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Firan Technology Group Corporation ("FTG") Announces First Quarter 2022 Financial Results

T.FTG

TORONTO, April 13, 2022 (GLOBE NEWSWIRE) -- Firan Technology Group Corporation (TSX: FTG) today announced financial results for the first quarter 2022.

  • FTG achieved a fifth sequential quarter of increased bookings as the aerospace industry recovers from the COVID-19 pandemic.
  • First quarter bookings of $26.0M are up 10% over Q4 2021 and up 43% over Q1 2021 and is the best bookings quarter since Q4 2019.
  • FTG has maintained strong liquidity with net cash on the balance sheet of $16.2M, after investments in the quarter of $2.1M for capital expenditures and $1.4M for research and development.
  • Sales for Q1 2022 were $20.5M, which is an increase of 7.9% over Q1 2021.

First Quarter Results: (three months ended March 4, 2022 compared with three months ended March 5, 2021)

Q1 2022
Q1 2021
Sales $20,461,000 $18,970,000
Gross Margin 4,242,000 3,662,000
Gross Margin (%) 20.7% 19.3%
Operating Earnings (1): 1,016,000 686,000
• Net R&D Investment 1,392,000 1,382,000
• R&D Tax Credits (177,000) (127,000)
• Foreign Exchange Loss 169,000 618,000
• Amortization of Intangibles 31,000 89,000
• Forgiveness of debt - (1,336,000)
Net (Loss) Earnings before Tax (399,000) 60,000
• Income Tax 332,000 487,000
• Non-controlling Interests 2,000 (27,000)
Net (Loss) Earnings After Tax ($733,000) ($400,000)
(Loss) Earnings per share
- basic ($0.03) ($0.02)
- diluted ($0.03) ($0.02)
Government Assistance included in the Periods:
• Forgiveness of Debt - 1,336,000
• Other Government Subsidies 257,000 1,083,000
Total Government Assistance included in the Periods 257,000 2,419,000

(1) Operating Earnings is not a measure recognized under International Financial Reporting Standards (“IFRS”). Management believes that this measure is important to many of the Corporation’s shareholders, creditors and other stakeholders.The Corporation’s method of calculating Operating Earnings may differ from other corporations and accordingly may not be comparable to measures used by other corporations.


Business Highlights

FTG accomplished many goals in Q1 2022 that continue to improve the Corporation and position it for the future, including:

  • Achieved a 1.27:1 book-to-bill ratio for Q1 2022
  • Booked an order valued at $1.3M for Simulator products on a military program with delivery expected in the 2nd half of 2022
  • Total backlog as of the end of Q1 2022 is $45.1M, which is up 26% from Q1 2021
  • Improved sales compared to Q1 2021 and sequentially from Q4 2021 despite numerous business disruptions including high COVID-related employee absence rate at all FTG sites, government-mandated production suspension in Tianjin during the Winter Olympics, winter storm at the Circuits Fredericksburg site and a fire at the Circuits Chatsworth facility

Overall for FTG, sales increased by $1.5M or 7.9% from $19.0M in Q1 2021 to $20.5M in Q1 2022. The increase in sales reflects a partial recovery of the commercial aerospace market. The market is improving for both domestic and international air travel as governments reduce travel restrictions.

The Circuits Segment sales in Q1 2022 were up $2.2M, or 18.3% versus Q1 2021. All sites were up but the largest percentage increases were at the Circuits Toronto and Tianjin sites, which have a high concentration of Commercial Aerospace customers. Shipments from the Circuits segment continued to be negatively impacted by COVID-related employee absences in all locations and a winter storm impacting the Circuits Fredericksburg site.

The Aerospace Segment sales in Q1 2022 decreased by $0.7M, or 10.1% versus Q1 2021. Lower sales were driven by a reduction in Simulator product revenue of $2.4M in Q1 2022. Excluding the Simulator product line, sales in the Aerospace segment increased by $1.7 million or 38.7% in Q1 2022 relative to Q1 2021, with increased shipments to commercial aerospace customers, primarily from the Toronto and Tianjin sites. The Chatsworth site also recorded increased sales, primarily to military customers. Shipments from the Aerospace segment continued to be negatively impacted by COVID-related employee absences in all locations and production suspension imposed in Tianjin during the Winter Olympics.

