REG - Somero Enterprises - Interim Results
31/08/2023 07:00
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RNS Number : 8548K Somero Enterprises Inc. 31 August 2023
For immediate release
31 August 2023
Somero(®) Enterprises, Inc.
("Somero" or "the Company" or "the Group")
Interim Results for the six months ended June 30, 2023
Financial Highlights
· H1 2023 revenues were US$ 58.9m (H1 2022: US$68.5m)
o Non-residential construction markets remain healthy across a wide range of
sectors and customers report high activity levels and extended project
backlogs
o Three of the Company's four regions reported revenues up over H1 2022 with
Europe, Australia and ROW demonstrating the continued success of the
international strategy in growing a combined 29%
o North America revenues declined 24% as the conversion of continued
favorable non-residential construction activity into trading was impacted by
delayed project starts and pauses, primarily due to elevated interest rates,
and tightened bank lending standards
o Limited availability of the relaunched S-22EZ further tempered trading in
H1 2023, now in full production
· H1 revenue translated efficiently to profits and operating cash
flow
o H1 2023 adjusted EBITDA margin of 29.5% (H1 2022: 35.3%)
o US$ 8.8m cash flow from operations (H1 2022: US$ 12.8m)
· Expected improvement in H2 2023, trading in line with
expectations for 2023 revenues of approximately US$ 120.0m, EBITDA of
approximately US$ 36.0m, and year-end cash of approximately US$ 32.0m
H1 2023 H1 2022 % Change
US$ US$
Revenue $58.9m $68.5m -14%
Adjusted EBITDA((1,2)) $17.3m $24.1m -28%
Adjusted EBITDA margin((1,2)) 29.5% 35.3% -580bps
Profits before tax $15.6m $22.4m -30%
Adjusted net income((1,3)) $12.2m $17.3m -29%
Diluted adjusted net income per share((1,3)) $0.22 $0.31 -29%
Cash flow from operations $8.8m $12.8m -31%
Net cash((4)) $25.2m $27.2m -7%
Interim dividend per share $ 0.10 $ 0.10 -
Operational Highlights
· Strategically targeted investments for sustainable long-term growth
o Key personnel prioritizing international sales and customer support roles
o Larger facility in Australia that provides expanded capacity and
additional capabilities
o Europe and Australia reported heightened revenues, growing 46% and 33%
from H1 2022, respectively
· High level of new product development activity with a high volume of
job site visits and innovation council events, that includes exploring new
technologies to incorporate into future products
· Continued penetration of our broader product offerings in
international markets
· S-22EZ entered full production at the end of H1 2023
· Completed installation of in-house painting and material preparation
systems in the Houghton, Michigan facility as part of the planned expansion
completed in H1 2023
Post-Period Highlights
· Declaration of a US$ 0.10 per share interim dividend,
consistent with 2022 interim dividend
Notes:
1. The Company uses non-US GAAP financial measures to provide supplemental
information regarding the Company's operating performance. See further
information regarding non-GAAP measures below.
2. Adjusted EBITDA as used herein is a calculation of the Company's net
income plus tax provision, interest expense, interest income, foreign exchange
loss, other expense, depreciation, amortization stock-based compensation and
non-cash lease expense.
3. Adjusted net income as used herein is a calculation of net income plus
amortization of intangibles and excluding the tax impact of stock option and
RSU settlements and other special items.
4. Net cash is defined as cash and cash equivalents less borrowings under
bank obligations exclusive of deferred financing costs.
Jack Cooney, President & CEO of Somero, said:
"While the state of the overall US non-residential construction market remains
fundamentally sound and allows us and our customers to maintain a positive
outlook for the remainder of 2023, with customers continuing to report a high
level of activity and healthy backlogs, trading was slowed in the US due to
delays in project starts, as previously announced. Our main international
markets reported exceptional revenue growth, particularly Europe and Australia
with Rest of World regions also contributing favorably.
In response to the slower H1 trading in the US, we reduced our operational
workforce commensurate with revenue decline and imposed cost controls for the
remainder of 2023 to partly offset the profitability impact. The Company has
also taken additional measures to preserve cash through inventory
reductions.
We remained diligent and focused on product development through a high level
of customer interactions. And we continue to build market acceptance for our
new products targeting entirely new market segments and are exploring
opportunities to incorporate new technologies to address customer needs today
and in the future.
The expected improvement in H2 2023 trading in the US compared to H1 2023,
supported by the entry of the S-22EZ into full production, contributions from
key international markets and positive feedback from customers, reinforces the
Board's belief that 2023 results will fall in line with market expectations.
With a healthy financial position, we remain committed to making sound
strategic investments to deliver strong results and cash flows to our
shareholders."
For further information, please contact:
Enquiries:
Somero Enterprises,
Inc.
www.somero.com
Jack Cooney, President &
CEO
+1 239 210 6500
Vincenzo LiCausi, CFO
Howard Hohmann, EVP Sales
finnCap Ltd (NOMAD and Broker)
Matt Goode /Seamus Fricker/Fergus Sullivan (Corporate Finance) +44
(0)20 7220 0500
Tim Redfern/Harriet Ward (ECM)
Alma PR (Financial PR Advisor)
somero@almapr.co.uk
David
Ison
+44 (0)20
3405 0205
Rebecca Sanders-Hewett
Notes to Editors:
Somero Enterprises provides industry-leading concrete-levelling equipment,
training, education and support to customers in over 90 countries. The
Company's cutting-edge technology allows its customers to install high-quality
horizontal concrete floors faster, flatter and with fewer people. Somero®
equipment that incorporates laser-technology and wide-placement methods is
used to place and screed the concrete slab in all building types and has been
specified for use in a wide range of commercial construction projects for
numerous global blue-chip companies.
Somero pioneered the Laser Screed® market in 1986 and has maintained its
market-leading position by continuing to focus on bringing new products to
market and developing patent-protected proprietary designs. In addition to its
products, Somero offers customers unparalleled global service, technical
support, training and education, reflecting the Company's emphasis on helping
its customers achieve their business and profitability goals, a key
differentiator to its peers.
For more information, visit www.somero.com (http://www.somero.com)
Chairman's and Chief Executive Officer's Statement
Overview
Against an exceptional H1 2022 and taking into consideration the previously
reported factors outside of Somero's control impacting the pace of trading in
North America, the Board believes overall performance in H1 2023 to have been
solid with commercial delivery in our international markets a particular
highlight. Led by Europe and Australia, our overseas revenues grew
significantly compared to H1 2022. Group H1 2023 revenues totaled US$ 58.9m
(H1 2022: US$68.5m), with the 14% decline driven by the trading slowdown in
North America.
