Inscape Announces Fiscal Year 2020 Third Quarter Results

Inscape (TSX: INQ), a leading designer and manufacturer of furnishings for the workplace, today announced its third quarter financial results ended January 31, 2020. Sales in the third quarter of fiscal year 2020 were $17.4 million and adjusted EBITDA was a deficit of $0.7 million.

Third Quarter Highlights:

  • Third quarter sales were 40% less than the same quarter of the previous year. A year ago, sales were driven by an unusually large number of calendar year end projects implemented by our Platinum customers. In addition, Q3/F’20 results were impacted by several large projects moving out to future quarters and the exit of unprofitable Walls sales.
  • Gross profit for the third quarter decreased to $4.4 million (25.2%) compared to $8.2 million (28.5%) in the previous year’s quarter. Manufacturing efficiencies realized were offset by unfavourable product mix and lower sales volume in the quarter.
  • Selling, general and administrative expenses (“SG&A”) declined by $1.2 million compared to the same quarter of the previous year due to cost reduction initiatives implemented in fiscal 2020.
  • Gain from disposal of $1.8 million was realized in the third quarter as Inscape restructured its U.S. based Walls operating facilities. This included the sale and leaseback of the Falconer property and realized gross proceeds of $4.4 million.
  • Net income for the third quarter was $0.1 million.
  • At the end of the quarter, the company was debt-free and had cash totaling $2.7 million.

“Third quarter results were mixed. We were disappointed in our sales performance after posting 6 consecutive quarters of organic growth. However, we continue to make progress on improving our margins through our cost savings and plant restructuring initiatives,” said Brian Mirsky, CEO. “Our focus remains on driving profitable sales growth. We are encouraged with a number of recent wins with both our existing and new customers and the strength of our sales pipeline.”

The third quarter of fiscal year 2020 ended with net income of $0.1 million or 1 cent per share, compared with a net income of $1.3 million or 9 cents per share in the same quarter of last year. Net income of both quarters included certain unrealized, non-cash expenses and one-time items that have significant impact on the net income per GAAP. With the exclusion of these items, the third quarter of fiscal 2020 had an adjusted net loss before taxes of $1.5 million, compared with an adjusted net income before taxes of $1.1 million in the same quarter of last year. This represents a reduction in net income of $1.2 million compared to the prior year driven by lower sales volumes.

The nine-month period of fiscal year 2020 ended with a net loss of $0.2 million or 1 cent per share, compared with a net loss of $4.3 million or 30 cents per share for the same period of last year. Net losses of both periods included certain unrealized, non-cash expenses and one-time items that have significant impact on the net loss per GAAP. With the exclusion of these items, the nine-month period of fiscal year 2020 had an adjusted net loss before taxes of $2.9 million, compared with an adjusted net loss before taxes of $3.5 million for the same period of the previous year. Realized manufacturing efficiencies and lower SG&A expense contributed to the $0.6 million improvement in net results. Furthermore, the sale and leaseback of the Falconer Facility which currently manufactures Inscape’s branded Walls products; and sale of the DC Rollform integrated metal fabrication business resulted in net gains of $1.8 million being recognized in the third quarter.

Gross profit margin as a percentage of sales for the third quarter of fiscal year 2020 at 25.2% was 330 basis points lower than the same quarter of last year’s gross profit of 28.5%. Manufacturing efficiencies realized were offset by unfavourable product mix and lower sales volume in the quarter.

For the nine-month period of fiscal year 2020 gross profit as a percentage of sales of 27.6%, was 60 basis points lower than the same period of the previous year. Higher fixed and variable cost of sales contributed to the gross profit margin decrease.

SG&A in the third quarter of fiscal year 2020 were 34.8% of sales, compared to 25.0% in the same quarter of last year. The dollar amount decreased by $1.2 million compared to the same quarter of last year as the previous year included incremental investments in marketing, sales coverage and supply chain initiatives. Lower sales volumes impacted the overall increased SG&A ratio to sales as compared to the prior year.

SG&A for the nine-month period of fiscal year 2020 were 32.3% of sales, compared to 33.2% in the same period of the previous year. The current nine-month period SG&A of $19.8 million was $4.1 million lower than the same period of last year, mainly due to reductions in incremental investments in marketing, sales coverage and supply chain initiatives.

At the end of the quarter, the company was debt-free and had cash totaling $2.7 million.

Financial Statements

Financial statements are available from our website as of this press release.

Third Quarter Call Details

Inscape hosted a conference call at 8:30 AM EST on Friday, March 6, 2020 to discuss the company’s quarterly results. A replay of the conference call will be available until 11:59 PM EST on April 8, 2020. To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number 21952730).

The full text of Inscape’s 3Q20 earnings release, including all tables, may be accessed at myinscape.com/investors.

About Inscape

Since 1888, Inscape has been designing products and services that are focused on the future, so businesses can adapt and evolve without investing in their workspaces all over again. Our versatile portfolio includes systems furniture, storage, and walls – all of which are adaptable and built to last. Inscape’s wide dealer network, showrooms in the United States and Canada, along with full service and support for all our clients, enable us to stand out from the crowd. We make it simple. We make it smart. We make our clients wonder why they didn’t choose us sooner.

For more information, visit www.myinscape.com