Mr. Bradley Bourne reports

FIRAN TECHNOLOGY GROUP CORPORATION ("FTG") ANNOUNCES SECOND QUARTER 2023 FINANCIAL RESULTS

Firan Technology Group Corp. has released its financial results for the second quarter of 2023.

• Second quarter bookings of $40.3-million were up 48 per cent over Q2 2022 and up 22 per cent over Q1 2023. This was the 10th sequential quarter of bookings growth.
• Firan second quarter revenues of $34.0-million were up 52 per cent over Q2 2022, as Firan ramps up production to meet customer demand. Revenue included $3.4-million from the newly acquired Circuits sites in Minnetonka, Minn., and Haverhill, Mass.
• Firan achieved net earnings in Q2 2023 of $2.4-million, which was up $2.4-million from Q2 2022.
• Net debt on the balance sheet as of Q2 2023 is $6.4-million, which is 0.46 times adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the trailing-12-month period ended June 2, 2023.

Business highlights

Firan continued to play offence in the first half of 2023. The company has invested in technology in existing sites, grown the business organically and completed two acquisitions. Through all these actions, Firan is strategically deploying its capital in ways that will drive increased shareholder returns for the future in both the near term and long term.

Specifically, Firan accomplished many goals in Q2 2023 that continue to improve the corporation and position it for the future, including:

• On April 28, 2023, the corporation completed the acquisition of Holaday Circuits LLC based in Minnetonka, Minn., a suburb of Minneapolis. Firan acquired 100 per cent of Holaday for cash consideration of approximately $24.4-million and contingent consideration up to $6.0-million, subject to final closing adjustments. The business is operating as FTG Circuits Minnetonka LLC.
• Also on April 28, 2023, the corporation completed the acquisition IMI Inc. based in Haverhill, Mass., north of Boston. Firan acquired 100 per cent of the common shares of IMI for cash consideration of $1.8-million, subject to final closing adjustments. The business is operating as FTG Circuits Haverhill Inc.
• Achieved a 1.19:1 book-to-bill ratio for Q2 2023 resulting in increased backlog of $98.2-million compared with $65.5-million at the end of 2022. Backlog as of Q2 2023 includes $18.2-million at the newly acquired sites.
• Firan added 17 staff in Q2 2023, including operations leadership to help increase throughput. Firan now employs approximately 680 people across its nine operating sites.
• Firan received $300,000 in Employee Retention Credits (ERC) for its United States sites as they retained their staff through the pandemic for a total of $3.8-million received during 2023.
• Firan received financing of $1.1-million in the quarter for a total of $3.7-million received to date under the Canadian Aerospace Regional Recovery Initiative (ARRI) program.
• Firan received $500,000 as the initial draw on a conditional loan provided by the Ontario Ministry of Economic Development, Job Creation and Trade pursuant to the Advanced Manufacturing and Innovation Competitiveness (AMIC) program.
• On June 1, 2023, Firan announced the acceptance by the Toronto Stock Exchange of Firan's notice of intention to make a normal course issuer bid (NCIB). Pursuant to the NCIB, Firan is authorized to purchase over the next 12 months, up to an aggregate of 1,195,550 common shares, being approximately 5 per cent of its common shares outstanding.

For Firan in Q2 2023, overall sales increased by $11.6-million or 52.2 per cent from $22.3-million in Q2 2022 to $34.0-million in Q2 2023. Increased revenue in Q2 2023 is the result of robust demand across the company's markets and specifically increased Simulator product activity, acquisitions and favourable foreign exchange rates. The average foreign exchange rate in Q2 2023 was 7 per cent (8.5 cents) higher than in Q2 2022, with a positive impact on sales of $1.6-million. On a year-to-date basis, sales increased by $15.8-million or 37.0 per cent from 2022.

The circuits segment sales in Q2 2023 were up $5.7-million, or 36.8 per cent compared with last year. The sales increase included a $3.4-million contribution from the newly acquired circuits sites in Minnetonka and Haverhill for the five-week period following close of the acquisitions.

On a year-to-date basis, the circuits segment sales were up $7.1-million or 24.0 per cent.

For the aerospace segment, sales in Q2 2023 were up $5.7-million or 71.4 per cent compared with last year. Aerospace segment sales in Q2 2023 included $4.9-million of revenue from simulator products as compared with $700,000 in Q2 2022. On a year-to-date basis, the aerospace segment sales were up $8.0-million or 50.6 per cent.

