Héroux-Devtek Reports Fiscal 2020 Third Quarter Financial Results

Q3 Financial and Operational Highlights

• Sales of $157.3 million, up 8.8% from $ 144.5 million last year
• Operating income of $13.5 million, up 13.1% from $11.9 million last year
• Adjusted EBITDA¹ of $24.6 million, up 7.3% from $22.9 million last year
• Corporation announces increase to Fiscal 2020 sales guidance to $600-610 million range
• Funded backlog² increased to a record-level of $839 million, up 9.1% from $769 million in Q2
• Successful completion by Boeing, subsequent to quarter-end, of the first flight for the new Boeing 777X commercial aircraft for which Héroux-Devtek provides complete landing gear systems

LONGUEUIL, QC, Feb. 6, 2020 /CNW Telbec/ - Héroux-Devtek Inc. (TSX: HRX) ("Héroux-Devtek" or the "Corporation"), a leading international manufacturer of aerospace products and the world's third-largest landing gear manufacturer, today reported its financial results for the third quarter ended December 31, 2019. Unless otherwise indicated, all amounts are in Canadian dollars.

"I am pleased with our Q3 results and by the continued growth of our commercial and defence sales, especially on the heels of what had been a particularly strong third quarter last year. Accordingly, we have reviewed our sales guidance for Fiscal 2020 upwards, which we now expect to reach $600-610 million as a reflection of stronger than expected growth," said Martin Brassard, President and CEO of Héroux-Devtek.

"We are committed to continue to deliver on all our programs, especially as several of them will be reaching important development milestones over the course of the next twelve months, including the very promising Boeing 777X program that successfully completed its first flight on January 25, 2020. Our short-term focus is to execute on our backlog," concluded Mr. Brassard.

FINANCIAL HIGHLIGHTS	Three months ended December 31,		Nine months ended December 31,
(in thousands, except per share data)	2019	2018	2019	2018
Sales	$  157,253	$  144,528	$   446,196	$  325,963
Operating income	13,466	11,904	34,356	22,050
Adjusted operating income^1	13,466	13,973	34,971	25,355
Adjusted EBITDA^1	24,563	22,883	67,582	48,303
Net income	8,705	7,390	21,455	14,236
Adjusted net income^1	8,705	9,367	21,971	17,558
Cash flows related to operating activities	9,664	12,651	25,863	32,788
Free cash flow^1	7,939	11,901	13,599	26,241
in dollars per share
EPS – basic and diluted	$        0.24	$         0.20	$         0.60	$        0.39
Adjusted EPS^1	0.24	0.26	0.61	0.48
As at			December 31, 2019	September 30, 2019
Funded backlog^2			$   839,000	$  769,000

¹ This is a non-IFRS measure. Please refer to the "Non-IFRS Measures" section at the end of this press release.

² Represents firm orders

THIRD QUARTER RESULTS

Consolidated sales grew 8.8% to $157.3 million, up from $144.5 million last year, including a 1.4% organic growth and a contribution of $10.8 million by the Corporation's recent acquisitions. Commercial sales grew 11.8% from $65.5 million to $73.2 million, while defence sales were up 6.3%, from $79.0 million to $84.1 million.

Strong performances by Beaver and CESA, offset by the temporarily dilutive effect of the margin of more recently acquired businesses, led to relatively stable gross profit as a percentage of sales for the third quarter as compared to the corresponding period last year.

Operating income increased to $13.5 million, or 8.6% of sales, up from $11.9 million, or 8.2% of sales last year. Adjusted EBITDA, which excludes non-recurring items, stood at $24.6 million, or 15.6% of sales, compared with $22.9 million, or 15.8% of sales, a year ago. Foreign exchange fluctuations had an unfavorable net impact of $1.1 million year-over-year, or 0.7% of sales.

EPS grew from $0.20 last year to $0.24 as last year's EPS included non-recurring acquisition costs of $2.0 million net of taxes or $0.06 per share. Adjusted EPS decreased from $0.26 last year to $0.24 mainly due to the foreign exchange fluctuations representing $0.02 per share.

The Corporation's funded backlog increased to $839 million as at December 31, 2019, compared to $769 million as at September 30, 2019, mainly due to increased demand for defence products under long-term contracts.

NINE-MONTH RESULTS

Consolidated sales grew 36.9% to $446.2 million, up from $326.0 million for the corresponding period last year. Organic growth accounted for 8.8% of this increase, while the Corporation's recent acquisitions contributed $91.5 million. Commercial sales grew 33.8% in the first nine months of the year, from $158.3 million to $211.8 million, while defence sales were up 39.8% for the same period last year, from $167.7 million to $234.4 million.

Gross profit as a percentage of sales for the first nine months of the year was also negatively impacted by higher manufacturing costs at our Longueuil facility compared to last year.

