Inscape Announces FY 2018 Third Quarter Results
Reports solid sales growth in Q3
Inscape (TSX: INQ) on Mar. 6 announced its third quarter financial results ended January 31, 2018. Sales in the third quarter of fiscal year 2018 were $25.9 million, 11.9% higher than the same quarter of the previous year.
“We are pleased with our performance this quarter,” said Brian Mirsky, CEO. “Despite unfavorable foreign exchange compared to the prior year, and increased investments in marketing, sales and product development, our net income was positive and our cash balance remains strong. We are continuing to invest to drive Inscape’s organic sales growth and improve manufacturing efficiencies.”
The third quarter of fiscal year 2018 ended with a net income of $1.3 million or 9 cents per share, compared with a net income of $1.8 million or 13 cents per share in the same quarter of last year. Net income of both quarters included certain unrealized, non-cash expenses and onetime items that have significant impact on the net income per GAAP. With the exclusion of these items, the third quarter of fiscal 2018 had an adjusted net income of $0.1 million, compared with adjusted net income of $2.5 million in the same quarter of last year. The adjusted net income of $0.1 million in the quarter is inclusive of a $1.5 million incremental investment in sales, marketing and product development.
On a year-to-date basis, the nine month period had a net income of $1.8 million, compared to a net income of $1.9 million a year ago. The current year-to-date period included certain unrealized and non-cash expense and severance obligations, which were considered as unusual operating expenses. With the exclusion of these unusual items, the year-to-date third quarter had an adjusted net loss of $1.4 million compared to adjusted net income of $4.9 million in the prior period. The adjusted year-to-date net loss of $1.4 million is inclusive of $4 million incremental investment in sales, marketing and product development.
Sales in the third quarter of fiscal year 2018 were $2.7 million or 11.9% higher than the same quarter of the previous year. Excluding the impact foreign exchange, third quarter sales were 21% higher than the prior year quarter due to gains realized in both the furniture and walls segments.
Year-to-date sales declined by $1.9 million or -2.5% compared to the prior year. YTD sales are 1% higher than the prior year if we normalize foreign exchange. The previous year benefitted from two large non-recurring projects totaling $5 million which implies the run rate sales have improved.
Gross profit as a percentage of sales for the third quarter of fiscal year 2018 was 27.1%, a decline from 30.3% from the same quarter of the previous year. Unfavorable foreign exchange and lower product mix negatively impacted gross profit.
Year-to-date gross profit percentage was 28.0% compared to last year’s 30.9% due to the same factors as described in the quarter.
Selling, general and administrative expenses (“SG&A”) in the third quarter of fiscal year 2018 were 28.0% of sales, compared to 29.4% in the same quarter of last year. The increase in SGA by $0.5 million compared to the prior year was mainly due to severance costs and investment in marketing, sales coverage and supply chain initiatives.
Year-to-date SG&A was 30.7% of sales, compared to 27.4% for the same period of last year. The dollar amount increased by $1.9 million due to severance costs and investments in marketing, sales coverage and supply chain initiatives.
At the previous fiscal year ended April 30, 2017, the Company recorded a valuation allowance of $6.4 million to derecognize the future income tax benefit of loss carryforwards as deferred tax assets. The off-balance sheet valuation allowance was utilized to reduce the Company’s income tax expense of the current period.
At the end of the quarter, the company was debt-free and had cash, cash equivalents and short-term investments totaling $9.3 million and an unused credit facility.
Board of Directors Update
After 5 decades with the company, Madan Bhayana has decided to retire as Chair and Director effective March 6, 2018. “I have enjoyed my time working with the company and am grateful for the help and support from the board over the years. I wish the board and the company all the best for the future,” said Madan.
Bart Bull will assume the role of Chair of the Inscape board effective March 7, 2018. Bart has over 25 years of experience with Inscape, including roles in management, as an investor and as a board member. “On behalf of the board, I would like to thank Mo for the vision, dedication and energy that he has brought to Inscape for over five decades,” said Bart. “We wish him all the best in his retirement.”
Tania Bortolotto joined the Inscape Board of Directors effective March 6, 2018. Tania is an architect and interior designer, and founder and president of Bortolotto Design, recently named on Blog TO’s list of top 15 Architects in Toronto. A design advocate, Tania lends her time to numerous design panels, juries and speaking engagements. Tania’s passion for architecture is grounded in its ability to uplift the human experience through design. Tania has recently become a WELL AP and is an active WELL Faculty member.
The full text of Inscape’s third-quarter FY18 earnings release, including all tables, may be accessed at http://inscapesolutions.com/company/news/press-releases/. A replay of the company’s Mar. 7 conference call will be available 11:59 PM EST on March 14, 2018. To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number 21881450).
Inscape is a design enabler. We have been saying yes since 1888 with a versatile portfolio of systems, storage, and walls products that are adaptable, and always built to last. With a wide dealer network, showrooms in both Canada and the U.S., and full service and support for all of our clients, our philosophy is to always do what we can to say Yes. For more information, visit www.inscapesolutions.com.