• Revenue growth in Q2 2016 was 57% versus prior year quarter.
• Gross margin improved to 28% in Q2 2016, up from 27% in the last quarter and 22% in the comparable quarter a year
• Operating expenses for the first half of fiscal 2016, at $9.6 million, were $0.8 lower than a year ago.
• EBITDA in current quarter grew to $0.5 million, up from prior quarter of amount of $0.2 million, and improved from EBITDA loss of $1.7 million last
• Cash on hand increased by $1.4 million in Q2 2016, to $8.1

Toronto, CANADA, August 9, 2016 – Baylin Technologies Inc. (TSX: BYL) (the “Company” or “Baylin”), a global provider of innovative antenna solutions for the networking, mobile and wireless infrastructure markets, today announced its financial results for the three and six months ended June 30, 2016. All figures are stated in United States dollars unless otherwise noted.

Fiscal Q2 2016 Highlights 

• Positive momentum continued into the second quarter of fiscal 2016, building on the much improved first quarter of fiscal
• Revenue increased by 57%, to $15.7 million in Q2 2016, from the comparable quarter in fiscal Strong results were posted in Mobile and Infrastructure product lines, which grew by 222% and 18% respectively. Year-to-date 2016 Revenue was up 75%, to $31.5 million, from the comparable period in fiscal 2015.
• Gross profit and gross margin both increased in the current quarter to $4.4 million and 1%, respectively; doubling the $2.2 million generated in the same quarter in fiscal 2015. Gross profit also grew by 3% from the first quarter of fiscal 2016, bringing year-to-date gross profit to $8.7 million; a 167% increase from the same period in fiscal 2015.
• Operating expenses declined again in both dollar term and as a percentage of Revenue, to $4.7 million (29.8% of Revenue) when compared to Q1 2016 ($4.9 million, 31.0%) and Q2 2015 ($4.9 million, 49.2%).
• Positive EBITDA continued into Q2 At $0.5 million it increased from $0.2 million in Q1 of fiscal 2016. This was the second sequential positive quarter, and an improvement over the comparable quarter last year where the EBITDA loss was $1.7 million. EBITDA for the six months ended June 30, 2016 was $0.7 million; an improvement from the comparable period in fiscal 2015 where the EBITDA loss was $5.2 million.
• Invested to facilitate further growth, by continuing to hire more engineers and investing $0.3 million in capital equipment in the first half of The second half of 2016 will see the launch of our new product introduction line (NPI) in Tempe, Arizona which will improve time to market for new Infrastructure products.
• Continued to improve liquidity through (i) improved cash conversion cycle, to 36 days in the current quarter, and (ii) entered into a sale and leaseback of our Israel based R&D facility. Sale proceeds are $1.8 million, and the lease term is for 3 years leasing approximately 50% of the space previously
• Increased our Cash position to $8.1 million at end of Q2 2016; an increase of $1.4 million from March 31, Debt and lease obligations declined by 57%, to $2.7 million, in the first six months of 2016.
• Completed the Head office transition with the announcement of PricewaterhouseCoopers LLP (Canada) as the company’s new auditors.

“We are very pleased to report another positive EBITDA quarter in this second quarter of 2016. By showing an increase from last quarter, we are encouraged by the improved underlying financial metrics”, said Randy Dewey, Vice Chairman, President and Chief Executive Officer. The changes we’ve made to the business over the past 5 quarters is leading to the improving gross profit and gross margin percentage, and operating expense control.”

Mr. Dewey added: “As noted in our comments in the last quarter, we are encouraged by the strong start to the year however the management team is continuing its efforts to increase profitability and cash flow. Our primary focus remains unchanged; controlling operating expenses, improving margins, as well as building a stronger sales culture to achieve growth across all three of our product lines and diversifying our customer base.”

The Company’s complete financial statements and Management’s Discussion & Analysis for the three and six months ended June 30, 2016 are available at www.baylintech.com/investor-relations/ and www.sedar.com/.

Financial Summary

Revenue

Revenue in the three months ended June 30, 2016 and 2015 were $15.7 million and $10.0 million, respectively, reflecting an increase of 56.7% year-over-year. The increase was due primarily to stronger shipments of Mobile products, particularly to our main customer, and to a lesser extent growth in sales of our Infrastructure products. Sales of Networking products in the current quarter were lower than in the comparable prior year quarter due to the timing of customer demand.