Gross margin in Q2 2023 was $10.0-million or 29.4 per cent as compared with $5.6-million or 25.2 per cent in Q2 2022. Excluding government assistance, the gross margin rate improved to 28.6 per cent in Q2 2023 up from 24.9 per cent in Q2 2022. The increase in the gross margin rate is due to the operating leverage of increased sales volumes, operational improvements, including favourable pricing actions and favourable exchange rates.

Net earnings after tax at FTG in Q2 2023 was $2.4-million or 10 cents per diluted share compared with a net income of zero dollars or nil per diluted share in Q2 2022. The acquisitions did not materially impact earnings in the quarter. Adjusted net earnings was $2.3-million or nine cents per diluted share in Q2 2023 as compared with an adjusted net loss of (zero dollars) or nil per diluted share in the prior-year quarter. The $2.2-million increase in adjusted net earnings is the result of higher sales volume, operational improvements and a more favourable foreign exchange rate. On a year-to-date basis adjusted net earnings after tax was $3.3-million or 13 cents per diluted share compared with a net loss of ($1.0-million) or (four cents) per diluted share in the prior-year period.

The circuits segment earnings before interest and income taxes was $1.7-million in Q2 2023 as compared with $800,000 in Q2 2022. Higher sales drove the increase in earnings. The acquisitions did not materially impact earnings for this segment.

The aerospace segment earnings before interest and income taxes was $2.7-million in Q2 2023 versus $500,000 in Q2 2022. The increase in earnings was driven by higher sales including simulator products and improved pricing on a range of products.

The trailing-12-month earnings before interest, tax, depreciation and amortization (EBITDA) was $16.8-million or $13.7-million for adjusted EBITDA as compared with approximately $9-million for the full year 2022.

EBITDA for Firan in Q2 2023 was $5.3-million or 15.7 per cent of sales compared with $2.1-million or 9.4 per cent of sales in Q2 2022. On a year-to-date basis, EBITDA in 2023 was $11.6-million or 19.8 per cent compared with $3.4-million or 8.0 per cent in 2022.

Adjusted EBITDA for Q2 2023, which excludes government assistances, and expenses related to the acquisitions, was $5.2-million or 15.3 per cent of net sales, as compared with $2.1-million or 9.2 per cent of net sales in Q2 2022. The increase in profitability is driven by increased operating leverage from higher sales, operational improvements and a favourable foreign exchange impact. For the trailing-12-month period ended June 2, 2023, adjusted EBITDA was $13.7-million or 13.0 per cent of sales.

As at June 2, 2023, the corporation's net working capital was $34.5-million, compared with $30.5-million at year-end in 2022.

Net debt at the end of Q2 2023 was ($6.4-million) compared with net cash of $12.3-million at the end of 2022, after the combined impact of a net cash outlay of $26.3-million for acquisitions, net proceeds of $8.5-million from the Aerospace Chatsworth facility sale leaseback transaction, and receiving $3.8-million from the U.S. Employment Retention Credit program (ERC). In addition, Firan has access to committed credit lines of approximately $21.5-million.

The corporation will host a live conference call on Thursday, July 13, 2023, at 8:30 a.m. (Eastern) to discuss the results of Q2 2023.

Anyone wishing to participate in the call should dial 416-764-8658 or 1-888-886-7786 and identify that you are calling to participate in the Firan conference call. The chairperson is Brad Bourne. A replay of the call will be available until Sept. 13, 2023, and will be available on the Firan website. The number to call for a rebroadcast is 416-764-8692 or 1-877-674-7070, playback pass code 132339 followed by the pound key.

About Firan Technology Group Corp.

Firan is an aerospace and defence electronics product and subsystem supplier to customers around the globe. The company has two operating units:

FTG Circuits is a manufacturer of high-technology, high-reliability printed circuit boards. Its customers are leaders in the aviation, defence and high-technology industries. FTG Circuits has operations in Toronto, Ont., Chatsworth, Calif., Fredericksburg, Va., Haverhill, Mass., Minnetonka, Minn., and a joint venture in Tianjin, China.

FTG Aerospace manufactures and repairs illuminated cockpit panels, keyboards and subassemblies for original equipment manufacturers of aerospace and defence equipment. FTG Aerospace has operations in Toronto, Ont., Chatsworth, Calif., and Tianjin, China.

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