Investor Conference Call on March 10, 2022 at 8:00
a.m. ET
TORONTO, March 9, 2022 /CNW/ - Baylin Technologies Inc.
(TSX: BYL) (the "Company" or "Baylin"), a diversified global
wireless technology company focused on research, design,
development, manufacturing and sales of passive and active radio
frequency products, satellite communications products, and
supporting services, today announced its financial results for the
three and twelve months ended December 31,
2021. All amounts are stated in Canadian dollars unless
otherwise indicated.
FOURTH QUARTER SUMMARY
- Adjusted EBITDA(2) of $0.9
million in the fourth quarter of 2021, the first quarter of
positive Adjusted EBITDA since the third quarter of 2020. Adjusted
EBITDA in the fourth quarter of 2021 was an increase of
$1.3 million compared to the fourth
quarter of 2020. The increase in Adjusted EBITDA was due primarily
to an increase in revenue and gross profit discussed below
partially offset by higher operating expenses compared to the prior
year period.
- Historically high levels of backlog(3) of
$38.3 million at February 28, 2022 and $36.4 million at December
31, 2021, led by the Satcom and Embedded Antenna business
lines. Backlog at December 31, 2021
increased by $19.3 million or 112.9%
from December 31, 2020.
- Revenue of $27.2 million in the
fourth quarter of 2021, an increase of $1.6
million or 6.3% compared to the fourth quarter of 2020. The
increase was mainly due to stronger revenue from the Embedded
Antenna business line in part due to increased availability of
global chipsets despite the supply chain challenges.
- Gross profit of $8.8 million in
the fourth quarter of 2021, an increase of $2.1 million or 30.6% compared to the fourth
quarter of 2020. Gross margin was 32.3% in the fourth quarter of
2021 compared to 26.3% in the fourth quarter of 2020. Gross margin
was primarily impacted by improved product mix. The increase in
gross margin was attributable to improved gross margins in the
Satcom and Embedded Antenna business lines in the fourth quarter of
2021 compared to the prior year period. The improvement in gross
margin in the Satcom business line included the impact of an
inventory provision release of $1.6
million.
- Despite Adjusted EBITDA of $0.9
million, net loss of $20.1
million in the fourth quarter of 2021 compared to net loss
of $9.4 million in the fourth quarter
of 2020. The net loss in the fourth quarter of 2021 was mainly due
to operating loss which included a non-current asset impairment
provision of $10.1 million and income
tax expense which included a $7.1
million reduction in the carrying value of deferred tax
assets. On a per share basis, the fourth quarter of 2021 produced a
net loss of $0.26 per share compared
to a net loss of $0.23 per share in
the fourth quarter of 2020.
- Completed the second tranche of a private placement of
5,883,000 common shares, raising $5
million, the net proceeds from which were used to partially
repay outstanding debt and for general corporate purposes.
FISCAL YEAR SUMMARY
- Raised $15 million in a private
placement of 17,648,000 common shares, the net proceeds from which
were used to partially repay outstanding debt and for general
corporate purposes.
- Revenue of $102.5 million in
fiscal 2021, a decrease of $17.2
million or 14.4% compared to fiscal 2020. The decrease was
primarily due to softer sales across all business lines in fiscal
2021 attributable to the impact of the COVID-19 pandemic, global
chipset shortages and supply chain constraints.
- Gross profit of $15.1 million in
fiscal 2021 compared to $35.4 million
in fiscal 2020. Gross margin was 14.7% in fiscal 2021 compared to
29.6% in fiscal 2020. Gross margin was negatively impacted in
fiscal 2021 by an overall decrease in sales volumes across the
Company's business lines. The decrease in gross profit was also due
to a write-down of $4.0 million
against inventory in the Satcom business line, an accumulated loss
of $4.1 million on a consumer product
in the Asia Pacific business line
and lower gross margins generated by the Asia Pacific business line as a result of
lower margin products making up a larger portion of the remaining
gross profit.
