SigmaTron International, Inc. Reports Financial Results For the Second Quarter of Fiscal 2025

Rhea-AI Summary

SigmaTron International (NASDAQ: SGMA) reported financial results for Q2 FY2025. Revenue decreased 24% to $74.7 million compared to $98.7 million in the prior year. The company recorded a net loss of $9.5 million, with a loss per share of $1.55. For the six-month period, revenue fell 19% to $159.5 million, with a net loss of $12.8 million.

The quarter included $3.3 million in expenses related to debt modification and financing costs. Despite challenges, the company reported an operating profit in October, showing positive impact from restructuring efforts. SigmaTron completed a sale/leaseback of its Elk Grove Village property, expecting to report a one-time capital gain of approximately $7 million in Q3. Management expects current depressed revenue levels to continue through Q3, but anticipates improved conditions in calendar 2025.

Positive

• Operating profit achieved in October 2024
• Sale/leaseback transaction completed with expected $7 million capital gain
• Restructuring efforts showing significant impact
• Inventory reduction progress with significant gains expected in Q3

Negative

• Q2 revenue declined 24% to $74.7 million
• Net loss of $9.5 million in Q2
• Six-month revenue decreased 19% to $159.5 million
• $3.3 million in debt modification and financing expenses
• Continued soft revenue expected in Q3

Insights

Financial Analyst

The Q2 FY2025 results reveal significant challenges for SigmaTron. Revenue declined 24% to $74.7M, with a concerning net loss of $9.5M. The sequential revenue drop from $84.8M in Q1 to $74.7M in Q2 signals persistent market weakness. The $3.3M in debt modification expenses and deferred financing costs further strained profitability.

The sale-leaseback transaction of the Elk Grove Village property is a strategic move to strengthen the balance sheet, expected to generate a $7M capital gain in Q3. This transaction demonstrates management's commitment to deleveraging but also indicates potential cash flow pressures. The engagement of Lincoln International suggests possible strategic alternatives being explored.

The October operating profit amid restructuring efforts shows early signs of cost management effectiveness, but sustained revenue weakness remains a primary concern. The inventory reduction initiative, while showing modest progress, will be important for working capital management in the coming quarters.

Supply Chain Analyst

The electronic component market dynamics have created a complex situation. Previous supply chain volatility led to customer overordering, resulting in inventory buildup that's now being worked through. This correction phase has significantly impacted SigmaTron's order book and revenue stream.

The company's assertion that excess inventory is largely consumed suggests a potential inflection point in 2025. However, the immediate outlook remains challenging, with Q3 expected to show continued weakness due to seasonal factors in North America and Asia. The anticipated improvement in customer demand will likely be gradual, requiring careful inventory management and operational efficiency to bridge the transition period.

ELK GROVE VILLAGE, Ill., Dec. 20, 2024 (GLOBE NEWSWIRE) -- SigmaTron International, Inc. (NASDAQ: SGMA), an electronic manufacturing services company (the “Company”), today reported revenues and earnings for the fiscal quarter ended October 31, 2024.

For the three month period ended October 31, 2024, revenues decreased $24 million, or 24 percent, to $74.7 million compared to $98.7 million for the same quarter in the prior year. Net income/(loss) for the three month period ended October 31, 2024 was a loss of $9.5 million compared to break even for the same period in the prior year. Approximately $3.3 million of expenses were recorded during the second quarter related to debt modification, expensing of deferred financing costs and lender warrants after remeasurement. Basic and diluted income/(loss) per share for the three month period ended October 31, 2024 was a loss of $1.55, compared to $0.00 income per share for the same period in the prior year.

For the six month period ended October 31, 2024, revenues decreased $37.3 million, or 19 percent, to $159.5 million, compared to $196.8 million for the same period in the prior year. Net income/(loss) for the six month period ended October 31, 2024, was a net loss of $12.8 million, compared to net income of $0.3 million for the same period in the prior year. Approximately $3.3 million of expenses were recorded during the second quarter related to debt modification, expensing of deferred financing costs and lender warrants after remeasurement. Basic and diluted income/(loss) per share for the six month period ended October 31, 2024 was a loss of $2.08, compared to $0.05 income per share for the same period in the prior year.

