UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
May 9, 2019 (May 8, 2019)
SMTC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 0-31051 | 98-0197680 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
7050 Woodbine Avenue, Suite 300
Markham, Ontario, Canada L3R 4G8
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (905) 479-1810
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (240.12b-2 of this chapter).
☐ Emerging Growth Company
☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common | SMTX | Nasdaq |
Item 2.02. | Results of Operations and Financial Condition. |
On May 8, 2019, SMTC Corporation issued a press release announcing its first quarter and fiscal year 2019 financial results, a copy of which is attached as Exhibit 99.1 to this Current Report and incorporated herein by reference.
On May 9, 2019, SMTC Corporation held a teleconference announcing its first quarter 2019 financial results. A transcript of this teleconference is attached as Exhibit 99.2 to this Current Report and incorporated herein by reference.
The information being furnished under Item 2.02 in this Form 8-K, including the accompanying exhibits, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing.
Exhibit Number |
Description | |
99.1 | Press Release of SMTC Corporation dated May 8, 2019 | |
99.2 | Transcript of SMTC Corporation’s first quarter 2019 results teleconference held May 9, 2019 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 9, 2019 |
SMTC CORPORATION
By: /s/ Edward Smith Name: Edward Smith Title: President and Chief Executive Officer |
EXHIBIT 99.1
SMTC Corporation Reports First Quarter 2019 Results
$103 Million Revenue Quarter Fueled by Expanding Customer Base
MC Assembly Acquisition Contributes to Strong Year-over-Year Growth
TORONTO, May 08, 2019 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX), a global electronics manufacturing services provider, today announced its first quarter 2019 results.
First Quarter Financial Highlights
2019 Outlook
“With the strong start to 2019 and a growing funnel of business opportunities from existing and new customers in key markets, we anticipate another year of solid revenue growth. We expect to complete the integration of MC Assembly during the second quarter and have implemented steps to attain additional synergies which we believe will increase production efficiencies and improve our operating results,” said Ed Smith, SMTC’s President and Chief Executive Officer.
“Our priorities over the next several quarters are to continue to grow the top line, become more efficient, make progress towards achieving our long-term the gross margin targets of 12% to 14%, and strengthen our balance sheet through working capital improvements and debt reduction. As I look ahead, I am excited about the opportunities for our company to achieve best-in-class operating and financial metrics among our EMS peers,” added Smith.
SMTC’s current expectations for 2019:
2019 Revenue | 2019 Adjusted EBITDA Range* | ||
$393 - $408 million | $27 - $29 million |
*Adjusted EBITDA is calculated based on net income (loss) adjusted to exclude stock-based compensation, interest, restructuring charges, unrealized foreign exchange gain (loss) on unsettled forward exchange contracts, income taxes and depreciation of property plant and equipment and amortization of intangible assets, merger and acquisition related expenses and gains or losses on contingent consideration. SMTC has provided in this release a non-GAAP calculation of Adjusted EBITDA as supplemental information regarding the operational performance of SMTC’s core business. A reconciliation of Adjusted EBITDA to net earnings (loss) is shown below in this press release.
Financial Results Conference Call
The company will host a conference call which will start at 8:30 a.m. Eastern Time on Thursday, May 9, 2019 by accessing the Investor Relations section of SMTC’s web site on the Investor Relations Events Calendar page at https://ir.smtc.com/ir-calendar or dialing 1-877-317-6789 (for U.S. participants) or 1- 412-317-6789 (for participants outside of the U.S ten minutes prior to the start of the call and request to join the SMTC Corporation’s First Quarter 2019 Results Conference Call.
The conference call will be available for rebroadcast from the Investor Relations section of SMTC’s web site on the Investor Relations Events Calendar page.
