Schmitt Announces Second Quarter 2020 Operating Results and CFO Appointment
January 15 2020 - 08:17AM
Schmitt Industries, Inc. (NASDAQ: SMIT) (the “Company” or
“Schmitt”) today announced its operating results for the second
quarter of Fiscal 2020.
Highlights of the three and six months ended
November 30, 2019:
- Schmitt completed the announced sale of the Schmitt Dynamic
Balance Systems (“SBS”) business line to Tosei Engineering Corp.
and Tosei America, Inc. (collectively “Tosei”) for gross proceeds
of $10.5 million on November 22, 2019. This sale allows Schmitt to
streamline its focus on the Xact and Acuity business lines. All
continuing operation results are a reflection of these two business
lines and the Tosei lease, which was entered into on November 22,
2019.
- Company revenue decreased 10.8% and 11.5% for the three and six
months ended November 30, 2019, respectively, as compared to the
three and six months ended November 30, 2018. The decrease is
attributable to a decline in XACT and Acuity product revenue,
partially offset by a 13.0% and 14.6% increase in XACT monitoring
revenue for the three months and six months ended November 30,
2019, respectively, as compared to the three and six months ended
November 30, 2018.
- Gross margin decreased 3.9% and increased 0.7% for the three
and six months ended November 30, 2019, respectively, as compared
to the three and six months ended November 30, 2018. The decrease
in gross margin from the three months ended November 30, 2018 to
the three months ended November 30, 2019 was primarily due to
unrecoverable inventory costs. The increase in gross margin from
the six months ended November 30, 2018 to the six months ended
November 30, 2019 was primarily influenced by favorable product mix
shifts and the $70,000 sale of discontinued product line items with
no offsetting cost of sales.
- Operating expenses increased 21.0% and 6.3% for the three and
six months ended November 30, 2019, respectively, as compared to
the three and six months ended November 30, 2018. These results
include expenses of $466,707 and $508,681 incurred during the three
and six months ended November 30, 2019, respectively, that are not
expected to be incurred in future periods.
- Adjusted EBITDA was $(83,712) and $(295,226) for the three and
six months ended November 30, 2019, respectively, as compared to
$(167,606) and $(284,166) for the three and six months ended
November 30, 2018, respectively.
- Net loss from continuing operations per fully diluted share was
$(0.15) and $(0.20) for the three and six months ended November 30,
2019. Excluding expenses not expected to be incurred in future
periods, including unrecoverable inventory costs, non-GAAP EPS was
$(0.03) and $(0.09) for the three and six months ended November 20,
2019, respectively.
“The SBS sale has unlocked significant value for
our shareholders while partnering the SBS business line and
employees with a partner that is strategically positioned and
resourced to maximize SBS’s potential. We wish SBS/Accretech much
success in the years ahead,” commented Michael R. Zapata. Schmitt’s
CEO and Chairman.
“As we look ahead to Schmitt 2.0, we will seek
to make focused and prudent investments to better determine our
businesses’ potential. Although our improvements to Company
operations are starting to reflect in the financials, the limited
size of the two units and the high administrative burden create a
hurdle the Company must overcome. We are exploring ways to
streamline our operations to better focus our time and efforts on
the analysis of the Company’s markets and growth potential of
Schmitt’s businesses in order to maximize our earnings
potential.”
“Similar to the 8.9% share purchase we announced
in December 2019, we will seek to deploy capital based on return on
investment. At this time, we intend to selectively invest in
high-return organic investments while retaining the majority of our
capital for share repurchases and/or select acquisition
opportunities.”
BUSINESS UPDATES
CFO Appointment
We are pleased to announce the appointment of Jamie Schmidt as
Chief Financial Officer (“CFO”) of the Company, effective
immediately.
Mr. Schmidt most recently served as Schmitt’s Controller from
October 2019 through January 2020. Prior to his role as Controller
he served as Schmitt’s Business Development and Financial Analyst
since February 2019, where he was vital in the SBS/Tosei diligence
process and the successful sale of the business unit. Prior to
Schmitt Mr. Schmidt was an analyst at Sententia Capital Management
(“Sententia”) from 2016-2019. Prior to joining Sententia, Mr.
Schmidt was an analyst in the Mergers & Acquisitions Department
at Craig-Hallum Capital Group, where he closed sell-side
engagements in the lower middle market. Mr. Schmidt has a B.S. from
Florida State University magna cum laude and attended Columbia
Business School, MBA, Value Investing Program.
