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Syntec Optics Holdings, Inc. (Nasdaq: OPTX) Reports Second Quarter 2024 Financial Results

ROCHESTER, NEW YORK, Aug. 14, 2024 (GLOBE NEWSWIRE) -- Syntec Optics Holdings, Inc. (“Syntec Optics” or the “Company”) (Nasdaq: OPTX), a leading provider of mission-critical products to advanced technology defense, biomedical, and communications equipment manufacturers, today reported financial results for the first quarter of 2024.

Second Quarter 2024 Financial Highlights

  • Net Sales of $7.01 million increased by 12% from $6.26 million in Q1 2024, and sales from products increased by 20% from $5.8 million in Q2 2023.
  • Adjusted EBITDA increased to $1.32 million from negative $0.67 million in Q1 2024.
  • Earnings per Share increased to $0.01 from negative $0.03 in Q1 2024.

Dean Rudy, CFO, said, “At the previous earnings call, we provided guidance for second quarter 2024 revenue to be between $6.4 and $7.0 million. I am excited to report that our revenues came in just above $7 million, as anticipated. The company ramps up space optics, data center connectivity products for increased Artificial Intelligence deployment, night vision optics and opto-mechanicals, mission-critical biomedical products, and other diverse new launches.”

Strong Order Momentum and End-Market Expansion:

  • Secured significant orders for space optics to continue growth in Low Earth Orbit (LEO) satellites. Satellite broadband could represent a significant portion of the $1 trillion global space economy by 2040.
  • Secured follow-up order for defense heads-up microdisplays and a new order for advanced technology – high-resolution, wide-field-of-view, innovative freeform prism subsystem that makes up high-brightness and high-contrast defense microdisplays for viewing vital information. The 2021 SPIE review valued the photonics-enabled defense marketplace at $343.6 billion.
  • Entered the high-growth data center market driven by the deployment of Artificial Intelligence, with the first product order forecasted to more than double to $3.2 million annually within a year. The data center market is expected to reach $622.4 billion by 2030.

 Technological Leadership and Innovation:

  • Developed advanced optical solutions, including high-performance, disposable optics for biomedical imaging with a multi-angled, wider field of view and increased imaging detail. SPIE assessed the 2021 photonics-enabled biomedical marketplace as $201 billion in total revenues.
  • Demonstrated expertise in designing and manufacturing complex optical systems, such as high numerical aperture lens systems for digital night vision. These systems allow more light to reach the camera sensor, thus enabling better performance in low-light conditions. Such pioneering systems require Syntec’s high technical skills to architect and make the system.
  • Developed dedicated production cells to ramp volumes with high yield for space optics and data center connectivity. According to SPIE, one of the ten major end-markets in optics and photonics, communications was valued at nearly $43 billion in the global marketplace. 

Operational Excellence and Strategic Growth:

  • Enhanced manufacturing capabilities to support increased production volumes and meet customer demands – launched process development for a fully automated high-volume production line to make disposable medical optics.
  • Implemented a strategic growth plan with executive changes to optimize organizational structure and focus on key priorities – Chairman Al Kapoor extended his role to CEO to oversee strategy and inorganic growth. At the same time, then-CEO Joe Mohr took the role of Chief Manufacturing Officer to focus on manufacturing excellence.
  • Strengthened financial leadership by appointing a new CFO to support the company's growth trajectory.

Second Quarter 2024 Financial and Operating Results

The $7.01 million in net sales for the three months ending 2024 increased 12% compared to $6.3 million in Q1 2024. The overall sales decreased by 8.9% compared to $7.7 million in Q1 2023, but the sales from products increased by 20% as the company shifts from development to production ramp-up.

The decrease in net sales compared to the prior year is due to decreases in our custom tooling and non-recurring engineering revenue streams. Custom tooling revenue decreased by $0.8 million for the three months ended 2024 compared to 2023, and non-recurring engineering revenue decreased by $1.1 million for the three months ended 2024 compared to 2023. An increase in product sales revenue partially offset these decreases. For the three months ending June 2024, product revenue was $7.0M compared to $5.8M in 2023, a 20% increase.

The second quarter of 2024 adjusted EBITDA was $1.32 million for the three months ending 2024, compared to a negative $0.7 million adjusted EBITDA in the first quarter of 2024 and $1.8 million in 2023. The increase over the previous quarter was achieved by a reduction in accounting and production-related expenses. Contributing factors to the year-over-year decrease include a $0.2 million decrease in gross profit and an increase in general and administrative expenses to enable future product launches.

