Baylin Announces Financial Results for the First Quarter of 2020

Toronto, Canada, June 16, 2020-Baylin Technologies Inc. (TSX: BYL)  a diversified, global wireless technology company focused on research, design, development, manufacturing and sales of passive and active radio frequency products and services, today announced its financial results for the three months ended March 31, 2020.

All amounts are stated in Canadian dollars unless otherwise indicated.

QUARTERLY HIGHLIGHTS

Key highlights for the three months ended March 31, 2020 include the following:

• Revenue was $26.9 million in the first quarter of 2020, a decrease of $12.1 million or 31.0% compared to the first quarter of 2019. In the first quarter of 2019, Asia Pacific was awarded several "one-time" platforms from a major customer that were not expected to be repeated in the first quarter of 2020. Taking that into consideration, the vast majority of the remaining revenue shortfall in the first quarter of 2020 was due to the COVID-19 outbreak. The initial stages of the pandemic had a disruptive effect on each of the Company's lines of business in February and March: (i) Asia Pacific's revenue was impacted, initially caused by supply chain shortages in China and then by lower consumer demand due to commercial store lockdowns in Europe and North America; (ii) Wireless Infrastructure and Embedded Antenna's revenues were impacted by delayed shipments in China during the government mandated extension of the Lunar New Year holiday; and, (iii) Satcom generated lower revenue due to less demand from its commercial customers, which was somewhat offset by strength of emergency services and military customers.
   
• Gross profit was $8.6 million in the first quarter of 2020, a decrease of $5.7 million compared to the first quarter of 2019. Gross margin(3) was 31.9% in the first quarter of 2020 compared to 36.7% in the first quarter of 2019. Gross margin was negatively impacted by the significant decrease of sales volumes in the first quarter of 2020. Asia Pacific's gross margin was lower than anticipated as the smartphones that were sold in the quarter were primarily less expensive models and the antennas in these models generate a lower gross margin than the flagship models.
   
• Adjusted EBITDA(2) was $0.6 million in the first quarter of 2020 compared to $4.1 million in the first quarter of 2019. The decrease of Adjusted EBITDA was primarily due to the lower revenue and gross margin somewhat offset by lower operating expenses. Labour expenses in China were inflated relative to volumes because of a ban on layoffs during the re-start period after the Lunar New Year holiday. The impact of this layoff ban resulted in labour variances over a 4-week period.
   
• Net cash at March 31, 2020 decreased from December 31, 2019 due to capital expenditures, debt servicing and cash taxes, offset by a decrease in non-cash working capital.

RECENT DEVELOPMENTS

The COVID-19 outbreak has been unsettling; however, despite the government shutdowns, the Company and all of its subsidiaries worldwide have remained open for business throughout the entire period to date. The company has had no reported cases of COVID-19 by any of its employees in any country. The Company has filed for and received government stimulus related to COVID-19 relief including reduced corporate social insurance premiums in China, forgivable government loans in the United States under the Paycheck Protection Program and wage subsidies in Canada under the Canada Emergency Wage Subsidy.

The Company's credit agreement with Royal Bank of Canada and HSBC Bank Canada (collectively, the "Lenders") has been amended. The Lenders have waived compliance with the financial covenants as at March 31, 2020, have modified the financial covenants for the second and third quarters of 2020 and have given the Company an option to defer the scheduled principal repayments on the term loan on June 30, 2020 and September 30, 2020.

"We appreciate the flexibility and support shown by our lenders", stated Michael Wolfe, Baylin's Chief Financial Officer. "This has been an unusual time, and their continued willingness to work with us cooperatively as we navigate our way through the uncertainty brought about by the COVID-19 pandemic demonstrates the strength of our relationship", added Mr. Wolfe.