SigmaTron International, Inc. (NASDAQ:SGMA) is a leading provider of electronic manufacturing services (EMS), serving a diverse range of industries, including industrial electronics, consumer electronics, and medical/life sciences. The company's global footprint and commitment to innovation have positioned it as a trusted partner for its customers.
Business Overview
SigmaTron operates in a single reportable segment, the EMS Segment, which includes printed circuit board assemblies, electro-mechanical subassemblies, and completely assembled (box-build) electronic products. The company's services range from assembly and testing to material sourcing, manufacturing engineering support, design services, and regulatory compliance assistance. SigmaTron's international network of facilities in the United States, Mexico, China, Vietnam, and Taiwan provides its customers with flexibility and geographic diversification.Financial Performance
In the fiscal year ended April 30, 2023, SigmaTron reported annual revenue of $414,435,845, a decrease of 4.4% compared to the prior fiscal year. The company's net income for the same period was $14,194,424. SigmaTron's annual operating cash flow was -$55,290,990, and its annual free cash flow was -$59,625,159.For the three months ended January 31, 2024, the company reported net sales of $95,919,888, an increase of 3.4% compared to the same period in the prior fiscal year. Net income for the quarter was $599,006. SigmaTron's operating cash flow for the nine-month period ended January 31, 2024, was $16,837,855, and its free cash flow was -$1,672,441.
Segmental Performance
SigmaTron's EMS Segment, which accounts for all of the company's continuing operations, saw net sales increase by 3.4% to $95,919,888 in the three-month period ended January 31, 2024, compared to the same period in the prior fiscal year. This increase was primarily driven by growth in the industrial electronics market, which offset declines in the consumer electronics and medical/life sciences markets.Gross profit margin for the EMS Segment was 10.3% of net sales for the three-month period ended January 31, 2024, compared to 12.0% for the same period in the prior fiscal year. The decrease in gross margins was primarily due to higher labor and other fixed manufacturing costs during the quarter.
Operational Challenges and Outlook
The impact of inflation and ongoing global supply chain disruptions in the electronic component marketplace have continued to be challenging for SigmaTron. The company has experienced varying demand from its customers, with some reducing orders while others remain strong. SigmaTron expects these uncertainties to persist in the short term, but anticipates customer requirements to pick up in the first half of fiscal 2025 as supply chain challenges gradually improve.Liquidity and Capital Resources
As of January 31, 2024, SigmaTron had $3,716,998 in cash and cash equivalents. The company's current ratio was 2.28, and its quick ratio was 0.69, indicating a strong liquidity position. SigmaTron's total debt stood at $82,955,802, with a debt-to-equity ratio of 1.27.In April 2023, the company entered into waiver and amendment agreements with its lenders, JPMorgan Chase Bank, N.A. and TCW Asset Management Company LLC, to address certain covenant defaults and modify the terms of its credit facilities. These agreements provided the company with additional financial flexibility and revised its financial covenants.
Risks and Challenges
SigmaTron faces several risks and challenges, including its continued dependence on certain significant customers, the variability of its operating results, the impact of inflation and supply chain disruptions, and the availability and cost of necessary components and materials. The company also faces risks related to the collectability of aged accounts receivable, regulatory compliance, and the stability of the economic, labor, and political systems in the countries where it operates.Geographic Breakdown
SigmaTron's international footprint provides geographic diversification, with manufacturing facilities in the United States, Mexico, China, Vietnam, and Taiwan. For the nine-month period ended January 31, 2024, the company's net sales were distributed as follows: United States (31.3%), China (9.7%), Vietnam (1.6%), and Mexico (57.4%).Revenue Breakdown and Trends
SigmaTron's revenue is primarily generated from three end-markets: industrial electronics, consumer electronics, and medical/life sciences. For the three-month period ended January 31, 2024, the company's net sales were distributed as follows: industrial electronics (74.9%), consumer electronics (20.0%), and medical/life sciences (5.1%).Compared to the same period in the prior fiscal year, net sales in the industrial electronics market increased, while the consumer electronics and medical/life sciences markets experienced declines. The increase in industrial electronics sales was driven by stronger demand from customers in this segment, while the decreases in consumer electronics and medical/life sciences were due to lower order volumes.