- Net loss of $67.4 million in
fiscal 2021 compared to net loss of $16.9
million in fiscal 2020. The net loss in fiscal 2021 was
primarily due to operating loss which included non-current asset
impairments of $26.0 million, income
tax expense, which included a $7.1
million reduction in the carrying value of deferred tax
assets, as well as a fair value adjustment to the Debentures. On a
per share basis, fiscal 2021 generated a net loss of $1.09 per share compared to a net loss of
$0.42 per share in fiscal 2020.
- Adjusted EBITDA of ($14.8)
million in fiscal 2021 compared to $6.4 million in fiscal 2020. Adjusted EBITDA was
negatively impacted in fiscal 2021 by an overall decrease in sales
volumes across all the business lines. Additionally, the decrease
in Adjusted EBITDA was due to lower gross margins generated by the
Satcom business line due to the inventory write-down noted above
and the Asia Pacific business line
as a result of lower margin products making up a larger portion of
the remaining gross profit, partially offset by lower operating
expenses compared to fiscal 2020.
- Net cash as at December 31, 2021
was $8.9 million, an increase of
$7.8 million from December 31, 2020, primarily due to proceeds from
the private placement, proceeds from the exercise in March 2021 of common share purchase warrants
issued in December 2020, drawdown of
the Vietnam Loan and a decrease in non-cash working capital, offset
by operating losses and principal and interest payments.
RECENT DEVELOPMENTS
Private Placement
The Company issued 17,648,000 common shares at $0.85 per share in two tranches for aggregate
proceeds of $15 million. The first
tranche of 11,765,000 common shares, completed on September 1, 2021, resulted in gross proceeds of
$10 million, and the second tranche
of 5,883,000 common shares, completed on October 21, 2021, resulted in gross proceeds of
$5 million. The Company's largest
shareholder, 2385796 Ontario Inc., purchased all 11,765,000 common
shares in the first tranche and 5,460,192 common shares in the
second tranche, with the remaining 422,808 common shares purchased
by other insiders of the Company. Mr. Jeffrey C. Royer, Chairman of the Board of
Directors of the Company, exercises control and direction over
investment decisions of the shareholder. The Company relied on the
"financial hardship" exemption available to it under the rules of
the Toronto Stock Exchange ("TSX") and applicable securities laws
to complete the private placement and to permit the insiders to
purchase the shares. All the common shares are listed on the
TSX.
Credit Facility
The Company and its lenders (Royal Bank of Canada and HSBC Bank Canada) have agreed to
amend the Credit Agreement to extend the maturity date of the
credit facilities from March 29 to September
30, 2022. This will provide the Company with additional time
either to renew the existing credit facilities when they mature or
to find alternative credit facilities. The Company is currently in
discussions with several prospective lenders and advisors for that
purpose. During the period of the extension, the Company will be
required to continue to maintain a minimum Liquidity of
$10 million and Fixed Charge Coverage
Ratio of 1.15:1.00.
MMU Facility
Over the course of the COVID-19 pandemic, our customer's sales
of its massive multiple-input multiple-output product ("MMU")
softened considerably. This led the customer to significantly lower
its sales forecast, as well as to redesign the product to reduce
its complexity and cost. As a result, in November 2021 we announced that, in light of
market conditions exacerbated by COVID-19 and changes to the
product design, we would be assessing the long-term options for our
MMU facility in Vietnam. We have
now concluded that the facility will not enter production for its
intended purpose and have decided to liquidate the assets of the
facility and apply the sales proceeds in repayment of the Vietnam
Loan. Consequently, the Company recorded an aggregate $10.0 million impairment provision consisting of
a $6.8 million impairment of
property, plant and equipment, $2.3
million impairment of right of use assets and $0.9 million impairment of intangibles in the
fourth quarter of 2021 all related to the MMU facility.
