5N PLUS INC. Strong Demand Grows Revenue by 28%, Global Inflation Weighs on Margins
All amounts are expressed in U.S. dollars unless otherwise stated.
In the third quarter of 2021, the Company delivered significant revenue growth driven by strong demand within Eco-Friendly Materials, against the backdrop of global supply chain challenges caused by the pandemic. The growth in revenue is independent of any price adjustments underway to mitigate cost increases due to the current supply chain challenges. The Company's results were largely impacted by additional costs associated with international freight and consumables. When comparing the Adjusted EBITDA1 of Q3 2021 to Q3 2020, international freight and consumables accounted for
Electronic Materials performed as anticipated, with medical imaging and renewable energy providing lower contributions, as the revenue for space business increased as compared to the same period last year. The demand for Health and Pharma products was particularly strong this quarter and performed well above expectations.
"Our revenue growth amid a challenging landscape serves as a testament to the efficacy and adaptability of our long-term strategy," said
Third Quarter Highlights:
- Revenue in Q3 2021 increased by 28%, reaching
$50.8 million , compared to$39.9 million in Q3 2020, favorably impacted by higher demand under Eco-Friendly Materials segment. Year-to-date revenue stands at$145.4 million compared to$131.0 million in the same period last year. - Adjusted EBITDA1 in Q3 2021 reached
$5.5 million compared to$7 .7 million in Q3 2020, impacted by an unfavorable sales mix under Electronic Materials, and significant cost increases for international freight and consumables, partially mitigated by revenue growth. EBITDA1 in Q3 2021 reached$5 .1 million compared to$7 .5 million in Q3 2020. Adjusted EBITDA in YTD 2021 reached$18.2 million compared to$22.2 million in YTD 2020. - In Q3 2021, net loss was
$0.8 million or$0.01 per share, compared to net earnings of$2.7 million or$0.03 per share in Q3 2020. Net earnings in YTD 2021 were$2.1 million or$0.03 per share as compared to$5 .1 million or$0.06 per share in the same period last year. - On
September 30, 2021 , the backlog1 represented 174 days of annualized revenue, 25 days lower than the previous quarter. Bookings1 in Q3 2021 reached 78 days compared to 53 days for the same period last year. - Annualized Return on Capital Employed ("ROCE")1 reached 11.4% in Q3 2021 compared to 14.4% at the end of 2020.
- Net debt1 stood at
$11.8 million onSeptember 30, 2021 , down from 14.1 million onJune 30, 2021 .
Subsequent Events
- On
October 19, 2021 , 5N Plus announced a long-term agreement with Samsung Electronics Co. ("Samsung") to supply engineered substrates based on II-VI semiconductor materials for the detector core of the next generation of medical imaging devices. The detector is based on Photon Counting Detector ("PCD") technology and will be incorporated into computed tomography ("CT") by Samsung's subsidiaryNeuroLogica Corp. , located inDanvers, Massachusetts . - On
October 27, 2021 , 5N Plus announced that it received the necessary approval from the regulatory agencies to acquire all of the issued and outstanding shares and ("the Transaction") ofAZUR SPACE Solar Power GmbH ("AZUR"). The Company expects the deal to close within the next few weeks. The Transaction will allow 5N Plus to meaningfully expand into new, larger and growing markets and develop a highly competitive value chain, spanning from procurement of strategic materials to finished epitaxy engineered substrates. 5N Plus plans to fully integrate AZUR's workforce and will appoint Mr. Jürgen Heizmann, Managing Director of AZUR, as a member of 5N Plus's Executive Committee.
Outlook
The acquisition of AZUR, a process that began earlier this year following the announcement of intent to acquire and recently approved by regulators, is the cornerstone of 5N Plus's transition to advanced materials based on cutting edge technology. Considering the strategic importance of AZUR and its portfolio of technologies, the relevant regulatory authorities conducted an exhaustive review process to vet 5N Plus as an appropriate acquirer. The Company expects to close this milestone transaction within the next few weeks. In congruence with the Company's strategy, this Transaction will enable 5N Plus to expand its product portfolio within specialty semiconductors and uniquely positions the Company to benefit from potential growth linked to a number of critical industries that will be relying on advanced compound semiconductors in the future.