The Company ended the second quarter of 2024 with an unused $3.7 million line of credit, an unused $4.8 million equipment line of credit, and a paydown of 3.2% principal on other commercial bank lines.

Our net income for the three months ended in the second quarter of 2024 was $0.3 million, or $0.01 per share, up from negative $1.2 million or negative $0.03 per share for Q1 2024, and compared to $0.6 million, or $0.02 per share, for Q2 2023.

Guidance

Our recent increases in ongoing sales into the communications, medical, and defense industries are expected to accelerate in the third quarter, particularly within our space communications optics and datacom microlens arrays.  As such, the third quarter 2024 revenue is expected to be in the range of $9.5 - $11.0 million. 

We expect our gross margin to hold level or slightly improve based on the profitability of ramping up products. General and administrative costs are expected to increase modestly to enable ramped-up engineering, quality, and pilot production to support continued growth in the third quarter.

Looking to the fourth quarter, we anticipate continued strength from the communications and biomedical end-markets, with additional growth coming from defense-based product launches.

Our products are propelled by tailwinds as we move towards laser-based satellite communications versus radar-based for low latency, biomedical automation, defense equipment modernization, and on-shoring. Mission-critical products use proprietary techniques that provide an economic moat.

Lastly, we expect positive net income in the second half of the year, enabling further investments to energize our continued growth.

About Syntec Optics

Syntec Optics Holdings, Inc. (Nasdaq: OPTX), headquartered in Rochester, NY, is a provider of advanced technology products to diverse end-market equipment manufacturers in the United States. Operating for over two decades, Syntec Optics runs a state-of-the-art facility with extensive core capabilities of various optics manufacturing processes, both horizontally and vertically integrated, to provide a competitive advantage for mission-critical OEMs. Syntec Optics recently launched new products, including Low Earth Orbit (LEO) satellite optics, lightweight night vision goggle optics, biomedical equipment optics, and precision microlens arrays. To learn more, visit www.syntecoptics.com.

Forward-Looking Statements

This press release contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, including certain financial forecasts and projections. All statements other than statements of historical fact contained in this press release, including statements as to the transactions contemplated by the business combination and related agreements, future results of operations and financial position, revenue and other metrics, planned products and services, business strategy and plans, objectives of management for future operations of Syntec Optics, market size, and growth opportunities, competitive position and technological and market trends, are forward-looking statements. Some of these forward-looking statements can be identified by the use of forward-looking words, including “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “plan,” “targets,” “projects,” “could,” “would,” “continue,” “forecast” or the negatives of these terms or variations of them or similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors (some of which are beyond the control of Syntec Optics), which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements are based upon estimates, forecasts and assumptions that, while considered reasonable by Syntec Optics and its management, as the case may be, are inherently uncertain and many factors may cause the actual results to differ materially from current expectations which include, but are not limited to: 1) risk outlined in any prior SEC filings; 2) ability of Syntec Optics to successfully increase market penetration into its target markets; 3) the addressable markets that Syntec Optics intends to target do not grow as expected; 4) the loss of any key executives; 5) the loss of any relationships with key suppliers including suppliers abroad; 6) the loss of any relationships with key customers; 7) the inability to protect Syntec Optics’ patents and other intellectual property; 8) the failure to successfully execute manufacturing of announced products in a timely manner or at all, or to scale to mass production; 9) costs related to any further business combination; 10) changes in applicable laws or regulations; 11) the possibility that Syntec Optics may be adversely affected by other economic, business and/or competitive factors; 12) Syntec Optics’ estimates of its growth and projected financial results for the future and meeting or satisfying the underlying assumptions with respect thereto; 13) the impact of any pandemic, including any mutations or variants thereof and the Russian/Ukrainian or Israeli conflict, and any resulting effect on business and financial conditions; 14) inability to complete any investments or borrowings in connection with any organic or inorganic growth; 15) the potential for events or circumstances that result in Syntec Optics’ failure to timely achieve the anticipated benefits of Syntec Optics’ customer arrangements; and 16) other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in prior SEC filings including registration statement on Form S-4 filed with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Syntec Optics does not give any assurance that Syntec Optics will achieve its expected results. Syntec Optics does not undertake any duty to update these forward-looking statements except as otherwise required by law.

