SIFCO Industries, Inc. (“SIFCO”) Announces Third Quarter Fiscal 2024 Financial Results

Rhea-AI Summary

SIFCO Industries, Inc. (NYSE American: SIF) reported strong financial results for its third quarter of fiscal 2024, ending June 30, 2024. Net sales increased 33.9% to $29.3 million, compared to $21.9 million in the same period last year. The company achieved a net income of $0.1 million, or $0.01 per diluted share, a significant improvement from the net loss of $(0.6) million in Q3 2023. EBITDA more than doubled to $2.7 million, while Adjusted EBITDA reached $3.4 million.

Year-to-date results also showed improvement, with net sales up 23.2% to $76.9 million for the first nine months of fiscal 2024. Despite a net loss of $(4.9) million, this represents an improvement from the $(5.6) million loss in the same period last year. The company's backlog grew to $139.2 million, indicating strong future demand.

Positive

• Net sales increased 33.9% year-over-year in Q3 2024
• Achieved net income of $0.1 million in Q3 2024, compared to a net loss in Q3 2023
• EBITDA more than doubled to $2.7 million in Q3 2024
• Adjusted EBITDA improved to $3.4 million in Q3 2024
• Backlog grew to $139.2 million, indicating strong future demand

Negative

• Net loss of $(4.9) million for the first nine months of fiscal 2024
• Year-to-date loss per diluted share of $(0.82)

Insights

Financial Analyst

SIFCO's Q3 FY2024 results show significant improvement. Net sales increased by 33.9% to $29.3 million and the company turned a profit with net income of $0.1 million. The EBITDA more than doubled to $2.7 million, indicating enhanced operational efficiency. The growing backlog of $139.2 million suggests strong future revenue potential. However, the year-to-date net loss of $4.9 million, although improved from last year, indicates ongoing challenges. The company's ability to sustain this quarterly profitability will be important for long-term financial health.

Market Research Analyst

SIFCO's performance reflects positively on the broader industrial manufacturing sector. The 33.9% increase in sales suggests a robust demand for their products, likely driven by recovery in aerospace and energy markets. The growing backlog indicates sustained demand, which could translate to continued revenue growth. However, the year-to-date loss highlights the challenging nature of the industry. Investors should monitor whether SIFCO can capitalize on this momentum to achieve consistent profitability, especially given the cyclical nature of their end markets.

Business Strategy Consultant

SIFCO's turnaround strategy appears to be gaining traction. The company has successfully increased sales and improved profitability in Q3. The focus now should be on sustaining this momentum and addressing the factors contributing to the year-to-date loss. The growing backlog is a positive sign, but efficient execution will be key to converting it into profitable sales. Management should prioritize cost control and operational efficiency to ensure that increased revenue translates to consistent bottom-line growth. Strategic initiatives to diversify the customer base and expand into high-growth sectors could further strengthen SIFCO's market position.

CLEVELAND--(BUSINESS WIRE)-- SIFCO Industries, Inc. (NYSE American: SIF) today announced financial results for its third quarter of fiscal 2024, which ended June 30, 2024.

Third Quarter Results

• Net sales in the third quarter of fiscal 2024 increased 33.9% to $29.3 million, compared with $21.9 million for the same period in fiscal 2023.
• Net income for the third quarter of fiscal 2024 was $0.1 million, or $0.01 per diluted share, compared with net loss of $(0.6) million, or $(0.11) per diluted share, in the third quarter of fiscal 2023.
• EBITDA was $2.7 million in the third quarter of fiscal 2024, compared with $1.3 million in the third quarter of fiscal 2023.
• Adjusted EBITDA in the third quarter of fiscal 2024 was $3.4 million, compared with Adjusted EBITDA of $1.9 million in the third quarter of fiscal 2023.

Year to Date Results

• Net sales in the first nine months of fiscal 2024 increased 23.2% to $76.9 million, compared with $62.4 million for the same period in fiscal 2023.
• Net loss for the first nine months of fiscal 2024 was $(4.9) million, or $(0.82) per diluted share, compared with net loss of $(5.6) million, or $(0.94) per diluted share, in the first nine month of fiscal 2023.
• EBITDA was $2.3 million in the first nine month of fiscal 2024, compared with $0.3 million in the first nine months of fiscal 2023.
• Adjusted EBITDA in the first nine month of fiscal 2024 was $3.9 million, compared with Adjusted EBITDA of $1.8 million in the first nine months of fiscal 2023.

Other Highlights

CEO George Scherff stated, “We are pleased with our continued progress this past quarter as revenues rose 34% over last year. Third quarter EBITDA more than doubled compared with last year to $2.7 million, leading to a profitable quarter. We continue to increase our backlog, which has grown to $139.2 million to support our customers."

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 the United States. SIFCO Industries, Inc. believes that such information provides an additional measurement and consistent historical comparison of the Company’s performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.

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, including COVID-19, 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.

The Company's Annual Report on Form 10-K for the year ended September 30, 2023 and other reports filed with the Securities and 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.

