
|
|
|
Basic and diluted net
loss per share from discontinued operations
|
($0.01)
|
|
($0.03)
|
$0.02
|
(66.7 %)
|
|
|
|
|
|
Basic and diluted
net loss per share
|
($0.02)
|
|
($0.01)
|
($0.01)
|
100.0 %
|
|
|
|
|
|
EBITDA from
continuing operations
|
(671)
|
|
3,327
|
(3,998)
|
N/A
|
|
|
|
|
|
EBITDA from
discontinued operations
|
281
|
|
(1,006)
|
1,287
|
N/A
|
|
|
|
|
|
EBITDA(1)
|
(390)
|
|
2,321
|
(2,711)
|
N/A
|
|
|
|
|
|
Adjusted EBITDA from
continuing operations
|
460
|
|
1,585
|
(1,125)
|
(71.0 %)
|
|
|
|
|
|
Adjusted EBITDA from
discontinued operations
|
(43)
|
|
(708)
|
665
|
(93.9 %)
|
|
|
|
|
|
Adjusted
EBITDA(2)
|
417
|
|
877
|
(460)
|
(52.5 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
As at
|
|
|
As at
|
As at
|
|
|
|
March
31,
2024
|
|
March
31,
2023
|
Change
|
Change
|
March
31,
2024
|
December
31,
2023
|
Change
|
Change
|
|
$
|
|
$
|
$
|
%
|
$
|
$
|
$
|
%
|
|
Balance Sheet and
Other**
|
|
|
|
|
|
|
|
|
|
|
Current assets -
Continuing operations
|
38,335
|
|
49,730
|
N/A
|
N/A
|
38,335
|
35,346
|
2,989
|
8.5 %
|
|
Current assets - Assets
held for sale
|
9,576
|
|
402
|
N/A
|
N/A
|
9,576
|
7,885
|
1,691
|
21.4 %
|
|
Total current
assets
|
47,911
|
|
50,132
|
N/A
|
N/A
|
47,911
|
43,231
|
4,680
|
10.8 %
|
|
Total
assets
|
63,978
|
|
72,702
|
(8,724)
|
(12.0 %)
|
63,978
|
59,710
|
4,268
|
7.1 %
|
|
Current liabilities
- Continuing operations
|
43,291
|
|
66,197
|
N/A
|
N/A
|
43,291
|
38,941
|
4,350
|
11.2 %
|
|
Current liabilities -
Liabilities related to assets held for sale
|
10,628
|
|
-
|
N/A
|
N/A
|
10,628
|
8,854
|
1,774
|
20.0 %
|
|
Total current
liabilities
|
53,919
|
|
66,197
|
N/A
|
N/A
|
53,919
|
47,795
|
6,124
|
12.8 %
|
|
Total
liabilities
|
65,943
|
|
75,854
|
(9,911)
|
(13.1 %)
|
65,943
|
59,746
|
6,197
|
10.4 %
|
|
Net debt(3) from continuing
operations
|
15,689
|
|
23,219
|
(7,530)
|
(32.4 %)
|
15,689
|
12,787
|
2,902
|
22.7 %
|
|
Backlog(4) from continuing
operations
|
30,336
|
|
33,942
|
(3,606)
|
(10.6 %)
|
30,336
|
31,156
|
(820)
|
(2.6 %)
|
|
(1)
|
See "Non-IFRS
Measures". EBITDA refers to operating income (loss) plus
depreciation and amortization.
|
|
(2)
|
See "Non-IFRS
Measures". Adjusted EBITDA refers to EBITDA plus the sum of: a)
post business acquisition expenses; b) fair value step-up of
inventory acquired as part of an acquisition; c) expenses for
litigation relating to acquisition agreements; d) expenses relating
to planned restructuring following acquisition; e) impairment of
fixed and intangible assets (including goodwill) following
acquisition; f) expenses to permanently close or relocate a
facility, shut down a line of business, eliminate positions; g)
expenses related to corporate re-organization; h) M&A expenses;
and, i) non-cash compensation.
|
|
(3)
|
See "Non-IFRS
Measures". Net debt refers to total bank indebtedness less cash and
cash equivalents.
|
|
(4)
|
See "Non-IFRS
Measures". Backlog refers to the value of unfulfilled purchase
orders placed by customers.
|
|
|
|
** Balance
Sheet as at March 31, 2024 and December 31, 2023 reflects the
reclassification of all assets and liabilities of the M&N
business line into "Assets held for sale" and "Liabilities related
to assets held for sale", respectively. Such assets and liabilities
are classified as current. Balance Sheet as at March 31, 2023 does
not reflect such reclassification, which makes the comparison
against the current quarter-end results not applicable (except for
"Total assets" and "Total liabilities").
|
A copy of the Company's unaudited interim condensed consolidated
financial statements for the three months ended March 31, 2024
and corresponding management's discussion and analysis (the
"MD&A") are available under the Company's profile on SEDAR+ at
www.sedarplus.ca.
