Mr. Leighton Carroll reports

BAYLIN ANNOUNCES FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2023 AND ITS SEVENTH CONSECUTIVE QUARTER OF POSITIVE ADJUSTED EBITDA

Baylin Technologies Inc. has released its financial results for the three and six months ended June 30, 2023.

Second quarter summary:

• Revenue was $25.3-million in the second quarter of 2023, a decrease of $4.8-million or 16.1 per cent compared with the second quarter of 2022. The decrease was primarily due to a significant reduction in orders from the company's principal customer in the mobile and network (M&N) business line, partially offset by stronger sales in the embedded antenna and Satcom business lines.
• Gross margin was 32.5 per cent in the second quarter of 2023 compared with 29.9 per cent in the second quarter of 2022 despite gross profit of $8.2-million being $800,000 less than the second quarter of 2022. The improved gross margin resulted from a balanced product mix due to sales from newly launched products, changes in pricing strategy and a data-driven focus on contribution margin at the business line level. In the second quarter of 2023, the improvement was primarily generated by: (i) stronger revenue recovery in the Satcom business line despite supply chain constraints; (ii) favourable product mix, including new multibeam and innovative antenna portfolio in the wireless infrastructure business line; and (iii) consistent operational efficiency in the embedded antenna business line.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $100,000 in the second quarter of 2023, the seventh consecutive quarter of positive adjusted EBITDA. Adjusted EBITDA decreased by $200,000 compared with the second quarter of 2022. The decrease in adjusted EBITDA was mainly due to the decrease in gross profit as a result of lower revenue, partially offset by the decrease in operating expenses compared with the prior-year period.
• Net loss was $1.2-million in the second quarter of 2023 compared with a net loss of $4.3-million in the second quarter of 2022. The net loss in the second quarter of 2023 was primarily attributable to an operating loss of $1.3-million. On a per-share basis, a net loss of one cent per share in the second quarter of 2023 compared with a net loss of five cents per share in the second quarter of 2022.
• Net debt was $23.6-million as at June 30, 2023, an increase of $2.1-million from Dec. 31, 2022, primarily due to debt interest payments and lease payments.
• Backlog was $34.5-million at June 30, 2023, compared with $38.1-million at Dec. 31, 2022, and $37.7-million at June 30, 2022. The decrease was mainly due to a significantly lower level of backlog in M&N business as a result of across-the-board production volume reductions at its principal customer.

Selected financial information

The attached table discloses selected financial information for the periods indicated.

A copy of the company's unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2023, and corresponding management's discussion and analysis is available under the company's profile on SEDAR+.

Outlook

The company has achieved seven consecutive quarters of positive adjusted EBITDA and has consistently improved gross margins since the first quarter of 2022, this, despite a continuing difficult business environment. It had expected financial performance in the second quarter to be weaker than the first and the most challenging quarter of the year, but it now expects the third quarter will be similarly challenging. Although the North American business lines continue to perform well generally, its overall performance is being significantly negatively affected by the results of its M&N business line.

It continues to prioritize product mix, emphasizing products that generate higher margins and gross profit, with a view to maintaining and increasing adjusted EBITDA, even at the expense of higher revenue. The macroeconomic environment, shortages in materials and increased material costs due to supply chain challenges, and chip set shortages remain an issue for the business. These factors are expected to continue to cause delays in both the production and the delivery of its products, as well as pushouts of orders from customers. It had expected these disruptions would begin to ease in the first half of 2023, but now anticipates that they will continue for the rest of 2023. The continuing war in Ukraine could continue to exacerbate supply chain disruptions. As a result of these continuing challenges, particularly in its M&N business line, it now expects that its 2023 results will be below its 2022 results for revenue and adjusted EBITDA.

Investor conference call

Baylin will hold a conference call on Aug. 10, 2023, at 8 a.m. ET, to discuss its financial results for the three and six months ended June 30, 2023. The conference call will be hosted by Leighton Carroll, chief executive officer, and Dan Nohdomi, chief financial officer. All interested parties are invited to participate using the dial-in details provided below.

Date:  Aug. 10, 2023

Time:  8 a.m. ET

Dial-in number:  888-664-6392 or 416-764-8659

Conference ID No.:  59787852

Rapid connect:  To instantly join the conference call by phone, please register and be connected into the conference call automatically.

Webcast:  This call is also on webcast.

About Baylin Technologies Inc.

Baylin is a diversified global wireless technology company focused on the research, design, development, manufacture and sale of passive and active radio frequency products, satellite communications products, and supporting services.

We seek Safe Harbor.