SigmaTron International, Inc. reported a significant decline in financial performance for the three months ended July 31, 2024, compared to the same period in 2023. Net sales decreased by 13.6%, totaling $84.8 million, down from $98.1 million. This decline was primarily attributed to reduced customer demand in the industrial electronics and medical/life sciences markets, although there was a slight increase in the consumer electronics sector.

The company's gross profit also fell sharply to $6.4 million from $9.7 million, resulting in a gross profit margin decrease from 9.8% to 7.6%. Operating results reflected a shift from an operating income of $2.8 million in the prior year to an operating loss of $218,672. The net loss for the quarter was $3.3 million, a stark contrast to the net income of $262,099 reported in the same quarter of the previous year. This resulted in a basic loss per share of $(0.54), compared to earnings of $0.04 per share in 2023.

The company’s financial challenges were compounded by a decrease in cash flow from operating activities, which fell to $2.6 million from $7.8 million year-over-year. Additionally, SigmaTron experienced an increase in inventories, rising to $13.2 million from $7.1 million, reflecting adjustments in response to market conditions.

On the strategic front, SigmaTron has undertaken several initiatives to address its financial situation, including the sale of property in Elgin, Illinois, and the consolidation of operations to its Elk Grove Village headquarters. The company has also implemented headcount reductions across various levels to streamline operations and reduce costs.

As of July 31, 2024, SigmaTron faced covenant defaults under its credit agreements, leading to the classification of total debt as current liabilities. The company received a delinquency notification from Nasdaq for failing to file its Form 10-K on time, but compliance was regained shortly after filing. Amendments to the credit agreements were made to adjust financial covenants, including a reduction in the revolving commitment from $70 million to $55 million.

Overall, SigmaTron is navigating a challenging financial landscape, marked by declining revenues and increased losses, while actively pursuing strategic measures to stabilize its operations and improve its financial health.