OUTLOOK
A number of the Company's financial measures from continuing
operations in the first quarter of 2024 improved sequentially,
quarter over quarter, compared to the fourth quarter of 2023.
Revenue increased by 24% ($20.1
million compared to $16.1
million) and gross profit increased by 36% ($7.7 million compared to $5.7 million). Gross margin improved by 3.3
percentage points (38.5% compared to 35.2%). This led to a return
to positive Adjusted EBITDA of $0.5
million in the first quarter of 2024. The Embedded Antenna
and Wireless Infrastructure business lines were particularly
strong, rebounding in the first quarter of 2024 from lower sales
volumes in the fourth quarter of 2023. Despite a moderate decrease
in revenue, due to a particularly strong sales effort in the fourth
quarter of 2023, Satcom achieved higher gross profit and gross
margin, a testament to improving product mix and production
efficiencies. We expect the second quarter performance of our
continuing operations to be similarly strong. Although our business
continues to be negatively affected by the M&N business line,
its first quarter results were also an improvement over the
previous quarter.
We continue to prioritize product mix, emphasizing products that
generate higher margins and gross profit, with a view to
maintaining and growing Adjusted EBITDA. The macroeconomic
environment and the effect of high interest rates remain an issue
for our business, which, in the short-term could continue to affect
our volume of orders and revenue, as well as causing pushouts of
orders from customers. Nevertheless, we expect the recent
improvements across our operating business lines to continue in the
second quarter of 2024.
The Company is continuing its efforts to replace its revolving
credit facility with an asset-based loan, the structure of which
would be more conducive to an operating business such as ours. With
a recapitalized balance sheet as a result of the term loan being
fully repaid from net proceeds of the rights offering and private
placement of preferred shares, annual debt service costs are
materially lower, which would allow the Company to re-invest any
excess cashflow in the business.
Embedded Antenna Business Line
The Embedded Antenna business line had a very strong first
quarter of 2024, following unfavourable macro-economic conditions
in 2023, particularly in the fourth quarter, which resulted in
materially lower sales volumes, a result that was reflected
industrywide. These conditions are not likely to reoccur in 2024
and we expect to see a recovery in demand for embedded products,
including as service providers shift from Wi-Fi 6 to Wi-Fi 7.
Although we are unlikely to see the same relative improvement in
performance in the second quarter of 2024, we expect the Embedded
Antenna business line will continue to perform better in 2024 than
in 2023. Its performance depends on the ability of the home
networking, public safety and automotive markets to remain
resilient in the face of the economic pressures. The number of
active bids for 2024 projects remains at a very strong level for
the business.
Wireless Infrastructure Business Line
The Wireless Infrastructure business line also had a very strong
first quarter of 2024 compared to the fourth quarter of 2023,
building on the sales success of its higher margin multibeam and
innovative small cell antennas as well as the strong pace of
stadium and airport deployments. We expect that our new higher
margin multibeam and innovative small cell antennas will open up
new global opportunities to drive sales with wireless carriers and
third-party operators who operate wireless mobile networks for
their customers. We are continuing to expand into new markets,
particularly in areas in Europe,
where we have not previously had sales. Although we experienced
some pull-back on spending by wireless carriers and infrastructure
customers broadly in the fourth quarter of 2023, we expect to
continue to grow and take market share by focusing on our unique
competitive advantages. We also expect to see increased spending by
carriers on small cells in 2024, which will drive further volumes
for the business. Based on our current assessment, we expect
Wireless Infrastructure to show improved performance in 2024 over
2023.
Satcom Business Line
The Satcom business line continues to see consistent demand for
its products, supported by strong capital spending by its
customers.
Satcom benefited from the capital build cycles of satellite
operators and others in the Satcom ecosystem in 2023. We saw that
major programmatic opportunities continued to be resilient,
particularly for high powered amplifiers, and we expect this will
continue in 2024. We are seeing softness in the commercial lower
power market, but given our focus on higher power opportunities, we
expect the business to continue to demonstrate resiliency in 2024.
Our Genesis and Summit lines of solid-state power amplifiers are
generating sales from clients due to the improvements in
performance, monitoring, and failover they provide over our older
technology and products of our competitors. Importantly, these new
amplifiers are consistent in architecture, meaning they will allow
the business to simplify supply chain requirements over time and
thereby improve efficiencies in manufacturing.
We continue to see opportunities for growth in sales for
military and other government-related uses as many western
countries continue to maintain high levels of defense and
scientific spending. Given the technology upgrades within our
product portfolio, we expect to continue our strong sales volumes
while we work to improve our overall margin attainment.
