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SMTC Corporation Debt increased on 5.4% while EBITDA decreased on 3.8%

03/17/2021 • About SMTC Corporation ($SMTX) • By InTwits

SMTC Corporation reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • EBITDA Margin is quite volatile: 5.3% in FY2020, 5.8% in FY2019, 3.8% in FY2018, -2.0% in FY2017, 3.0% in FY2016
  • SMTC Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.2%. At the same time it's in pair with industry average of 3.2%
  • CAPEX is quite volatile: $2m in FY2020, $4m in FY2019, $4m in FY2018, $1m in FY2017, $2m in FY2016
  • The company has business model with low profitability: ROIC is 7.4%
  • It operates with high leverage: Net Debt/EBITDA is 4.2x while industry average is 3.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

SMTC Corporation's Revenue increased on 3.7%. Revenue growth showed acceleration in FY20Q4 - it increased 12.3% YoY. During FY2016-FY2020 Revenue growth topped in FY2019 at 72.4%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 6.7 pp from 13.4% to 6.7% in FY2020.

Gross Margin increased slightly on 1.3 pp from 9.9% to 11.2% in FY2020. SG&A as a % of Revenue showed almost no change in FY2020.

Net Income margin increased slightly on 1.5 pp from -1.6% to -0.15% in FY2020.

Investments (CAPEX, working capital and M&A)

In FY2020 the company had CAPEX/Revenue of 0.58%. CAPEX/Revenue showed almost no change from FY2017 to FY2020. It's average level of CAPEX/Revenue for the last three years was 1.2%.

Return on investment

The company operates at low but positive ROIC (7.4%) and negative ROE (-1.4%). ROIC increased on 3.1 pp from 4.2% to 7.4% in FY2020. ROE jumped on 14.9 pp from -16.3% to -1.4% in FY2020. During the last 5 years ROIC bottomed in FY2017 at -16.0% and was growing since that time.

Leverage (Debt)

Debt level is 4.2x Net Debt / EBITDA and 4.3x Debt / EBITDA. Net Debt / EBITDA surged on 0.4x from 3.8x to 4.2x in FY2020. Debt increased on 5.4% while cash dropped on 56.1%.

SMTC Corporation has short term refinancing risk: cash is only 1.4% of short term debt.

Management team

SMTC Corporation's CEO is Edward J Smith "Ed". Edward J Smith "Ed" has 3 years tenure with the company. SMTC Corporation's CFO Steven M Waszak "Steve" has spent 3 years with the company.

Financial and operational results

FY ended 01/03/2021

SMTC Corporation ($SMTX) key annual financial indicators

mln. $201620172018201920202020/2019
Gross Profit15.010.921.737.043.316.9%
Net Income-0.2-7.8-0.4-6.0-0.6
Balance Sheet
Short Term Debt5.114.427.938.342.09.7%
Long Term Debt8.
Cash flow
Revenue growth-23.9%-17.1%55.2%72.4%3.7%
EBITDA growth-14.9%-156.4%-393.6%161.6%-3.8%

Gross Margin9.0%7.8%10.0%9.9%11.2%1.3%
EBITDA Margin3.0%-2.0%3.8%5.8%5.3%-0.4%
SG&A, % of revenue8.3%10.0%8.4%7.3%7.7%0.4%
Net Income Margin-0.1%-5.6%-0.2%-1.6%-0.2%1.5%
CAPEX, % of revenue1.3%1.1%2.0%1.0%0.6%-0.5%

Net Debt/EBITDA1.0x11.3x3.8x4.2x0.4x

SMTC Corporation ($SMTX) key quoterly financial indicators

mln. $FY20Q1FY20Q2FY20Q3FY20Q4 YoY change
Revenue9590100101 -7.3%-0.6%12.3%12.3%
EBITDA6651 -26.3%22.2%534.7%-80.6%
Net Income111-4 -36.0%---456.8%
Balance Sheet
Cash1001 -15.2%-50.9%-71.9%-56.1%
Short Term Debt38384042 31.8%108.7%2.4%9.7%
Long Term Debt47474646 -31.3%-31.8%0.4%1.8%
Gross Margin10.1%11.8%11.2%11.7% 1.7%1.9%1.1%0.1%
EBITDA Margin 6.1% 6.8% 5.4% 1.4% -1.6%1.3%4.5%-6.7%
Net Income Margin 0.8% 1.1% 1.2% -3.5% -0.4%3.8%7.7%-4.6%

