SIFCO Industries, Inc. ("SIFCO") Announces Fourth Quarter and Full Year Fiscal 2023 Financial Results
- None.
- None.
Insights
Revenue Growth and Cost Management: The reported 32.2% increase in net sales for Q4 and the 3.7% rise for FY 2023 indicate a positive trajectory in SIFCO Industries' revenue stream. This growth, particularly in the commercial aerospace sector, suggests that the company's strategic initiatives to expand market share are bearing fruit. Despite this, the persistence of net losses, albeit reduced from the previous fiscal year, highlights ongoing challenges in cost management and operational efficiency.
Investors should note the improved EBITDA and Adjusted EBITDA figures, which suggest some success in the company's continuous improvement initiatives. Adjusted EBITDA turning positive in FY 2023 is a critical indicator of the company's potential to reach profitability. However, the negative EBITDA for the same period reflects that there are still underlying issues that need to be addressed. The juxtaposition of these two metrics can be indicative of non-recurring expenses or accounting adjustments that investors should scrutinize.
Market Penetration and Product Diversification: The announcement of winning eighty-six new products across served markets is a testament to SIFCO's aggressive strategy in market penetration and diversification. This approach is particularly pertinent given the volatility in global markets and it shows the company's resilience and adaptability in seeking growth opportunities. The stable military aerospace market provides a consistent revenue base, while the growth in commercial aerospace can be attributed to the sector's recovery post-pandemic.
Investors should consider the long-term implications of these new products, which may lead to increased sales and market share. However, the upfront costs associated with product development and market entry could strain short-term financials. The ability to convert these opportunities into profitable ventures will be crucial for investor confidence.
Economic Context and Financial Strategy: SIFCO's conservative financial approach amidst market volatility is indicative of a strategic decision to balance risk and growth. The company's focus on continuous improvement and operational efficiency is a sound strategy in an economic environment that remains uncertain. The CEO's emphasis on capitalizing on market conditions suggests an awareness of the cyclical nature of the aerospace industry and the importance of timing in financial and strategic decision-making.
For stakeholders, the economic context of these results is significant. The aerospace industry is heavily influenced by economic cycles and the company's performance must be analyzed in light of broader economic indicators. The return to growth in the commercial aerospace market, coupled with stable military spending, could signal a favorable environment for SIFCO's future performance, but external economic pressures such as inflation, supply chain issues and geopolitical tensions could impact the industry's recovery trajectory.
Fourth Quarter and Fiscal 2023 Highlights
Results for the Fourth Quarter
-
Net sales in the fourth quarter of fiscal 2023 increased
32.2% to$24.6 million $18.6 million -
Net loss for the fourth quarter of fiscal 2023 was
$3.1 million $(0.53) $6.9 million $(1.18) -
EBITDA was
$(1.1) million $(5.2) million -
Adjusted EBITDA in the fourth quarter of fiscal 2023 was
$(0.8) million $(4.8) million
Results for the Fiscal Year 2023
-
Net sales in fiscal 2023 increased
3.7% to$87.0 million $83.9 million -
Net loss in fiscal 2023 was
$8.7 million $(1.47) $9.6 million $(1.65) -
EBITDA was
$(0.8) million $(2.7) million -
Adjusted EBITDA in fiscal 2023 was
$1.0 million $(6.6) million
Other Highlights
The Company informed shareholders that it has sought to capitalize on the current market volatility by increasing market penetration and diversifying while maintaining a conservative financial approach. To highlight this point, CEO Peter W. Knapper stated, "2023 witnessed a return to growth in the commercial aerospace market, while the military aerospace market remained stable. Our efforts to gain market share resulted in winning eighty-six new products across our served markets during the fiscal year. In addition, our efforts in continuous improvement initiatives demonstrated benefits as we work to return to profitability."
Use of Non-GAAP Financial Measures
The Company uses certain non-GAAP measures in this release. EBITDA and Adjusted EBITDA are non-GAAP financial measures and are intended to serve as supplements to results provided in accordance with accounting principles generally accepted in
Forward-Looking Language
Certain statements contained in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions, concerns with or threats of, or the consequences of, pandemics, contagious diseases or health epidemics, competition and other uncertainties the Company, its customers, and the industry in which they operate have experienced and continue to experience, detailed from time to time in the Company's Securities and Exchange Commission filings. For a discussion of such risk factors and uncertainties, see Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the quarter ended September 30, 2023 and other reports filed by the Company with the Securities & Exchange Commission.