Third Quarter ended June 30, (Amounts in thousands, except per share data) (Unaudited)
	Three Months Ended June 30,								Nine Months Ended June 30,
		2024				2023				2024				2023
Net sales	$	29,259			$	21,853			$	76,854			$	62,394
Cost of goods sold		24,725				18,375				68,857				55,935
Gross profit		4,534				3,478				7,997				6,459
Selling, general and administrative expenses		3,150				3,388				9,939				10,517
Amortization of intangible assets		40				63				121				187
(Gain) loss on disposal of operating assets		—				(3	)			3				—
Operating profit (loss)		1,344				30				(2,066	)			(4,245	)
Interest expense, net		1,078				305				2,471				919
Foreign currency exchange (gain) loss, net		(1	)			1				6				11
Other expense, net		139				323				244				287
Income (loss) before income tax expense		128				(599	)			(4,787	)			(5,462	)
Income tax expense		56				35				153				128
Net income (loss)	$	72			$	(634	)		$	(4,940	)		$	(5,590	)
Net income (loss) per share
Basic	$	0.01			$	(0.11	)		$	(0.82	)		$	(0.94	)
Diluted	$	0.01			$	(0.11	)		$	(0.82	)		$	(0.94	)
Weighted-average number of common shares (basic)		6,009				5,940				5,991				5,925
Weighted-average number of common shares (diluted)		6,105				5,940				5,991				5,925

Consolidated Condensed Balance Sheets (Amounts in thousands, except per share data) (Unaudited)
	June 30, 2024				September 30, 2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,696			$	368
Short-term investments		1,713				—
Receivables, net of allowance for credit losses of $124 and $242, respectively		26,831				20,196
Contract assets		10,055				10,091
Inventories, net		13,423				8,853
Refundable income taxes		84				84
Prepaid expenses and other current assets		1,200				1,882
Total current assets		55,002				41,474
Property, plant and equipment, net		33,914				36,287
Operating lease right-of-use assets, net		13,673				14,380
Intangible assets, net		161				278
Goodwill		3,493				3,493
Other assets		88				81
Total assets	$	106,331			$	95,993
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	6,116			$	3,820
Promissory note - related party		3,366				—
Revolver		19,693				16,289
Short-term operating lease liabilities		906				869
Accounts payable		14,965				13,497
Contract liabilities		3,880				1,150
Accrued liabilities (Related party is $880 at June 30, 2024 and $0 at September 30, 2023)		6,506				5,327
Total current liabilities		55,432				40,952
Long-term debt, net of current maturities, net of unamortized debt issuance costs		3,620				2,457
Long-term operating lease liabilities, net of short-term		13,333				14,020
Deferred income taxes, net		—				142
Pension liability		3,469				3,417
Other long-term liabilities		651				670
Shareholders’ equity:
Serial preferred shares, no par value, 1,000 shares authorized; 0 shares issued and outstanding at June 30, 2024 and September 30, 2023		—				—
Common shares, par value $1 per share, 10,000 shares authorized; issued and outstanding shares 6,180 at June 30, 2024 and 6,105 at September 30, 2023		6,180				6,105
Additional paid-in capital		11,745				11,626
Retained earnings		18,324				23,264
Accumulated other comprehensive loss		(6,423	)			(6,660	)
Total shareholders’ equity		29,826				34,335
Total liabilities and shareholders’ equity	$	106,331			$	95,993

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 the United States of America (“GAAP”). The Company presents EBITDA and Adjusted EBITDA because management believes that they are useful indicators for evaluating operating performance and liquidity, including the Company’s ability to incur and service debt and it uses EBITDA to evaluate prospective acquisitions. Although the Company uses EBITDA and Adjusted EBITDA for the reasons noted above, the use of these non-GAAP financial measures as analytical tools has limitations. Therefore, reviewers of the Company’s financial information should not consider them in isolation, or as a substitute for analysis of the Company's results of operations as reported in accordance with GAAP. Some of these limitations include:

• 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	Three Months Ended								Nine Months Ended
	June 30,								June 30,
		2024				2023				2024				2023
Net income (loss)	$	72			$	(634	)		$	(4,940	)		$	(5,590	)
Adjustments:
Depreciation and amortization expense		1,499				1,623				4,567				4,820
Interest expense, net		1,078				305				2,471				919
Income tax expense		56				35				153				128
EBITDA		2,705				1,329				2,251				277
Adjustments:
Foreign currency exchange loss, net (1)		(1	)			1				6				11
Other expense (income), net (2)		78				295				184				149
Gain (loss) on disposal of assets (3)		—				(3	)			3				—
Equity compensation (4)		72				85				243				292
Pension settlement expense (5)		60				78				60				78
Severance expense (6)		435				—				435				—
LIFO impact (7)		475				(73	)			826				(272	)
IT incident (benefit) cost, net (8)		(627	)			182				(605	)			1,269
Strategic alternative expense (9)		169				29				490				29
Adjusted EBITDA	$	3,366			$	1,923			$	3,893			$	1,833

(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 (prior year included $0.1 million in loss on insurance recovery, separately reclassed to IT incident costs, net line).
(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 equity-based compensation expense recognized by the Company under the 2016 Plan due to granting of awards, awards not vesting and/or forfeitures.
(5)	Represents expense incurred by its defined benefit pension plans related to settlement of pension obligations.
(6)	Represents expense incurred for executive severance.
(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 Company's Annual Report on Form 10-K.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240812851038/en/

SIFCO Industries, Inc.

Thomas R. Kubera, 216-881-8600

www.sifco.com

Source: SIFCO Industries, Inc.

FAQ

What was SIFCO Industries' (SIF) net sales growth in Q3 2024?

SIFCO Industries (SIF) reported a 33.9% increase in net sales for Q3 2024, reaching $29.3 million compared to $21.9 million in the same period last year.

Did SIFCO Industries (SIF) achieve profitability in Q3 2024?

Yes, SIFCO Industries (SIF) achieved profitability in Q3 2024 with a net income of $0.1 million, or $0.01 per diluted share, compared to a net loss in Q3 2023.

How much did SIFCO Industries' (SIF) EBITDA grow in Q3 2024?

SIFCO Industries' (SIF) EBITDA more than doubled in Q3 2024, reaching $2.7 million compared to $1.3 million in Q3 2023.

What was SIFCO Industries' (SIF) backlog as of Q3 2024?

SIFCO Industries (SIF) reported a backlog of $139.2 million as of Q3 2024, indicating strong future demand for their products and services.