Inscape (INQ.TO) today announced its first quarter financial results ended July 31, 2017. Sales in the first quarter of fiscal year 2018 was $23.3 million which was 1.1% lower than the same quarter of the previous year, however gross profit improved by two percentage points in the same time period.
“Despite flat sales growth, we are pleased with the first quarter results,” said Brian Mirsky, CEO. “We saw improvement in our gross margin which has been our focus over the past year. This margin improvement has allowed us to accelerate investment in our growth initiatives to better compete in the marketplace. These initiatives include product development, marketing support and expanded sales coverage.”
The first quarter of fiscal year 2018 ended with a net income of $3.1 million or 21 cents per share, compared with a net loss of $1.5 million or 11 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 first quarter of fiscal 2018 had an adjusted net loss of $0.4 million, compared with adjusted net income of $0.2 million in the same quarter of last year.
Adjusted net income or loss is a non-GAAP measure, which does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers.
The following is a reconciliation of net income and loss calculated in accordance with GAAP to the non-GAAP measure:
Despite lower volume, gross profit as a percentage of sales for the first quarter of fiscal year 2018 at 30.9% was 1.8 percentage points higher than last year’s 29.1%. The unfavourable impact of lower volume was more than offset by lower production costs of favourable product mix and higher U.S. exchange during the quarter.
Selling, general and administrative expenses (“SG&A”) in the first quarter of fiscal year 2018 were 33.5% of sales, compared to 29.4% in the same quarter of last year. The dollar amount incurred was $0.9 million higher than the same quarter of last year. The increase includes investment in marketing, sales coverage and supply chain initiatives.
The first quarter of fiscal year 2018 had a net income of $3.1 million, compared to a net loss of $1.5 million in the same quarter of last year. With exclusion of unrealized and unusual items, the adjusted net loss of the current quarter was $0.4 million, compared with adjusted net income of $0.2 million in the same quarter of last year. Improvement in gross margin was more than offset by higher SG&A costs.
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 quarter.
At the end of the quarter, the company was debt-free and had cash, cash equivalents and short-term investments totaling $9.8 million and an unused credit facility.