Vietnam Loan
The MMU facility and equipment was financed in part by the
Company's Vietnamese subsidiary, Galtronics Vietnam Dai Dong
Company Limited ("GTD"), with the Vietnam Loan provided by HSBC
Vietnam. The Vietnam Loan required GTD and its parent, Galtronics
Vietnam Company Limited ("GTV"), as guarantor of the Vietnam Loan,
to meet certain financial covenants. In light of the situation with
the MMU facility, if those covenants had been tested (as required)
on December 31, 2021 those tests
would not have been met, but HSBC Vietnam agreed, as part of
ongoing discussions with the Company, to waive the financial
covenant requirements. As a result of those discussions, the
parties have settled a term sheet under which the Vietnam Loan will
now become payable in full on August 18,
2022 and Baylin will provide an unsecured guarantee of the
remaining balance of the Vietnam Loan in favour of HSBC
Vietnam.
SELECTED FINANCIAL INFORMATION
The table below discloses selected financial information for the
twelve months ended December 31, 2021
compared to the prior year period.
(in $000's except
per share amounts)
|
|
|
|
|
|
Twelve Months
Ended December 31,
|
|
2021
|
2020
|
Change
|
Change
|
|
$
|
$
|
$
|
%
|
Revenue
|
102,494
|
119,739
|
(17,245)
|
(14.4%)
|
Gross
profit
|
15,112
|
35,401
|
(20,289)
|
(57.3%)
|
Loss before income
taxes
|
(60,749)
|
(17,811)
|
(42,938)
|
241.1%
|
Income tax expense
(recovery)
|
6,671
|
(887)
|
7,558
|
(852.1%)
|
Net loss
|
(67,420)
|
(16,924)
|
(50,496)
|
298.4%
|
Basic and diluted net
loss per share
|
($1.09)
|
($0.42)
|
($0.67)
|
159.5%
|
EBITDA(1)
|
(43,875)
|
-
|
(43,875)
|
N/A
|
Adjusted
EBITDA(2)
|
(14,796)
|
6,350
|
(21,146)
|
(333.0%)
|
Current
assets
|
61,086
|
58,021
|
3,065
|
5.3%
|
Total
assets
|
93,033
|
133,473
|
(40,440)
|
(30.3%)
|
Current
liabilities
|
61,852
|
36,470
|
25,382
|
69.6%
|
Non-current
liabilities
|
19,400
|
48,140
|
(28,740)
|
(59.7%)
|
Total
liabilities
|
81,252
|
84,610
|
(3,358)
|
(4.0%)
|
Backlog(3)
|
36,444
|
17,117
|
19,327
|
112.9%
|
The table below discloses selected financial information for the
three months ended December 31, 2021
compared to the prior year period.
(in $000's except
per share amounts)
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
2021
|
2020
|
Change
|
Change
|
|
$
|
$
|
$
|
%
|
Revenue
|
27,196
|
25,591
|
1,605
|
6.3%
|
Gross
profit
|
8,782
|
6,725
|
2,057
|
30.6%
|
Loss before income
taxes
|
(13,288)
|
(8,282)
|
(5,006)
|
60.4%
|
Income tax
expense
|
6,837
|
1,109
|
5,728
|
516.5%
|
Net loss
|
(20,125)
|
(9,391)
|
(10,734)
|
114.3%
|
Basic and diluted net
loss per share
|
($0.26)
|
($0.23)
|
($0.03)
|
13.0%
|
EBITDA(1)
|
(10,050)
|
(3,988)
|
(6,062)
|
152.0%
|
Adjusted
EBITDA(2)
|
864
|
(445)
|
1,309
|
(294.2%)
|
Backlog(3)
|
36,444
|
17,117
|
19,327
|
112.9%
|
|
(1) See "Non-IFRS
Measures". EBITDA refers to operating income (loss) plus
depreciation and amortization.
|
(2) See "Non-IFRS
Measures". Adjusted EBITDA refers to EBITDA plus the sum of: a)
acquisition expenses; b) fair value step-up of inventory acquired
as part of an acquisition; c) expenses for litigation relating to
acquisition agreements; d) expenses relating to planned
restructuring post an acquisition; e) impairment on fixed and
intangible assets (including goodwill) post an acquisition; f)
expenses to permanently close/relocate a facility, shut down a line
of business, eliminate positions; g) expenses related to corporate
re-organization; and, h) non-cash compensation.
|
(3) See "Non-IFRS
Measures". Backlog refers to the value of unfulfilled purchase
orders placed by customers.
|
A copy of the Company's consolidated financial statements for
the three and twelve months ended December 31, 2021 and
corresponding management's discussion and analysis (the "MD&A")
are available under the Company's SEDAR profile on
www.sedar.com.