Leveraging the Company's flexible cost structure, which enabled it to quickly
adjust to the changing circumstances, H1 2023 adjusted EBITDA margin remained
healthy at 29.5% (H1 2022: 35.3%). H1 2023 adjusted EBITDA was US$ 17.3m (H1
2022: US$ 24.1m), with the decline primarily due to lower volume and to a
lesser degree to strategically added headcount to execute the long-term growth
strategy. The Company was able to offset cost inflation affecting wages and
material costs with 2023 price increases and operational efficiency gains.
As a result of all these factors, H1 2023 profits benefitted from a strong
gross margin of 57.0% (H1 2022: 58.3%). Operating cash flow in H1 2023 was US$
8.8m (H1 2022: US$ 12.8m), translating to a June 30, 2023 cash balance of US$
25.2m, notwithstanding the dividend payment of US$ 14.2m in May 2023. The
Company has taken additional steps to minimize inventory levels and maintain
accounts receivable at moderate levels which is anticipated to have a positive
impact on year-end cash.
Regional Review
North America
H1 2023 North American sales declined 24% from H1 2022 to US$ 42.2m. Our US
customers continue to report a high level of activity and a diverse range of
projects ranging from large footprint manufacturing facilities, data centers
and warehousing to smaller footprint retail, schools, and medical centers, and
maintain extended project backlogs. As noted in the 20 June 2023 Trading
Update, while underlying market conditions remain positive, new factors
emerged to impact the translation of construction activity into trading in the
US. Elevated interest rates, tightened bank lending standards and, to a
lesser degree, construction permitting delays due to large complex projects
creating bottlenecks in the approval process in certain portions of the US,
led to delayed starts and pauses to non-residential construction projects.
While US customers have not reported project cancellations, certain customers
have indicated these project delays have impacted the timing of their
equipment purchase decisions. In addition, the S-22EZ, which was re-launched
in early 2023, did not reach full production until the end of H1 2023, and its
limited availability delayed sales to customers with a preference for it.
Other market factors as noted in the 08 March 2023 Final Results statement,
such as the limited supply of concrete across the US, have remained unchanged.
The long-standing and worsening shortage of skilled labor necessitating the
need for automation and work productivity continues to drive demand for our
products in the territory.
Europe
Europe continues to be one of our target international markets where we see
meaningful opportunity for growth from sales of new and existing products.
Europe reported sales of US$ 7.0m in H1 2023, up 46% from US$ 4.8m in H1 2022.
The Company's investments in customer facing resources and capabilities,
including adding three European-based sales positions and customer support
employees, has led to an increase in new customer acquisitions and deeper
penetration of new and existing products, such as the S-28EZ and the SRS-4,
contributed to the growth. The Company remains focused on attracting new
customers by leveraging entry-level equipment such as the SRS-4 in the boomed
screed category and the EcoScreed in the ride-on category, and intends to
continue to invest in this market in H2 2023 and 2024.
Australia
Australia reported H1 2023 sales of US$ 5.3m, a 33% increase from the US$ 4.0m
in H1 2022. Similar to Europe, the higher sales were attributable to our
direct sales and customer support teams that were expanded with additional
staff in late 2021 and throughout 2022, focused on new customer acquisitions
and selling a broader range of new and existing products, coupled with
favorable exchange rates.
Australia is also a target international market where we see meaningful
opportunity for growth through increased market penetration across our product
portfolio. The transition to a direct sales and support model at the end of
2020 has provided the foundation for the strong performance in H1 2023 and
future growth.
Due to the success and continued growth in in the region, in late H1 2023 we
secured a larger facility to replace the current one. This provides additional
space to stock a broader range of our products locally to quickly capitalize
on sales opportunities, accommodate recent and future staff additions, and
enhance our training and machine repair capabilities in the market.
Operations were transitioned to the new facility in August 2023.
As in Europe, the Company intends to continue to invest in this market in H2
2023 and 2024.
Rest of World
Our Rest of World region, which includes Latin America, the Middle East,
India, Southeast Asia, Korea and China, reported H1 2023 sales of US$ 4.4m,
representing a 7% increase compared to H1 2022. The main contributors to H1
2023 revenues were Latin America and the Middle East, which reported
respective sales of US$ 1.6m and US$ 1.1m, compared to US$ 1.4m and US$ 0.5m
in H1 2022, respectively. India reported sales of US$ 1.1m in H1 2023, a US$
0.4m decrease compared to H1 2022, and China reported sales of US$ 0.4m,
comparable to prior year. Given the relatively small base of business in
each region, trading will fluctuate from period to period. Albeit, the
Company intends to maintain the resources allocated to the regions and add
personnel as appropriate.
Product Review
Demand for our product categories is impacted by the type and size of
projects, and applications, which are ultimately driven by end users. Large
Boomed screeds are suitable for large footprint projects such as warehousing,
medical facilities and manufacturing facilities, while Ride-on screeds are
suitable for smaller footprint projects and smaller concrete slabs.
Different applications drive demand for other equipment, such as exterior
applications drive demand for the 3D Profiler Systems and the Somero
Broom+Cure(TM). As these variables shift, our product mix fluctuates
accordingly.
Revenue from sales of Boomed screeds and 3D Profiler Systems both decreased
compared to H1 2022, driven by the factors in the US noted in the 20 June 2023
Trading Update and in the section above. Nonetheless, there continues to be
healthy demand for large Boomed screeds driven by recent onshoring efforts, an
increase in electric vehicle battery plants and US legislation including the
CHIPS Act, a statute providing roughly US$ 280 billion in new funding to boost
domestic research and manufacturing of semiconductors in the United States.
There also continues to be healthy demand for our Ride-on screeds, including
smaller concrete slab pours necessitated by an inconsistent supply of
concrete. Ride-on screeds grew 7% from H1 2022 contributing US$ 11.2m to H1
2023 revenues. Sales of 3D Profiler System contributed US$ 4.3m to H1 2023
revenue, a decrease of 19% compared to H1 2022, driven by adverse weather
conditions as this product is typically used for concrete parking and loading
areas around the exterior perimeter of buildings. Other revenues increased
slightly driven by strong parts trading reflective of the high level of
equipment utilization by our customers.
Products released since 2019, the SkyScreed® 36, S-PS50, SkyStrip® and the
Somero Broom+Cure(TM), combined to contribute US$ 0.8m in H1 2023 revenues,
down from H1 2022 of US$ 3.2m. The modest contribution from the new product
category reflects a slower than anticipated pace in achieving sustainable
traction due to their disruptive nature. These are new inventions that
address entirely new market segments and customer bases, and therefore market
acceptance will be gradual, and trading will be somewhat volatile.
Nevertheless, we are confident in the value proposition of the offerings and
will continue to work through its strategy to increase the market penetration
of these new products.
We continue to dedicate significant organizational time and resources to
engage customers directly to develop a pipeline of ideas for solutions that
address pain points. H1 2023 was an active period in this regard, with
extensive jobsite visits and innovation council sessions both in the US and
internationally. Additionally, as part of this process, we are exploring new
technological advancements and the impact advanced technology will have on the
future product offering.