Non-GAAP information
Adjusted EBITDA, Adjusted Gross Profit and Adjusted Gross Profit percentage are non-GAAP measures. Adjusted EBITDA is computed as net earnings (loss) from operations excluding depreciation and amortization, restructuring charges, unrealized foreign exchange gains/losses on unsettled forward foreign exchange contracts, stock-based compensation, interest, income tax expense and merger and acquisition related expenses and gains or losses on contingent consideration. SMTC Corporation has provided in this release a non-GAAP calculation of Adjusted EBITDA as supplemental information regarding the operational performance of SMTC’s core business. A reconciliation of Adjusted EBITDA to net income (loss) is included in the attachment. Adjusted Gross Profit is computed as gross profit excluding unrealized gains or losses on unsettled forward foreign exchange contracts and amortization of intangible assets. Adjusted Gross Profit percentage is computed as Adjusted Gross Profit divided by revenue. A reconciliation of Adjusted Gross Profit to gross profit is included in the attachment. Management uses these non-GAAP financial measures internally in analyzing SMTC’s financial results to assess operational performance and liquidity as well as to provide a consistent method of comparison to historical periods and to the performance of competitors and peer group companies. SMTC believes that these non-GAAP financial measures are useful for management and investors in assessing SMTC’s performance and when planning, forecasting and analyzing future periods. SMTC believes these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key financial metrics we use in making operating decisions and because investors and analysts use it to help assess the health of our business. Non-GAAP measures are subject to limitations as these measures are not in accordance with, or an alternative for, United States Generally Accepted Accounting Principles (US GAAP) and may be different from non-GAAP measures used by other companies. Because of these limitations, investors should consider Adjusted EBITDA, Adjusted Gross Profit and Adjusted Gross Profit percentage along with other financial performance measures, including revenue, gross profit and net earnings (loss), as reflected in SMTC’s interim consolidated financial statements prepared in accordance with US GAAP.
Forward-Looking Statements
The statements contained in this release that are not purely historical are forward-looking statements, which involve risk and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. These statements may be identified by their use of forward looking terminology such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other and similar words, and include, but are not limited to, statements regarding the expectations, intentions or strategies of SMTC. For these statements, we claim the protection of the safe harbor for forward looking statements contained in the Private Securities Litigation Reform Act of 1995. Risks and uncertainties that may cause future results to differ from forward looking statements include the challenges of managing quickly expanding operations and integrating acquired companies, fluctuations in demand for customers' products and changes in customers' product sources, competition in the electronics manufacturing services (EMS) industry, component shortages, and others risks and uncertainties discussed in SMTC's most recent filings with the SEC. The forward-looking statements contained in this release are made as of the date hereof and SMTC assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ materially from those projected in the forward-looking statements.
About SMTC Corporation
SMTC Corporation was founded in 1985 and acquired MC Assembly Holdings, Inc. in November 2018. Following the MC Assembly acquisition, SMTC has more than 50 manufacturing and assembly lines in United States, China and Mexico which creates a powerful low-to-medium volume, high-mix, end-to-end global EMS provider. With local support and expanded manufacturing capabilities globally, including fully integrated contract manufacturing services with a focus on global original equipment manufacturers (OEMs) and emerging technology companies, including those in the Defense and Aerospace, Industrial, Power and Clean Technology, Medical and Safety, Retail and Payment Systems, Semiconductors and Telecom, Networking and Communications; and Test and Measurement industries. As a mid-size provider of end-to-end electronics manufacturing services (EMS), SMTC provides printed circuit boards assemblies (PCB) production, systems integration and comprehensive testing services, enclosure fabrication, as well as product design, sustaining engineering and supply chain management services. SMTC services extend over the entire electronic product life cycle from the development and introduction of new products through to the growth, maturity and end-of-life phases.
SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX and was added to the Russell Microcap® Index in 2018. For further information on SMTC Corporation, please visit our website at www.smtc.com.
