DELAND, Fla., Feb. 13, 2019 (GLOBE NEWSWIRE) -- ARC Group Worldwide, Inc. (“ARC” or the “Company”) (NASDAQ: ARCW), a leading global provider of advanced manufacturing, today reported its results for the second fiscal quarter ending December 30, 2018.

Highlights for the second quarter of fiscal year 2019 compared to the second quarter fiscal year 2018 for Continuing Operations:

• Sales of $20.9 million, an increase of 19.9%;
• Gross Profit of $1.5 million, an increase of 602.3%;
• EBITDA of $0.8 million, an increase of 168.4%

Highlights for the first six months ended December 30, 2018, compared to the first six months ended December 31, 2017 for Continuing Operations:

• Sales of $41.4 million, an increase of 13.6%;
• Gross Profit of $4.6 million, an increase of 414.1%;
• EBITDA of $3.3 million, an increase of 508.8%

Quarterly Financial Summary

The following analysis is performed over Sales, Gross Profit, and EBITDA from Continuing Operations for the comparative periods identified unless otherwise noted. 

We experienced continued sales growth, with an increase of approximately $3.5 million as compared to the prior period last year.  This was primarily driven by higher metal injection molding (“MIM”) and plastics sales, which was due to the combination of sales with higher order volumes in the aerospace, medical, and firearms and defense markets.  Furthermore, the Company submitted for customer approval an additional two aerospace components and acquired a new aerospace customer.  These two components have an annual expected volume of 0.2 million pieces and $1.0 million in sales.  The sales increases were magnified by the effectiveness of the cost reduction initiatives in the Precision Components Group that continue to provide benefit. 

Fiscal second quarter 2019 Revenue was $20.9 million, compared to $17.4 million in our fiscal second quarter 2018.  The increase in revenue was primarily driven by higher MIM and plastics sales, as noted above. 

Fiscal second quarter 2019 Gross Profit was $1.5 million, compared to a gross deficit of $(0.3) million in our fiscal second quarter 2018.  This increase was primarily the result of the cost reduction initiatives that were completed during fiscal year 2018 and the continued diversification into higher margin aerospace and medical parts sales.  As a result, the sales increase of approximately $3.5 million was 19.9%, while Gross Profit increase was approximately $1.8 million, or 602.4% over the prior comparable period. 

EBITDA was $0.8 million in the fiscal second quarter 2019 compared to $(1.2) million in the fiscal second quarter 2018.  Like Gross Profit, EBITDA was positively impacted by the increased revenues, aerospace and medical part profit margins, and lower costs. 

Fiscal YTD 2019 Revenues was $41.5 million, compared to $36.5 million for fiscal YTD 2018.  The increase in revenue was primarily driven by higher MIM and plastics sales, as discussed above.

Gross Profit was $4.6 million YTD 2019 compared to $0.9 million for YTD 2018.  The increase in gross profit was due to the increase in sales, cost reduction initiatives, and the continued diversification into aerospace, as noted above. 

EBITDA was $3.3 million for YTD 2019, compared to $(0.8) for YTD 2018.  The increase in EBITDA is due to the cost reduction initiatives and diversification, as noted above. 

Further, the Company’s planned sale of 3D Material Technologies (“3DMT”) has been progressing.  We expect to be able to sell 3DMT prior to the end of third quarter of fiscal year 2019 with the funds being used to pay down debt.  For the fiscal second quarter 2019, 3DMT had EBITDA loss of ($0.6) million.  3DMT has been recorded as discontinued operations in the financial statements

ARC’s CEO, Alan Quasha, commented, “I am generally pleased with our progress, particularly in our critically important Colorado facilities.  At this time last year, we were incurring significant losses there.  We have made operational improvements in Colorado that we expect to drive continued improved results. Additionally, Colorado has continued to successfully increase its aerospace business and prospects.  This quarter we added another aerospace customer, and launched two new aerospace parts, with an additional two new parts to be launched in fiscal third quarter 2019. While we still have more work to do, I am confident in the new leadership team we have in place to continue to drive their success.

“Our Florida facility remains our strongest performer.  Its ability to make the difficult, intricate medical parts gives them a strong niche market that continues to do well. They are working on some promising new parts, which we hope to be able to highlight in the coming quarters.

“Unfortunately, we got hit with some sins of the past and did stumble this quarter. For example, we settled a past lawsuit related to the sale of Tekna Seal, and Hungary and Stamping had some disruptions and self-inflicted wounds.  Hungary encountered high scrap and a material contamination issue that we caught early and disposed of before it was too late.  Nevertheless, it was costly. Hungary is putting in place new equipment and taking other actions to curb their scrap and contamination issues going forward, so we expect these glitches to be a onetime event.  Stamping experienced leadership and growing pains. Stamping missed Mr. Willman's strong and tight reins when he was promoted to CFO in Colorado. It also suffered a delay in a major program. Both Mr. Eli Davidai, Board Member, and Mr. Willman have spent significant time there this quarter, and we have a solid plan in place to get them back on track.  Like Florida, they also have a very promising new program in the works that has been verbally awarded and will diversify them away from their high automotive concentration.

“In all, while the bottom-line results for the quarter were disappointing, they masked continued significant progress at the Company. I am encouraged by a number of positive developments. By fiscal year end, we expect to be finally done with all the sins of the past. We have improved operational efficiencies and coordination throughout the company and have put in place programs and procedures for continued improvements. We have increased our sales growth and prospects, particularly in medical and aerospace, both of which will improve margins and stability. While disappointing we will exit the 3D printing business, the sale of 3DMT will allow us to begin to make small but meaningful investments in our core business and generate the cash flow to begin to pay down debt.

“The lead time for new orders in our business is frustratingly long, but we believe that the underlying improvements we have been making will begin to become clearer and that shareholders who have patience will be rewarded.” 

GAAP to Non-GAAP Reconciliation

The Company has provided non-GAAP financial information to provide additional, meaningful comparisons of current results to prior periods’ results by excluding items that the Company does not believe are representative or indicative of its results of operations.  Non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States.  The Company’s non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP.  Specifically, EBITDA from Continuing Operations, EBITDA Margin from Continuing Operations, Facility EBITDA from Continuing Operations, Facility EBITDA Margin from Continuing Operations, Adjusted Earnings, and Adjusted Earnings Per Share are non-GAAP financial measures.  EBITDA Margin from Continuing Operations and Facility EBITDA Margin from Continuing Operations are calculated by dividing EBITDA from Continuing Operations and Facility EBITDA from Continuing Operations, respectively, by sales.

The reconciliation to GAAP is as follows (dollars in thousands):