Cashflow and Balance Sheet
Somero reported operating cash flow in H1 2023 of US$ 8.8m, down from US$
12.8m reported in H1 2022, primarily due to lower profits, partly offset by a
decrease in working capital. The decreased working capital requirement in H1
2023 came from a lower level of inventory receipts as a result of improved raw
material lead times and availability, allowing the Company to start returning
safety stock back to more normal levels.
The Company spent US$ 1.0m in H1 2023 on capital expenditures, relating to
on-going product software programs, and other activities in the ordinary
course of business. The Company also paid dividends in H1 2023 totaling US$
14.2m (2022: US$ 23.4m), reflecting the Company's ongoing commitment to
disciplined return of cash to shareholders, as well as repurchasing US$ 0.4m
in common stock under the 2022 US$ 2.0m share buyback program that carried
over into 2023.
The Company ended H1 2023 with US$ 25.2m in net cash down from the US$ 33.7m
reported at the end of 2022, reflecting the sizable dividend payment, but
still providing ample liquidity to support the business and allow it to
continue making strategic investments. The Company's net working capital
remains moderate relative to level of trading. The balance sheet remains
debt-free with access to an untapped US$ 25.0m secured revolving line of
credit. All of which provide a secure financial position to fund future
growth.
Dividend and share buyback program
Based on the results in H1 2023, our strong financial position and confidence
in the outlook for the remainder of 2023, we are pleased to report that the
Board has decided to declare an interim 2023 dividend of US$ 0.10 per share,
consistent with the interim 2022 dividend. The dividend, representing a total
payment of approximately US$ 5.6m, will be payable on October 20, 2023 to
shareholders on the register as of September 22, 2023. The common stock
ex-dividend date is 21 September 2023.
In H1 2023, the Company repurchased a total of 107,978 shares of common stock
under the Company's share buyback program put in place to offset dilution from
on-going equity award programs. Under the buyback program, the maximum price
paid per Ordinary Share is to be no more than the higher of 105% of the
average middle market closing price of an ordinary share for the five business
days preceding the date of any share buyback, the price of the last
independent trade and the highest current independent purchase bid. It is
intended that any shares repurchased will be immediately cancelled and the
Company will make further announcements to the market as and when share
purchases are made.
Our People
On behalf of the Board, we would like to thank all our global employees for
their great performance in H1 2023. A core strength of the Somero team is its
ability to quickly adjust to changing conditions while always delivering the
highest level of products and service to our customers. This core strength
underpins the Company's highly flexible cost model that enables it to deliver
healthy profits. John Yuncza, former President and Director of Somero, left
the Company post-period on 28 August 2023. John made a significant
contribution to Somero and we wish him all the best in his future endeavors.
The search for John's successor is underway with Jack Cooney reassuming the
dual role of CEO and President until an appointment is made. The Board and
management team remain as committed as ever to providing all our employees
with a rewarding and challenging working environment that is full of
opportunity.
Facility Expansion
The 50,000 square foot expansion of the Houghton, Michigan, Operations and
Support Offices became fully operational in H1 2023. This expansion provides
a 35% increase in operational capacity that increases operational efficiency,
supports future growth of our product portfolio, and provides our engineering
team with an expanded development and testing area.
Environmental, Social and Governance
The Board closely monitors environmental, social and governance topics that
materially impact our stakeholders. These topics are routinely discussed to
ensure Somero strikes the appropriate balance of meeting shareholder
expectations and addressing the concerns of key stakeholders necessary to
ensure sustainability of the business. A primary material topic is the
environmental impact of our business including the use of our equipment in the
construction process. In 2022, we commissioned a phase two environmental study
by Colorado State University that is nearing completion. The phase two study
supplements the phase one study that was completed in 2021 by Middle Tennessee
State University, the results of which are outlined in a white paper available
on our website. The phase one study concluded the use of our laser screed
machines in non-residential construction provides a number of environmental
benefits, including a reduction in required manpower and concrete used in
building projects that in turn reduces carbon emissions during construction
that would otherwise occur from the use of alternative manual methods.
Outlook
Non-residential construction across our main markets remains healthy,
underscored by customers reporting high levels of activity and extended
project backlogs across a wide range of sectors and project types.
In the US, we do not see any indications of fundamental changes in the
non-residential construction market, and the factors that have impacted the
pace of work have not caused project cancellations and have not changed the
direct feedback we receive from customers regarding their project backlogs.
The Company anticipates improvement in H2 2023 trading in our home region
compared to H1 2023, driven in large part by the increased availability of the
S-22EZ. This confidence is supported by our primary means of gauging market
health, which is direct feedback from customers. Our US customers continue
to indicate non-residential construction is active, encompasses a wide range
of project types, and that project backlogs remain healthy and extended.
The Company also anticipates healthy contributions to H2 2023 trading from
Europe and Australia, and H2 2023 trading comparable to H1 2023 in the Rest of
World territories.
As such, the Board remains confident that 2023 results will fall in line with
market expectations with revenues of approximately US$ 120.0m, EBITDA of
approximately US$ 36.0m, and year-end cash of approximately US$ 32.0m.
Larry Horsch
Non-Executive Chairman
Jack Cooney
President & Chief Executive Officer
August 31, 2023
FINANCIAL REVIEW
Summary of financial results For the six months ended June 30
* unaudited 2023 2022
US$ 000 US$ 000
Except per share data Except per share data
Revenue 58,850 68,473
Cost of sales 25,281 28,535
Gross profit 33,569 39,938
Operating expenses
Selling, marketing and customer support 7,634 7,391
Engineering and product development 1,386 1,203
General and administrative 8,641 8,747
Total operating expenses 17,661 17,341
Operating income 15,908 22,597
Other income (expense)
Interest expense (11) (9)
Interest income 37 38
Foreign exchange impact (472) (242)
Other 173 (3)
Income before income taxes 15,635 22,381
Provision for income taxes 3,234 4,891
Net income 12,401 17,490
Per Share
Per Share
US$ US$
Basic earnings per share 0.23 0.31
Diluted earnings per share 0.22 0.31
Basic adjusted net income per share ((1), (2), (4)) 0.22 0.31
Diluted adjusted net income per share ((1), (2), (4)) 0.22 0.31
Other data
Adjusted EBITDA ((1), (2), (4)) 17,337 24,141
Adjusted net income ((1), (3), (4)) 12,230 17,323
Depreciation expense 640 656
Amortization of intangibles 68 67
Capital expenditures 1,005 2,251
Notes:
1. Adjusted EBITDA and Adjusted net income are not measurements of the
Company's financial performance under US GAAP and should not be considered as
an alternative to net income, operating income or any other performance
measures derived in accordance with US GAAP or as an alternative to US GAAP
cash flow from operating activities as a measure of profitability or
liquidity. Adjusted EBITDA and Adjusted net income are presented herein
because management believes they are useful analytical tools for measuring the
profitability and cash generation of the business. Adjusted EBITDA is also
used to determine pricing and covenant compliance under the Company's credit
facility and as a measurement for calculation of management incentive
compensation. The Company understands that although Adjusted EBITDA is
frequently used by securities analysts, lenders, and others in their
evaluation of companies, its calculation of Adjusted EBITDA may not be
comparable to other similarly titled measures reported by other companies.
