- Adjusted EBITDA(2) grew sequentially by almost
400%.
- Revenue and gross profit grew by 10% and 20%,
respectively.
- Baylin completed the sale of its Korean
subsidiary.
Investor Conference Call on August 8, 2024 at 8:00
a.m. ET
TORONTO, Aug. 7, 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 and six months ended
June 30, 2024. All amounts are stated in Canadian dollars
unless otherwise indicated.
"Three years ago, we started the journey to turnaround Baylin
from substantial losses to profitability," said Leighton Carroll, Baylin's Chief Executive
Officer. "We operate in intensely competitive markets and despite
negative macroeconomic challenges, Baylin has been growing quarter
over quarter. By building competitive advantage based on unique
intellectual property, by engaging the talents of our entire team,
and by delivering on a specific go to market strategy, we have seen
our business had a very solid quarter. I cannot thank the employees
of our business enough for the dedication and hard work."
SECOND QUARTER SUMMARY
Continuing Operations
- Revenue of $22.0 million in the
second quarter of 2024, an increase of $0.7
million or 3.4% compared to the second quarter of 2023. This
also represents an increase of $1.9
million or 9.9% compared to the first quarter of 2024.
Compared to the same prior year period, the increase in revenue was
primarily due to sales volume increase in the Wireless
Infrastructure business line.
- Gross profit of $9.2 million in
the second quarter of 2024, an increase of $0.7 million or 8.8% compared to the second
quarter of 2023. This also represents an increase of $1.5 million or 19.6% compared to the first
quarter of 2024. Gross margin of 41.9% in the second quarter of
2024 compared to 39.9% in the second quarter of 2023 and compared
to 38.5% in the first quarter of 2024. Compared to the same prior
year period, the higher gross margin in the second quarter of 2024
was mainly due to improved product mix. Wireless Infrastructure
revenue as a percentage of total revenue was higher in the second
quarter of 2024 and most of its products generate higher gross
margins than the other product lines.
- Adjusted EBITDA of $2.3 million
in the second quarter of 2024, an increase of $1.2 million or 116% compared to the second
quarter of 2023. This also represents an increase of $1.8 million or 394% compared to the first
quarter of 2024. Compared to the same prior year period, the
increase in the second quarter of 2024 was mainly due to
combination of higher revenue, higher gross margins and lower
operating expenses. The second quarter of 2023 had the benefit of
specific one-time government incentives which were recorded as an
offset to operating expenses in that quarter.
- Net loss of $0.1 million in the
second quarter of 2024 compared to a net income of $0.2 million in the second quarter of 2023. This
also represents an increase of $1.9
million compared to a net loss of $2.0 million in the first quarter of 2024. The
net loss in the second quarter of 2024 was primarily the net result
of an operating income of $0.8
million offset by interest and other finance expenses as
well as income tax expenses. The net income in the second quarter
of 2023 was due in part to a gain on lease termination and sale of
non-current assets in Vietnam as
well as a favourable adjustment based on the fair market value of
the convertible debentures. On a per share basis, a net loss of
$nil per share in the second quarter of 2024 compared to a net
income of $nil per share in the second quarter of 2023.
- Net debt(3) of $16.6
million at June 30, 2024, an
increase of $3.9 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 six months ended June 30, 2024.
- Backlog(4) of $32.6
million as at June 30, 2024
compared to $31.2 million as at
December 31, 2023. The increase was
mainly due to a higher level of backlog in the Wireless
Infrastructure business line as a result of an increase in demand
from wireless carriers and third-party operators. Backlog increased
to $33.1 million as at July 29, 2024 as a result of an increase in new
order intake across all business lines at the start of the third
quarter of 2024.
Discontinued Operations (representing the Mobile and Network
business line)
- Adjusted EBITDA from discontinued operations of -$0.6 million in the second quarter of 2024
compared to -$1.0 million in the
second quarter of 2023. The reduced loss in Adjusted EBITDA from
discontinued operations in the second quarter of 2024 was primarily
due to an increase in gross profit as a result of higher revenue as
well as a decrease in operating expenses in the M&N business
line compared to the prior year period.
- Net loss from discontinued operations of $1.5 million in the second quarter of 2024, which
was largely consistent with the prior year period. The net loss
from discontinued operations in the second quarter of 2024 was
mainly due to an operating loss of $1.0
million in the M&N business line. On a per share basis,
a net loss of $0.01 per share in the
second quarter of 2024 compared to a net loss of $0.02 per share in the second quarter of
2023.
RECENT DEVELOPMENTS
Products
In May 2024, Advantech Wireless
Technologies Inc. ("Advantech") received an $8.2 million order for its ultra-high power
Summit II Solid State Power Amplifier System. The order was placed
by a major US defence contractor for use in a NATO government
specific application. The Summit systems, produced by Advantech in
its Kirkland, Quebec facility,
feature a soft-fail redundant architecture based on our proprietary
CAN Bus operating system.