Notwithstanding contributions from future acquisitions, including that of AZUR, the Company's portfolio of current businesses is expected to deliver revenue growth in 2021, supported by strong customer demand. The Company expects challenges stemming from the global supply chain to continue over the next quarters. Despite this, 5N Plus's priorities will be to fulfill customer demand and revenue growth, recognizing that the inflationary environment around freight and consumables will weigh on margins. For 2021, the Company expects Adjusted EBITDA1to be in the range of
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1 See Non-IFRS Measures |
Conference Call
5N Plus will host a conference call on Wednesday, November 3, 2021, at 8:00 am Eastern Daylight Time to discuss results of the third quarter ended September 30, 2021. All interested parties are invited to participate in the live broadcast on the Company's website at www.5nplus.com.
To participate in the conference call:
Toronto area: 416–764–8659- Toll–Free: 1–888–664–6392
- Enter access code: 6506503
A replay of the webcast and a recording of the Q&A will be available until November 10, 2021. To access the recording, please dial at 1–888–390–0541 and enter access code 065031.
About
5N Plus is a leading global producer of specialty semiconductors and performance materials. The Company's ultra–pure materials often form the core element of its customer products. These customers rely on 5N Plus's products to enable performance and sustainability in their own products. 5N Plus deploys a range of proprietary and proven technologies to develop and manufacture its products. The Company's products enable various applications in a number of key industries including renewable energy, security, space, pharmaceutical, medical imaging, and industrial and additive manufacturing. Headquartered in
Non–IFRS Measures
Backlog represents the expected orders we have received but have not yet executed and that are expected to translate into sales within the next twelve months expressed in number of days. Bookings represent orders received during the period considered, expressed in days, and are calculated by adding revenues to the increase or decrease in backlog for the period considered divided by annualized year revenues. We use backlog to provide an indication of expected future revenues in days, and bookings to determine its ability to sustain and increase its revenues.
EBITDA means net earnings before interest expenses, income taxes, depreciation and amortization. We use EBITDA because we believe it is a meaningful measure of the operating performance of our ongoing business without the effects of certain expenses. The definition of this non–IFRS measure used by the Company may differ from that used by other companies. EBITDA margin is defined as EBITDA divided by revenues.
Adjusted EBITDA means EBITDA as defined above before impairment of inventories, share–based compensation expense (income), impairment of non–current assets, litigation and restructuring costs (income), gain on disposal of property, plant and equipment, foreign exchange and derivatives loss (gain). We use adjusted EBITDA because we believe it is a meaningful measure of the operating performance of our ongoing business without the effects of certain expenses. The definition of this non–IFRS measure used by the Company may differ from that used by other companies. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
Adjusted operating expenses means operating charges before impairment of inventories, share-based compensation expense (income), impairment of non-current assets, litigation and restructuring costs (income), gain on disposal on property, plant and equipment and depreciation and amortization. 5N Plus uses adjusted operating expenses to calculate the Adjusted EBITDA. 5N Plus believes it is a meaningful measure of the operating performance of its ongoing business. The definition of this non-IFRS measure used by the Company may differ from that used by other companies.
Net debt is calculated as total debt less cash and cash equivalents. Any introduced IFRS 16 reporting measures in reference to lease liabilities are excluded from the calculation. We use this measure as an indicator of its overall financial position.
Gross margin is a measure used to monitor the sales contribution after paying cost of sales, excluding depreciation and impairment inventory charge. We also express this measure in percentage of revenues by dividing the gross margin value by the total revenue.