OUTLOOK
The Company's business continues to face challenges brought
about by the COVID-19 pandemic, in particular shortages and
increased materials costs due to supply chain disruptions, although
we expect these disruptions will begin to ease over the second half
of 2022 as spending generally moves away from goods and back into
services. Travel restrictions continue to hamper some business
activities as well as international travel. Despite these
continuing challenges, we are seeing improvements in all areas of
our business and expect that 2022 will show improvements in both
revenue and Adjusted EBITDA over 2021.
We are monitoring the current conflict in Ukraine and its effect on our business.
Although our direct exposure to customers in Russia and Ukraine is minimal, the conflict there may
indirectly impact our business given the sanctions imposed upon
Russia, particularly in terms of
supply chain and commodity prices. While it is too early to
definitively quantify the impact these sanctions will have on our
business, thus far the impacts have been manageable.
Asia Pacific Business Line
In 2022, we plan to conduct a review of Asia Pacific's product portfolio with a view
to right-sizing its product mix. This product rationalization is
intended to improve the contribution margin of this business line,
even if it is at the expense of foregoing additional revenue.
Nevertheless, we do expect stronger revenue growth over 2021. The
antenna we were producing for use in a consumer product for our
major customer, although at declining production volumes, is
expected to end in the second quarter of 2022 when the program
comes to an end. Due to steps taken to improve the economics of the
product, we have not incurred any further losses on this
program.
Embedded Antenna Business Line
We expect the Embedded Antenna business line to show
considerable strength in the first half of 2022, with growth in
both revenue and volume, due in part to demand from new customers
for home networking products. This continues the strong increase in
revenue and volume from the second half of 2021, despite a
significant global chipset shortage in 2021, which impacted
customers' build schedules and forecasts. The Embedded Antenna
business line continues to demonstrate a strong order book despite
supply chain challenges, though some of the strength may reflect
pre-purchases by customers to build supply of stock.
Wireless Infrastructure Business Line
We expect the first half of 2022 to be challenging for the
Wireless Infrastructure business line, with lower revenue than in
the second half of 2021. Customer spending is focused on
prioritizing deployment of integrated base station antennas for 5G
networks in urban areas over small cell deployments, where the
Wireless Infrastructure business line has historically been
strongest. We expect distributed antenna systems (DAS)
deployments will strengthen, particularly for use in stadiums and
as people return to the office, later in 2022. New Multibeam BSA
antennas from Galtronics will come to market in the second half of
the year, opening new opportunities to drive sales with wireless
carriers.
Satcom Business Line
The commercial side of the Satcom business line continues
somewhat to feel the effects of the downturn due to the impact of
COVID-19. Although there are clear signs of recovery, we expect
capital spending by our commercial customers to remain somewhat
constrained in the first half of 2022 with a more sustained
recovery becoming evident in the second half of the year. The
C-band spectrum auction in the United
States is beginning to open up opportunities with satellite
operators as they have received the first round of incentive
payments based on clearing their C-band spectrum. Given the capital
build cycles of these operators and others in the Satcom ecosystem,
we expect the benefit to the Satcom business line from the
build-out of the related C-band infrastructure to begin in the
second half of 2022.
We expect sales for military and other government-related uses,
which represents the balance of Satcom's business, to improve in
2022. We expect to make additional deliveries of our Ultra
High-Power Summit II solid state power amplifiers over the course
of the year. We believe that there is no other platform in the
market that can deliver the capabilities of our Summit II.
Moreover, we expect to launch multiple technology upgrades within
our product portfolio over the course of the calendar year.