Consolidated Statements of Operations and Comprehensive Income | |||||||
(Unaudited) | |||||||
Three months ended | |||||||
(Expressed in thousands of U.S. dollars, except number of shares and per share amounts) | March 31, 2019 |
April 1, 2018 | |||||
Revenue | $ | 102,649 | $ | 37,120 | |||
Cost of sales | 94,025 | 33,270 | |||||
Gross profit | 8,624 | 3,850 | |||||
Selling, general and administrative expenses | 6,698 | 3,509 | |||||
Gain on Contingent Consideration | (3,050 | ) | - | ||||
Restructuring charges | 624 | - | |||||
Operating earnings | 4,352 | 341 | |||||
Interest expense | 2,870 | 307 | |||||
Net income before income taxes | 1,482 | 34 | |||||
Income tax expense (recovery) | |||||||
Current | 279 | 110 | |||||
Deferred | (8 | ) | (84 | ) | |||
271 | 26 | ||||||
Net income and comprehensive income | $ | 1,211 | $ | 8 | |||
Basic income per share | $ | 0.05 | $ | 0.00 | |||
Diluted income per share | $ | 0.05 | $ | 0.00 | |||
Weighted average number of shares outstanding | |||||||
Basic | 23,248,918 | 17,041,504 | |||||
Diluted | 24,465,435 | 17,523,890 | |||||
Consolidated Balance Sheets | |||||||
(Unaudited) | |||||||
(Expressed in thousands of U.S. dollars) | March 31, 2019 |
December 30, 2018 | |||||
Assets | |||||||
Current assets: | |||||||
Cash | $ | 1,596 | $ | 1,601 | |||
Accounts receivable - net | 74,180 | 72,986 | |||||
Unbilled contract assets | 24,208 | 20,405 | |||||
Inventories - net | 48,660 | 53,203 | |||||
Prepaid expenses and other assets | 6,630 | 5,548 | |||||
Derivative assets | - | 15 | |||||
Income taxes receivable | 158 | 160 | |||||
155,432 | 153,918 | ||||||
Property, plant and equipment - net | 27,213 | 28,160 | |||||
Operating lease right of use assets - net | 4,904 | - | |||||
Goodwill | 18,165 | 18,165 | |||||
Intangible assets - net | 18,091 | 19,935 | |||||
Deferred financing costs - net | 634 | 668 | |||||
Deferred income taxes - net | 388 | 380 | |||||
Total assets | $ | 224,827 | $ | 221,226 | |||
Liabilities and Shareholders' Equity | |||||||
Current liabilities: | |||||||
Revolving credit facility | 23,636 | $ | 25,020 | ||||
Accounts payable | 78,806 | 76,893 | |||||
Accrued liabilities | 13,022 | 13,040 | |||||
Warrant liability | 1,908 | 2,009 | |||||
Contingent consideration | - | 3,050 | |||||
Income taxes payable | 39 | 12 | |||||
Current portion of long-term debt | 1,368 | 1,368 | |||||
Current portion of operating lease obligations | 2,070 | - | |||||
Current portion of finance lease obligations | 1,485 | 1,547 | |||||
122,334 | 122,939 | ||||||
Long-term debt | 55,963 | 56,039 | |||||
Operating lease obligations | 3,338 | - | |||||
Finance lease obligations | 9,592 | 9,947 | |||||
Total liabilities | 191,227 | 188,925 | |||||
Shareholders’ equity: | |||||||
Capital stock | 460 | 458 | |||||
Additional paid-in capital | 278,734 | 278,648 | |||||
Deficit | (245,594 | ) | (246,805 | ) | |||
33,600 | 32,301 | ||||||
Total liabilities and shareholders' equity | $ | 224,827 | $ | 221,226 |
Consolidated Statements of Cash Flows | |||||||
(Unaudited) | |||||||
Three months ended | |||||||
(Expressed in thousands of U.S. dollars) | |||||||
Cash provided by (used in): | March 31, 2019 |
April 1, 2018 | |||||
Operations: | |||||||
Net income | $ | 1,211 | $ | 8 | |||
Items not involving cash: | |||||||
Depreciation on property, plant and equipment | 1,627 | 774 | |||||
Amortization of intangible assets | 1,844 | - | |||||
Unrealized foreign exchange gain on unsettled forward | |||||||
exchange contracts | - | (319 | ) | ||||
Deferred income taxes (recovery) | (8 | ) | (84 | ) | |||
Amortization of deferred financing fees | 271 | 9 | |||||
Stock-based compensation | 88 | 126 | |||||