“On behalf of the Board, I’d like to welcome Jamie as our CFO.
During his time, he has proven vital in the analysis and execution
of the Company’s financials under both Ann Ferguson and Gina
Walker. I’d like to thank Gina again for her work and her impact on
Schmitt, and I am excited to continue to unlock Schmitt’s potential
with Jamie as CFO,” stated Mr. Zapata.
Share Repurchases
On December 17, 2019, the Company announced the purchase of
365,490 Shares, or 8.9% of the Company’s outstanding shares, from
its second largest shareholder for $3.25 per share. This private
transaction was outside of the recently announced $2 million share
repurchase plan (the “Plan”). To date, no shares have been
repurchased under the Plan, which remains active.
Summary data for the three months ended November
31, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended November 30, |
|
|
|
|
|
|
2019 |
|
2018 |
|
|
Change ($) |
|
Change (%) |
Total net
revenue |
$ |
1,033,102 |
|
$ |
1,157,999 |
|
$ |
(124,897) |
|
(10.8%) |
Gross
margin |
|
37.7% |
|
|
41.6% |
|
|
|
|
|
Operating
expenses |
$ |
998,607 |
|
$ |
825,503 |
|
|
173,104 |
|
21.0% |
Net (loss)
from continuing operations |
$ |
(599,058) |
|
$ |
(339,484) |
|
|
(259,574) |
|
|
Net (loss)
per fully diluted share from continuing operations |
$ |
(0.15) |
|
$ |
(0.08) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary data for the six months ended November 30, 2019 and
2018:
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended November 30, |
|
|
|
|
|
|
2019 |
|
2018 |
|
|
Change ($) |
|
Change (%) |
Total net
revenue |
$ |
2,127,879 |
|
$ |
2,404,121 |
|
$ |
(276,242) |
|
(11.5%) |
Gross
margin |
|
40.7% |
|
|
40.0% |
|
|
|
|
|
Operating
expenses |
$ |
1,705,845 |
|
$ |
1,604,059 |
|
|
101,786 |
|
6.3% |
Net (loss)
from continuing operations |
$ |
(821,185) |
|
$ |
(634,697) |
|
|
(186,488) |
|
|
Net (loss)
per fully diluted share from continuing operations |
$ |
(0.20) |
|
$ |
(0.16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA:
|
|
Three Months EndedNovember 30, 2019 |
|
Six Months EndedNovember 30, 2019 |
(Loss) before
income taxes from continuing operations |
$ |
(603,497 |
) |
|
$ |
(829,014 |
) |
Depreciation and
Amortization |
|
41,249 |
|
|
|
83,277 |
|
EBITDA from
continuing operations |
$ |
(562,248 |
) |
|
$ |
(745,737 |
) |
Adjusted for: |
|
|
|
|
|
|
Non-recurring income from discontinued product line |
|
(64,270 |
) |
|
|
(134,269 |
) |
|
Unrecoverable inventory
costs |
|
76,099 |
|
|
|
76,099 |
|
|
Non-recurring expenses |
|
466,707 |
|
|
|
508,681 |
|
|
|
|
|
|
|
|
Adjusted
EBITDA from continuing operations |
$ |
(83,712 |
) |
|
$ |
(295,226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedNovember 30, 2018 |
|
Six Months EndedNovember 30, 2018 |
(Loss) before
income taxes from continuing operations |
$ |
(337,370 |
) |
|
$ |
(630,470 |
) |
Depreciation and
Amortization |
|
44,484 |
|
|
|
88,974 |
|
EBITDA from
continuing operations |
$ |
(292,886 |
) |
|
$ |
(541,496 |
) |
Adjusted for: |
|
|
|
|
|
|
Non-recurring expenses |
|
125,280 |
|
|
|
257,330 |
|
|
|
|
|
|
|
|
Adjusted
EBITDA from continuing operations |
$ |
(167,606 |
) |
|
$ |
(284,166 |
) |
Reconciliation of Adjusted Net Income and Non-GAAP EPS:
|
|
Three Months EndedNovember 30, 2019 |
|
Six Months EndedNovember 30, 2019 |
Net (loss) from
continuing operations |
$ |
(599,058 |
) |
|
$ |
(821,185 |
) |
Adjusted for: |
|
|
|
|
|
|
Non-recurring (loss) from discontinued product line |
|
(64,270 |
) |
|
|
(134,269 |
) |
|
Unrecoverable inventory
costs |
|
76,099 |
|
|
|
76,099 |
|
|
Non-recurring expenses |
|
466,707 |
|
|
|
508,681 |
|
|
|
|
|
|
|
|
Adjusted net
(loss) from continuing operations (non-GAAP) |
$ |
(120,522 |
) |
|
$ |
(370,674 |
) |
|
|
|
|
|
|
|
Non-GAAP
(loss) per fully diluted share |
$ |
(0.03 |
) |
|
$ |
(0.09 |
) |
About Schmitt Industries
Schmitt Industries, Inc., founded in 1987,
designs, manufactures and sells high precision test and measurement
products, solutions and services through its Acuity® and Xact®
product lines. Acuity provides laser and white light sensor
distance measurement and dimensional sizing products, and our Xact
line provides ultrasonic-based remote tank monitoring products and
related monitoring revenues for markets in the Internet of Things
environment.