Overall, we expect revenue of the Satcom business line to be
stronger in 2022 as certain industries start to invest as the world
comes out of the COVID-19 pandemic. The Satcom business line
continues to show a strong and growing order book but is facing
supply chain constraints and a push-out of customer orders.
INVESTOR CONFERENCE CALL
Baylin will hold a conference call on March 10, 2022 at 8:00
a.m. (ET) to discuss its financial results for the three and
twelve months ended December 31, 2021. The call will be hosted
by Leighton Carroll, Chief Executive
Officer, Dan Nohdomi, Chief
Financial Officer, and Daniel Kim,
Executive Vice President of Corporate Development. All interested
parties are invited to participate using the dial-in details
provided below.
Date:
|
March 10,
2022
|
Time:
|
8:00 a.m.
(ET)
|
Dial-in
Number:
|
888-664-6392 or
416-764-8659
|
Conference
ID#:
|
61217897
|
|
|
Webcast: https://produceredition.webcasts.com/starthere.jsp?ei=1527770&tp_key=3a543f9baf
|
FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release includes forward-looking information and
forward-looking statements (together, "forward-looking statements")
within the meaning of applicable securities laws. Forward-looking
statements are not statements of historical fact. Rather,
forward-looking statements are disclosure regarding conditions,
developments, events or financial performance that we expect or
anticipate may or will occur in the future including, among other
things, information or statements concerning our objectives and
strategies to achieve those objectives, statements with respect to
management's beliefs, estimates, intentions and plans, and
statements concerning anticipated future circumstances, events,
expectations, operations, performance or results. Forward-looking
statements can be identified generally by the use of
forward-looking terminology, such as "anticipate", "believe",
"could", "should", "would", "estimate", "expect", "forecast",
"indicate", "intend", "likely", "may", "outlook", "plan",
"potential", "project", "seek", "target", "trend" or "will" or the
negative or other variations of these words or other comparable
words or phrases and is intended to identify forward-looking
statements, although not all forward-looking statements contain
these words.
The forward-looking statements in this press release include
statements concerning the continuing effect of the COVID-19
pandemic on our business, the outlook for our business lines,
including backlog, and settling final documentation amending the
Vietnam Loan. Forward-looking information and statements are based
on certain assumptions and estimates made by us in light of the
experience and perception of historical trends, current conditions,
expected future developments, including projected growth in sales
of passive and active radio frequency and satellite communications
products, and supporting services, and other factors we believe are
appropriate and reasonable in the circumstances, but there can be
no assurance that such assumptions and estimates will prove to be
correct.
Many factors could cause our actual results, level of activity,
performance or achievements or future events or developments to
differ materially from those expressed or implied by the
forward-looking statements, including the risk factors discussed in
the Company's most recent Annual Information Form, which is
available under the Company's profile on SEDAR at www.sedar.com.
All the forward-looking statements made in this press release are
qualified by these cautionary statements and other cautionary
statements or factors in this press release. There can be no
assurance that the actual results or developments will be realized
or, even if substantially realized, will have the expected
consequences to, or effects on, the Company. Unless required by
applicable securities law, the Company does not intend and does not
assume any obligation to update any forward-looking statements.
NON-IFRS MEASURES
This press release includes a number of measures that are not
prescribed by International Financial Reporting Standards ("IFRS")
and as such may not be comparable to similar measures presented by
other companies. We believe these measures are commonly employed to
measure performance in our industry and are used by analysts,
investors, lenders and interested parties to evaluate financial
performance and our ability to incur and service debt to support
business activities. While management of the Company believes that
non-IFRS measures provide helpful supplemental information, they
should not be considered in isolation as an alternative to net
income, cash flows generated by operating, investing or financing
activities, or other financial statement data presented in
accordance with IFRS. See "Non-IFRS Measures" on page 2 of the
MD&A for further information.
ABOUT BAYLIN
Baylin Technologies Inc. is a diversified global wireless
technology company. Baylin focuses on research, design,
development, manufacturing and sales of passive and active radio
frequency products, satellite communications products, and
supporting services.
SOURCE Baylin Technologies Inc.