Change in fair value of warrant liability | (101 | ) | - | ||||
Change in fair value of contingent consideration | (3,050 | ) | - | ||||
Change in non-cash operating working capital: | |||||||
Accounts receivable | (1,194 | ) | (1,793 | ) | |||
Unbilled contract assets | (3,803 | ) | (1,735 | ) | |||
Inventories | 4,543 | (974 | ) | ||||
Prepaid expense sand other assets | (1,067 | ) | (369 | ) | |||
Income taxes payable | 29 | (48 | ) | ||||
Accounts payable | 1,970 | 3,837 | |||||
Accrued liabilities | 486 | 1,184 | |||||
2,846 | 616 | ||||||
Financing: | |||||||
Repayments of revolving credit facility | (1,384 | ) | (2,149 | ) | |||
Repayments of long-term debt | (313 | ) | (500 | ) | |||
Principal repayments of finance lease obligations | (417 | ) | (44 | ) | |||
Debt issuance and deferred financing fees | - | (33 | ) | ||||
(2,114 | ) | (2,726 | ) | ||||
Investing: | |||||||
Purchase of property, plant and equipment | (737 | ) | (104 | ) | |||
(737 | ) | (104 | ) | ||||
Decrease in cash | (5 | ) | (2,214 | ) | |||
Cash, beginning of period | 1,601 | 5,536 | |||||
Cash, end of the period | $ | 1,596 | $ | 3,322 | |||
Supplementary Information: | |||||||||||||||||
Reconciliation of Adjusted EBITDA | |||||||||||||||||
Three months ended | |||||||||||||||||
Note 1 | Note 2 | ||||||||||||||||
Proforma | |||||||||||||||||
March 31, 2019 | April 1, 2018 | December 30, 2018 | April 1, 2018 | ||||||||||||||
Net income (loss) | $ | 1,211 | $ | 8 | $ | (1,223 | ) | $ | (1,055 | ) | |||||||
Add (deduct): | |||||||||||||||||
Depreciation of property, plant and equipment | 1,627 | 774 | 1,365 | 1,620 | |||||||||||||
Amortization of Intangible assets | 1,844 | - | 1,065 | - | |||||||||||||
Interest | 2,870 | 307 | 1,922 | 2,052 | |||||||||||||
Income tax expense | 271 | 26 | 272 | 26 | |||||||||||||
EBITDA | $ | 7,823 | $ | 1,115 | $ | 3,401 | $ | 2,643 | |||||||||
Add (deduct): | |||||||||||||||||
Stock compensation expense | 88 | 126 | 129 | 126 | |||||||||||||
Stock compensation expense - warrant revaluation | (101 | ) | - | 111 | - | ||||||||||||
Restructuring charges | 624 | - | 18 | 102 | |||||||||||||
Merger and acquisitions related expenses | 91 | - | 1,676 | - | |||||||||||||
Contingent Consideration reversal | (3,050 | ) | - | (15 | ) | - | |||||||||||
Unrealized foreign exchange loss (gain) | - | (319) | - | (338 | ) | ||||||||||||
on unsettled forward exchange contracts | |||||||||||||||||
Adjusted EBITDA | $ | 5,475 | $ | 922 | $ | 5,320 | $ | 2,533 | |||||||||
Note 1: Reflects historical SMTC results as filed | |||||||||||||||||
Note 2: Reflects proforma SMTC and MC as if combined as at April 1, 2018 | |||||||||||||||||
Supplementary Information: | |||||||
Reconciliation of Adjusted Gross Profit | |||||||
Three months ended | |||||||
March 31, 2019 |
April 1, 2018 | ||||||
Gross Profit | $ | 8,624 | $ | 3,850 | |||
Add (deduct): | |||||||
Amortization of intangible assets | 1,844 | - | |||||
Unrealized foreign exchange loss (gain) | |||||||
on unsettled forward exchange contracts | - | (319 | ) | ||||
Adjusted Gross Profit | $ | 10,468 | $ | 3,531 | |||
Adjusted Gross Profit Percentage | 10.2 | % | 9.5 | % | |||
Supplementary Information: | |||
Reconciliation of Adjusted EBITDA | |||
Forecasted Twelve months ended |
|||
December 29, 2019 |
|||
Net Income | $ | 317 | |
Add (deduct): | |||
Depreciation | 7,344 | ||
Amortization of Intangible | 7,376 | ||
Interest | 10,597 | ||
Income tax expense | 1,179 | ||
EBITDA | $ | 26,813 | |
Add (deduct): | |||
Stock compensation expense | 500 | ||
Restructuring charges | 624 | ||
Merger and acquisitions related expenses | 91 | ||
Adjusted EBITDA | $ | 28,028 | |
Investor Relations Contact
Peter Seltzberg
Managing Director
Darrow Associates, Inc.
