Compared with the prior-year period, fourth quarter revenue was down primarily due to $8.7 million in lower sales to the semi market. This was partially offset by a 171%, or $3.7 million, increase in sales to the industrial market, a 42%, or $1.2 million, increase in sales to the auto/EV market and an 11%, or $0.2 million, increase in the defense/aerospace market. Sequentially, industrial revenue was up 141% and auto/EV sales were up 124%.
Gross margin was 44.6% in the fourth quarter, a 160-basis point contraction compared with the prior-year period primarily due to lower volume and product mix. Operating expenses increased primarily because of $0.4 million of incremental corporate development expenses, which were somewhat offset by lower selling costs and expense management.
With the benefit of other income in the quarter of $0.6 million, net earnings were $1.5 million, or $0.12 per diluted share.
2023 Summary
Full year revenue was a record $123.3 million, up 6%, or $6.5 million, over the prior year. Growth was driven primarily by $5.5 million higher sales to the defense/aerospace market, as well as a $4.3 million increase in sales to the industrial market.
Gross profit for the year increased 7% to $57.0 million reflecting the impact of higher volume, favorable mix as well as ongoing cost and pricing actions. Gross margin expanded 50 basis points to 46.2%. Operating income was down 3% to $10.4 million and net earnings increased 10% to $9.3 million. Adjusted EBITDA (Non-GAAP) was down 1% to $15.8 million.
Net earnings benefitted from higher cash balances and interest rates resulting in other income of $1.3 million. On a per diluted share basis, net earnings were up 1% to $0.79 compared with $0.78 in the prior year. Adjusted earnings per diluted share (Non-GAAP)1 were $0.94 compared with $0.99 in 2022.
Significant Financial Flexibility with Strong Cash Flow and a Solid Balance Sheet
The Company generated $4.7 million in cash from operations in the fourth quarter and $16.2 million in 2023. Capital expenditures in the fourth quarter were $0.3 million, unchanged from the prior-year period and were $1.3 million in 2023, down from $1.4 million in 2022.
Cash and cash equivalents at December 31, 2023 were $45.3 million, an increase of $31.8 million from the end of 2022, which included $19.2 million in net proceeds from the Company’s at-the-market equity offering program that was initiated and completed in second quarter 2023. The Company paid down $1.0 million in debt in the fourth quarter and $4.1 million during the year. Total debt was $12.0 million at year end.
Fourth Quarter 2023 Orders and Backlog (see orders by market in accompanying tables)
|
Three Months Ended |
||||||
($ in 000s) |
|
|
Change |
|
Change |
||
|
12/31/2023 |
12/31/2022 |
$ |
% |
9/30/2023 |
$ |
% |
Orders |
$27,523 |
$31,315 |
$(3,792) |
-12.1% |
$26,854 |
$669 |
2.5% |
Backlog (at quarter end) |
$40,130 |
$46,800 |
$(6,670) |
-14.3% |
$40,491 |
$(361) |
-0.9% |
Fourth quarter orders of $27.5 million were down 12% versus the prior-year period but up 2% sequentially. Defense/aerospace orders were very strong year-over-year, up 53% to $5.2 million, and were strong as well sequentially, increasing 70%. Higher demand drove fourth quarter industrial orders up 30%, or $0.8 million, compared with last year’s fourth quarter. Sequentially, industrial orders more than doubled to $3.4 million. Semi front-end orders were resilient in the fourth quarter, primarily supporting epitaxy applications. Back-end orders declined further year-over-year and sequentially but began to show stabilization. Combined semi orders, while down 10% year-over-year, improved sequentially by 3% to $13.3 million.
Backlog at December 31, 2023, was $40.1 million, down 14% versus the prior year on lower demand from the semi market as well as customers returning to shorter lead times as global supply chain challenges have dissipated. Approximately 45% of backlog is expected to ship beyond the first quarter of 2024.
Orders and backlog are key performance metrics that management uses to analyze and measure the Company’s financial performance and results of operations. Please see “Key Performance Indicators” for a further explanation of the use and how these metrics are calculated.
First Quarter and Full Year 2024 Guidance
First quarter guidance now includes just over two weeks of financial results from the Alfamation acquisition. Revenue for the first quarter of 2024 is expected to be approximately $29 million with gross margin of approximately 45% to 46%. First quarter 2024 operating expenses, including amortization, corporate development expenses and additional professional fees, are now expected to be approximately $13 million. Intangible asset amortization is estimated to be approximately $0.6 million pre-tax, or approximately $0.5 million after tax, or $0.04 per share. The effective tax rate is expected to be approximately 16% to 17% and weighted average shares are expected to be about 12.2 million in the first quarter.