In the first nine months of the year, operating income increased to $34.4 million, or 7.7% of sales, up from $22.1 million, or 6.8% of sales last year. Adjusted EBITDA, which excludes non-recurring items, stood at $67.6 million, or 15.1% of sales, compared with $48.3 million, or 14.8% of sales last year.

For the same period, EPS grew from $0.39 last year to $0.60, while adjusted EPS grew to $0.61, up from the $0.48 recorded in the same period last year. Last year, adjusted EPS excluded non-recurring acquisition costs representing $3.3 million net of taxes or $0.09 per share.

GUIDANCE UPDATE

Management increased its Fiscal 2020 sales guidance to reflect stronger than expected growth. Management expects sales to reach between $600 million and $610 million in Fiscal 2020.

Please see "Forward-Looking Statements" below and the Guidance section in the Corporation's MD&A for the quarter ended December 31, 2019, for further details regarding the material assumptions underlying the foregoing guidance.

FINANCIAL POSITION

Cash flows related to operating activities reached $9.7 million in the third quarter, down from $12.7 million last year. For the nine-month period, cash flows related to operating activities amounted to $25.9 million, down from $32.8 million for the corresponding period last year. For the third quarter as for the nine-month period, the variations in cash flows related to operating activities are mainly explained by an increase in inventories in preparation for upcoming growth, even though cash flow from operations increased.

As at December 31, 2019, net debt stood at $256.8 million, up from $243.0 million as at April 1, 2019³. The increase in long-term debt during the nine-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.

Over the course of the third quarter, the Corporation reached an agreement with its syndicate of banks to extend the term of its Revolving Facility from May 2022 to December 2024. Most of the other terms remained unchanged.

CONFERENCE CALL

Héroux-Devtek Inc. will hold a conference call to discuss these results on Thursday, February 6, 2020 at 8:30 AM Eastern Time. Interested parties can join the call by dialing 1-888-231-8191 (North America) or 1-647-427-7450 (overseas). The conference call can also be accessed via live webcast on Héroux-Devtek's website, www.herouxdevtek.com/en/news-events/events or at https://webinars.on24.com/cision/hrxq3f20. An accompanying presentation is also available on Héroux-Devtek's website at https://www.herouxdevtek.com/en/investors/financial-documents.

If you are unable to call in at this time, you may access a recording of the meeting by calling 1-855-859-2056 and entering the passcode 8169806 on your phone. This recording will be available from Thursday, February 6, 2020 as of 11:30 AM Eastern Time until 11:59 PM Eastern Time on Thursday, February 13, 2020. Additionally, the recording will be made available for replay on Héroux-Devtek's website after that date.

FORWARD-LOOKING STATEMENTS

Except for historical information provided herein, this press release contains information and statements of a forward-looking nature concerning the future performance of the Corporation.

Forward-looking statements are based on assumptions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Corporation's products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes.

As a result, readers are advised that actual results may differ from expected results. Please see the Guidance section in the Corporation's MD&A for the third quarter ended December 31, 2019 for further details regarding the material assumptions underlying the forecasts and guidance. Such forecasts and guidance are provided for the purpose of assisting the reader in understanding the Corporation's financial performance and prospects and to present management's assessment of future plans and operations, and the reader is cautioned that such statements may not be appropriate for other purposes.

NON-IFRS MEASURES

Earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, adjusted net income, adjusted earnings per share and free cash flow are financial measures not prescribed by International Financial Reporting Standards ("IFRS") and are not likely to be comparable to similar measures presented by other issuers. Management considers these to be useful information to assist investors in evaluating the Corporation's profitability, liquidity and ability to generate funds to finance its operations. Refer to Non-IFRS financial measures under Operating Results in the Corporation's MD&A for definitions of these measures and reconciliations to the most comparable IFRS measures.

ABOUT HÉROUX-DEVTEK

Héroux-Devtek Inc. (TSX: HRX) is an international company specializing in the design, development, manufacture, repair and overhaul of aircraft landing gear, hydraulic and electromechanical actuators, custom ball screws and fracture-critical components for the Aerospace market. The Corporation is the third-largest landing gear company worldwide, supplying both the commercial and defence sectors. Approximately 90% of the Corporation's sales are outside of Canada, including about 50% in the United States. The Corporation's head office is located in Longueuil, Québec with facilities in Canada, the United States, the United Kingdom and Spain.

^1 This is a non-IFRS measure. Please refer to the "Non-IFRS Measures" section at the end of this press release.
^2 Represents firm orders
^3 Pro forma net debt as at April 1, 2019 reflects the impact of the adoption of IFRS 16 – Leases. See the Corporation's financial statements for further details.

SOURCE Héroux-Devtek Inc.

Héroux-Devtek Inc.: Stéphane Arsenault, Vice President and Chief Financial Officer, Tel.: [phone], [email protected]; Investor Relations: Hugo Delorme, MERCURE Conseil, Tel.: [phone], ext. 555, [email protected]

Related Links

www.herouxdevtek.com