FORWARD-LOOKING STATEMENTS
This document may contain forward-looking
statements made pursuant to the Private Securities Litigation
Reform Act of 1995. These statements are not guarantees of future
performance and involve risks and uncertainties that are difficult
to predict. Actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements
due to numerous factors. A complete discussion of the risks and
uncertainties that may affect Schmitt’s business, including the
business of its subsidiary, is included in “Risk Factors” in the
Company’s most recent Annual Report on Form 10-K as filed by the
Company with the Securities and Exchange Commission.
For further information regarding risks and
uncertainties associated with the Company’s business, please refer
to Schmitt’s SEC filings, including, but not limited to, its Forms
10-K, 10-Q and 8-K.
The forward-looking statements in this release
speak only as of the date on which they were made, and the Company
does not undertake any obligation to update any forward-looking
statement to reflect events or circumstances after the date of this
release, or for changes to this document made by wire services or
internet service providers.
For more information contact: |
Michael R. Zapata, President and CEOJamie Schmidt, CFO and
Treasurer(503) 227-7908 or visit our web site at
www.schmitt-ind.com |
SCHMITT INDUSTRIES,
INC.CONSOLIDATED BALANCE
SHEETS(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
November 30, 2019 |
|
May 31, 2019 |
|
|
ASSETS |
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
12,105,462 |
|
$ |
1,467,435 |
|
|
Restricted cash |
|
420,000 |
|
|
- |
|
|
Accounts receivable, net |
|
395,241 |
|
|
631,126 |
|
|
Inventories |
|
1,077,618 |
|
|
1,241,132 |
|
|
Prepaid expenses |
|
47,575 |
|
|
101,617 |
|
|
Current assets held for sale |
|
- |
|
|
5,192,384 |
|
Total current assets |
|
14,045,896 |
|
|
8,633,694 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
657,354 |
|
|
676,387 |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
Intangible assets, net |
|
339,894 |
|
|
392,185 |
|
|
Noncurrent assets held for sale |
|
- |
|
|
162,987 |
|
|
|
TOTAL ASSETS |
$ |
15,043,144 |
|
$ |
9,865,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
& STOCKHOLDERS’ EQUITY |
Current liabilities |
|
|
|
|
|
|
Accounts payable |
$ |
226,266 |
|
$ |
102,566 |
|
|
Accrued commissions |
|
41,516 |
|
|
71,663 |
|
|
Accrued payroll liabilities |
|
22,150 |
|
|
112,351 |
|
|
Customer deposits and prepayments |
|
103,002 |
|
|
78,376 |
|
|
Other accrued liabilities |
|
699,923 |
|
|
128,353 |
|
|
Income taxes payable |
|
69,100 |
|
|
491 |
|
|
Current portion of long-term liabilities |
|
- |
|
|
20,828 |
|
|
Current liabilities held for sale |
|
- |
|
|
849,149 |
|
Total current liabilities |
|
1,161,957 |
|
|
1,363,777 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities |
|
- |
|
|
28,543 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
1,161,957 |
|
|
1,392,320 |
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
Common stock, no par value, 20,000,000 shares authorized, 4,127,632
shares issued and outstanding at November 30, 2019 and 4,032,878
shares issued and outstanding at May 31, 2019 |
|
13,438,041 |
|
|
13,245,439 |
|
|
Accumulated other comprehensive loss |
|
- |
|
|
(527,827 |
) |
|
Retained earnings (accumulated deficit) |
|
443,146 |
|
|
(4,244,679 |
) |
Total stockholders’ equity |
|
13,881,187 |
|
|
8,472,933 |
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
15,043,144 |
|
$ |
9,865,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHMITT INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONSFOR THE THREE MONTHS AND SIX MONTHS
ENDED NOVEMBER 30, 2019 AND
2018(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended November 30, |
