ARC Group Worldwide Reports Solid Performance with Fiscal Year Results

Rhea-AI Summary

ARC Group Worldwide reported fiscal year 2021 results with net sales reaching $62.2 million, up 28.1% year-over-year. Gross profit increased to $14.1 million, a 106.8% rise, leading to a gross margin of 22.6%. Operating expenses decreased by 13.6% to $7.3 million, while income from continuing operations surged to $6.8 million from a loss of $1.6 million a year ago. EBITDA also saw a considerable increase, climbing 176% to $12.3 million. The company noted a strong performance in the defense and firearms sector despite challenges in the automotive and aerospace industries.

Positive

• Net sales increased by 28.1% to $62.2 million.
• Gross profit rose 106.8% to $14.1 million, enhancing gross margin to 22.6%.
• Operating expenses decreased by 13.6% to $7.3 million.
• Income from continuing operations rebounded to $6.8 million from a prior loss.
• EBITDA increased by 176% to $12.3 million.

Negative

• Automotive sector affected by ongoing chip shortages.
• Aerospace industry facing softness due to large OEM destocking.

DELAND, FL / ACCESSWIRE / December 6, 2021 / ARC Group Worldwide, Inc. ("ARC" or the "Company"), a leading global provider of advanced manufacturing, today announces financial results for fiscal year 2021, ended June 30, 2021.

Fiscal Year Results

• Net sales of $62.2 million, up 28.1% from the prior-year period;
• Gross profit of $14.1 million, up 106.8% from the prior-year period;
• Gross margin of 22.6%, up 860 basis points from the prior-year period.
• Operating expenses of $7.3 million, down 13.6% from the prior-year period;
• Income from continuing operations of $6.8 million, as compared to operating loss of $1.6 million in the prior-year period;
• Interest and financing costs of $2.0 million, down 43.1% from the prior-year period;
• EBITDA was $12.3 million; up 176% from the prior-year period;
• Adjusted EBITDA was $12.5 million, up 163% from the prior-year period. Adjusted EBITDA is a non-GAAP financial measure, which is reconciled to the most directly comparable GAAP financial measure and more fully defined in the enclosed table.

Prior year financials include the results of ARC Metal Stamping, LLC ("AMS"), which was divested in December 2019 and are presented as discontinued operations.

Financial Summary

The following analysis is performed over Sales, Gross Profit, and EBITDA from Continuing Operations for the comparative periods identified unless otherwise noted.

Net sales were $62.2 million, compared to $48.5 million in the prior-year period. The increase in revenue was primarily driven by strength in the defense and firearms sector. Over the year the business saw a significant increase in full turnkey assembly components, further bolstering its revenue position. The increase in sales was offset by slower than expected COVID-19 related recoveries in the automotive, aerospace and medical industries. The automotive sector has also been negatively impacted by chip shortages that has continued to hurt the entire automotive supply chain. Aerospace continues to remain soft as large OEM destocking is occurring. Most aerospace industry intelligence is indicating an FY22-FY23 return to normalcy. Medical backlog levels were nearing pre-COVID levels toward the end of FY21, showing positive signs in that industry.

Gross profit was $14.1 million, compared to $6.8 million in the prior-year period. Gross profit increases for the year were primarily driven by increases in operational productivity and proactive cost reduction measures implemented to balance costs with specific industry performance. The company overcame high volatility in many of its major industries through business agility and decisive actions.

EBITDA was $12.3 million, compared to $4.4 million in the prior-year period. The increase was due to the upturn in overall sales due to global uncertainty combined with the aforementioned cost control and productivity gains impacting both Cost of Sales and SG&A expense.

Mr. Jed Rust, CEO of ARC Group Worldwide, said, "I am pleased to report that ARC strengthened its position over the past year as a healthy global provider of metal and plastic injection molding. The team's efforts on operational excellence combined with a strategy of fiscal responsibility and debt reductions allows us to again thrive in our core business."

GAAP to Non-GAAP Reconciliation

The Company uses Adjusted EBITDA, a Non-GAAP financial measure as defined by the SEC, as a supplemental profitability measure because management finds it useful to understand and evaluate results, excluding the impact of non-cash depreciation and amortization charges, stock based compensation expenses, and nonrecurring expenses and outlays, prior to consideration of the impact of other potential sources and uses of cash, such as working capital items. This calculation may differ in method of calculation from similarly titled measures used by other companies and may be different than the EBITDA calculation used by our lenders for purposes of determining compliance with financial covenants. This Non-GAAP measure may have limitations when understanding performance as it excludes the financial impact of transactions such as interest expense necessary to conduct the Company's business and therefore is not intended to be an alternative to financial measures prepared in accordance with GAAP. The Company has not quantitatively reconciled its forward looking Adjusted EBITDA target to the most directly comparable GAAP measure because such items such as amortization of stock-based compensation and interest expense, which are specific items that impact these measures, have not yet occurred, are out of the Company's control, or cannot be predicted. For example, quantification of stock-based compensation is not possible as it requires inputs such as future grants and stock prices, which are not currently ascertainable.