Overall, we expect revenue and Adjusted EBITDA in 2024 will be
stronger than 2023. The Satcom business line continues to
demonstrate a strong order book with improving margins. Improving
production efficiencies in our facilities in order to address the
backlog and improve overall revenue attainment remains an important
priority, particularly in our Kirkland,
Quebec, facility. In order to alleviate some of the
production backlog in that facility, we have begun production of
high-power amplifiers in our State
College, Pennsylvania, facility.
Mobile and Network (formerly, Asia Pacific) Business Line
The M&N business line continues to face significant
challenges, particularly on the revenue side. Although its
principal customer had a strong first quarter in its smartphone
business, after suffering a contraction in 2023, it was led by a
particular model for which M&N is not an antenna supplier. In
addition, M&N was unable to benefit from another project for
its customer due to quality control issues related to another
supplier to the project.
Management has been taking steps to limit the adverse effect
this has had on the M&N business. We continue to focus on
reducing or eliminating operating and other costs while work is
done to diversify the revenue base. M&N has been awarded other
revenue-generating projects, but several have been hampered by the
adverse economic environment in the Korean market, and any
resulting benefit is not likely to be seen until the second half of
2024.
In the meantime, the Company is continuing its efforts to sell
the business.
INVESTOR CONFERENCE CALL
Baylin will hold a conference call on May
9, 2024 at 8:00 a.m. (ET) to
discuss its financial results for the three months ended
March 31, 2024. The conference call will be hosted by
Leighton Carroll, Chief Executive
Officer, and Dan Nohdomi, Chief
Financial Officer. All interested parties are invited to
participate using the dial-in details provided below.
Date:
May 9, 2024
Time:
8:00 a.m. (ET)
Dial-in Number:
888-664-6392 or 416-764-8659
Conference ID#:
02294336
Rapid Connect: To join the conference call by
phone, please use the following URL to easily register and be
connected into the conference call automatically:
https://emportal.ink/3TafiEe
Webcast:
This call is also on webcast and can be accessed at:
https://app.webinar.net/M8pVORaJ7Ka
FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release includes forward-looking information and
forward-looking statements (together, "forward-looking statements")
within the meaning of applicable securities laws.
Forward-looking statements are not statements of historical
fact. Rather, forward-looking statements are disclosure
regarding conditions, developments, events or financial performance
that we expect or anticipate may or will occur in the future
including, among other things, information or statements concerning
our objectives and strategies to achieve those objectives,
statements with respect to management's beliefs, estimates,
intentions and plans, and statements concerning anticipated future
circumstances, events, expectations, operations, performance or
results. Forward-looking statements can be identified generally by
the use of forward-looking terminology, such as "anticipate",
"believe", "could", "should", "would", "estimate", "expect",
"forecast", "indicate", "intend", "likely", "may", "outlook",
"plan", "potential", "project", "seek", "target", "trend" or "will"
or the negative or other variations of these words or other
comparable words or phrases and is intended to identify
forward-looking statements, although not all forward-looking
statements contain these words.
The forward-looking statements in this press release include
statements concerning the effect of the macro-economic environment
on our business, higher interest rates, the outlook for our
business lines, particularly M&N, and other disruptions to
their financial performance. Forward-looking statements are based
on certain assumptions and estimates made by us in light of the
experience and perception of historical trends, current conditions,
expected future developments, including projected growth in the
sales of passive and active radio frequency and satellite
communications products, and supporting services, and other factors
we believe are appropriate and reasonable in the circumstances, but
there can be no assurance that such assumptions and estimates will
prove to be correct.
Many factors could cause our actual results, level of activity,
performance or achievements or future events or developments to
differ materially from those expressed or implied by the
forward-looking statements, including the risk factors discussed in
the Company's most recent Annual Information Form, which is
available under the Company's profile on SEDAR+ at
www.sedarplus.ca. All the forward-looking statements made in this
press release are qualified by these cautionary statements and
other cautionary statements or factors in this press release. There
can be no assurance that the actual results or developments will be
realized or, even if substantially realized, 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 any forward-looking statements.
NON-IFRS MEASURES
This press release includes a number of measures that are not
prescribed by International Financial Reporting Standards ("IFRS")
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
business activities. While management of the Company believes that
non-IFRS measures provide 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 IFRS. For further information, see "Non-IFRS
Measures" on page 3 of the MD&A.
ABOUT BAYLIN
Baylin Technologies Inc. is a diversified global wireless
technology company focused on the research, design, development,
manufacture, and sale of passive and active radio frequency
products, satellite communications products, and supporting
services.
SOURCE Baylin Technologies Inc.