Inscape today announced its second quarter financial results ended October 31, 2019. Sales in the second quarter of fiscal year 2020 were $23.3 million and adjusted EBITDA was $1.0 million.

Second Quarter Highlights:

Second quarter sales were 7% higher than the same quarter of the previous year. This is the sixth consecutive quarter of year over year growth, excluding sales from an exited business unit
Furniture sales for the second quarter are 32% higher than the previous year quarter
Sales order pipeline remains solid.
Gross profit for the second quarter increased to $6.8 million compared to $6.6 million in the previous year quarter
SG&A declined by $2.1 million compared to the previous year quarter due to completion of investment in sales and marketing initiatives in fiscal 2019 and cost reduction initiatives implemented in fiscal 2020. We continue to analyze opportunities to further reduce SG&A expenses.
Adjusted EBITDA for the second quarter improved by $2.6 million compared to the prior year

“We are pleased with the results as it reinforces our commitment to deliver profitable growth. Our investments to grow the topline are starting to generate the return we expect,” said Brian Mirsky, CEO. “We remain focussed on sustaining our profitable growth performance.”

Fiscal 2020 quarterly and year to date net income improved significantly compared to the previous year.

The second quarter of fiscal year 2020 ended with net income of $0.4 million or 3 cents per share, compared with a net loss of $2.4 million or 17 cents per share in the same quarter of last year. Net income (loss) of both quarters included certain unrealized, non-cash expenses and one-time items that have significant impact on the net income per GAAP. With the exclusion of these items, the second quarter of fiscal 2020 had an adjusted net income before taxes of $0.2 million, compared with an adjusted net loss before taxes of $2.1 million in the same quarter of last year. This represents an improvement in net income of $2.3 million compared to the prior year driven by lower SG&A expenses.

The six month period of fiscal year 2020 ended with a net loss of $0.4 million or 2 cents per share, compared with a net loss of $5.6 million or 39 cents per share for the same period of last year. Net income (loss) of both periods included certain unrealized, non-cash expenses and one-time items that have significant impact on the net income (loss) per GAAP. With the exclusion of these items, the six month period of fiscal year 2020 had an adjusted net loss before taxes of $1.4 million, compared with an adjusted net loss before taxes of $4.6 million in the same period of the previous year. Exit of an unprofitable business unit, realized manufacturing efficiencies and lower SG&A expense contributed to the $3.2 million improvement in net income.

Gross profit as a percentage of sales for the second quarter of fiscal year 2020 at 29% was 100 basis points lower than the same quarter of the last year’s gross profit of 30.0%. Manufacturing efficiencies realized were more than offset by unfavourable product mix and increase in sales discount.

For the six month period of fiscal year 2020 gross profit as a percentage of sales of 28.5%, was 50 basis points higher than the same period of the previous year. Exit of an unprofitable business unit and improved manufacturing efficiencies contributed to the gross profit increase.

Selling, general and administrative expenses (“SG&A”) in the second quarter of fiscal year 2020 were 27.9% of sales, compared to 39.6% in the same quarter of last year. The dollar amount decreased by $2.1 million compared to the same quarter of last year as the previous year included incremental investments in marketing, sales coverage and supply chain initiatives.

SG&A for the six month period of fiscal year 2020 were 31.3% of sales, compared to 38.7% in the same period of the previous year. The current six month period SG&A of $13.8 million was $2.9 million lower than the same period of last year, mainly due to incremental investments in marketing, sales coverage and supply chain initiatives, which were incurred in prior year and additional cost savings implemented in fiscal 2020.

At the end of the quarter, the company was debt-free and had cash totaling $2.7 million.

Inscape announces the resignation of Aziz Hirji as Inscape, CFO

Aziz Hirji has resigned as the Chief Financial Officer and Secretary of the Company effective January 10, 2020. Mr. Hirji has accepted a position with a privately held Pharmaceutical Company.

“We wish to thank Aziz for his commitment and guidance since he joined us in November, 2016” commented Brian Mirsky, CEO of Inscape.

The Company will immediately start a search for his replacement.