2. Adjusted EBITDA as used herein is a calculation of net income plus tax
provision, interest expense, interest income, foreign exchange gain (loss),
other expense, depreciation, amortization, stock-based compensation, and
non-cash lease expense.
3. Adjusted net income as used herein is a calculation of net income plus
amortization of intangibles and excluding the tax impact of stock option and
RSU settlements and other special items.
4. The Company uses non-US GAAP financial measures to provide supplemental
information regarding the Company's operating performance. The non-US GAAP
financial measures presented herein should not be considered in isolation
from, or as a substitute to, financial measures calculated in accordance with
US GAAP. Investors are cautioned that there are inherent limitations
associated with the use of each non-US GAAP financial measure. In particular,
non-US GAAP financial measures are not based on a comprehensive set of
accounting rules or principles, and many of the adjustments to the US GAAP
financial measures reflect the exclusion of items that may have a material
effect on the Company's financial results calculated in accordance with US
GAAP.
Net income to adjusted EBITDA reconciliation and
Adjusted net income reconciliation
* unaudited Six months ended June 30
2023 2022
US$ 000 US$ 000
Adjusted EBITDA reconciliation
Net income 12,401 17,490
Tax provision 3,234 4,891
Interest expense 11 9
Interest income (37) (38)
Foreign exchange impact 472 242
Other (173) 3
Depreciation 640 656
Amortization 68 67
Non-cash lease expense 173 148
Stock-based compensation 548 673
Adjusted EBITDA 17,337 24,141
Adjusted net income reconciliation
Net income 12,401 17,490
Amortization 68 67
Tax impact of stock option & RSU settlements (239) (234)
Adjusted net income reconciliation 12,230 17,323
Notes:
1. Adjusted EBITDA and Adjusted net income are not measurements of the
Company's financial performance under US GAAP and should not be considered as
an alternative to net income, operating income or any other performance
measures derived in accordance with US GAAP or as an alternative to US GAAP
cash flow from operating activities as a measure of profitability or
liquidity. Adjusted EBITDA and Adjusted net income are presented herein
because management believes they are useful analytical tools for measuring the
profitability and cash generation of the business. Adjusted EBITDA is also
used to determine pricing and covenant compliance under the Company's credit
facility and as a measurement for calculation of management incentive
compensation. The Company understands that although Adjusted EBITDA is
frequently used by securities analysts, lenders, and others in their
evaluation of companies, its calculation of Adjusted EBITDA may not be
comparable to other similarly titled measures reported by other companies.
2. Adjusted EBITDA as used herein is a calculation of the Company's net income
plus tax provision, interest expense, interest income, foreign exchange gain
(loss), other expense, depreciation, amortization, stock-based compensation,
and non-cash lease expense.
3. Adjusted net income as used herein is a calculation of net income plus
amortization of intangibles and excluding the tax impact of stock option and
RSU settlements and other special items.
4. The Company uses non-US GAAP financial measures in order to provide
supplemental information regarding the Company's operating performance. The
non-US GAAP financial measures presented herein should not be considered in
isolation from, or as a substitute to, financial measures calculated in
accordance with US GAAP. Investors are cautioned that there are inherent
limitations associated with the use of each non-US GAAP financial measure. In
particular, non-US GAAP financial measures are not based on a comprehensive
set of accounting rules or principles, and many of the adjustments to the US
GAAP financial measures reflect the exclusion of items that may have a
material effect on the Company's financial results calculated in accordance
with US GAAP.
Revenues
The Company's consolidated revenues decreased by 14% to approximately US$ 58.9
(H1 2022: US$ 68.5m). The Company's revenues consist primarily of sales from
Boomed Screed products, which include the S-28EZ, S22-EZ, S-15R, S-10A and
SRS-4 Laser Screed machines, sales from Ride-on Screed products, which are
drive through the concrete machines that include the S-485, S-940 and S-158C
Laser Screed machines, remanufactured machines sales, 3-D Profiler Systems,
SkyScreed®, and Other revenues which consist of revenue from sales of parts
and accessories, sales of other equipment, service, training and shipping
charges. The overall decrease for the period was primarily driven by lower
volume of the Boomed Screeds, particularly the S-28EZ, and 3-D Profiler
System, partly offset by elevated volume in Ride-on Screed products Other
revenue.
Boomed Screed sales decreased to approximately US$ 24.4m (H1 2022: US$ 32.9m)
as unit volume decrease to 84 units (H1 2022: 93 units), Ride-on screed
sales increased to approximately US$ 11.2m (H1 2022: US$ 10.5m) partly due
to price increases and an increase in volume to 94 units (H1 2022: 90),
remanufactured machine sales increased slightly to approximately US$ 3.4m (H1
2022: US$ 3.2m) due to higher prices as unit volume remained unchanged at 14
units (H1 2022: 14), 3-D Profiler System sales decreased to approximately US$
4.3m (H1 2022: US$ 5.3m) as unit volume decreased to 41 units (H1 2022: 43),
there were no sales of the SkyScreed® in H1 2023, compared to 3 units in H1
2022. Other revenues increased slightly to approximately US$ 15.6m (H1 2022:
US$ 15.5m) due to an increase in parts sales. The following table shows the
breakdown during the six months ended June 30, 2023 and 2022:
Revenue breakdown by geography
North America EMEA((1)) ROW((2)) Total
US$ in millions US$ in millions US$ in millions US$ in millions
2023 2022
2023 2022 2023 2022 2023 2022 Net sales % of Net sales Net sales % of Net sales
Boomed screeds ((3)) 16.8 26.9 4.2 2.8 3.4 3.2 24.4 41.4% 32.9 48.0%
Ride-on screeds ((4)) 8.4 7.5 1.0 0.8 1.8 2.2 11.2 19.0% 10.5 15.3%
Remanufactured machines 2.2 2.9 0.9 0.3 0.3 - 3.4 5.8% 3.2 4.7%
3D Profiler System 3.1 5.0 0.1 - 1.1 0.3 4.3 7.3% 5.3 7.7%
SkyScreed® - 1.1 - - - - - - 1.1 1.6%
Other ((5)) 11.7 12.2 1.9 1.5 2.0 1.8 15.6 26.5% 15.5 22.7%
Total 42.2 55.6 8.1 5.4 8.6 7.5 58.9 100% 68.5 100%
Notes:
1. EMEA includes the Europe, Middle East, and Scandinavia.
2. ROW includes Australia, Latin America, India, China, Korea, and Southeast
Asia
3. Boomed Screeds include the S-22EZ, S-28EZ, S-15R, S-10A and SRS-4.
4. Ride-on Screeds include the S-940, S-485, and S-158C.
5. Other includes parts, accessories, services, and freight, as well as other
equipment such as the Somero Line Dragon®, Somero Broom+Cure(TM), STS-11M
Topping Spreader, Copperhead, Mini Screed C and S-PS50.
