Héroux-Devtek Reports Solid Fiscal 2020 Second Quarter Financial Results

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 backlog² 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.

FINANCIAL HIGHLIGHTS	Three months ended September 30,				Six months ended September 30,
(in thousands, except per share data)		2019		2018		2019		2018
Sales	$	145,516	$	95,665	$	288,943	$	181,435
Operating income		10,519		5,289		20,890		10,146
Adjusted operating income^1		10,519		6,165		21,505		11,382
Adjusted EBITDA^1		21,510		13,176		43,019		25,420
Net income		6,307		3,294		12,750		6,846
Adjusted net income^1		6,307		4,405		13,266		8,191
Cash flows related to operating activities		12,504		11,687		16,199		20,137
Free cash flow^1		7,248		8,152		5,660		14,520
In dollars per share
EPS – basic and diluted	$	0.18	$	0.09	$	0.36	$	0.19
Adjusted EPS^1		0.18		0.12		0.37		0.22
As at					September 30, 2019		March 31, 2019
Funded backlog^2					$	769,000	$	624,000

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.

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.

CONFERENCE CALL

Héroux-Devtek Inc. will hold a conference call to discuss these results on Friday, November 8, 2019 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 new website, www.herouxdevtek.com/en/news-events/events or at https://webinars.on24.com/cision/hrxq2f20. 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 455983 on your phone. This recording will be available on Friday, November 8, 2019 as of 11:30 AM Eastern Time until 11:59 PM Eastern Time on Friday, November 15, 2019. 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 second quarter ended September 30, 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.

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^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]; Investor Relations: Catherine Moreau, MERCURE Conseil, Tel.: [phone], ext. 552, [email protected]

Related Links

www.herouxdevtek.com