516-419-9915
pseltzberg@darrowir.com
EXHIBIT 99.2
Note: Readers should refer to the audio replays, when available, on our website (www.smtc.com) for clarification and accuracy.
First Quarter 2019
Conference Call Prepared Remarks
Operator
Good morning, ladies and gentlemen, and welcome to the SMTC First Quarter 2019 Earnings Call. (Operator Instructions) As a reminder, this conference call will be recorded.
I would now like to introduce your host for today's conference, Mr. Blair McInnis, Vice President of Finance. You may begin.
Blair McInnis
Thank you. Before we begin the call, I'd like to remind everybody that the presentation will include statements about expected future events and financial results that are forward-looking in nature and subject to risks and uncertainties. The company cautions that actual performance will be affected by a number of factors, many of which are beyond the company's control, and that future events and results may vary substantially from what the company currently foresees. Discussion of the various factors that may affect future results is contained in the company's annual report on Form 10-K, on form 10-Q, and subsequent reports on Form 8-K and other filings with the Securities and Exchange Commission. All forward-looking statements are made as of the date of this call. And except as required by law, we do not intend to update this information. This conference call will also be available for audio replay in the Investor Relations section of SMTC's website at www.smtc.com.
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SMTC will be participating at the B. Riley FBR Annual Investor Conference on May 22nd in Los Angeles, and the 16th Annual Craig-Hallum Institutional Investor Conference on May 29th in Minneapolis. Information about these events have been posted on the Investor Relations section of our website.
I will now pass the call over to Eddie Smith, SMTC's President and Chief Executive Officer.
Edward J. Smith
Thank you, Blair, and good morning ladies and gentlemen, I'm Eddie Smith, SMTC's President and Chief Executive Officer. On this call with me today is Rich Fitzgerald, our Chief Operating Officer, and Steve Waszak, SMTC's Chief Financial Officer.
As the press release we issued yesterday indicates we got off to a strong start to 2019. Steve will discuss our financial results for the first quarter and provide our guidance for 2019. After Steve’s review of the numbers, I’ll come back and offer my thoughts on progress-made and priorities on our continuing journey to make SMTC into a company that delights our customers and delivers increasing shareholder value.
Steven M. Waszak
Thank you, Eddie. Good morning, everyone and thank you for taking time to join us, As Eddie mentioned, we will start the call with my review of the quarter’s financial results and then I’ll turn the call back over to Eddie for his comments. To frame my discussion on financial results, as with year-end results call, I will be referencing numbers for 2019, which includes SMTC + MC Assembly combined; also 2018 year-over-year which include “as previously reported” by SMTC which as a reminder include MC Assembly from acquisition date of November 9th 2018 and, finally, when you hear “pro-forma” this will include SMTC and MC Assembly assuming MC was part of SMTC in the first quarter of 2018. We hope to frame the dialogue in this way such that the comparatives are understandable.
Our revenue in the first quarter was $102.6 million, up $65.5 million or 177%, compared to $37.1 in the first quarter of 2018. On a proforma basis, assuming MC Assembly had been part of SMTC in the first quarter of 2018, revenue increased 45% from $70.7 million in the first quarter of 2018. Approximately $3.8 million of the revenues reported in the first quarter of 2019 was due to the impact of the revenue accounting standard ASC 606 compared to $1.7 million of the revenues in the same period in the prior year. During Q1 of 2019, we had one 10%+ customers in that period.
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Our gross profit for the first quarter was $8.6 million or 8.4% of revenues, compared to $3.9 million or 10.4% of revenues in the same quarter of 2018. The year-over-year decline in the GAAP gross margin percentages was primarily due higher labor charges in Q1 2019 and a $1.8 million non-cash expense for amortization of intangibles with the MC Assembly acquisition. In April we implemented steps which Eddie will discuss further in a few minutes to address higher labor costs, and we expect to see a rebound in our gross margin percentages as we progress through the year of 2019.
Above said, our Adjusted Gross Profit was $10.5 million or 10.2% of revenues, compared to $3.5 million or 9.5% of revenue for the same period last year.
