Syntec Optics Holdings, Inc. (Nasdaq: OPTX) Reports Second Quarter 2024 Financial Results
Syntec achieves sequential revenue growth and returns to positive EBITDA and Earnings per Share.
ROCHESTER, NEW YORK, Aug. 14, 2024 (GLOBE NEWSWIRE) -- Syntec Optics Holdings, Inc. ("Syntec Optics" or the "Company") (Nasdaq: OPTX), a leading provider of mission-critical products to advanced technology defense, biomedical, and communications equipment manufacturers, today reported financial results for the first quarter of 2024.
Second Quarter 2024 Financial Highlights
-- Net Sales of $7.01 million increased by 12% from $6.26 million in Q1
2024, and sales from products increased by 20% from $5.8 million in Q2
2023.
-- Adjusted EBITDA increased to $1.32 million from negative $0.67 million in
Q1 2024.
-- Earnings per Share increased to $0.01 from negative $0.03 in Q1 2024.
Dean Rudy, CFO, said, "At the previous earnings call, we provided guidance for second quarter 2024 revenue to be between $6.4 and $7.0 million. I am excited to report that our revenues came in just above $7 million, as anticipated. The company ramps up space optics, data center connectivity products for increased Artificial Intelligence deployment, night vision optics and opto-mechanicals, mission-critical biomedical products, and other diverse new launches."
Strong Order Momentum and End-Market Expansion:
-- Secured significant orders for space optics to continue growth in Low
Earth Orbit $(LEO)$ satellites. Satellite broadband could represent a
significant portion of the $1 trillion global space economy by 2040.
-- Secured follow-up order for defense heads-up microdisplays and a new
order for advanced technology -- high-resolution, wide-field-of-view,
innovative freeform prism subsystem that makes up high-brightness and
high-contrast defense microdisplays for viewing vital
information. The 2021 SPIE review valued the photonics-enabled defense
marketplace at $343.6 billion.
-- Entered the high-growth data center market driven by the deployment of
Artificial Intelligence, with the first product order forecasted to more
than double to $3.2 million annually within a year. The data center
market is expected to reach $622.4 billion by 2030.
Technological Leadership and Innovation:
-- Developed advanced optical solutions, including high-performance,
disposable optics for biomedical imaging with a multi-angled, wider field
of view and increased imaging detail. SPIE assessed the 2021
photonics-enabled biomedical marketplace as $201 billion in total
revenues.
-- Demonstrated expertise in designing and manufacturing complex optical
systems, such as high numerical aperture lens systems for digital night
vision. These systems allow more light to reach the camera sensor, thus
enabling better performance in low-light conditions. Such pioneering
systems require Syntec's high technical skills to architect and make the
system.
-- Developed dedicated production cells to ramp volumes with high yield for
space optics and data center connectivity. According to SPIE, one of the
ten major end-markets in optics and photonics, communications was valued
at nearly $43 billion in the global marketplace.
Operational Excellence and Strategic Growth:
-- Enhanced manufacturing capabilities to support increased production
volumes and meet customer demands -- launched process development for a
fully automated high-volume production line to make disposable medical
optics.
-- Implemented a strategic growth plan with executive changes to optimize
organizational structure and focus on key priorities -- Chairman Al
Kapoor extended his role to CEO to oversee strategy and inorganic growth.
At the same time, then-CEO Joe Mohr took the role of Chief Manufacturing
Officer to focus on manufacturing excellence.
-- Strengthened financial leadership by appointing a new CFO to support the
company's growth trajectory.
Second Quarter 2024 Financial and Operating Results
The $7.01 million in net sales for the three months ending 2024 increased 12% compared to $6.3 million in Q1 2024. The overall sales decreased by 8.9% compared to $7.7 million in Q1 2023, but the sales from products increased by 20% as the company shifts from development to production ramp-up.