H1 2023 H1 2022
Units by product line
Boomed screeds 84 93
Ride-on screeds 94 90
Remanufactured machines 14 14
3-D Profiler System 41 43
SkyScreed® 0 3
Other ((1)) 47 57
Total 280 300
Notes:
1. Other includes equipment such as the Somero Line Dragon®, Somero
Broom+Cure(TM), STS-11M Topping Spreader, Copperhead, Mini Screed C and
S-PS50.
Sales to customers located in North America contributed 72% of total revenue
(H1 2022: 81%), sales to customers in EMEA (Europe, Middle East, and
Scandinavia) contributed 14% (H1 2022: 8%) and sales to customers in ROW
(Southeast Asia, Australia, Latin America, India and China) contributed 14%
(H1 2022: 11%).
Sales in North America totaled approximately US$ 42.2m (H1 2022: US$ 55.6m)
down 24%, primarily driven by a decrease in Boomed Screeds. Sales to
customers in EMEA were approximately US$ 8.1m (H1 2022: US$ 5.4m), which
increased 50% driven by a higher volume sold in Europe across most product
categories and higher prices, accompanied by a higher volume of boom screeds
sold in the Middle East. Sales to customers in ROW were approximately US$
8.6m (H1 2022: US$ 7.5m) increasing by 15% driven primarily by an increase in
sales of Boomed Screeds and 3-D Profiler System in Australia and Latin
America.
US$ in millions
Regional sales H1 2023 H1 2022
North America 42.2 55.6
Europe 7.0 4.8
Australia 5.3 4.0
Rest of World((1)) 4.4 4.1
Total 58.9 68.5
Notes:
(1) Includes India, Middle East, China, Southeast Asia, Korea and Latin
America.
Gross profit
Gross profit decreased to approximately US$ 33.6m (2022: US$ 39.9m), with
gross margins decreased slightly to 57.0% compared to 58.3% in H1 2022,
reflecting higher input and logistical costs, and training expense, partly
offset by a price increase.
Operating expenses
Operating expenses excluding depreciation, amortization and stock-based
compensation for H1 2023 were approximately US$ 16.6m (H1 2022: US$ 16.2m),
which is reflective of increased staffing that includes investment in sales
and support staff in the US and abroad, and increased travel, offset by lower
incentive compensation and sales commissions.
Debt
As of June 30, 2023, the Company had no outstanding debt. In August 2022,
the Company updated its credit facility to a US$ 25.0m secured revolving line
of credit, with a maturity date of August 2027. The interest rate on the
revolving credit line is based on the BSBY Index plus 1.25%. The Company's
credit facility is secured by substantially all of its business assets.
Provision for income taxes
The provision for income taxes decreased to approximately US$ 3.2m, at an
overall effective tax rate of 21%, compared to a provision of approximately
US$ 4.9m in H1 2022, at an overall effective tax rate of 22%.
Earnings per share
Basic earnings per share represents income available to common stockholders
divided by the weighted average number of shares outstanding during the
period. Diluted earnings per share reflect additional common shares that
would have been outstanding if dilutive potential common shares had been
issued, as well as any adjustments to income that would result from the
assumed issuance. Potential common shares that may be issued by the Company
relate to outstanding stock options and restricted stock units.
Earnings per common share has been computed based on the following:
Six months ended June 30
2023 2022
US$ 000 US$ 000
Income available to stockholders 12,401 17,490
Basic weighted shares outstanding 54,825,552 56,038,690
Net dilutive effect of stock options and restricted stock units 626,219 661,282
Diluted weighted average shares outstanding 55,451,771 56,699,972
Per Share Per Share
US$ US$
Basic earnings per share 0.23 0.31
Diluted earnings per share 0.22 0.31
Basic adjusted net income per share 0.22 0.31
Diluted adjusted net income per share 0.22 0.31
Consolidated Balance Sheets
As of June 30, 2023 and December 31, 2022
As of June 30, 2023 As of December 31, 2022
* unaudited US$ 000
US$ 000
Assets
Current assets:
Cash and cash equivalents 25,243 33 ,699
Accounts receivable - net 7,257 10,315
Inventories - net 21,406 18,849
Prepaid expenses and other assets 1,661 2,724
Total current assets 55,567 65,587
Accounts receivable, non-current - net 669 414
Property, plant, and equipment - net 26,012 25,650
Financing lease right-of-use assets - net 350 323
Operating lease right-of-use assets - net 1,808 1,066
Intangible assets - net 1,189 1,257
Goodwill 3,294 3,294
Deferred tax asset 1,949 1,165
Other assets 245 235
Total assets 91,083 98,991
Liabilities and stockholders' equity
Current liabilities:
Accounts payable 5,088 9,683
Accrued expenses 7,623 8,495
Financing lease liability - current 214 175
Operating lease liability - current 437 304
Total current liabilities 13,362 18,657
Financing lease liability - long-term 90 98
Operating lease liability - long-term 1,409 799
Other liabilities 2,309 2,311
Total liabilities 17,170 21,865
Stockholders' equity
Preferred stock, US$.001 par value, 50,000,000 shares authorized, no shares - -
issued and outstanding
Common stock, US$.001 par value, 80,000,000 shares authorized, 55,784,380 and 26 26
55,818,357 shares issued on June 30, 2023 and December 31, 2022,
respectively, and 55,765,025 and 55,812,857 shares outstanding on June 30,
2023 and December 31, 2022, respectively
Less: treasury stock, 19,355 shares as of June 30, 2023 and 5,500 shares as of (91) (39)
December 31, 2022 at cost
Additional paid in capital 13,634 14,625
Retained earnings 62,488 64,325
Other comprehensive loss (2,144) (1,811)
Total stockholders' equity 73,913 77,126
Total liabilities and stockholders' equity 91,083 98,991
See Notes to unaudited consolidated financial statements.