Going below the gross profit line, selling, general & administrative expenses were $6.7 million in Q1 2019, or approximately 6.5% of revenues, compared to $3.5 million (or 9.5% of revenues) recorded in the same period of 2018. The year-over-year dollar increase was primarily to the result of the acquisition of MC Assembly.
Net Income in the first quarter of 2019 was $1.2 million and included a $624 thousand dollar restructuring charges and a $3.1 million non-cash gain from a reversal of a prior quarter’s accrual for a contingent consideration related to the MC Assembly acquisition. In comparison, the company reported a small $8 thousand net income in the same period a year ago
Adjusted EBITDA increased 494% to $5.5 million in the first quarter 2019, compared to $922 thousand dollars in the same period a year ago. The large increase in the first quarter adjusted EBITDA compared to the same period in the prior year was due growth from 177% increased revenue from both SMTC and MC Assembly customers.
Now before I return the call back to Eddie, I'd like to comment on the balance sheet and other key financial metrics. At the end of the first quarter, we had $1.6 million of cash, our cash-to-cash cycle remained strong at was 66 days and we generated $2.8 million in cash from operations in the first quarter of 2019.
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Net Debt at the end of the first quarter was $95.9 million, and includes debt incurred in November 2018 associated with financing of the MC Assembly acquisition of $50 million Term A and $12 million Term B, and $16.5 million of finance and operating lease obligations, of which $5.4 million included in the $16.5 million represents operating lease right-to-use liabilities associated with the adoption on January 1, 2019 of the new lease accounting standard (ASC 842 – Leases). In comparison, net debt at the end of 2018 was $92.3 million. Net debt, excluding our finance and operating lease obligations, was $ 79.4 million as of March 31, 2019, as compared to $80.8 million at the end of 2018.
During the first quarter we filed an 8kK noting we sought a waiver from Lenders associated with covenants on our senior debt. That said, higher than anticipated level of revenue, together with strong collection activities, in the first quarter of 2019 eliminated the need for a Senior Debt Leverage Covenant waiver that we secured during the quarter.
We generated $2.8 million cash from operations in the first quarter of 2019. Most importantly, our cash-to-cash cycle was 66 days, compared to 67 days in the prior quarter, with DSO at approximately 58 days and DPO at approximately 73 days. Inventory turnover on annualized basis was 4.5 times for the first quarter of 2019. Finally, cash uses associated with identified costs to implement our acquisition synergies should be cleared by end of Q2 reducing cash needed in 2H of year to devote to merger and other integration activities.
As Eddie will highlight, we are very focused on improving our efficiencies, particularly at our newly acquired MC Assembly facilities, as well as re-shaping our balance sheet to provide flexibility and added growth capacity. We are currently evaluating a number of alternatives, which Eddie will outline in his comments, and we will provide an update at the appropriate time.
While we do not plan to provide quarterly guidance, we believe sharing our expectations for the full year provides increased insights to possible results for the combined SMTC-MC company as integration activities complete and further efficiencies are realized during 2019. We are off to a strong start and see a great funnel of business opportunities ahead for us.
For the full year, we currently forecast revenues to range between $393 million to $408 million, up 85% at the midpoint of the guidance from $216 million SMTC reported in 2018. If we compare the midpoint of $345 million, which assumes MC Assembly had been part of SMTC for the full year during 2018, our guidance for the top line growth represents a 16% year-over-year improvement.
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As we implement operational efficiencies that I briefly mentioned, and Eddie will discuss in more detail, we expect an improvement in our adjusted EBITDA from the $10.2 million in 2018 to between $27 million and $29 million in 2019, continuing our expansion of adjusted EBITDA to approximately 7.0% of revenues at the midpoint of our guidance for full year in 2019, and a level we believe which would position SMTC in the top-quartile of operating performance relative to our peers in the EMS market.
Now let me hand the call back to Eddie and provide some additional comments before we open for questions. Thank you.
Edward J. Smith
Thank you, Steve.
As the numbers that Steve presented indicate, we continue to make solid progress in building a stronger SMTC. I’ll now add some color on the progress-made in the first quarter and my priorities for 2019 in our journey of transforming SMTC into that stronger company.