For further information, please contact:

Sara Hart

Investor Relations

InvestorRelations@syntecoptics.com

SOURCE: Syntec Optics Holdings, Inc. (Nasdaq: OPTX)

SYNTEC OPTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2024 AND DECEMBER 31, 2023

  2024 (unaudited)  2023 
ASSETS        
         
Current Assets        
Cash $830,479  $2,158,245 
Accounts Receivable, Net  5,939,091   6,800,064 
Inventory  7,501,090   5,834,109 
Prepaid Expenses and Other Assets  302,134   359,443 
         
Total Current Assets  14,572,794   15,151,861 
Property and Equipment, Net  10,651,951   11,101,052 
Deferred Income Taxes  283,104   - 
Intangible Assets, Net  265,000   295,000 
Total Assets $25,772,849  $26,547,913 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current Liabilities        
Accounts Payable $2,574,836  $3,042,315 
Accrued Expenses  1,197,066   1,071,257 
Federal Income Tax Payable  51,966   370,206 
Deferred Revenue  280,763   - 
Line of Credit  6,263,863   6,537,592 
Current Maturities of Debt Obligations  454,522   362,972 
         
Total Current Liabilities  10,823,016   11,384,342 
         
Long-Term Liabilities        
Long-Term Debt Obligations  2,813,391   2,024,939 
Deferred Income Taxes  -   74,890 
         
Total Long-Term Liabilities  2,813,391   2,099,829 
         
Total Liabilities  13,636,407   13,484,171 
         
Commitments and Contingencies (Note 15)  -   - 
         
Stockholder’s Equity        
CL A Common Stock, Par value $.0001 per share; 121,000,000 authorized; 36,688,266 issued and outstanding as of June 30, 2024; 36,688,266 issued and outstanding as of December 31, 2023  3,669   3,669 
Common Stock Value  3,669   3,669 
Additional Paid-In Capital  1,927,204   1,927,204 
Retained Earnings  10,205,569   11,132,869 
         
Total Stockholder’s Equity  12,136,442   13,063,742 
Total Liabilities and Stockholder’s Equity $25,772,849  $26,547,913 

 

SYNTEC OPTICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

  June 30, 2024  June 30, 2023  June 30, 2024  June 30, 2023 
  Three Months Ended  Six Months Ended 
  June 30, 2024  June 30, 2023  June 30, 2024  June 30, 2023 
             
Net Sales $7,006,000  $7,692,296  $13,261,908  $14,576,732 
                 
Cost of Goods Sold  4,831,673   5,315,662   10,380,138   10,488,396 
                 
Gross Profit  2,174,327   2,376,634   2,881,770   4,088,336 
                 
General and Administrative Expenses  2,015,783   1,609,270   4,130,326   3,127,232 
                 
Income (Loss) from Operations  158,544   767,364   (1,248,556)  961,104 
                 
Other Income (Expense)                
Interest Expense, Including Amortization of Debt Issuance Costs  (167,242)  (131,562)  (327,109)  (261,583)
Other Income  319,623   49,056   338,972   49,807 
                 
Total Other Income (Expense), Net  152,381   (82,506)  11,863   (211,776)
                 
Income (Loss) Before Provision for (Benefit) Income Taxes  310,925   684,858   (1,236,693)  749,328 
                 
Provision (Benefit) for Income Taxes  29,082   117,093   (309,393)  128,541 
                 
Net Income (Loss) $281,843  $567,765  $(927,300) $620,787 
                 
Net Income (Loss) per Common Share                
Basic and diluted $0.01  $0.02  $(0.03) $0.02 
                 
Weighted Average Number of Common Shares Outstanding                
Basic and diluted  36,688,266   31,600,000   36,688,266   31,600,000 

 

SYNTEC OPTICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

  2024  2023 
Cash Flows From Operating Activities        
Net (Loss) Income $(927,300) $620,787 
Adjustments to Reconcile (Loss) Income to Net Cash (Used In)        
Provided By Operating Activities:        
Adjustments to Reconcile (Loss) Income to Net Cash (Used In) Provided By Operating Activities:        
Depreciation and Amortization  1,385,606   1,404,552 
Amortization of Debt Issuance Costs  4,387   4,825 
Gain on Disposal of Property and Equipment  (309,000)  - 
Change in Allowance for Expected Credit Losses  (24,395)  48,080 
Change in Reserve for Obsolescence  291,576   (8,032)
Deferred Income Taxes  (357,994)  (461,514)
(Increase) Decrease in:        
Accounts Receivable  885,368   (1,177,615)
Inventory  (1,958,557)  (942,781)
Prepaid Expenses and Other Assets  57,309   159,125 
Increase (Decrease) in:        
Accounts Payables and Accrued Expenses  (993,406)  773,821 
Federal Income Tax Payable  (318,240)  449,245 
Deferred Revenue  280,763   (282,845)
         