In July 2024, the Company's
Embedded Antenna business line received a multi-year, multi-million
dollar award for a 4G/5G antenna solution. It was selected by a US
computer networking company to provide this solution for the
networking company's mobile customer premise equipment product,
which will be available to consumers through multiple US Tier 1
carriers as well as a Tier 1 carrier outside the United States.
Sale of the Mobile and Network Business
On July 9, 2024, the Company
announced that it had entered into an agreement (the "Transfer
Agreement") with a Korean strategic acquirer, under which the
Company agreed to sell Galtronics Korea Co., Ltd. ("GTK") and
Galtronics Vietnam Company Limited ("GTV"). The Company has
completed the sale of GTK to the strategic acquirer. Subject to
receipt of required regulatory approvals, the Company expects to
complete the sale of GTV during the third quarter of 2024. Upon the
sale of GTV, the Company will no longer be in the Mobile and
Network business.
SELECTED FINANCIAL INFORMATION
The table below discloses selected financial information for the
periods indicated.
|
(in $000's except
per share amounts)
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2024
|
|
2023
|
Change
|
Change
|
2024
|
2023
|
Change
|
Change
|
|
|
$
|
|
$
|
$
|
%
|
$
|
$
|
$
|
%
|
|
|
Profit and
Loss
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
22,035
|
|
21,307
|
728
|
3.4 %
|
42,088
|
40,052
|
2,036
|
5.1 %
|
|
|
Gross profit
|
9,238
|
|
8,492
|
746
|
8.8 %
|
16,960
|
16,110
|
850
|
5.3 %
|
|
|
Gross margin
|
41.9 %
|
|
39.9 %
|
2.0 %
|
N/A
|
40.3 %
|
40.2 %
|
0.1 %
|
N/A
|
|
|
Net income (loss)
from continuing operations
|
(132)
|
|
218
|
(350)
|
N/A
|
(2,104)
|
1,082
|
(3,186)
|
N/A
|
|
|
Net loss from
discontinued operations
|
(1,457)
|
|
(1,461)
|
4
|
(0.3 %)
|
(2,243)
|
(3,491)
|
1,248
|
(35.7 %)
|
|
|
Net
loss
|
(1,589)
|
|
(1,243)
|
(346)
|
27.8 %
|
(4,347)
|
(2,409)
|
(1,938)
|
80.4 %
|
|
|
Basic and diluted
net income (loss) per share from continuing
operations
|
($0.00)
|
|
$0.00
|
($0.00)
|
N/A
|
($0.02)
|
$0.02
|
($0.04)
|
N/A
|
|
|
Basic and diluted net
loss per share from discontinued operations
|
($0.01)
|
|
($0.02)
|
$0.01
|
(50.0 %)
|
($0.01)
|
($0.05)
|
$0.04
|
(80.0 %)
|
|
|
Basic and diluted
net loss per share
|
($0.01)
|
|
($0.02)
|
$0.01
|
(50.0 %)
|
($0.03)
|
($0.03)
|
$0.00
|
0.0 %
|
|
|
EBITDA from
continuing operations
|
1,514
|
|
1,094
|
420
|
38.4 %
|
843
|
4,421
|
(3,578)
|
(80.9 %)
|
|
|
EBITDA from
discontinued operations
|
(580)
|
|
(684)
|
104
|
(15.2 %)
|
(299)
|
(1,690)
|
1,391
|
(82.3 %)
|
|
|
EBITDA(1)
|
934
|
|
410
|
524
|
> 100.0%
|
544
|
2,731
|
(2,187)
|
(80.1 %)
|
|
|
Adjusted EBITDA from
continuing operations
|
2,273
|
|
1,050
|
1,223
|
> 100.0%
|
2,733
|
2,635
|
98
|
3.7 %
|
|
|
Adjusted EBITDA from
discontinued operations
|
(580)
|
|
(968)
|
388
|
(40.1 %)
|
(623)
|
(1,676)
|
1,053
|
(62.8 %)
|
|
|
Adjusted
EBITDA(2)
|
1,693
|
|
82
|
1,611
|
> 100.0%
|
2,110
|
959
|
1,151
|
> 100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
As at
|
|
|
As at
|
As at
|
|
|
|
|
June 30,
2024
|
|
June 30,
2023
|
Change
|
Change
|
June 30,
2024
|
December
31,
2023
|
Change
|
Change
|
|
|
$
|
|
$
|
$
|
%
|
$
|
$
|
$
|
%
|
|
|
Balance Sheet and
Other**
|
|
|
|
|
|
|
|
|
|
|
|
Current assets -
Continuing operations
|
37,044
|
|
49,267
|
N/A
|
N/A
|
37,044
|
35,346
|
1,698
|
4.8 %
|
|
|
Current assets - Assets
held for sale
|
8,581
|
|
400
|
N/A
|
N/A
|
8,581
|
7,885
|
696
|
8.8 %
|
|
|
Total current
assets
|
45,625
|
|
49,667
|
N/A
|
N/A
|
45,625
|
43,231
|
2,394
|
5.5 %
|
|
|
Total
assets
|
60,993
|
|
70,643
|
(9,650)
|
(13.7 %)
|
60,993
|
59,710
|
1,283
|
2.1 %
|
|
|
Current liabilities
- Continuing operations
|
41,296
|
|
63,522
|
N/A
|
N/A
|
41,296
|
38,955
|
2,341
|
6.0 %
|
|
|
Current liabilities -
Liabilities related to assets held for sale
|
10,547
|
|
-
|
N/A
|
N/A
|
10,547
|
8,854
|
1,693
|
19.1 %
|
|
|
Total current
liabilities
|
51,843
|
|
63,522
|
N/A
|
N/A
|
51,843
|
47,809
|
4,034
|
8.4 %
|
|
|
Total
liabilities
|
64,728
|
|
72,940
|
(8,212)
|
(11.3 %)
|
64,728
|
59,746
|
4,982
|
8.3 %
|
|
|
Net debt(3) from continuing
operations
|
16,641
|
|
23,725
|
(7,084)
|
(29.9 %)
|
16,641
|
12,787
|
3,854
|
30.1 %
|
|
|
Backlog(4) from continuing
operations
|
32,603
|
|
32,275
|
328
|
1.0 %
|
32,603
|
31,156
|
1,447
|
4.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
(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
June 30, 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 June 30, 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 and six months ended
June 30, 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 second quarter of 2024 continued to improve,
quarter over quarter, compared to the first quarter of 2024.
