Héroux-Devtek Reports Solid Fiscal 2020 Second Quarter Financial Results

Press Release from Héroux-Devtek Inc.

Q2 Financial Highlights

  • Sales of $145.5 million, up 52.1% from $ 95.7 million last year, with 14.3% coming from organic growth
  • Operating income of $10.5 million, up 98.9% from $5.3 million last year
  • Adjusted EBITDA1 of $21.5 million, up 63.3% from $13.2 million last year
  • Adjusted EBITDA margin of 14.8%, up from 13.8% last year

Q2 Operational and Commercial Highlights

  • Funded backlog increased to a record-level of $769 million, from $747 million in Q1
  • Successful completion by Boeing of the first test flight for the MQ-25 unmanned aerial refueler for which Héroux-Devtek provides complete landing gear systems

LONGUEUIL, QC, Nov. 8, 2019 /CNW Telbec/ – Héroux-Devtek Inc. (TSX: HRX) (“Héroux-Devtek” or the “Corporation”), a leading international manufacturer of aerospace products, today reported strong results for the second quarter ended September 30, 2019. Unless otherwise indicated, all amounts are in Canadian dollars.

“While the second quarter has historically been a seasonally softer one for Héroux-Devtek, I am pleased that we were able to deliver strong commercial and defence sales growth, both organically and through acquisitions – even outperforming first quarter sales. As we continue to focus on executing our plan, I wish to thank each member of our team for their continued commitment towards our success,” said Martin Brassard, President and CEO of Héroux-Devtek.

“We now turn to the second half of the year with a strong commitment towards the execution of our business integration and operational delivery strategies. With a record-setting backlog, up 60% from a year ago, and all our programs progressing according to plan, we are now well on track to achieve our revenue and profitability targets for the year,” concluded Mr. Brassard.

SECOND QUARTER RESULTS

Consolidated sales grew 52.1% to $145.5 million, up from $95.6 million last year, including a 14.3% organic growth and a solid performance by the Corporation’s recent acquisitions, which contributed $36.1 million. Commercial sales grew 38.1% from $47.0 million to $64.9 million, while defence sales were up 65.7%, from $48.6 million to $80.6 million.

Gross profit as a percentage of sales decreased during the second quarter to 15.3%, from 16.2% last year, mainly due to the 0.6% negative net impact of exchange rate fluctuations and higher manufacturing costs at the Longueuil facility. These negative factors were partially offset by the positive impact of the CESA acquisition.

Operating income increased to $10.5 million, or 7.2% of sales, up from $5.3 million, or 5.5% of sales last year, mainly driven by lower selling and administrative expenses as a percentage of sales. Last year’s operating income also reflected non-recurring acquisition-related costs, as opposed to this year. Adjusted EBITDA, which excludes non-recurring items, stood at $21.5 million, or 14.8% of sales, compared with $13.2 million, or 13.8% of sales, a year ago. For the same period, EPS doubled from $0.09 last year to $0.18 this quarter, while adjusted EPS1 grew 50%, from $0.12 last year to $0.18 in Q2.

SIX-MONTH RESULTS

Consolidated sales grew 59.3% to $288.9 million, up from $181.4 million for the corresponding period last year. Organic growth accounted for 14.7% of this increase, while the solid performance of the Corporation’s recent acquisitions contributed $80.7 million. Commercial sales grew 42.7% in the first six months of the year, from $92.8 million to $132.4 million, while defence sales were up 76.6% for the same period, from $88.6 million to $156.6 million.

Gross profit as a percentage of sales increased during the first half of the year to 16.1% from 15.7% last year, mainly due to the positive impact of the Beaver and CESA acquisitions, partially offset by the 0.3% negative net impact of exchange rate fluctuations and higher manufacturing costs at the Longueuil facility.

In the first six months of the year, operating income increased to $20.9 million, or 7.2% of sales, up from $10.1 million, or 5.6% of sales last year. Adjusted EBITDA, which excludes non-recurring items, stood at $43.0 million, or 14.9% of sales, compared with $25.4 million, or 14.0% of sales last year. For the same period, EPS grew 89.5%, from $0.19 last year to $0.36, while adjusted EPS grew to $0.37, up 68.2% from the $0.22 recorded in the same period last year.

The Corporation’s funded backlog increased to $769 million as at September 30, 2019, compared to $624 million as at March 31, 2019, mainly due to an increased demand for defence products combined with Alta’s backlog at acquisition, as recorded in the first quarter.

HEALTHY FINANCIAL POSITION

Cash flows related to operating activities reached $12.5 million in the second quarter, up from $11.7 million last year. For the six-month period, cash flows from operating activities amounted to $16.2 million, down from $20.1 million for the corresponding period last year, mainly due to an increase in inventories in preparation for upcoming growth.

As at September 30, 2019, net debt stood at $264.7 million, up from $243.0 million as at April 1, 20193. The increase in long-term debt during the six-month period is mainly due to the Alta acquisition partially offset by a US$12 million ($15.9 million) repayment made over the course of the second quarter.