Return on Capital Employed ("ROCE") is a non–IFRS financial measure, calculated by dividing the annualized Adjusted EBIT by capital employed at the end of the period. Adjusted EBIT is calculated as the Adjusted EBITDA less depreciation of PPE and amortization of intangible assets (adjusted for accelerated depreciation charge, if any). Capital employed is the sum of the accounts receivable, the inventory, the PPE, the goodwill and intangibles less trade and accrued liabilities (adjusted for exceptional items). We use ROCE to measure the return on capital employed, whether the financing is through equity or debt. In our view, this measure provides useful information to determine if capital invested in the Company yields competitive returns. The usefulness of ROCE is limited by the fact that it is a ratio and not providing information as to the absolute amount of its net income, debt or equity. It also excludes certain items from the calculation and other companies may use a similar measure but calculate it differently.
Forward–Looking Statements
Certain statements in this press release may be forward–looking within the meaning of applicable securities laws. Forward–looking information and statements are based on the best estimates available to the Company at the time and involve known and unknown risks, uncertainties or other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward–looking statements. A description of the risks affecting the Company's business and activities appears under the heading "Risk and Uncertainties" of the 5N Plus 2020 MD&A dated
Forward–looking statements can generally be identified by the use of terms such as "may", "should", "would", "believe", "expect", the negative of these terms, variations of them or any similar terms. No assurance can be given that any events anticipated by the forward–looking information in this press release will transpire or occur, or if any of them do so, what benefits that 5N Plus will derive therefrom. In particular, no assurance can be given as to the future financial performance of 5N Plus. The forward–looking information contained in this press release is made as of the date hereof and the Company has no obligation to publicly update such forward–looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws. The reader is warned against placing undue reliance on these forward–looking statements.
INTERIM CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS
For the three and nine-month periods ended
(in thousands of
Three months | Nine months | |||
2021 | 2020 | 2021 | 2020 | |
$ | $ | $ | $ | |
Revenue | 50,839 | 39,872 | 145,434 | 130,962 |
Cost of sales | 42,587 | 29,982 | 118,124 | 101,565 |
Selling, general and administrative expenses | 4,729 | 4,522 | 14,858 | 14,002 |
Other expenses (income), net | 1,519 | 210 | 4,119 | 2,512 |
48,835 | 34,714 | 137,101 | 118,079 | |
Operating earnings | 2,004 | 5,158 | 8,333 | 12,883 |
Financial expense | ||||
Interest on long-term debt | 663 | 661 | 1,945 | 2,016 |
Imputed interest and other interest expense | 298 | 287 | 604 | 704 |
Foreign exchange and derivative (gain) loss | (130) | 683 | (662) | 1,763 |
831 | 1,631 | 1,887 | 4,483 | |
Earnings before income taxes | 1,173 | 3,527 | 6,446 | 8,400 |
Income tax expense | ||||
Current | 1,904 | 656 | 4,134 | 2,946 |
Deferred | 61 | 162 | 182 | 404 |
1,965 | 818 | 4,316 | 3,350 | |
Net (loss) earnings | (792) | 2,709 | 2,130 | 5,050 |
Attributable to: | ||||
Equity holders of | (792) | 2,709 | 2,130 | 5,050 |
(792) | 2,709 | 2,130 | 5,050 | |
(Loss) earnings per share attributable to equity holders of | (0.01) | 0.03 | 0.03 | 0.06 |
