SigmaTron Incurs Q1 Loss on Soft Demand, Revenues Fall Y/Y

SigmaTron International, Inc. SGMA reported a challenging first quarter of fiscal 2025. It incurred a loss of 54 cents per share against earnings of 4 cents per share in the prior-year quarter.  

Revenues of $84.8 million denoted a decrease of 14% compared to $98.1 million in the year-ago quarter. 

SigmaTron’s performance for the quarter was affected by multiple factors. According to CEO Gary R. Fairhead, the company continued to experience soft demand, particularly in key customer segments, a trend that had been signaled earlier in the year. This softness was reflected in the year-over-year revenue decline, although management pointed to a potential uptick in customer demand expected to begin in the fourth quarter of calendar year 2024.

Key Business Metrics

SigmaTron’s gross profit saw a significant reduction, coming in at $6.4 million compared to $9.7 million last year. This decline was primarily driven by reduced volumes, which weighed on the company's ability to spread fixed costs over larger production runs. The gross margin for the quarter was approximately 7.6%, down from 9.8% in the prior year.

Selling and administrative expenses remained relatively stable, at $6.6 million, a slight decrease from the $6.8 million reported in the first quarter of fiscal 2024. However, the steep drop in gross profit meant that operating income swung from $2.8 million in the prior-year period to an operating loss of $0.2 million for the first quarter of fiscal 2025. 

SigmaTron recorded an "other expense" of $2.3 million, largely related to interest expenses and debt-related costs. This led to a pre-tax loss of $2.5 million, further exacerbated by a tax expense of $0.8 million. The company incurred a net loss of $3.3 million, contrasting sharply with a net income of $0.3 million a year earlier.

Management Guidance

Management's commentary suggests anticipation of market recovery in the later part of the calendar year 2024, with sequential quarterly revenue showing a 4.4% increase from the fourth quarter of fiscal 2024 to the first quarter of fiscal 2025, hinting at a possible stabilization. Management has been actively engaged in reducing overhead and operational costs in response to the softened market, with another round of cost reductions implemented in August 2024. The strategic focus remains on reducing inventory to alleviate working capital constraints, indicating a proactive approach to financial management amid challenging times.

Other Developments

Significantly, SigmaTron is collaborating with Lincoln International to improve its financial structure, aiming to de-leverage its balance sheet. This move is part of a broader strategy to navigate through current market softness, which is reportedly widespread across the industry. The company's efforts to adapt to market conditions through strategic cost management and operational adjustments are critical as it prepares for expected improvements in customer activity levels in 2025.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research