The decrease in net sales compared to the prior year is due to decreases in our custom tooling and non-recurring engineering revenue streams. Custom tooling revenue decreased by $0.8 million for the three months ended 2024 compared to 2023, and non-recurring engineering revenue decreased by $1.1 million for the three months ended 2024 compared to 2023. An increase in product sales revenue partially offset these decreases. For the three months ending June 2024, product revenue was $7.0M compared to $5.8M in 2023, a 20% increase.
The second quarter of 2024 adjusted EBITDA was $1.32 million for the three months ending 2024, compared to a negative $0.7 million adjusted EBITDA in the first quarter of 2024 and $1.8 million in 2023. The increase over the previous quarter was achieved by a reduction in accounting and production-related expenses. Contributing factors to the year-over-year decrease include a $0.2 million decrease in gross profit and an increase in general and administrative expenses to enable future product launches.
The Company ended the second quarter of 2024 with an unused $3.7 million line of credit, an unused $4.8 million equipment line of credit, and a paydown of 3.2% principal on other commercial bank lines.
Our net income for the three months ended in the second quarter of 2024 was $0.3 million, or $0.01 per share, up from negative $1.2 million or negative $0.03 per share for Q1 2024, and compared to $0.6 million, or $0.02 per share, for Q2 2023.
Guidance
Our recent increases in ongoing sales into the communications, medical, and defense industries are expected to accelerate in the third quarter, particularly within our space communications optics and datacom microlens arrays. As such, the third quarter 2024 revenue is expected to be in the range of $9.5 - $11.0 million.
We expect our gross margin to hold level or slightly improve based on the profitability of ramping up products. General and administrative costs are expected to increase modestly to enable ramped-up engineering, quality, and pilot production to support continued growth in the third quarter.
Looking to the fourth quarter, we anticipate continued strength from the communications and biomedical end-markets, with additional growth coming from defense-based product launches.
Our products are propelled by tailwinds as we move towards laser-based satellite communications versus radar-based for low latency, biomedical automation, defense equipment modernization, and on-shoring. Mission-critical products use proprietary techniques that provide an economic moat.
Lastly, we expect positive net income in the second half of the year, enabling further investments to energize our continued growth.
About Syntec Optics
Syntec Optics Holdings, Inc. (Nasdaq: OPTX), headquartered in Rochester, NY, is a provider of advanced technology products to diverse end-market equipment manufacturers in the United States. Operating for over two decades, Syntec Optics runs a state-of-the-art facility with extensive core capabilities of various optics manufacturing processes, both horizontally and vertically integrated, to provide a competitive advantage for mission-critical OEMs. Syntec Optics recently launched new products, including Low Earth Orbit (LEO) satellite optics, lightweight night vision goggle optics, biomedical equipment optics, and precision microlens arrays. To learn more, visit www.syntecoptics.com.
Forward-Looking Statements
This press release contains certain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended, including certain financial forecasts and projections. All statements other than statements of historical fact contained in this press release, including statements as to the transactions contemplated by the business combination and related agreements, future results of operations and financial position, revenue and other metrics, planned products and services, business strategy and plans, objectives of management for future operations of Syntec Optics, market size, and growth opportunities, competitive position and technological and market trends, are forward-looking statements. Some of these forward-looking statements can be identified by the use of forward-looking words, including "may," "should," "expect," "intend," "will," "estimate," "anticipate," "believe," "predict," "plan," "targets," "projects," "could," "would," "continue," "forecast" or the negatives of these terms or variations of them or similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors (some of which are beyond the control of Syntec Optics), which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements are based upon estimates, forecasts and assumptions that, while considered reasonable by Syntec Optics and its management, as the case may be, are inherently uncertain and many factors may cause the actual results to differ materially from current expectations which include, but are not limited to: 1) risk outlined in any prior SEC filings; 2) ability of Syntec Optics to successfully increase market penetration into its target markets; 3) the addressable markets that Syntec Optics intends to target do not grow as expected; 4) the loss of any key executives; 5) the loss of any relationships with key
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