Commenting on SigmaTron International Inc.’s second quarter fiscal 2025 results, Gary R. Fairhead, Chief Executive Officer and Chairman of the Board, said “Unfortunately the softness we’ve seen in our revenue stream has continued during the second quarter. Sequentially, our first quarter for fiscal 2025 revenue was $84.8 million and for the second quarter, our revenue was $74.7 million. We currently expect the depressed revenue levels to continue for our third fiscal quarter, in part because of the holidays in December for North America and at the end of January in Asia. As you would expect, this level of revenue resulted in another loss for the second quarter, which included a non-cash charge for deferred financing and warrant expenses that totaled approximately $3.3 million.

On a positive note, the Company reported an operating profit in October, demonstrating that our restructuring efforts are now showing a significant impact. We continue to right-size our Company offering significant upside for the operations. The softness we continue to encounter was tied to the general economy and exacerbated by the supply chain volatility in the electronic component marketplace, with customers having overordered in the recent past because of the uncertainty related to acquiring certain components for the electronic assemblies. We believe that the excess inventory that was the result of this behavior has in large part been consumed, which should lead to overall demand increasing in 2025.

 “In the short term, we continue to see soft revenue in terms of our backlog. However, most of our customers are starting to indicate that they view calendar 2025 as a stronger and growing economy and expect the current trend to have bottomed out. We have seen this with several customers where some modest orders have been pulled in and there has been increased activity with new opportunities. It will still take a while to get to where we want to be but at least the current trend appears to be positive after the third quarter. In addition to right-sizing the Company, we have continued to remain focused on reducing inventory further. We made modest progress in that area in the second quarter, but we fully expect to see significant gains in our reduction efforts during the third quarter.

 “In our first quarter press release, I also mentioned that we were focused on activities to de-lever our balance sheet. I’m pleased to announce that on December 13, 2024, SigmaTron entered into a sale/leaseback of our Elk Grove Village property. We have signed a three-year lease with two one-year options on the property. From an accounting perspective, not only have we reduced our bank debt, but we will have a one-time capital gain of approximately $7 million to report in our third quarter results. We continue to look at other options for the Company strategically, with the assistance of Lincoln International. We continue to enjoy good relationships with our customers and supply chain and expect that to continue as we continue to go through the process.”

About SigmaTron International, Inc.

Headquartered in Elk Grove Village, Illinois, SigmaTron International, Inc. operates in one reportable segment as an independent provider of electronic manufacturing services (“EMS”). The EMS segment includes printed circuit board assemblies, electro-mechanical subassemblies and completely assembled (box-build) electronic products. The Company and its wholly-owned subsidiaries operate manufacturing facilities in Elk Grove Village, Illinois; Acuna, Chihuahua, and Tijuana Mexico; Union City, California; Suzhou, China; and Biên Hòa City, Vietnam. In addition, the Company maintains an International Procurement Office and Compliance and Sustainability Center in Taipei, Taiwan. The Company also provides design services in Elk Grove Village, Illinois, U.S.

Forward-Looking Statements

Note: This press release contains forward-looking statements. Words such as “continue,” “anticipate,” “will,” “expect,” “believe,” “plan,” and similar expressions identify forward-looking statements. These forward-looking statements are based on the current expectations of the Company. Because these forward-looking statements involve risks and uncertainties, the Company’s plans, actions and actual results could differ materially. Such statements should be evaluated in the context of the direct and indirect risks and uncertainties inherent in the Company’s business including, but not necessarily limited to, the Company’s continued dependence on certain significant customers; the continued market acceptance of products and services offered by the Company and its customers; pricing pressures from the Company’s customers, suppliers and the market; the activities of competitors, some of which may have greater financial or other resources than the Company; the variability of the Company’s operating results; the impact of material weaknesses in internal controls over financial reporting; the results of long-lived assets and goodwill impairment testing; the risks inherent in any merger, acquisition or business combination, including the ability to achieve the expected benefits of acquisitions as well as the expenses of acquisitions; the collectability of aged account receivables; the variability of the Company’s customers’ requirements; the impact of inflation on the Company’s operating results; the availability and cost of necessary components and materials; the impact acts of war may have to the supply chain; the ability of the Company and its customers to keep current with technological changes within its industries; regulatory compliance, including conflict minerals; the continued availability and sufficiency of the Company’s credit arrangements; the costs of borrowing under the Company’s senior and subordinated credit facilities, including under the rate indices that replaced LIBOR; increasing interest rates; the ability to meet the Company’s financial and restrictive covenants under its loan agreements; changes in U.S., Mexican, Chinese, Vietnamese or Taiwanese regulations affecting the Company’s business; the turmoil in the global economy and financial markets; public health crises, including COVID-19 and variants; the continued availability of scarce raw materials, exacerbated by global supply chain disruptions, necessary for the manufacture of products by the Company; the stability of the U.S., Mexican, Chinese, Vietnamese and Taiwanese economic, labor and political systems and conditions; global business disruption caused by the Russian invasion of Ukraine and related sanctions and the Israel-Hamas conflict; currency exchange fluctuations; and the ability of the Company to manage its growth. These and other factors which may affect the Company’s future business and results of operations are identified throughout the Company’s Annual Report on Form 10-K, and as risk factors, may be detailed from time to time in the Company’s filings with the Securities and Exchange Commission. These statements speak as of the date of such filings, and the Company undertakes no obligation to update such statements in light of future events or otherwise unless otherwise required by law.