Adjusted EBITDA from Continuing Operations, Adjusted Earnings, and Adjusted Earnings Per Share are non-GAAP financial measures. Adjusted EBITDA Margin from Continuing Operations is calculated by dividing EBITDA from Continuing Operations by sales.

The reconciliation to GAAP is as follows (dollars in thousands):

			June 30, 2021				June 30, 2020
Net Income/(Loss)			4,617				(5,287	)
Interest expense, net			2,025				3,556
Income taxes			175				(138	)
Depreciation and amortization			5,437				6,114
Stock based compensation			218				285
Adjustment to exclude Loss from Discontinued Operations			-				197
Adjusted EBITDA from Continuing Operations			12,472				4,727
Adjusted EBITDA Margin from Continuing Operations			20.1	%			9.7	%
Net Income/(Loss)			4,617				(5,287	)
Adjustment to Exclude Loss from Discontinued Operations, net of tax			-				197
Adjusted Earnings, Continuing Operations			4,617				(5,090	)
Adjusted Earnings Per Share, Continuing Operations			0.19				(0.22	)
Weighted Average Common Shares Outstanding
Basic			23,886,481				23,469,268
Diluted			24,626,074				23,469,268

About ARC Group Worldwide, Inc.

ARC Group Worldwide, Inc. (OTCM: ARCW) is a leading global advanced manufacturing service provider. Founded in 1987, the Company offers its customers a compelling portfolio of advanced manufacturing technologies and cutting-edge capabilities to improve the efficiency of traditional manufacturing processes and accelerate their time to market. In addition to being a world leader in metal injection molding, ARC has significant expertise in prototyping, advanced tooling, automation, machining, plastic injection molding, lean manufacturing, and robotics. ARC's mission is to bring innovation and technology to manufacturing. Learn more at arcw.com.

Forward Looking Statements

This release includes certain forward-looking statements and projections of ARC Group Worldwide, Inc. Such statements are subject to risks and uncertainties that could cause results to differ materially from the Company's expectations. While the Company makes these statements in good faith, neither the Company nor its management can guarantee that anticipated future results will be achieved. The Company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the Company, whether as a result of new information, future events, or otherwise. All forward-looking statements attributable to the Company or persons acting on the Company's behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

ARC Group Worldwide, Inc.

Consoidated Statements of Operations
(in thousands, except for share and per share amounts)

		Year ended June 30,
		2021				2020
Sales		$	62,157			$	48,526
Cost of sales			48,093				41,724
Gross profit			14,064				6,802
Selling, general and administrative			7,288				8,436
Income/(loss) from operations			6,776				(1,634	)
Other expense, net			41				(38	)
Interest expense, net			(2,025	)			(3,556	)
Income/(loss) before income taxes			4,792				(5,228	)
Income tax (expense) benefit			(175	)			138
Net income/(loss) from continuing operations			4,617				(5,090	)
Loss on sale of subsidiaries and loss from discontinued operations, net of tax			-				(197	)
Net income/(loss)		$	4,617			$	(5,287	)
Net income/(loss) per common share, basic and diluted:
Continuing operations		$	0.19			$	(0.22	)
Discontinued operations		$	-			$	(0.01	)
ARC Group Worldwide, Inc.		$	0.19			$	(0.23	)
Weighted average common shares outstanding:
Basic			23,886,481				23,469,268
Diluted			24,626,074				23,469,268

ARC Group Worldwide, Inc.

