ARC Group Worldwide, Inc.: ARC Group Worldwide Posts 33% Revenue Growth in First Quarter FY22

DELAND, FL / ACCESSWIRE / December 10, 2021 / ARC Group Worldwide, Inc. ("ARC" or the "Company"), a leading global provider of advanced manufacturing, today reports its results for the first fiscal quarter ending September 26, 2021. ARC reports large improvements across all major financial metrics for the organization.

First Quarter Fiscal Year 2022 Results

• Net sales were $15.2 million, up 32.7% from the prior-year period;
• Gross profit was $3.3 million, up 56.9% from the prior-year period;
• Operating expenses were $1.7 million, up 3.7% from the prior-year period however down 3.2% as a percentage of revenue;
• Income from operations was $1.6 million, up 259.3% from the prior-year period;
• Interest and financing costs were $0.5 million, up 55.7% from the prior-year period;
• EBITDA was $2.9 million, increasing by 57.1%;
• Adjusted EBITDA for the three months ended September 26, 2021 was also $2.9 million. Adjusted EBITDA is a non-GAAP financial measure, which is reconciled to the most directly comparable GAAP financial measure and more fully defined in the enclosed table.

Quarterly Financial Summary

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

Fiscal first quarter net sales were $15.2 million, compared to $11.4 million in our fiscal first quarter of 2021. The increase in revenue was driven by a recovery in medical product sales post COVID-19 along with strong growth in turnkey assembled products in the defense sector. Automotive sector revenue remained flat year over year due to continued chip shortages.

Fiscal first quarter gross profit was $3.3 million, compared to $2.1 million in our fiscal first quarter of 2021. Gross profit increases were primarily driven by increased volume, the return of medical device component sales and operational productivity gains in our Hungarian operations.

EBITDA was $2.9 million for the fiscal first quarter, compared to $1.8 million in our fiscal first quarter of 2021. The increase was due to the upturn in overall sales, the return to pre-pandemic medical sales levels and overall business productivity improvements.

During the quarter ARC generated $2.1 million in cash provided from operating activities and utilized it to pay down long term debts, strengthening balance sheet position.

Mr. Jed Rust, CEO of ARC Group Worldwide said, "There has been a tireless effort on improving our core business. The results continue to indicate that the efforts are yielding meaningful gains on both our financial metrics and customer growth." He went on to say, "I am encouraged by the recovery in the medical industry and am excited to see that segment continue to grow. I also see a renewed sense of focus in the aerospace industries to drive cost out and have found that metal injection molding is providing an excellent solution for our clients and expect extensive growth as a result. While I remain optimistic toward these sectors, we are seeing a slowdown in our defense sector, particularly in plastic injection molding and assemblies. We believe this slowdown will overshadow the gains we are seeing in the alternate sectors for the remainder of the fiscal year."

GAAP to Non-GAAP Reconciliation

The Company uses Adjusted EBITDA, a Non-GAAP financial measure as defined by the SEC, as a supplemental profitability measure because management finds it useful to understand and evaluate results, excluding the impact of non-cash depreciation and amortization charges, stock based compensation expenses, and nonrecurring expenses and outlays, prior to consideration of the impact of other potential sources and uses of cash, such as working capital items. This calculation may differ in method of calculation from similarly titled measures used by other companies and may be different than the EBITDA calculation used by our lenders for purposes of determining compliance with financial covenants. This Non-GAAP measure may have limitations when understanding performance as it excludes the financial impact of transactions such as interest expense necessary to conduct the Company's business and therefore is not intended to be an alternative to financial measures prepared in accordance with GAAP. The Company has not quantitatively reconciled its forward looking Adjusted EBITDA target to the most directly comparable GAAP measure because such items such as amortization of stock-based compensation and interest expense, which are specific items that impact these measures, have not yet occurred, are out of the Company's control, or cannot be predicted. For example, quantification of stock-based compensation is not possible as it requires inputs such as future grants and stock prices, which are not currently ascertainable.

Adjusted EBITDA from Continuing Operations, Adjusted Earnings, and Adjusted Earnings Per Share are non-GAAP financial measures. Adjusted EBITDA Margin from Continuing Operations is calculated by dividing EBITDA from Continuing Operations by sales.

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

		Sept. 26, 2021				Sept. 27, 2020
Net Income/(Loss)		$	1,037			$	93
Interest expense, net			509				327
Income taxes			32				29
Depreciation and amortization			1,312				1,391
Stock based compensation			47				55
Adjusted EBITDA from Continuing Operations		$	2,937			$	1,895
Adjusted EBITDA Margin from Continuing Operations			19.3	%			16.6	%
Net Income/(Loss)		$	1,037			$	93
Earnings Per Share		$	0.04			$	0.00
Weighted Average Common Shares Outstanding			24,671,623				23,548,442

About ARC Group Worldwide, Inc.