First, we are experiencing continued robust top line growth which has been accelerated by our acquisition in November last year of MC Assembly. Within the end-market of our customers, our industrial, power and clean tech, retail and payment systems, and test and measurement customer sectors all contributed to the strong growth in revenue in the first quarter, while semiconductors showed a decline consistent with global trends for 1H 2019, and defense and aerospace experienced strong bid and quote activities although longer sales-cycles to realize awards and associated revenues. The slow start to the semiconductor sector was not surprising as many in the industry likely double-booked semi orders last year when there was a supply constrained environment. We expect our defense and aerospace business to pick up later this year as we were awarded new business in that sector from both existing and new customers. We have posted a slide deck on the Investor Relations section of our website that provides the specific revenue contributions from our various market sectors.
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With the strong start to 2019, we are anticipating another year of double-digit revenue growth. I am pleased to report that our growth is being driven by increased business and several new programs at existing customers plus the addition of new customers. In the first quarter we were awarded seven new programs from existing customers; and we also saw growth from these customers in their existing programs. As important, we added three new customers in Q1 to our growing customer roster.
Second, we continued to make progress with our integration of MC Assembly and through April have recognized a significant portion of the synergies we expected from the November 2018 acquisition. As Steve alluded, our Q1 results were negatively impacted by labor inefficiencies, primarily at our Zacatecas Mexico facility. We have taken steps in Q2 to address this situation, including a realignment of our workforce and strengthening on-site leadership. A key element of our integration plans involves empowering local site managers to make decisions and focus on programs to improve plant efficiencies.
We expect to complete our integration activities by the end of Q2 and have identified additional operational efficiency opportunities that we believe will lead us to exceed our original synergy goals as announced from the acquisition. To-date our actions should result in over $5 million of annualized cost savings synergies from purchasing and operational advantages and corporate and shared services redundancies. We remain focused on identifying and implementing additional efficiencies, across all 6 SMTC’s manufacturing sites, in its pursuit of achieving best-in-class operating and financial metrics among its EMS peers.
Third, we saw a loosening up of the supply chain during the first quarter which our supply-chain team is positioned to leverage.. Based on our current forecasts we expect our inventory turns to increase allowing us to support pursuit of increased business development in the second half of 2019 as new programs enter their start-up phases.
Which brings me to the fourth and final point I would like to emphasize on today’s call, namely our focus on strengthening our balance sheet and further reduce our cash-to-cash days. In addition to being focused in the second half of the year on increasing our inventory turns and other operational efficiency opportunities, we are also evaluating alternatives to reshaping and deleverage our balance sheet. To finance our acquisition of MC Assembly we entered into two senior term loans totaling $62 million and a $45 Asset Based Line of Credit. During Q1, we reduced our Senior Debt-leverage, on a trailing 12-month EBITDA basis assuming projected annualized synergy savings, to 3.33 times from approximately 4.0 times in Q4 2018 at time of acquisition of MC Assembly. While we have not made any definitive decisions, we are currently examining alternatives that could reduce the cost of debt and provide more flexibility and added growth capacity. Our Increasing market value in 2018, and start of 2019, provided an opportunity to step-in to additional equity shelf-filing structures. My strategy, and a priority focus, is to address the high cost $12 million of outstanding Term B debt, put in-place with acquisition of MC Assembly.
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To summarize, after operational efficiencies implemented in April that I mentioned relating to our integration of MC Assembly, we believe we have significantly enhanced our capabilities with the acquisition, in particular within our aerospace and defense capabilities, to even better serve our growing base of customers and as the steps we implemented year-to-date kick in, we believe to see accelerating profitability in the second half of the year of 2019.
As I look ahead, we are committed to deleveraging our balance sheet, achieving industry-leading performance metrics, growing our business to become the Tier 3 EMS market segment leader, making our company an even stronger company that delights our customers with superior service, taking care of our employees, and rewarding our stockholders with enhanced shareholder value.
With that, Steve, Rich Fitzgerald, our Chief Operating Officer, and I will take questions from those on the call today.
Q&A
Eddie Smith
Thank you, operator.
In closing, I want to thank our employees, leadership team, business partners, distributors and our investors for their support and look forward to reporting our progress to our various stakeholders over the next several quarters. Thank you.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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