|
|
Six Months Ended November 30, |
|
|
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
$ |
1,033,102 |
|
$ |
1,157,999 |
|
|
$ |
2,127,879 |
|
$ |
2,404,121 |
Cost of revenue |
|
643,348 |
|
|
675,872 |
|
|
|
1,260,771 |
|
|
1,443,308 |
|
Gross profit |
|
389,754 |
|
|
482,127 |
|
|
|
867,108 |
|
|
960,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
General, administration and sales |
|
993,230 |
|
|
800,671 |
|
|
|
1,697,382 |
|
|
1,556,651 |
|
Research and development |
|
5,377 |
|
|
24,832 |
|
|
|
8,463 |
|
|
47,408 |
|
|
Total
operating expenses |
|
998,607 |
|
|
825,503 |
|
|
|
1,705,845 |
|
|
1,604,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) |
|
(608,853) |
|
|
(343,376) |
|
|
|
(838,737) |
|
|
(643,246) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
5,356 |
|
|
6,006 |
|
|
|
9,723 |
|
|
12,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) before income taxes |
|
(603,497) |
|
|
(337,370) |
|
|
|
(829,014) |
|
|
(630,470) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
(4,439) |
|
|
2,114 |
|
|
|
(7,829) |
|
|
4,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) from continuing operations |
|
(599,058) |
|
|
(339,484) |
|
|
$ |
(821,185) |
|
$ |
(634,697) |
Income from discontinued operations, including gain on sale, net of
tax |
|
5,117,005 |
|
|
84,212 |
|
|
|
5,509,010 |
|
|
167,608 |
Net income (loss) |
$ |
4,517,947 |
|
$ |
(255,272) |
|
|
$ |
4,687,825 |
|
$ |
(467,089) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) per common share from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.15) |
|
$ |
(0.08) |
|
|
$ |
(0.20) |
|
$ |
(0.16) |
|
|
Weighted
average number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common shares, basic |
|
4,083,538 |
|
|
3,994,545 |
|
|
|
4,030,709 |
|
|
3,994,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
$ |
(0.15) |
|
$ |
(0.08) |
|
|
$ |
(0.20) |
|
$ |
(0.16) |
|
|
Weighted
average number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common shares, diluted |
|
4,083,538 |
|
|
3,994,545 |
|
|
|
4,030,709 |
|
|
3,994,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share from discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.25 |
|
$ |
0.02 |
|
|
$ |
1.37 |
|
$ |
0.04 |
|
|
Weighted
average number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common shares, basic |
|
4,083,538 |
|
|
3,994,545 |
|
|
|
4,030,709 |
|
|
3,994,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
$ |
1.25 |
|
$ |
0.02 |
|
|
$ |
1.37 |
|
$ |
0.04 |
|
|
Weighted
average number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common shares, diluted |
|
4,083,538 |
|
|
3,994,545 |
|
|
|
4,030,709 |
|
|
3,994,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.11 |
|
$ |
(0.06) |
|
|
$ |
1.16 |
|
$ |
(0.12) |
|
|
Weighted
average number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common shares, basic |
|
4,083,538 |
|
|
3,994,545 |
|
|
|
4,030,709 |
|
|
3,994,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
$ |
1.11 |
|
$ |
(0.06) |
|
|
$ |
1.16 |
|
$ |
(0.12) |
|
|
Weighted
average number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common shares, diluted |
|
4,083,538 |
|
|
3,994,545 |
|
|
|
4,030,709 |
|
|
3,994,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
4,517,947 |
|
$ |
(255,272) |
|
|
$ |
4,687,825 |
|
$ |
(467,089) |
|
Foreign currency translation adjustment |
|
527,827 |
|
|
(5,907) |
|
|
|
527,827 |
|
|
73,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
$ |
5,045,774 |
|
$ |
(261,179) |
|
|
$ |
5,215,652 |
|
$ |
(393,352) |
Schmitt Industries (NASDAQ:SMIT)
Historical Stock Chart
From Feb 2024 to Mar 2024
Schmitt Industries (NASDAQ:SMIT)
Historical Stock Chart
From Mar 2023 to Mar 2024