Net Cash (Used In) Provided By Operating Activities  (1,983,883)  587,648 
         
Cash Flows From Investing Activities        
Purchases of Property and Equipment  (254,767)  (828,299)
Proceeds from Disposal of Property and Equipment  309,000   - 
         
Net Cash Provided By (Used in) Investing Activities  54,233   (828,299)
         
Cash Flows From Financing Activities        
(Repayments) Borrowing on Line of Credit, Net  (273,729)  324,114 
Borrowing on Debt Obligations  1,100,388   - 
Repayments on Debt Obligations  (224,775)  (486,402)
Distributions  -   (62,065)
         
Net Cash Provided By (Used in) Financing Activities  601,884   (224,353)
         
Net Decrease in Cash  (1,327,766)  (465,004)
         
Cash - Beginning  2,158,245   526,182 
         
Cash - Ending $830,479  $61,178 
         
Supplemental Cash Flow Disclosures:        
         
Cash Paid for Interest $276,809  $267,220 
         
Cash Paid for Taxes $537,510  $140,810 
         
Supplemental Disclosures of Non-Cash Investing Activities:        
         
Assets Acquired and Included in Accounts Payable and Accrued Expenses $651,736  $22,364 

 

NON-GAAP RECONCILIATION OF EBITDA

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

  Three Months Ended  Six Months Ended 
  June 30, 2024  June 30, 2023  June 30, 2024  June 30, 2023 
Net (Loss) Income $281,843  $567,765  $(927,300) $620,787 
Depreciation & Amortization  692,194   685,439   1,389,993   1,409,377 
Interest Expenses  164,828   129,448   322,722   256,757 
Taxes  29,082   117,093   (309,393)  128,541 
Non-Recurring Items                
Other Income - Sale of Equipment & Accessories  -   (10,068)  -   (10,068)
Discount Income  -   192   -   192 
Non-Recurring Transaction Fees  -   158,056   25,265   158,056 
Non-Recurring Contributions, Management Fees & Expenses  149,235   131,258   149,235   212,516 
Adjusted EBITDA $1,317,182  $1,779,183  $650,522  $2,776,158 

 

Use of Non-GAAP Financial Measures

The Company provides non-GAAP financial measures, including EBITDA and Adjusted EBITDA, as a supplement to GAAP financial information to enhance the overall understanding of the Company’s financial performance and to assist investors in evaluating the Company’s results of operations, period over period. Adjusted non-GAAP measures exclude significant unusual items. Investors should consider these non-GAAP measures as a supplement to, and not a substitute for financial information prepared on a GAAP basis.

Non-GAAP Financial Measures

This Annual Report includes a non-GAAP measure that the Company uses to supplement our results presented in accordance with U.S. GAAP. EBITDA is defined as earnings before interest and other income, tax and depreciation and amortization. Adjusted EBITDA is calculated as EBITDA adjusted for non-recurring items, and business combination expenses. Adjusted EBITDA is a performance measure that we believe is useful to investors and analysts because it illustrates the underlying financial and business trends relating to our core, recurring results of operations and enhances comparability between periods.

Adjusted EBITDA is not a recognized measure under U.S. GAAP and is not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry. Investors should exercise caution in comparing our non-GAAP measure to any similarly titled measure used by other companies. This non-GAAP measure excludes certain items required by U.S. GAAP and should not be considered as an alternative to information reported in accordance with U.S. GAAP.

Adjusted EBITDA

The Company defines adjusted EBITDA, a non-GAAP financial measure, as net earnings (loss) before interest and other expenses, net, income tax expense, depreciation and amortization, as adjusted to exclude non-recurring items as outlined in our 10-Q. The Company utilizes adjusted EBITDA as an internal performance measure in the management of our operations because we believe the exclusion of these non-cash and non-recurring charges allows for a more relevant comparison of our results of operations to other companies in our industry and is in accordance with the Non-GAAP Financial Measures Compliance & Disclosure Interpretations (Reference Question 102.03).


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