Basic (loss) earnings per share | (0.01) | 0.03 | 0.03 | 0.06 |
Diluted (loss) earnings per share | (0.01) | 0.03 | 0.03 | 0.06 |
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of
2021 | 2020 | |
$ | $ | |
Assets | ||
Current | ||
Cash and cash equivalents | 33,155 | 39,950 |
Accounts receivable | 31,234 | 30,110 |
Inventories | 71,624 | 67,139 |
Income tax receivable | 4,857 | 5,440 |
Other current assets | 8,731 | 8,256 |
Total current assets | 149,601 | 150,895 |
Property, plant and equipment | 51,855 | 53,191 |
Right-of-use assets | 11,458 | 5,047 |
Intangible assets | 8,946 | 9,668 |
Deferred tax assets | 6,407 | 6,789 |
Other assets | 3,057 | 1,088 |
Total non-current assets | 81,723 | 75,783 |
Total assets | 231,324 | 226,678 |
Liabilities | ||
Current | ||
Trade and accrued liabilities | 32,800 | 31,671 |
Income tax payable | 5,198 | 3,328 |
Derivative financial liabilities | 193 | - |
Current portion of long-term debt | - | 109 |
Current portion of lease liabilities | 1,651 | 1,442 |
Total current liabilities | 39,842 | 36,550 |
Long-term debt | 45,000 | 50,000 |
Employee benefit plan obligation | 15,238 | 17,202 |
Derivative financial liabilities | - | 439 |
Lease liabilities | 10,167 | 3,916 |
Other liabilities | 195 | 195 |
Total non-current liabilities | 70,600 | 71,752 |
Total liabilities | 110,442 | 108,302 |
Equity | 120,882 | 118,376 |
Total liabilities and equity | 231,324 | 226,678 |
Revenue by Segment and Gross Margin | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 |
$ | $ | $ | $ | |
Electronic Materials | 19,390 | 20,615 | 57,422 | 59,917 |
Eco-Friendly Materials | 31,449 | 19,257 | 88,012 | 71,045 |
Total revenue | 50,839 | 39,872 | 145,434 | 130,962 |
Cost of sales | (42,587) | (29,982) | (118,124) | (101,565) |
Depreciation included in cost of sales | 2,597 | 2,570 | 7,024 | 7,833 |
Gross margin1 | 10,849 | 12,460 | 34,334 | 37,230 |
Gross margin percentage1 | 21.3% | 31.3% | 23.6% | 28.4% |
Adjusted EBITDA and EBITDA | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 |
$ | $ | $ | $ | |
Revenue | 50,839 | 39,872 | 145,434 | 130,962 |
Adjusted operating expenses[2] * | (45,302) | (32,128) | (127,281) | (108,714) |
Adjusted EBITDA1 | 5,537 | 7,744 | 18,153 | 22,248 |
Impairment of inventories | - | - | - | - |
Impairment of non-current assets | - | (4,934) | - | (4,934) |
Share-based compensation expense | (62) | (254) | (1,149) | (934) |
Litigation and restructuring (costs) income, net | (500) | 5,577 | (500) | 5,577 |
Foreign exchange and derivative gain (loss) | 130 | (683) | 662 | (1,763) |
EBITDA1 | 5,105 | 7,450 | 17,166 | 20,194 |
Interest on long-term debt, imputed interest and other interest expense | 961 | 948 | 2,549 | 2,720 |
Depreciation and amortization | 2,971 | 2,975 | 8,171 | 9,074 |
Earnings before income taxes | 1,173 | 3,527 | 6,446 | 8,400 |
Income tax expense | ||||
Current | 1,904 | 656 | 4,134 | 2,946 |
Deferred | 61 | 162 | 182 | 404 |
1,965 | 818 | 4,316 | 3,350 | |
Net (loss) earnings | (792) | 2,709 | 2,130 | 5,050 |
Basic (loss) earnings per share | ( | |||
Diluted (loss) earnings per share | ( |
*Excluding impairment of inventories, share-based compensation expense (income), and depreciation and amortization. |
Net Debt | As at | As at |
$ | $ | |
Bank indebtedness | - | - |
Long-term debt including current portion | 45,000 | 50,109 |
Total Debt1 | 45,000 | 50,109 |
Cash and cash equivalents | (33,155) | (39,950) |
Net Debt1 | 11,845 | 10,159 |
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1 See Non-IFRS Measures |
SOURCE
© Canada Newswire, source