Revenue increased by 9.9% ($22.0
million compared to $20.1
million) and gross profit increased by 19.6% ($9.2 million compared to $7.7 million). Gross margin improved by 3.4
percentage points (41.9% compared to 38.5%). This led to a stronger
positive Adjusted EBITDA of $2.3
million from continuing operations in the second quarter of
2024 compared to $0.5 million in the
first quarter of 2024. The improvement was mainly driven by the
Wireless Infrastructure business line, which showed increased
strength across all financial metrics, including revenue, gross
profit and Adjusted EBITDA. The Embedded Antenna and Satcom
business lines maintained their strong performance from the first
quarter of 2024.
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 continuing 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
results from our continuing operations to remain positive during
the third quarter and for the rest of 2024.
Embedded Antenna Business Line
The Embedded Antenna business line again had a strong second
quarter of 2024, substantially in-line with its performance in the
first quarter. The unfavourable macroeconomic conditions,
principally due to an oversupply of finished goods, that led to
lower sales volumes at the end of 2023 have not occurred this year.
Moreover, demand for a new public safety product launched in the
fourth quarter of 2023 has exceeded expectations in 2024. We expect
the Embedded Antenna business line will continue to perform
strongly for the remainder of 2024, despite expected seasonally
affected lower sales in the third quarter. Results are dependent on
the home networking, public safety and automotive markets remaining
resilient in the face of 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 had a very strong
second quarter of 2024, building on its success in the first
quarter, with a continuing high volume of sales of its higher
margin multibeam and innovative small cell antennas and further
stadium and airport deployments. We are leveraging the competitive
advantages that these products afford to 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 there remains a risk of spending
cutbacks by carriers, we expect to see further spending on small
cells in 2024, which will drive further sales volumes for the
business. Based on our current assessment, we expect the full-year
results to reflect a marked improvement over 2023, despite likely
lower revenue in the second half of 2024 compared to the first six
months.
Satcom Business Line
The Satcom business line continues to see consistent demand for
its products, supported by strong capital spending by its
customers, particularly for high powered amplifiers used in
military, government, and broadcast applications.
Major programmatic opportunities continue to be resilient,
particularly for high powered amplifiers, although awards remain
lumpy. We continue to see softness in the commercial lower power
market, particularly in the maritime and airplane sectors, but
broadcast applications remain solid. 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 gross profit 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.
Mobile and Network (formerly, Asia Pacific) Business Line
The M&N business line continues to face significant
challenges. The second quarter saw a further reduction in revenue
over the first quarter, as a result of lower sales volumes in two
of its principal customer's mobile phones for which M&N
supplies the antennas. In addition, M&N was unable to benefit
from another program opportunity for its customer due to issues
related to the ultimate finished goods producer on 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 until the divestiture is
complete.
In July 2024, the Company
announced that it had reached agreement to sell the M&N
business (see "Recent Developments - Sale of the Mobile and Network
Business").
INVESTOR CONFERENCE CALL
Baylin will hold a conference call on Thursday, August 8, 2024 at 8:00 a.m. (ET) to discuss its financial results
for the three and six months ended June 30, 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:
August 8, 2024
Time:
8:00 a.m. (ET)
Dial-in Number:
(+1)
800-836-8184 or (+1) 289-819-1350
Conference ID#:
81373
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/4cNGhgf
Webcast:
This call is also on webcast and can be accessed at:
https://app.webinar.net/4ZlXmaEmAeO
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 outlook for our business and the expected
completion of the sale of GTV. 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 statement.
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.
For further information, please visit www.baylintech.com.
SOURCE Baylin Technologies Inc.