Consolidated Statements of Comprehensive Income
For the six months ended June 30, 2023 and 2022
* unaudited Six months ended June 30
2023 2022
US$ 000 US$ 000
Except per share data Except per share data
Revenue 58,850 68,473
Cost of sales 25,281 28,535
Gross profit 33,569 39,938
Operating expenses
Sales, marketing, and customer support 7,634 7,391
Engineering and product development 1,386 1,203
General and administrative 8,641 8,747
Total operating expenses 17,661 17,341
Operating income 15,908 22,597
Other income (expense)
Interest expense (11) (9)
Interest income 37 38
Foreign exchange impact (472) (242)
Other 173 (3)
Income before income taxes 15,635 22,381
Provision for income taxes 3,234 4,891
Net income 12,401 17,490
Other comprehensive income
Cumulative translation adjustment (333) (300)
Comprehensive income 12,068 17,190
Earnings per common share
Earnings per share - basic 0.23 0.31
Earnings per share - diluted 0.22 0.31
Weighted average number of common shares outstanding
Basic 54,825,552 56,038,690
Diluted 55,451,771 56,699,972
See Notes to unaudited consolidated financial statements.
Consolidated Statements of Changes in Stockholders' Equity
For the six months ended June 30, 2023
* unaudited
Common stock Treasury stock Other
Retained earnings Comprehensive
US$ 000 loss
US$ 000
Additional Total
paid-in Stockholders'
capital equity
US$ 000 US$ 000
Shares Amount Amount
US$ 000 Shares US$ 000
Balance - December 31, 2022 55,818,357 26 14,625 5,500 (39) 64,325 (1,811) 77,126
Cumulative translation adjustment - - - - - - (333) (333)
Net income - - - - - 12,401 - 12,401
Stock-based compensation - - 548 - - - - 548
Dividend - - - - - (14,238) - (14,238)
Treasury stock (94,123) - (384) (94,123) 384 - - -
RSUs settled for cash - - (1,155) - - - - (1,155)
Share buyback - - 107,978 (436) - - (436)
New shares issued 60,146 - - - - - - -
Balance - June 30, 2023 55,784,380 26 13,634 19,355 (91) 62,488 (2,144) 73,913
See Notes to unaudited consolidated financial statements.
Consolidated Statements of Cash Flows
For the six months ended June 30, 2023 and 2022
*unaudited Six months ended June 30
2023 2022
US$ 000 US$ 000
Cash flows from operating activities:
Net income 12,401 17,490
Adjustments to reconcile net income to net cash provided by operating
activities:
Deferred taxes (784) (976)
Depreciation and amortization 708 723
Non-cash lease expense 173 148
Bad debt 96 113
Stock-based compensation 548 673
Gain on disposal of property and equipment 3 (46)
Working capital changes:
Accounts receivable 2,707 1,159
Inventories (2,557) (5,691)
Prepaid expenses and other assets 361 (1,212)
Other assets (12) 156
Accounts payable, accrued expenses and other liabilities (4,809) 297
Net cash provided by operating activities 8,835 12,834
Cash flows from investing activities:
Property and equipment purchases (1,005) (2,251)
Proceeds from sale of equipment - 40
Net cash used in investing activities (1,005) (2,211)
Cash flows from financing activities:
Payment of dividend (14,238) (23,397)
RSUs settled for cash (1,156) (1,072)
Payments under financing capital leases (124) (103)
Share buy back (435) (721)
Net cash used in financing activities (15,953) (25,293)
Effect of exchange rates on cash and cash equivalents (333) (300)
Net decrease in cash and cash equivalents (8,456) (14,970)
Cash and cash equivalents:
Beginning of period 33,699 42,146
End of period 25,243 27,176
See Notes to unaudited consolidated financial statements.
Notes to the Consolidated Financial Statements
As of June 30, 2023 and December 31, 2022
1. Organization and description of business
Nature of business
Somero Enterprises, Inc. (the "Company" or "Somero") designs, assembles,
remanufactures, sells, and distributes concrete levelling, contouring, and
placing equipment, related parts and accessories, and training services
worldwide. Somero's Operations and Support Offices are located in Michigan,
USA with Global Headquarters and Training Facilities in Florida, USA. Sales
and service offices are in Chesterfield, England; Shanghai, China; New Delhi,
India; and Melbourne, Australia.
2. Summary of significant accounting policies
Basis of presentation
The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
of America.
Principles of consolidation
The consolidated financial statements include the accounts of Somero
Enterprises, Inc., and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
Cash and cash equivalents
Cash includes cash on hand, cash in banks, and temporary investments with a
maturity of three months or less when purchased. The Company maintains
deposits primarily in one financial institution, which may at times exceed
amounts covered by insurance provided by the U.S. Federal Deposit Insurance
Corporation ("FDIC"). The Company has not experienced any losses related to
amounts in excess of FDIC limits.
Accounts receivable and allowances for doubtful accounts
Financial instruments which potentially subject the Company to concentrations
of credit risk consist primarily of accounts receivable. The Company's
accounts receivable are derived from revenue earned from a diverse group of
customers. The Company performs credit evaluations of its commercial customers
and maintains an allowance for doubtful accounts receivable based upon the
expected ability to collect accounts receivable. Allowances, if necessary,
are established for amounts determined to be uncollectible based on specific
identification and historical experience. As of June 30, 2023 and December
31, 2022, the allowance for doubtful accounts was approximately US$ 1,919,000
and US$ 1,780,000, respectively. Bad debt expense for the six months ended
June 30, 2023 and 2022, was approximately US$ 96,000 and US$ 113,000,
respectively.
Inventories
Inventories are stated using the first in, first out ("FIFO") method, at the
lower of cost or net realizable value ("NRV"). Provision for potentially
obsolete or slow-moving inventory is made based on management's analysis of
inventory levels and future sales forecasts. As of June 30, 2023 and
December 31, 2022, the provision for obsolete and slow-moving inventory was
approximately US$ 851,000 and US$ 643,000, respectively.
Intangible assets and goodwill
Intangible assets consist primarily of customer relationships, trademarks, and
patents, and are carried at their fair value when acquired, less accumulated
amortization. Intangible assets are amortized using the straight-line method
over a period of three to seventeen years, which is their estimated period of
economic benefit.
Goodwill is not amortized but is subject to impairment tests on an annual
basis, and the Company has chosen December 31 as its periodic assessment
date. Goodwill represents the excess cost of the business combination over
the Company's interest in the fair value of the identifiable assets and
liabilities. Goodwill arose from the Company's prior sale from Dover
Corporation to The Gores Group in 2005 and the purchase of the Line Dragon,
LLC business assets in January 2019. The Company did not incur a goodwill
impairment loss for the periods ended June 30, 2023 nor December 31, 2022.
Revenue recognition
The Company generates revenue by selling equipment, parts, accessories,
service agreements and training. The Company recognizes revenue for equipment,
parts, and accessories when it satisfies the performance obligation of
transferring the control to the customer. For product sales where shipping
terms are FOB shipping point, revenue is recognized upon shipment. For
arrangements which include FOB destination shipping terms, revenue is
recognized upon delivery to the customer. The Company recognizes the revenue
for service agreements and training once the service or training has occurred.