Peers in Electronic Manufacturing Services

Below we provide SMTC Corporation benchmarking against other companies in Electronic Manufacturing Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Netlist Inc ($NLST)-95.0%-12.5%-22.1%81.0%
IEC Electronics Corp. ($IEC)--24.1%21.2%34.3%16.4%
eMagin Corporation ($EMAN)-3.0%19.1%1.9%10.1%
Jabil Inc. ($JBL)-3.9%15.9%14.4%7.8%
Plexus Corp. ($PLXS)--1.1%13.7%10.1%7.1%
Median (13 companies)4.6%3.0%7.1%1.9%-8.7%
SMTC Corporation ($SMTX)--17.1%55.2%72.4%3.7%

Top companies by Gross margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Neonode Inc. ($NEON)86.9%77.1%89.2%89.7%82.0%
IPG Photonics Corporation ($IPGP)54.9%56.6%54.8%46.1%44.9%
CTS Corporation ($CTS)35.4%33.2%35.1%33.6%32.8%
TE Connectivity Ltd. ($TEL)33.7%34.3%33.9%32.7%30.7%
RF Industries, Ltd. ($RFIL)28.0%30.4%34.1%28.3%26.9%
Median (13 companies)22.2%15.8%15.2%15.4%17.1%
SMTC Corporation ($SMTX)9.0%7.8%10.0%9.9%11.2%

Top companies by EBITDA margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
IPG Photonics Corporation ($IPGP)41.8%44.7%40.9%26.8%24.0%
CTS Corporation ($CTS)20.7%14.0%17.8%17.6%18.1%
TE Connectivity Ltd. ($TEL)20.9%20.4%21.4%19.8%11.1%
TTM Technologies, Inc. ($TTMI)14.0%14.6%13.5%15.8%9.7%
IEC Electronics Corp. ($IEC)7.4%3.8%4.3%6.6%7.5%
Median (12 companies)5.4%5.0%4.8%6.1%5.9%
SMTC Corporation ($SMTX)3.0%-2.0%3.8%5.8%5.3%

Top companies by CAPEX/Revenue, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
eMagin Corporation ($EMAN)6.7%6.2%8.8%4.2%8.5%
IPG Photonics Corporation ($IPGP)12.6%9.0%11.0%10.2%7.3%
TTM Technologies, Inc. ($TTMI)3.4%5.7%5.3%6.7%4.9%
TE Connectivity Ltd. ($TEL)5.3%5.6%6.7%5.6%4.6%
Jabil Inc. ($JBL)5.0%3.8%4.7%4.0%3.6%
Median (12 companies)2.8%3.4%2.5%1.6%3.5%
SMTC Corporation ($SMTX)1.3%1.1%2.0%1.0%0.6%

Top companies by ROIC, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
IEC Electronics Corp. ($IEC)16.9%3.1%6.4%12.7%14.8%
Sanmina Corporation ($SANM)14.2%13.9%7.0%16.2%13.0%
Plexus Corp. ($PLXS)8.7%10.3%9.6%12.6%12.4%
Jabil Inc. ($JBL)12.3%9.3%12.5%16.1%10.8%
CTS Corporation ($CTS)18.1%9.8%14.8%11.8%9.2%
Median (13 companies)6.7%5.7%6.7%11.8%4.5%
SMTC Corporation ($SMTX)2.0%-16.0%4.0%4.2%7.4%

Top companies by Net Debt / EBITDA

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
TE Connectivity Ltd. ($TEL)1.4x1.3x1.1x1.1x2.7x
IEC Electronics Corp. ($IEC)2.0x5.6x4.9x3.6x2.1x
TTM Technologies, Inc. ($TTMI)2.2x1.5x3.2x3.3x2.0x
Jabil Inc. ($JBL)1.0x0.8x1.0x0.9x1.4x
Plexus Corp. ($PLXS)-1.2x-1.5x-0.7x0.3x-0.0x
Median (10 companies)-0.0x0.2x-0.2x0.1x-0.1x
SMTC Corporation ($SMTX)1.0x-11.3x3.8x4.2x