Consoidated Statements of Balance Sheets
(in thousands, except for share and per share amounts)

		As of June 30,
		2021				2020
ASSETS
Current assets:
Cash		$	2,517			$	3,942
Accounts receivable, net			7,260				5,876
Inventories, net			7,042				5,530
Prepaid expenses and other current assets			2,970				2,410
Total current assets			19,789				17,758
Property and equipment, net			22,769				22,198
Right of use assets, net			756				1,869
Goodwill			6,412				6,412
Intangible assets, net			4,579				6,012
Other			167				32
Total assets		$	54,472			$	54,281
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	4,708			$	2,804
Accrued expenses and other current liabilities			2,130				3,048
Deferred revenue			893				14
Current portion of long-term debt, net of unamortized financing costs			4,413				6,806
Operating lease liability, current portion			71				695
Finance lease obligation, current portion			874				836
Accrued buyer obligations			-				272
Total current liabilities			13,089				14,475
Long-term debt, net of current portion and net of unamortized financing costs			21,627				23,991
Operating lease liability, net of current portion			716				1,188
Finance lease obligation, net of current portion			9,732				10,486
Other long-term liabilities			95				168
Total liabilities			45,259				50,308
Commitments and contingencies (Note 12)
Stockholders' Equity:
Common stock, $0.0005 par value, 225,000,000 shares authorized; 24,486,172 and 23,556,843 shares issued, and 24,477,771 and 23,548,442 shares issued and outstanding at June 30, 2021,"and June 30, 2020, respectively			13				12
Treasury stock, at cost; 8,401 shares at June 30, 2021 and June 30, 2020			(94	)			(94	)
Additional paid-in capital			43,226				42,468
Accumulated deficit			(33,726	)			(38,343	)
Accumulated other comprehensive loss			(206	)			(70	)
Total stockholders' equity			9,213				3,973
Total liabilities and stockholders' equity		$	54,472			$	54,281

ARC Group Worldwide, Inc.

Consolidated Statements of Cash Flows (in thousands)

		For the Years ended June 30,
		2021				2020
Cash flows from operating activities:
Net income/(loss)		$	4,617			$	(5,287	)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization			5,437				6,114
Share-based compensation expense			218				285
Amortization of deferred financing costs			152				406
(Gain)/loss on sale of assets			(19	)			84
Loss on sale of subsidiaries			-				153
Bad debt expense and other			11				43
Inventory reserve expense			(255	)			(234	)
Deferred income taxes			47				24
Changes in operating assets and liabilities:
Accounts receivable			(1,588	)			2,895
Inventory			(1,257	)			2,660
Prepaid expenses and other assets			(695	)			(175	)
Accounts payable			1,904				(5,087	)
Accrued expenses and other liabilities			(769	)			1,272
Deferred revenue			880				(13	)
Net cash provided by operating activities			8,683				3,140
Cash flows from investing activities:
Purchases of property and equipment			(3,855	)			(1,198	)
Proceeds from sale of assets			21				-
Proceeds from sale leaseback			-				10,000
Proceeds from sale of subsidiary			-				10,500
Net cash (used in)/provided by investing activities			(3,834	)			19,302
Cash flows from financing activities:
Proceeds from debt issuance			47,769				33,859
Repayments of long-term debt, finance and capital lease obligations			(53,362	)			(52,554	)
Payments of deferred loan costs related to new financings			(608	)			-
Issuance of common stock under employee stock purchase plan and exercise of stock options			-				24
Net cash used in financing activities			(6,201	)			(18,671	)
Effect of exchange rates on cash			(73	)			(92	)
Net (decrease)/increase in cash			(1,425	)			3,679
Cash, beginning of year			3,942				263
Cash, end of year		$	2,517			$	3,942
Supplemental disclosures of cash flow information:
Cash paid for interest		$	2,404			$	1,059
Cash paid for income taxes, net of refunds		$	3			$	6
Non-cash investing and financing activities:
Equipment acquired under finance leases and debt		$	513			$	133
Subordinated debt exchanged for redeemable preferred stock		$	17,925			$	-

Contact:

Investor Relations
Phone: (303)467-5236
Email: InvestorRelations@arcw.com

SOURCE: ARC Group Worldwide, Inc.

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FAQ

What were ARC Group's net sales for fiscal year 2021?

ARC Group reported net sales of $62.2 million for fiscal year 2021.

How did gross profit change for ARC Group in fiscal year 2021?

Gross profit for ARC Group increased by 106.8% to $14.1 million in fiscal year 2021.

What is the EBITDA for ARC Group in fiscal year 2021?

ARC Group's EBITDA for fiscal year 2021 was $12.3 million, reflecting a 176% increase.

What were the main challenges faced by ARC Group in fiscal year 2021?

ARC Group faced challenges in the automotive sector due to chip shortages and softness in the aerospace industry.

How did operating expenses perform for ARC Group in 2021?

Operating expenses decreased by 13.6% to $7.3 million for ARC Group in fiscal year 2021.