On September 11, 2024, Kewaunee Scientific Corp (KEQU, Financial) released its 8-K filing for the first quarter of fiscal year 2025, ending July 31, 2024. Kewaunee Scientific Corp is engaged in the design, manufacture, and installation of laboratory, healthcare, and technical furniture products. The company operates through two segments: Domestic and International, with the majority of its revenue generated from the Domestic segment.
Performance Overview
Sales for the first quarter of fiscal year 2025 were $48.4 million, a decrease of 2.9% compared to $49.8 million in the prior year's first quarter. Pre-tax earnings for the quarter were $2.4 million, down 28.8% from $3.4 million in the previous year. Net earnings were $2.2 million, compared to $2.5 million in the prior year quarter. EBITDA for the quarter was $3.3 million, a decline from $4.3 million in the previous year. Diluted earnings per share were $0.74, down from $0.86 in the prior year quarter.
Segment Analysis
Domestic Segment: Domestic sales for the quarter were $35.5 million, a slight increase of 0.3% from $35.4 million in the prior year quarter. Domestic segment net earnings were $2.9 million, up from $2.7 million in the prior year quarter. Domestic segment EBITDA was $4.7 million, compared to $4.6 million in the previous year. The segment's performance remained stable across all end-markets.
International Segment: International sales for the quarter were $12.9 million, a decrease of 10.7% from $14.4 million in the prior year quarter. International segment net earnings were $463,000, slightly down from $469,000 in the prior year quarter. International segment EBITDA was $696,000, compared to $670,000 in the previous year. The decline in sales was primarily due to customer construction site delays in India, which affected the timing of deliveries.
Corporate Segment: The Corporate segment reported a pre-tax net loss of $2.0 million for the quarter, compared to a pre-tax net loss of $1.0 million in the prior year quarter. Corporate segment EBITDA was ($2.1) million, compared to ($943,000) in the previous year. The increase in professional service fees unrelated to the core business and changes in corporate cost allocation methodology impacted the segment's performance.
Financial Achievements and Metrics
Total cash on hand as of July 31, 2024, was $25.2 million, compared to $25.9 million on April 30, 2024. Working capital was $56.0 million, up from $49.3 million at the end of the first quarter last year. The company's debt-to-equity ratio was 0.68-to-1, compared to 0.70-to-1 on April 30, 2024. Net of the sale-leaseback transaction, the debt-to-equity ratio was 0.19-to-1, compared to 0.20-to-1 on April 30, 2024.
Commentary
Our financial performance for the first quarter of fiscal year 2025 was solid," said Thomas D. Hull III, Kewaunee's President and Chief Executive Officer. "Domestic segment operating performance was improved when compared to last year's first quarter as our manufacturing loadings remain at a consistent level. Site delays in India on multiple projects impacted our ability to ship products and deliver services leading to a slightly down quarter when compared to the prior year first quarter."
Income Statement Summary
| Metric | Q1 FY2025 | Q1 FY2024 |
|---|---|---|
| Net Sales | $48.4 million | $49.8 million |
| Gross Profit | $12.5 million | $11.9 million |
| Operating Profit | $2.6 million | $3.8 million |
| Net Earnings | $2.2 million | $2.5 million |
| Diluted EPS | $0.74 | $0.86 |
Balance Sheet and Cash Flow
As of July 31, 2024, Kewaunee Scientific Corp reported total assets of $132.0 million, compared to $134.8 million on April 30, 2024. The company had short-term debt of $3.6 million and long-term debt of $28.3 million. The building lease from the company's December 2021 sale-leaseback transaction accounted for $28.0 million of the long-term debt.
Analysis
Kewaunee Scientific Corp's first quarter results reflect a mixed performance with stable domestic operations offset by challenges in the international segment. The decline in international sales due to construction delays in India highlights the potential risks associated with global operations. However, the company's strong backlog and consistent demand in the domestic market provide a positive outlook for the future. The financial metrics indicate a stable liquidity position, with a manageable debt-to-equity ratio, which is crucial for sustaining operations and funding future growth.
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Explore the complete 8-K earnings release (here) from Kewaunee Scientific Corp for further details.
