TORONTO – SMTC reported first quarter revenue of $95.1 million, down 7.3% year-over-year and up 5.4% sequentially.

Net income was $800,000, down 36% year-over-year and $22.2% sequentially.

Test and Measurement segment revenue was $29.4 million, up 5% sequentially.

In the first quarter, the company added four new customers, and new programs with existing and new customers through May could generate in excess of $57 million of revenue over the life of those programs.

All SMTC facilities currently remain in operation and in compliance with applicable Covid-19 health and safety measures.

As of Mar. 29, SMTC had additional borrowing capacity of $31.2 million under its asset-based lending credit facility.

“We experienced stable demand in the first quarter from our customers in nearly all of the markets we serve,” said Ed Smith, president and CEO. “The sequentially higher first quarter revenue was due primarily to revenue increases from our test and measurement, retail and payment systems, and avionics, aerospace and defense customers.

“At $95.1 million, our first quarter sales were in line with our forecasts, and bookings continued to show strength with further expansion of our customer base. We were awarded multi-year programs from four new customers, plus new programs from five existing customers in the first quarter that have the potential to generate in excess of $50 million of revenue over the life of those programs, including wins in the avionics, aerospace and defense markets. We are excited our new business pipeline continues to grow, with an additional $7 million in new programs awarded to us in April and May, bringing the total of new orders received in 2020 to $57 million. With these new program awards, we expect the first half of 2020 will involve making incremental investments in our program management teams, production certifications and startup phase costs to support the launch of new products before they reach volume production later this year and into 2021.

“In order to meet our customers’ delivery requirements, we incurred Covid-19 related expenses in the first quarter of approximately $0.2 million. We also expect to incur an additional $1.2 million of Covid-19 related expenses in the second quarter. These additional expenses are primarily due to incremental logistics costs associated with expediting inventory purchases from existing and new sources, and labor and production inefficiencies and retention of temporary replacement labor to address workplace absenteeism due to illness, potential Covid-19 exposure or personal commitments. We are currently taking steps to limit our expenses, including putting a pause on all non-essential new hiring and new programs, and reducing our second quarter capital expenditures.

“To meet the demands of our customers in industries deemed essential, including defense, medical devices, telecom infrastructure, and test and measurement systems, all of our facilities currently remain open and are operating in accordance with applicable health and safety regulations. The wellness and safety of our employees remain a top priority for SMTC. We have instructed those employees at higher risk of Covid-19 to stay home and have directed all non-essential employees to work remotely. For those employees who continue to work at our facilities, we have instituted programs of temperature metering, intensive cleaning and disinfection, social distancing and we are prohibiting visitors to our sites. We are also carefully monitoring the potential impact of the Covid-19 pandemic, including by proactively coordinating with our customers and key suppliers.”

For the three months ended Mar. 30, cash provided by operations was $2.9 million, and capital expenditures were $900,000. As of Mar. 30, SMTC had $31.2 million available for borrowing under its asset-based lending facility.

Second quarter revenue and adjusted EBITDA are expected to range between $96 million to $99 million and $5.7 million and $6.4 million, respectively, exclusive of $1.2 million of Covid-19 related expenditures.

“While we believe we have been successful so far in mitigating the impacts of the Covid-19 pandemic and are encouraged by our continued success in winning new business, we also recognize the potential for additional negative impacts of the Covid-19 pandemic on our business, such as changes in customer demand, supply chain or product build-shipment interruptions, new or changing government regulations, impacts on our employees or our manufacturing facilities and impacts on the global economy. Thus, we believe it is prudent at this time to withdraw the full-year 2020 guidance, initially provided on Sept. 19, 2019, and reaffirmed on Mar. 12, 2020, until such time that visibility returns to pre-Covid-19 levels.”

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