Environmental Tectonics Corporation Forecasts Promising Future After Reporting Strong Fiscal 2024 Results

Environmental Tectonics Corporation (ETC)

SOUTHAMPTON, PA — After an impressive financial performance in the fiscal year 2024, Environmental Tectonics Corporation (OTC Pink: ETCC) is poised for robust future growth. The corporation recently announced its financial results, which demonstrated a significant rebound from previous losses to newfound profitability.

In a pivot from the preceding year, the company reported a net income attributable of $1.8 million, translating to $0.09 earnings per diluted share in fiscal 2024. In contrast, fiscal 2023 witnessed a net loss of $1.6 million, or a $0.13 loss per share. The $3.4 million favorable difference stems from a $17 million increase in sales and a slight rise in gross profit margin percentage to 3.8%. However, this was somewhat offset by a $2.2 million negative variance in other expense (income), mainly due to the gain from the sale of its Southampton, Pennsylvania facility in fiscal 2023.

ETC’s net sales for fiscal 2024 reached $43.3 million, signaling a significant upswing of 64.4% or $17 million, compared to the previous fiscal year. The increase was mainly due to improved international sales in the ATS business unit and the CIS segment. However, it was somewhat weighed down by lower domestic sales. ETC remains optimistic about future prospects, with strong pipeline opportunities in both domestic and international CIS segments.

The gross profit of ETC rose to $12.5 million in fiscal 2024, marking an impressive 89.7% increase from fiscal 2023’s $6.6 million. This progress was credited to higher net sales in the ATS and Sterilizer Systems business units, coupled with a more favorable mix and superior absorption of overhead costs.

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Despite the rise in sales, operating expenses for fiscal 2024 remained consistent at $9.5 million, mirroring fiscal 2023’s figures. A surge in selling and marketing expenses, primarily propelled by the increased sales, was balanced out by a reduction in research and development.

Notably, ETC registered a net interest expense of $0.9 million in fiscal 2024, reflecting a 104.7% increase from the previous fiscal year. The uptick was primarily due to increased borrowing and higher interest rates.

Moreover, the corporation encountered an increase in other expenses, totaling $0.3 million for fiscal 2024, compared to the previous fiscal year’s net income of $1.9 million, translating to a decrease of $2.2 million. The other income in fiscal 2023 was driven by the sale of its Southampton, Pennsylvania facility.

One area that could potentially pose a challenge for ETC is their tax liabilities. The corporation estimates that it may not realize tax benefits from its federal and state NOL carryforwards and research and development tax credits due to uncertainties about their utilization before they expire. This resulted in a need to set up a $7.9 million valuation allowance for unclaimed deferred tax assets.

In terms of liquidity and capital resources, the company’s availability under the Revolving Line of Credit was $4 million as of February 2024. However, by June of the same year, availability had increased to approximately $6.5 million. The increase in working capital was mostly due to a significant rise in net accounts receivable and contract assets, although slightly hindered by an uptick in payable accounts and contract liabilities.

The upward trend of ETC’s financial performance is reassuring for investors. The company projects that its current sources of liquidity, along with the anticipated conversion of contract assets into cash, milestone payments from several international contracts, and expected deposits on fiscal 2025 bookings, will sufficiently fund its operations, forecasted capital expenditures, and debt repayments throughout fiscal 2025.

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