Insightful Analysis of SigmaTron’s Q1 Performance SigmaTron Incurs Q1 Loss on Soft Demand, Revenues Fall Y/Y

Written By Michael Gary Scott

SigmaTron International, Inc. endured a challenging first quarter of fiscal 2025, posting a loss of 54 cents per share compared to earnings of 4 cents per share in the prior year. Revenues plummeted by 14% to $84.8 million, down from $98.1 million in the same period last year.

The Impact of Market Conditions

Multiple factors contributed to SigmaTron’s Q1 performance woes. CEO Gary R. Fairhead highlighted soft demand, particularly in crucial customer segments, a trend that had been foreseen earlier in the year. This demand slump manifested in the year-over-year revenue decline. However, management anticipates a potential boost in customer demand starting in the fourth quarter of the 2024 calendar year.

Analysis of Key Business Metrics

SigmaTron’s gross profit took a significant hit, decreasing to $6.4 million from $9.7 million in the previous year. This decline was primarily driven by reduced volumes, constraining the company’s ability to distribute fixed costs over larger production runs. The gross margin for the quarter stood at approximately 7.6%, down from 9.8% in the prior year.

Selling and administrative expenses remained relatively steady at $6.6 million, slightly less than the $6.8 million reported in the Q1 of fiscal 2024. However, the substantial drop in gross profit resulted in the operating income swinging from $2.8 million to an operating loss of $0.2 million for Q1 of fiscal 2025.

An “other expense” of $2.3 million, largely tied to interest expenses and debt-related costs, led to a pre-tax loss of $2.5 million. This was further compounded by a tax expense of $0.8 million, resulting in a net loss of $3.3 million, a stark contrast to the net income of $0.3 million a year prior.

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Strategic Management Guidance

The company is looking ahead with cautious optimism, expecting a market recovery in the latter part of 2024 and signaling a possible stabilization with a 4.4% increase in sequential quarterly revenue from Q4 of fiscal 2024 to Q1 of fiscal 2025. Management has actively worked on reducing overhead and operational costs by implementing further cost-cutting measures. The primary focus remains on reducing inventory to alleviate working capital constraints, reflecting a proactive financial management approach during challenging times.

Strategic Collaborations and Market Adaptations

Notably, SigmaTron has engaged in a collaboration with Lincoln International to enhance its financial structure, aiming to de-leverage its balance sheet. This strategic move is part of a broader effort to navigate through the prevailing market softness, which has affected the industry at large. The company’s strategic cost management and operational adjustments are vital as it prepares for the anticipated uptick in customer activity levels in 2025.