As of June 30, 2023 and December 31, 2022, there were approximately US$
732,000 and US$ 582,000, respectively, of extended service agreement
liabilities. During the six months ended June 30, 2023 and 2022, approximately
US$ 304,000 and US$ 308,000, respectively, of revenue was recognized related
to the amounts recorded as liabilities on the balance sheets in the prior year
(deferred contract revenue).
As of June 30, 2023 and December 31, 2022, there were approximately US$
1,995,000 and US$ 2,180,000, respectively, in customer deposit liabilities for
advance payments received during the period for contracts expected to ship
following the end of the period. As of June 30, 2023 and December 31, 2022,
there are no significant contract costs such as sales commissions or costs
deferred. Interest income on financing arrangements is recognized as
interest accrues, using the effective interest method.
Warranty liability
The Company provides warranties on all equipment sales ranging from 60 days to
three years, depending on the product. Warranty liabilities are estimated
net of the warranty passed through to the Company from vendors, based on
specific identification of issues and historical experience.
US$ 000
Balance, January 1, 2022 (1,986)
Warranty charges 808
Accruals (270)
Balance, December 31, 2022 (1,448)
Balance, January 1, 2023 (1,448)
Warranty charges 541
Accruals (319)
Balance, June 30, 2023 (1,226)
Property, plant, and equipment
Property, plant, and equipment is stated at cost, net of accumulated
depreciation and amortization. Land is not depreciated. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets, which is 31.5 to 40 years for buildings (depending on the nature of
the building), 15 years for improvements, and 3 to 10 years for machinery and
equipment.
Income taxes
The Company determines income taxes using the asset and liability approach.
Tax laws require items to be included in tax filings at different times than
the items are reflected in the financial statements. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance, if necessary, to the
extent that it appears more likely than not that such assets will be
unrecoverable.
The Company evaluates tax positions that have been taken or are expected to be
taken in its tax returns and records a liability for uncertain tax
positions. This involves a two-step approach to recognizing and measuring
uncertain tax positions. First, tax positions are recognized if the weight
of available evidence indicates that it is more likely than not that the
position will be sustained upon examination, including resolution of related
appeals or litigation processes, if any. Second, the tax position is measured
as the largest amount of tax benefit that has a greater than 50% likelihood of
being realized upon settlement.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could
differ from those estimates.
Stock-based compensation
The Company recognizes the cost of employee services received in exchange for
an award of equity instruments in the financial statements over the period the
employee is required to perform the services in exchange for the award
(presumptively the vesting period). The Company measures the cost of
employee services in exchange for an award based on the grant-date fair value
of the award. Compensation expense related to stock-based payments was
approximately US$ 548,000 and US$ 673,000 for the six months ended June 30,
2023 and 2022, respectively. In addition, the Company settled approximately
US$ 1,155,000 and US$ 1,072,000 in restricted stock units for cash during the
six months ended June 30, 2023 and 2022, respectively.
Transactions in and translation of foreign currency
The functional currency for the Company's subsidiaries outside the United
States is the applicable local currency. The preparation of the consolidated
financial statements requires the translation of these financial statements to
USD. Balance sheet amounts are translated at period-end exchange rates and
the statement of comprehensive income accounts are translated at average
rates. The resulting gains or losses are charged directly to accumulated
other comprehensive income. The Company is also exposed to market risks
related to fluctuations in foreign exchange rates because some sales
transactions, and some assets and liabilities of its foreign subsidiaries, are
denominated in foreign currencies other than the designated functional
currency. Gains and losses from transactions are included as foreign
exchange gain (loss) in the accompanying consolidated statements of
comprehensive income.
Comprehensive income
Comprehensive income is the combination of reported net income and other
comprehensive income ("OCI"). OCI is changes in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources not included in net income.
Earnings per share
Basic earnings per share represents income available to common stockholders
divided by the weighted average number of common shares outstanding during the
year. Diluted earnings per share reflect additional common shares that would
have been outstanding if dilutive potential common shares had been issued
using the treasury stock method. Potential common shares that may be issued
by the Company relate to outstanding stock options and restricted stock units.
Earnings per common share have been computed based on the
following:
Six months ended June 30
2023 2022
US$ 000 US$ 000
Net income 12,401 17,490
Basic weighted shares outstanding 54,825,552 56,038,690
Net dilutive effect of stock options and restricted stock units 626,219 661,282
Diluted weighted average shares outstanding 55,451,771 56,699,972
Fair value
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable, and other current assets and liabilities approximate fair
value because of the short-term nature of these instruments. The carrying
value of our long-term debt approximates fair value due to the variable nature
of the interest rates under our Credit Facility.
Restricted Cash
Restricted cash of approximately US$ 255,000 is included in "Cash and cash
equivalents" on the consolidated balance sheet as of June 30, 2023. This
represents cash deposited by the Company into a guaranteed deposit account and
designated as collateral for the building lease in Australia in accordance
with the lease agreement.
3. Inventories
Inventories consisted of the following:
June 30, December 31,
2023 2022
US$ 000 US$ 000
Raw material 11,653 11,393
Finished goods and work in process 7,410 5,768
Remanufactured 2,343 1,688
Total 21,406 18,849
4. Goodwill and intangible assets
Goodwill represents the excess of the cost of a business combination over the
fair value of the net assets acquired. The Company is required to test
goodwill for impairment, at the reporting unit level, annually and when events
or circumstances indicate the fair value of a unit may be below its carrying
value.
The following table reflects other intangible assets:
Weighted average June 30, December 31,
Amortization 2023 2022
Period US$ 000 US$ 000
Capitalized cost Patents 12 years 19,247
19,247
Intangible Assets 7,434 7,434
26,681 26,681
Accumulated amortization Patents 12 years 18,745 18,721
Intangible Assets 6,747 6,703
25,492 25,424
Net carrying costs Patents 12 years 502 526
Intangible Assets 687 731
1,189 1,257
Amortization expense associated with the intangible assets in each of the six
months ended June 30, 2023 and 2022 was approximately US$ 68,000 and US$
67,000, respectively. The amortization expense for each of the next 5 years
will be approximately US$ 135,000 and the remaining amortization thereafter
will be approximately US$ 514,000.
5. Property, plant, and equipment
Property, plant, and equipment consist of the following:
June 30, December 31,
2023 2022
US$ 000 US$ 000
Land 864 864
Building and improvements 25,521 24,812
Machinery and equipment 7,768 8,744
34,153 34,420
Less: accumulated depreciation and amortization (8,141) (8,770)
26,012 25,650
Depreciation expense for the six months ended June 30, 2023 and 2022 was
approximately US$ 640,000 and US$ 656,000, respectively.
6. Line of credit and note payable
In August 2022, the Company updated its credit facility to a US$ 25.0m secured
revolving line of credit, with a maturity date of August 2027. The interest
rate on the revolving credit line is based on the BSBY Index plus 1.25%. The
Company's credit facility is secured by substantially all its business assets.