ARC Group Worldwide, Inc. (OTCM:ARCW) is a leading global advanced manufacturing service provider. Founded in 1987, the Company offers its customers a compelling portfolio of advanced manufacturing technologies and cutting-edge capabilities to improve the efficiency of traditional manufacturing processes and accelerate their time to market. In addition to being a world leader in metal injection molding, ARC has significant expertise in prototyping, advanced tooling, automation, machining, plastic injection molding, lean manufacturing, and robotics. ARC's mission is to bring innovation and technology to manufacturing. Learn more at arcw.com.

Forward Looking Statements

This release includes certain forward-looking statements and projections of ARC Group Worldwide, Inc. Such statements are subject to risks and uncertainties that could cause results to differ materially from the Company's expectations. While the Company makes these statements in good faith, neither the Company nor its management can guarantee that anticipated future results will be achieved. The Company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the Company, whether as a result of new information, future events, or otherwise. All forward-looking statements attributable to the Company or persons acting on the Company's behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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ARC Group Worldwide, Inc.

Unaudited Consolidated Statement of Operations
(in thousands, except for share and per share amounts)

		For the three months ended
		Sept. 26,				Sept. 27,
		2021				2020
Sales		$	15,189			$	11,442
Cost of sales			11,907				9,350
Gross profit			3,282				2,092
Selling, general and administrative			1,719				1,657
Income from operations		$	1,563			$	435
Other expense, net			15				14
Interest expense, net			(509	)			(327	)
Income before income taxes			1,069				122
Income tax expense			(32	)			(29	)
Net income		$	1,037			$	93
Net income per common share, basic and diluted:
ARC Group Worldwide, Inc.		$	0.04			$	0.00
Weighted average common shares outstanding:
Basic and diluted			24,671,623				23,548,442

ARC Group Worldwide, Inc.

Unaudited Consolidated Balance Sheets
(in thousands, except for share and per share amounts)

		Sept. 26, 2021				June 30, 2021
ASSETS
Current assets:
Cash		$	1,139			$	2,517
Accounts receivable, net			8,682				7,260
Inventories, net			6,843				7,042
Prepaid expenses and other current assets			1,057				2,970
Total current assets		$	17,721			$	19,789
Property and equipment, net			21,857				22,769
Right of use assets, net			735				756
Goodwill			6,412				6,412
Intangible assets, net			4,168				4,579
Other			163				167
Total assets		$	51,056			$	54,472
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable			2,796				4,708
Accrued expenses and other current liabilities			2,265				2,130
Deferred revenue			1,312				893
Current portion of long-term debt, net of unamortized financing costs			4,404				4,413
Operating lease liability, current portion			64				71
Finance lease liability, current portion			883				874
Total current liabilities		$	11,724			$	13,089
Long-term debt, net of current portion and net of unamortized financing costs			18,404				21,627
Operating lease liability, net of current portion			706				716
Finance lease liability, net of current portion			9,524				9,732
Other long-term liabilities			95				95
Total liabilities		$	40,453			$	45,259
Commitments and contingencies
Stockholders' Equity:
Common stock, $0.0005 par value, 225,000,000 shares authorized; 24,703,307 shares issued and 24,688,376 shares issued and outstanding at September 26, 2021, and 24,486,172 shares issued and 24,477,771 shares issued and outstanding at June 30, 2021			13				13
Treasury stock, at cost; 14,931 shares at September 26, 2021 and June 30, 2021			(94	)			(94	)
Additional paid-in capital			43,554				43,226
Accumulated deficit			(32,689	)			(33,726	)
Accumulated other comprehensive loss			(181	)			(206	)
Total stockholders' equity			10,603				9,213
Total liabilities and stockholders' equity		$	51,056			$	54,472

ARC Group Worldwide, Inc.

Unaudited Consolidated Statement of Cash Flows
(in thousands)

		For the three months ended
Cash flows from operating activities:		Sept. 26, 2021				Sept. 27, 2020
Net income		$	1,037			$	93
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,312				1,391
Share-based compensation expense			47				54
Amortization of debt discount			51				-
Bad debt expense and other			4				4
Changes in operating assets and liabilities:
Accounts receivable			(1,422	)			(869	)
Inventory			199				(1,174	)
Prepaid expenses and other assets			1,917				404
Accounts payable			(1,912	)			1,192
Accrued expenses and other liabilities			416				(1,611	)
Deferred revenue			433				933
Net cash provided by operating activities			2,082				417
Cash flows from investing activities:
Purchases of property and equipment			(4	)			(408	)
Net cash used in investing activities			(4	)			(408	)
Cash flows from financing activities:
Proceeds from debt issuance			15,737				4,644
Repayments of long-term debt and capital lease obligations			(19,191	)			(5,641	)
Net cash used in financing activities			(3,454	)			(997	)
Effect of exchange rates on cash			(2	)			(23	)
Net decrease in cash			(1,378	)			(1,011	)
Cash, beginning of quarter			2,517				3,942
Cash, end of quarter		$	1,139			$	2,931
Supplemental disclosures of cash flow information:
Cash paid for interest		$	215			$	152
Cash paid for income taxes, net of refunds		$	3			$	-

SOURCE: ARC Group Worldwide, Inc.

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