The Company's Form 10-K for the year ended September 30, 2023 and other reports filed with the Securities & Exchange Commission can be accessed through the Company's website: www.sifco.com, or on the Securities and Exchange Commission's website: www.sec.gov.
SIFCO Industries, Inc. is engaged in the production of forgings and machined components primarily for the aerospace and energy markets. The processes and services include forging, heat-treating, coating, and machining.
Fiscal Year Ended September 30, |
||||||||
(Amounts in thousands, except per share data) |
||||||||
|
|
Years Ended September 30, |
||||||
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
|
$ |
87,022 |
|
|
$ |
83,902 |
|
Cost of goods sold |
|
|
79,492 |
|
|
|
85,757 |
|
Gross profit (loss) |
|
|
7,530 |
|
|
|
(1,855 |
) |
Selling, general and administrative expenses |
|
|
14,029 |
|
|
|
11,909 |
|
Amortization of intangible assets |
|
|
233 |
|
|
|
313 |
|
Loss (gain) on disposal of operating assets |
|
|
1 |
|
|
|
(7 |
) |
Operating loss |
|
|
(6,733 |
) |
|
|
(14,070 |
) |
Interest expense, net |
|
|
1,348 |
|
|
|
645 |
|
Gain on debt extinguishment |
|
|
— |
|
|
|
(5,106 |
) |
Foreign currency exchange loss, net |
|
|
9 |
|
|
|
15 |
|
Other expense, net |
|
|
443 |
|
|
|
59 |
|
Loss before income tax expense (benefit) |
|
|
(8,533 |
) |
|
|
(9,683 |
) |
Income tax expense (benefit) |
|
|
159 |
|
|
|
(43 |
) |
Net loss |
|
$ |
(8,692 |
) |
|
$ |
(9,640 |
) |
|
|
|
|
|
||||
|
|
|
|
|
||||
Net loss per share: |
|
|
|
|
||||
Basic |
|
$ |
(1.47 |
) |
|
$ |
(1.65 |
) |
Diluted |
|
$ |
(1.47 |
) |
|
$ |
(1.65 |
) |
|
|
|
|
|
||||
Weighted-average number of common shares (basic) |
|
|
5,929 |
|
|
|
5,830 |
|
Weighted-average number of common shares (diluted) |
|
|
5,929 |
|
|
|
5,830 |
|
Quarter Ended September 30, |
||||||||
(Amounts in thousands, except per share data) |
||||||||
|
|
Quarter Ended September 30, |
||||||
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
|
$ |
24,628 |
|
|
$ |
18,632 |
|
Gross profit (loss) |
|
|
1,072 |
|
|
|
(3,697 |
) |
|
|
|
|
|
||||
Net loss |
|
$ |
(3,102 |
) |
|
$ |
(6,920 |
) |
|
|
|
|
|
||||
Net loss per share: |
|
|
|
|
||||
Basic |
|
$ |
(0.53 |
) |
|
$ |
(1.18 |
) |
Diluted |
|
$ |
(0.53 |
) |
|
$ |
(1.18 |
) |
Non-GAAP Financial Measures
Presented below is certain financial information based on the Company's EBITDA and Adjusted EBITDA. References to “EBITDA” mean earnings (losses) from continuing operations before interest, taxes, depreciation and amortization, and references to “Adjusted EBITDA” mean EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliations of net income to EBITDA and Adjusted EBITDA.
Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under generally accepted accounting principles in
- Neither EBITDA nor Adjusted EBITDA reflects the interest expense, or the cash requirements necessary to service interest payments on indebtedness;
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor Adjusted EBITDA reflects any cash requirements for such replacements;
- The omission of the amortization expense associated with the Company’s intangible assets further limits the usefulness of EBITDA and Adjusted EBITDA; and
- Neither EBITDA nor Adjusted EBITDA includes the payment of taxes, which is a necessary element of operations.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to the Company to invest in the growth of its businesses. Management compensates for these limitations by not viewing EBITDA or Adjusted EBITDA in isolation and specifically by using other GAAP measures, such as net income (loss), net sales, and operating income (loss), to measure operating performance. Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under GAAP, and neither should be considered as an alternative to net loss or cash flow from operations determined in accordance with GAAP. The Company’s calculation of EBITDA and Adjusted EBITDA may not be comparable to the calculation of similarly titled measures reported by other companies.