Gross margins in Q1 2022 were $4.2M or 20.7% compared to $3.7M or 19.3% in Q1 2021. The increase in gross margin is the result of increased operating leverage on higher sales volumes, operational improvements and reduced provisions for obsolete inventory. Government subsidies included in cost of sales for Q1 2022 were $0.3M as compared to $1.0M in Q1 2021.

Trailing twelve month (TTM) Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG was $9.1M.

The following table reconciles EBITDA(2) to the net earnings for the trailing 12 months as at March 4, 2022.

Trailing 12 Months
Net earnings to equity holders of FTG (77,000)
Add:
Interest, accretion 534,000
Income taxes 2,253,000
Depreciation/Amortization &Stock Comp 6,346,000
EBITDA $9,056,000

(2) EBITDA are not measures recognized under International Financial Reporting Standards (“IFRS”). Management believes that these measures are important to many of the Corporation’s shareholders, creditors and other stakeholders.The Corporation’s method of calculating EBITDA may differ from other corporations and accordingly may not be comparable to measures used by other corporations.


Net loss after tax at FTG in Q1 2022 was $0.7M or $0.03 per diluted share compared to a net loss of $0.4M or $0.02 per diluted share in Q1 2021. The impact of increased sales and gross margin in Q1 2022 was more than offset by reduced COVID-19 related government subsidies. In Q1 2022, government subsidies were limited to $0.3M from the US Department of Transportation AMJP program, whereas Q1 2021 included $2.4M of wage and rent subsidies in Canada and PPP loan forgiveness in the U.S. Excluding COVID-19 related government subsidies, net loss after tax from FTG’s operations improved by $1.5M in Q1 2022 compared to Q1 2021.

The Circuits Segment net earnings before corporate and interest and other costs was $0.3M in Q1 2022 compared to $0.6M in Q1 2021. The increase in sales was the most significant impact on the segment profitability offset by reduced subsidies from the US and Canadian governments. Q1 2022 included $0.3M of government subsidies whereas Q1 2021 included $1.3M. Excluding the effect of government subsidies, net earnings from the Circuits Segment increased by $0.7M.

The Aerospace Segment net earnings before corporate and interest and other costs was $0.1M in Q1 2022 compared to $0.3M in Q1 2021. Excluding the Simulator product line, increased sales contributed to increased segment profitability, however this was offset by reduced sales of Simulator products and reduced levels of subsidies from the US and Canadian governments. The Aerospace Segment received no government subsidy in Q1 2022 whereas Q1 2021 included $1.1M. Excluding the effect of government subsidies, net earnings from the Aerospace Segment increased by $0.9M.

As at March 4, 2022, the Corporation’s net working capital was $38.8M, compared to $40.0M at year-end in 2021.

FTG ended Q1 2022 with $16.2M in net cash as compared to $17.9M at the end of 2021. Capex investment was robust at $2.1M for the current quarter. This investment is part of our initiative to leverage our strong balance sheet to improve and grow across FTG.

The Corporation will host a live conference call on Thursday, April 14, 2022 at 8:30am (Eastern) to discuss the results of the first quarter of 2022.

Anyone wishing to participate in the call should dial 647-427-2311 or 1-866-521-4909 and identify that you are calling to participate in the FTG conference call. Conference ID is 5716718. The Chairperson is Mr. Brad Bourne. A replay of the call will be available until May 14, 2022 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 416-621-4642 or 1-800-585-8367, Conference ID 5716718.

ABOUT FIRAN TECHNOLOGY GROUP CORPORATION

FTG is an aerospace and defense electronics product and subsystem supplier to customers around the globe. FTG has two operating units:

FTG Circuits is a manufacturer of high technology, high reliability printed circuit boards. Our customers are leaders in the aviation, defense, and high technology industries. FTG Circuits has operations in Toronto, Ontario, Chatsworth, California, Fredericksburg, Virginia and a joint venture in Tianjin, China.