Revenue in the six months ended June 30, 2016 and 2015 were $31.5 million and $17.9 million, respectively, reflecting an increase of 75.2% YOY. The increase was due primarily to similar factors as noted above.

Our main customer (both directly and to their subcontractors) accounted for 52% and 58% of Revenue for the three months ended June 30, 2016 and 2015, respectively. As previously noted, due to this customer’s product launch being earlier than in prior years, Mobile shipments in Q2 of fiscal 2016 were marginally lower than the level shipped in Q1 of fiscal 2016. Also, due to this factor and the normal seasonality of this business, Mobile shipments in the second half of fiscal 2016 are currently anticipated to be lower than the level shipped in the first half of fiscal 2016.

Cost of Revenue

Cost of revenue is comprised of variable costs (such as material cost and direct labour) and fixed costs, (such as indirect labour, other manufacturing overheads and depreciation). Variable costs were $8.3 million (52.8% of Revenue) in Q2 of fiscal 2016, versus $5.2 million (51.6% of Revenue) in last year’s comparable quarter. The increase in variable costs of $3.1 million was due primarily to higher Revenue, and to a lesser extent the product mix. Fixed costs in Q2 of fiscal 2016 were $3.0 million (19.1% of Revenue), versus $2.6 million in the comparable quarter in fiscal 2015 (26.3% of Revenue).

For the six months ended June 30, 2016, variable costs were $17.3 million (55.1% of Revenue), versus $9.6 million (53.5% of Revenue) in last year’s comparable period. The increase in variable costs of $7.7 million was due primarily to higher Revenue. Fixed costs in the first half of fiscal 2016 were $5.4 million (17.3% of Revenue), versus $5.1 million in the comparable period in fiscal 2015 (28.4% of Revenue). The improved ratio of fixed costs to Revenue was primarily due to the higher production volumes in the first half of fiscal 2016.

Gross Profit

Gross profit increased to $4.4 million (28.1% of Revenue) in the three months ended June 30, 2016. This represented an improvement from Q1 of fiscal 2016 ($4.3 million or 26.9% of Revenue) and the comparable quarter in fiscal 2015 ($2.2 million or 22.2% of Revenue). The improvement in gross margin (gross profit divided by Revenue) in fiscal 2016 was attributable to the higher production volumes (associated with the increased sales) amortized over a relatively fixed cost base.

Gross profit increased to $8.7 million (27.6% of Revenue) in the six months ended June 30, 2016. This represented an improvement from the comparable period in fiscal 2015 ($3.2 million or 18.1% of Revenue). The improvement in gross margin in fiscal 2016 was attributable to the same factors cited above.

R&D Expenses

R&D expenses were $1.8 million in Q2 fiscal 2016, compared with $1.5 million in same quarter in fiscal 2015. These expenses were $3.7 million in the first six months of fiscal 2016, compared with $3.1 million in same period in fiscal 2015. We increased R&D spending in fiscal 2016, mainly in increased headcount, in order to expand the product pipeline for 2016 and future years

Sales and Marketing Expenses

Sales and marketing expenses of $0.7 million declined in the second quarter of fiscal 2016 from $1.1 million in the same quarter in fiscal 2015. Payroll-related expenses declined YOY due to streamlining senior sales management at the end of Q1 fiscal 2016, though was partially offset by hiring more sales people. Our belief is these investments will yield benefits in driving the Company’s growth strategy in new business areas, thereby diversifying our revenue base and penetrating new and growing markets. There were also decreases in tradeshows, travel expenses and other related expenses as part of the Company’s cost reduction initiatives.

Sales and marketing expenses of $1.5 million in the first half of fiscal 2016 declined from $2.3 million in the same period in fiscal 2015. The decreases were in tradeshows, travel expenses and other related expenses as part of the Company’s cost reduction initiatives.

General and Administrative

G&A expenses for the three months ended June 30, 2016 decreased from the three months ended June 30, 2015 by $0.1 million, whereas these expenses decreased by $0.5 million in the comparable six month periods, due to the ongoing expense control initiatives.

Net loss for the period

The improvement was the result of the positive EBITDA in 2016, as described in the MD&A.

Liquidity

The Company Cash increased by $1.4 million during the three months ended June 30, 2016.

Outlook

The significant changes made in Fiscal 2015, meant to address the operating losses and negative cash flow incurred in fiscal 2014 and 2015, were meaningful contributing factors to the significantly improved financial results in the first half of fiscal 2016. The second quarter of fiscal 2016 saw a continuation of year-over-year (“YOY”) growth in (i) Revenue and gross profit, (ii) gross margin expansion and (iii) reduction in overall operating costs, leading to the first sequential positive EBITDA quarters since our Initial Public Offering in November 2013.