The following table sets forth a reconciliation of net loss to EBITDA and Adjusted EBITDA:
|
(Dollars in thousands) |
Fourth Quarter Ended September 30, |
|
Years Ended September 30, |
||||||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Net loss |
$ |
(3,102 |
) |
|
$ |
(6,920 |
) |
|
$ |
(8,692 |
) |
|
$ |
(9,640 |
) |
|
Adjustments: |
|
|
|
|
|
|
|
||||||||
|
Depreciation and amortization expense |
|
1,584 |
|
|
|
1,548 |
|
|
|
6,404 |
|
|
|
6,348 |
|
|
Interest expense, net |
|
429 |
|
|
|
192 |
|
|
|
1,348 |
|
|
|
646 |
|
|
Income tax expense (benefit) |
|
31 |
|
|
|
(13 |
) |
|
|
159 |
|
|
|
(43 |
) |
|
EBITDA |
|
(1,058 |
) |
|
|
(5,193 |
) |
|
|
(781 |
) |
|
|
(2,689 |
) |
|
Adjustments: |
|
|
|
|
|
|
|
||||||||
|
Foreign currency exchange (gain) loss, net (1) |
|
(2 |
) |
|
|
13 |
|
|
|
9 |
|
|
|
15 |
|
|
Other loss (income), net (2) |
|
126 |
|
|
|
(36 |
) |
|
|
275 |
|
|
|
(149 |
) |
|
Loss (gain) on disposal of assets (3) |
|
1 |
|
|
|
(6 |
) |
|
|
1 |
|
|
|
(7 |
) |
|
Gain on debt extinguishment (4) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,106 |
) |
|
Equity compensation expense (5) |
|
83 |
|
|
|
119 |
|
|
|
375 |
|
|
|
428 |
|
|
Pension settlement/curtailment benefit (6) |
|
30 |
|
|
|
140 |
|
|
|
108 |
|
|
|
208 |
|
|
LIFO impact (7) |
|
(33 |
) |
|
|
144 |
|
|
|
(305 |
) |
|
|
729 |
|
|
IT incident costs, net (8) |
|
6 |
|
|
|
— |
|
|
|
1,275 |
|
|
|
— |
|
|
Strategic alternative expense (9) |
|
57 |
|
|
|
— |
|
|
|
86 |
|
|
|
— |
|
|
Adjusted EBITDA |
$ |
(790 |
) |
|
$ |
(4,819 |
) |
|
$ |
1,043 |
|
|
$ |
(6,571 |
) |
(1) |
Represents the gain or loss from changes in the exchange rates between the functional currency and the foreign currency in which the transaction is denominated. |
|
(2) |
Represents miscellaneous non-operating income or expense, such as pension costs or grant income. |
|
(3) |
Represents the difference between the proceeds from the sale of operating equipment and the carrying value shown on the Company's books. |
|
(4) |
Represents the gain on extinguishment of debt and interest for the amount forgiven by the SBA as it relates to the PPP loan in fiscal 2022. |
|
(5) |
Represents the equity-based compensation expense recognized by the Company under the 2016 Plan due to granting of awards, awards not vesting and/or forfeitures. |
|
(6) |
Represents expense incurred by its defined benefit pension plans related to settlement of pension obligations. |
|
(7) |
Represents the change in the reserve for inventories for which cost is determined using the last-in, first-out (“LIFO”) method. |
|
(8) |
Represents incremental information technology costs as it relates to the cybersecurity incident and loss on insurance recovery. |
|
(9) |
Represents expense related to evaluation of strategic alternatives. |
Reference to the above activities can be found in the consolidated financial statements included in Item 8 of the Annual Report on Form 10-K.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231229699418/en/
SIFCO Industries, Inc.
Thomas R. Kubera, 216-881-8600
www.sifco.com
Source: SIFCO Industries, Inc.
FAQ
What are the financial results announced by SIFCO Industries, Inc. (SIF) for Q4 and fiscal 2023?
What are the non-GAAP financial measures used by SIFCO Industries, Inc. (SIF)?
What did the CEO of SIFCO Industries, Inc. (SIF) mention about the company's performance in 2023?