No amounts were drawn under the secured revolving line of credit as of June
30, 2023 and December 31, 2022.
Interest expense for the six months ended June 30, 2023 and 2022 was
approximately US$ 10,800 and US$ 9,300, respectively, and relates primarily to
interest costs on leased vehicles.
7. Retirement program
The Company has a savings and retirement plan for its employees, which is
intended to qualify under Section 401(k) of the Internal Revenue Code ("IRC").
This savings and retirement plan provides for voluntary contributions by
participating employees, not to exceed maximum limits set forth by the IRC.
The Company's matching contributions vest immediately. The Company
contributed approximately US$ 579,000 and US$ 579,000 to the savings and
retirement plan during the six months ended June 30, 2023 and 2022,
respectively.
8. Leases
The Company leases property, vehicles, and equipment under leases accounted
for as operating and finance leases. The leases have remaining lease terms of
less than 1 year to 10 years, some of which include options for renewal. The
exercise of these renewal options is at the sole discretion of the Company.
The right-of-use assets and related liabilities presented on the Consolidated
Balance Sheets, reflect management's current expectations regarding the
exercise of renewal options.
The components for lease expense were as follows:
Six Months Ended Six Months Ended
June 30, 2023 June 30,
2022
US$ 000 US$ 000
Operating lease cost 205 182
Finance lease cost:
Amortization of right-of-use assets 137 148
Interest on lease liabilities 8 6
Total finance lease cost 145 154
As of June 30, 2023, the weighted average remaining lease term for finance and
operating leases was 1.5 years and 6.3 years, respectively, and the weighted
average discount rate was 4.7% and 5.1%, respectively. As of June 30, 2022,
the weighted average remaining lease term for finance and operating leases was
1.8 years and 7.2 years, respectively, and the weighted average discount rate
was 4.8% and 3.5%, respectively.
Maturities of lease liabilities represent the remaining six months for 2023
and the full 12 months of each successive period as follows:
Operating Leases Finance Leases
US$ 000 US$ 000
2023 275 122
2024 413 158
2025 304 31
2026 304 5
2027 304 -
Thereafter 565 -
Total 2,165 316
Less imputed interest (319) (12)
Total
1,846
304
9. Supplemental cash flow and non-cash financing disclosures
Six months ended June 30
2023 2022
US$ 000 US$ 000
Cash paid for interest 11 9
Cash paid for taxes 2,594 6,274
Finance lease liabilities arising from obtaining right-of-use assets 31 (102)
Operating lease liabilities arising from obtaining right-of-use assets 744 (250)
10. Business and credit concentration
The Company's line of business could be significantly impacted by, among other
things, the state of the general economy, the Company's ability to continue to
protect its intellectual property rights, and the potential future growth of
competitors. Any of the foregoing may significantly affect management's
estimates and the Company's performance. On June 30, 2023 and December 31,
2022, the Company had four customers which represented 31% and five customers
that represented 42% of total accounts receivable, respectively.
11. Commitments and contingencies
The Company has entered into employment agreements with certain members of
senior management. The terms of these are for renewable one-year periods and
include non-compete and non-disclosure provisions as well as provide for
defined severance payments in the event of termination or change in control.
The Company is also subject to various unresolved legal actions which arise in
the normal course of its business. Although it is not possible to predict with
certainty the outcome of these unresolved legal actions or the range of
possible losses, the Company believes these unresolved legal actions will not
have a material effect on its consolidated financial statements.
12. Income taxes
The Company's effective tax rate for the six months ended June 30, 2023 was
21%, which is in line with the U.S. federal statutory rate of 21%. The
Company is subject to US federal income tax as well as income tax of multiple
state and foreign jurisdictions. The Company was formed in 2005. The statute
of limitations for all federal, foreign, and state income tax matters for tax
years from 2019 forward is still open. The Company has no federal, foreign, or
state income tax returns currently under examination.
As of June 30, 2023, and December 31, 2022 the Company had income tax payable
of approximately US$ 495,000 and income tax receivable of US$ 702,000,
respectively.
On June 30, 2023, the Company had approximately US$ 1,949,000 in non-current
net deferred tax assets recorded on its balance sheet. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all the deferred tax assets will not be
realized. The ultimate realization of the deferred tax assets is dependent
upon the generation of future taxable income during the periods in which those
temporary differences become deductible.
13. Share buyback
In February 2022, the Board authorized an on-market share buyback programs for
such number of listed shares of common stock as are equal to US$ 2,000,000,
respectively. The maximum price paid per Ordinary Share was no more than the
higher of 105 percent of the average middle market closing price of an
Ordinary Share for the five business days preceding the date of the share
buyback, the price of the last independent trade and the highest current
independent purchase bid. As of June 30, 2023, the Company purchased 107,978
shares of common stock for an aggregate value of approximately US$ 436,000
pursuant to the share buyback program authorized in 2022. The company
estimates the share buyback program authorized in 2022 will be completed by
the end of H2 2023. In connection with the Company's share buyback program
authorized in 2022, 94,123 shares held in treasury were cancelled in H1 2023.
14. Subsequent events
Dividend
The Board declared an interim dividend for the six months ended June 30, 2023
of 10.0 US cents per share. This dividend will be paid on October 20, 2023
to shareholders on the register as of September 22, 2023.
All dividends, including both ordinary and supplemental, have the option of
being paid in two currencies, GBP, and USD. In addition, there is also the
option of being paid by Check or through Crest for either currency or
additionally via BACS for GBP payments. If no election is made, dividends
will be paid in USD and via Check. If shareholders wish to change their
current currency or payment methods, forms are available through Computershare
Investor Services PLC at
https://www-uk.computershare.com/Investor/#Help/PrintableForms
(https://www-uk.computershare.com/Investor/#Help/PrintableForms)
Distribution amount: $0.10 cents per share
Ex-dividend date: 21 September 2023
Dividend record date: 22 September 2023
Final day for currency election: 6 October 2023
Payment date: 20 October 2023
All dividends have the option of being paid in either GBP or USD. Payments
in USD can be paid by Check or through Crest. Payments in GBP can be paid via
Check, Crest and BACS. The default option if no election is made will be for
a USD payment via check. Should shareholders wish to change their current
currency or payment methods, forms are available through Computershare
Investor Services PLC at
https://www uk.computershare.com/Investor/#Help/PrintableForms
If shares are held as Depositary Interests through a broker or nominee, the
holding company must be contacted and advised of the payment preferences. Such
requests are subject to the terms and conditions of the broker or nominee.
Additional information on currency election and tax withholding can be found
at: https://investors.somero.com/aim-rule-26
(https://investors.somero.com/aim-rule-26) . Shareholders can also contact
Computershare Investor Services PLC by telephone at +44 (0370) 702 0000 or
email via webcorres@computershare.co.uk (mailto:webcorres@computershare.co.uk)
.
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