For Further Information Contact:
SigmaTron International, Inc.
Frank Cesario
1-800-700-9095

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
		Three Months				Three Months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		October 31,				October 31,				October 31,				October 31,
			2024				2023				2024				2023
Net sales			74,719,360				98,691,684				159,496,338				196,822,040
Cost of products sold			67,815,156				89,003,929				146,186,940				177,483,065
Gross profit			6,904,204				9,687,755				13,309,398				19,338,975
Selling and administrative expenses			6,370,511				6,613,634				12,994,377				13,456,439
Operating income			533,693				3,074,121				315,021				5,882,536
Change in fair value of warrants			(626,000	)			-				(626,000	)			-
Other expense			(4,701,108	)			(2,702,193	)			(6,969,383	)			(5,402,644	)
(Loss) income before income tax			(4,793,415	)			371,928				(7,280,362	)			479,892
Income tax benefit (expense)			(4,673,254	)			(343,666	)			(5,475,467	)			(189,531	)
Net (loss)/income		$	(9,466,669	)		$	28,262			$	(12,755,829	)		$	290,361
Net (loss)/income per common share - basic		$	(1.55	)		$	0.00			$	(2.08	)		$	0.05
Net (loss)/income per common share - diluted		$	(1.55	)		$	0.00			$	(2.08	)		$	0.05
Weighted average number of common equivalent
shares outstanding - assuming dilution			6,119,288				6,190,696				6,119,288				6,166,524
CONDENSED CONSOLIDATED BALANCE SHEETS
		October 31,				April 30,
			2024				2024
Assets:
Current assets		$	160,920,235				175,902,619
Machinery and equipment-net			31,626,827				33,755,078
Deferred income taxes			-				4,432,210
Intangibles			816,538				979,188
Other assets			11,298,366				8,724,880
Total assets		$	204,661,966			$	223,793,975
Liabilities and stockholders' equity:
Current liabilities		$	138,582,021				145,888,791
Long-term obligations			12,628,019				11,832,931
Stockholders' equity			53,451,926				66,072,253
Total liabilities and stockholders' equity		$	204,661,966			$	223,793,975

FAQ

What caused SGMA's revenue decline in Q2 2025?

The revenue decline was attributed to general economic softness and supply chain volatility in the electronic component marketplace, with customers having previously overordered due to component acquisition uncertainty.

How much will SGMA's sale/leaseback transaction impact Q3 2025 earnings?

The sale/leaseback of the Elk Grove Village property is expected to generate a one-time capital gain of approximately $7 million in Q3 2025.

What was SGMA's net loss per share in Q2 2025?

SGMA reported a loss of $1.55 per share for Q2 2025, compared to $0.00 income per share in the same period last year.

How much did SGMA's revenue decrease in the first six months of fiscal 2025?

Revenue decreased by $37.3 million, or 19%, to $159.5 million for the six-month period ended October 31, 2024.

What is SGMA's outlook for calendar year 2025?

Management indicates that customers are viewing calendar 2025 as a stronger and growing economy, expecting current trends to have bottomed out with anticipated increase in overall demand.