Inscape (INQ.TO) today announced its fourth quarter and annual financial results ended April 30, 2018. Sales in the fourth quarter of fiscal year 2018 were $21.5 million, or 2% higher than the same quarter of the previous year. The fourth quarter net loss was $4.8 million compared to a net loss of $2.1 million in the prior year.
“Inscape’s fourth quarter and full year performance reflect our commitment to building a strong foundation for future growth. Three key factors – exiting an unprofitable business, initiating a capacity utilization restructuring and investing in top line growth initiatives place us in a strong position for profitable growth in 2019,” said Brian Mirsky, CEO. “Even with these investments, our cash balance of $9.0 million remains strong.”
The fourth quarter of fiscal year 2018 ended with a net loss of $4.8 million or 33 cents per share, compared with a net loss of $2.1 million or 15 cents per share in the same quarter of last year. Net loss of both quarters included certain unrealized, non-cash expenses and one-time items that have significant impact on the net loss per GAAP. With the exclusion of these items, the fourth quarter of fiscal 2018 had an adjusted net loss of $3.5 million, compared with adjusted net income of $1.4 million in the same quarter of last year. The adjusted net loss of $3.5 million in the quarter is inclusive of $1.2 million of incremental investment in sales, marketing and product development. The quarter also included costs to exit an unprofitable business unit.
On a year-to-date basis, the twelve month period had a net loss of $3.0 million, compared to a net loss of $0.2 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 had an adjusted net loss of $4.9 million compared to adjusted net income of $4.0 million in the prior period. The adjusted year-to-date net loss of $4.9 million is inclusive of $2.7 million in incremental investment in sales, marketing and product development and losses attributable to the business unit.
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 (loss) income calculated in accordance with GAAP to the non-GAAP measure:
Sales in the fourth quarter of fiscal year 2018 were $0.5 million or 2.4% higher than the same quarter of the previous year. Increase in fourth quarter sales were led by strong Walls sales compared to the previous year.
Year-to-date sales declined by $1.3 million or 1.4% compared to the prior year. The previous year benefited from two large non-recurring projects totaling $5 million which if normalized would result in a year over year sales growth of 4%.
Gross profit as a percentage of sales for the fourth quarter of fiscal year 2018 was 22.8%, a decline from 26.5% from the same quarter of the previous year. Unfavorable product mix and non recurring costs negatively impacted gross profit.
Year-to-date gross profit percentage was 26.8% compared to last year’s 30.0% due to the same factors as described in the quarter.
Selling, general and administrative expenses (“SG&A”) in the fourth quarter of fiscal year 2018 were 40.0% of sales, compared to 28.6% in the same quarter of last year. The increase in SG&A of $2.6 million was mainly due to costs associated with the unprofitable business unit, severance and investments in marketing, sales coverage and supply chain initiatives.
Year-to-date SG&A was 32.8% of sales, compared to 27.6% last year. The dollar amount increased by $4.5 million for the same reasons as the quarter.
At the end of the quarter, the company was debt-free and had cash, cash equivalents and short-term investments totaling $9.0 million and an unused credit facility.