Another significant contributing factor to our improved financial results in the first six months of fiscal 2016 was the improved market position of our Mobile product line with our major customer relative to a year ago. The momentum created in the latter part of fiscal 2015 carried into the first half of fiscal 2016, primarily due to the continued success this customer is having with its new product launch. As previously noted, due to this customer’s product launch being earlier than in prior years and normal seasonality of this business, Mobile shipments in the second half of fiscal 2016 are currently anticipated to be lower than the level shipped in the first half of fiscal 2016.

U.S.-based telecommunication carriers are predicting growth in network capital spending in 2016, and we believe our Infrastructure products are well positioned to benefit from that occurrence. Accordingly we currently anticipate posting stronger Infrastructure shipments in the second half of fiscal 2016 relative to the first half of 2016.

Cost reductions, manufacturing efficiency and product line rationalization will continue in 2016 and we expect these improvements will lead to modest improvement in gross margin in the second half of fiscal 2016 compared with the first half.

The over-arching focus for the Board of Directors and management in fiscal 2016 is to continue the momentum created in the second half of 2015 while prudently managing our liquidity. Exploring new opportunities in the Mobile market, continuing to diversify and expand the Networking customer portfolio and further expanding the Infrastructure product portfolio will be the primary focus. Also, management will explore opportunities to increase its capital resources and liquidity in light of the anticipated growth and consequential requirement to fund increased working capital levels.

Conference Call

Baylin will hold a conference call to discuss its 2016 first quarter financial results on August 10, 2016, at 8:00 a.m. (ET). The call will be hosted by Randy Dewey, Vice-Chairman, President and Chief Executive Officer, James Newell, Chief Financial Officer and Clifford Gary, Corporate Controller and VP Finance. All interested parties are invited to participate.

DATE:                           August 10, 2016

TIME:                            8 a.m.

DIAL IN NUMBER:       647-427-7451

888-231-8192

CONFERENCE ID#:     71262042 WEBCAST DETAILS:        Webcast URL (EN):

http://event.on24.com/r.htm?e=1157302&s=1&k=B8B381BF7369C351D2E87E5A5A6575BC

(1) Non-IFRS Measures

Baylin uses EBITDA and Adjusted EBITDA to measure its financial performance and its future ability to generate and sustain earnings. EBITDA refers to earnings before interest (finance expenses, net), taxes, depreciation, and amortization and discontinued operations. Adjusted EBITDA refers to EBITDA less items of an exceptional nature outside of the ordinary course of business. Such items include, but are not limited to, certain exceptional, non-recurring share-based compensation, capital gains and losses, restructuring costs, recognition of significant provisions and other significant non-cash transactions. We do not believe these items reflect the underlying performance of our business. EBITDA and Adjusted EBITDA are non-IFRS performance measures. Besides net earnings, EBITDA and Adjusted EBITDA are useful complementary measures of pre-tax profitability and are commonly used by the financial and investment community for valuation purposes.

Forward Looking Statements

Certain statements in this news release, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. Often, but not always, forward-looking statements or information can be identified by words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate” or “believes” or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Regarding forward-looking statements and information contained, we have made numerous assumptions. Although our management believes that the assumptions made and the expectations represented by such statement or information are reasonable, there can be no assurance that any forward- looking statement or information referenced will prove accurate. Forward-looking statements and information are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Such risks, uncertainties and other factors include those risks identified in Baylin’s annual information form dated March 20, 2015 filed on SEDAR at www.sedar.com.

Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Also, many of the factors are beyond the control of Baylin. Readers should not place undue reliance on forward-looking statements or information. Baylin undertakes no obligation to reissue or update any forward-looking statements or information because of new information or events after the date except as required by law. All forward-looking statements and information are qualified by this cautionary statement. 

About Baylin 

Baylin (TSX: BYL) is a leading global technology company with over 38 years of experience in designing, producing and supplying innovative antennas for the mobile, networking and wireless infrastructure industries. We strive to meet our customers’ needs by being their trusted partner from initial design to production with an extensive portfolio of custom engineered solutions and leading edge off-the-shelf antenna products.

SOURCE Baylin Technologies Inc.

For further information please contact Investor relations: investor.relations@baylintech.com