FTG Aerospace manufactures and repairs illuminated cockpit panels, keyboards and sub-assemblies for original equipment manufacturers of aerospace and defense equipment. FTG Aerospace has operations in Toronto, Ontario, Chatsworth, California and Tianjin, China.

The Corporation's shares are traded on the Toronto Stock Exchange under the symbol FTG.

FORWARD-LOOKING STATEMENTS

This news release contains certain forward-looking statements. These forward-looking statements are related to, but not limited to, FTG’s operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains words such as “anticipate”, “believe”, “expect”, “plan” or similar words suggesting future outcomes. Such statements are based on the current expectations of management of the Corporation and inherently involve numerous risks and uncertainties, known and unknown, including economic factors and the Corporation’s industry, generally. The preceding list is not exhaustive of all possible factors. Such forward-looking statements are not guarantees of future performance and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Corporation. The reader is cautioned to consider these and other factors carefully when making decisions with respect to the Corporation and not place undue reliance on forward-looking statements. Other than as may be required by law, FTG disclaims any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

For further information please contact:

Bradley C. Bourne, President and CEO
Firan Technology Group Corporation
Tel: (416) 299-4000 x314
bradbourne@ftgcorp.com

Jamie Crichton, Vice President and CFO
Firan Technology Group Corporation
Tel:(416) 299-4000 x264
jamiecrichton@ftgcorp.com

Additional information can be found at the Corporation’s website www.ftgcorp.com


FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Financial Position
(Unaudited) March 4, November 30,
(in thousands of Canadian dollars) 2022 2021
ASSETS
Current assets
Cash and cash equivalents $ 18,210 $ 20,196
Accounts receivable 14,352 16,014
Contract assets 848 818
Inventories 17,316 16,953
Income tax recoverable 96 1
Prepaid expenses and other 3,062 3,162
53,884 57,144
Non-current assets
Plant and equipment, net 12,028 11,078
Right-of-use assets 9,715 10,098
Investment tax credits recoverable 248 327
Intangible and other assets, net 774 805
Total assets 76,649 79,452
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 11,996 $ 13,803
Provisions 610 545
Contract liabilities 156 335
Current portion of bank debt 936 935
Current portion of lease liabilities 1,420 1,553
15,118 17,171
Non-current liabilities
Bank debt 1,072 1,327
Lease liabilities 8,914 9,123
Deferred tax payable 824 789
Total liabilities 25,928 28,410
Equity
Retained earnings $ 18,658 $ 19,391
Accumulated other comprehensive income 891 478
19,549 19,869
Share capital
Common Shares 21,881 21,881
Contributed surplus 8,345 8,352
Total equity attributable to FTG's shareholders 49,775 50,102
Non-controlling interest 946 940
Total equity 50,721 51,042
Total liabilities and equity 76,649 79,452


FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Loss
Three months ended
(Unaudited) March 4, March 5,
(in thousands of Canadian dollars, except per share amounts) 2022 2021
Sales $ 20,461 $ 18,970
Cost of sales
Cost of sales 14,734 13,865
Depreciation of plant and equipment 1,128 1,077
Depreciation of right-of-use assets 357 366
Total cost of sales 16,219 15,308
Gross margin 4,242 3,662
Expenses
Selling, general and administrative 3,018 2,691
Research and development costs 1,392 1,382
Recovery of investment tax credits (177 ) (127 )
Depreciation of plant and equipment 57 63
Depreciation of right-of-use assets 10 17
Amortization of intangible assets 31 89
Interest expense on bank debt, net 9 39
Accretion on lease liabilities 108 126
Stock based compensation 24 40
Foreign exchange loss 169 618
Forgiveness of debt - (1,336 )
Total expenses 4,641 3,602
Earnings (loss) before income taxes (399 ) 60
Current income tax expense 296 461
Deferred income tax expense 36 26
Total income tax expense 332 487
Net loss $ (731 ) $ (427 )
Attributable to:
Non-controlling interest $ 2 $ (27 )
Equity holders of FTG $ (733 ) $ (400 )
Loss per share, attributable to the equity holders of FTG
Basic $ (0.03 ) $ (0.02 )
Diluted $ (0.03 ) $ (0.02 )


FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
Three months ended
(Unaudited) March 4, March 5,
(in thousands of Canadian dollars) 2022 2021
Net loss $ (731 ) $ (427 )
Other comprehensive earnings (loss) to be reclassified to
net earnings (loss) in subsequent periods:
Change in foreign currency translation adjustments (60 ) (428 )
Net gain (loss) on valuation of derivative financial instruments
designated as cash flow hedges 637 1,060
Deferred income taxes on change in valuation of
derivative financial instruments designated as cash flow hedges (160 ) (265 )
417 367
Total comprehensive loss $ (314 ) $ (60 )
Attributable to:
Equity holders of FTG $ (320 ) $ (22 )
Non-controlling interest $ 6 $ (38 )


FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Changes in Equity
Three months ended March 4, 2022 Attributed to the equity holders of FTG
Accumulated
other Non-
(Unaudited) Common Retained Contributed comprehensive
controlling Total
(in thousands of Canadian dollars) shares earnings surplus income Total interest equity
Balance, November 30, 2021 $ 21,881 $ 19,391 $ 8,352 $ 478 $ 50,102 $ 940 $ 51,042
Net income (loss) - (733 ) - - (733 ) 2 (731 )
Stock-based compensation - - (7 ) - (7 ) - (7 )
Other comprehensive income - - - 413 413 4 417
Balance, March 4, 2022 $ 21,881 $ 18,658 $ 8,345 $ 891 $ 49,775 $ 946 $ 50,721
Three months ended March 5, 2021 Attributed to the equity holders of FTG
Accumulated
other Non-
(Unaudited) Common Retained Contributed comprehensive controlling Total
(in thousands of Canadian dollars) shares earnings surplus income Total interest equity
Balance, November 30, 2020 $ 21,881 $ 19,135 $ 8,303 $ 958 $ 50,277 $ 1,011 $ 51,288
Net loss - (400 ) - - (400 ) (27 ) (427 )
Stock-based compensation - - 40 - 40 - 40
Other comprehensive income (loss) - - - 378 378 (11 ) 367
Balance, March 5, 2021 $ 21,881 $ 18,735 $ 8,343 $ 1,336 $ 50,295 $ 973 $ 51,268


FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
Three months ended
(Unaudited) March 4, March 5,
(in thousands of Canadian dollars) 2022 2021
Net inflow (outflow) of cash related to the following:
Operating activities
Net loss $ (731 ) $ (427 )
Items not affecting cash and cash equivalents:
Stock-based compensation 24 40
Loss on disposal of plant and equipment - 1
Effect of exchange rates on U.S. dollar bank debt (30 ) (189 )
Depreciation of plant and equipment 1,185 1,140
Depreciation of right-of-use assets 367 383
Amortization of intangible assets 31 89
Amortization, other 6 12
Investment tax credits/deferred income taxes 236 231
Accretion on lease liabilities 108 126
Forgiveness of debt - (1,336 )
Net change in non-cash operating working capital (283 ) 330
913 400
Additions to plant and equipment (2,109 ) (378 )
Recovery of contract and other costs 3 10
Additions to deferred financing costs - (8 )
(2,106 ) (376 )
Net cash flow from operating and investing activities (1,193 ) 24
Financing activities
Repayments of bank debt (231 ) (232 )
Lease liability payments (427 ) (452 )
(658 ) (684 )
Effects of foreign exchange rate changes on cash flow (135 ) (299 )
Net decrease in cash flow (1,986 ) (959 )
Cash and cash equivalents, beginning of the period 20,196 19,032
Cash and cash equivalents, end of period $ 18,210 $ 18,073
Disclosure of cash payments
Payment for interest $ 25 $ 42
Payments for income taxes $ 248 $ 197

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