SIGMATRON INTERNATIONAL INC (SGMA)·Q3 2025 Earnings Summary

Executive Summary

• Q3 FY2025 revenue fell 26% year over year to $71.1M, while EPS rose to $0.63 due to a ~$7.2M sale-leaseback gain; underlying operations posted an operating loss, and gross margin compressed to 7.8% .
• Sequentially, revenue declined for the second straight quarter (Q1→Q2→Q3: $84.8M → $74.7M → $71.1M); management expects Q4 revenue to be higher than Q3 based on backlog, but characterized the recovery as gradual .
• The company continues to reduce costs and inventory; operating profit was achieved in January, but Q3 overall had an operating loss and a going concern warning remains in the 10-Q .
• Strategic steps (Elk Grove Village sale-leaseback, lender amendments) reduced debt and provided non-operating gains, but covenant pressures persist and a Replacement Transaction is required by Sept 2025 unless debt ratios are achieved .
• Potential stock reaction catalysts: near-term revenue uptick in Q4 from backlog, continued inventory normalization, and strategic alternatives; offsets include ongoing tariff risks and the going concern disclosure .

What Went Well and What Went Wrong

• What Went Well

  • Sale-leaseback delivered ~$7.2M pretax gain, driving positive net income and $0.63 EPS in Q3 despite weaker revenues .
  • Cost actions and inventory reductions improved operations; management reported an operating profit in January and continued inventory drawdown in Q3 .
  • Component marketplace normalization (shorter lead times, stable pricing) and modest demand increases from several customers support management’s view that the revenue downturn has likely bottomed .

• What Went Wrong

  • Revenue declined 26% YoY and 4.9% sequentially; gross margin compressed to 7.8%, and Q3 posted an operating loss of $(0.8)M, indicating weak underlying profitability excluding the sale-leaseback gain .
  • Net debt and covenant pressures continue; debt remains largely classified as current, and the 10-Q repeats a going concern risk pending covenant compliance or a Replacement Transaction by Sept 2025 .
  • Tariff/macro volatility and elevated interest expense weighed on results; interest expense rose to $3.33M in Q3, reflecting financing costs tied to debt modifications .

Financial Results

Quarterly trend (Q1–Q3 FY2025)

Notes: Q3 included a ~$7.175M pretax gain from the Elk Grove Village sale-leaseback (Other income), materially impacting net income and EPS . Interest expense increased due to deferred financing costs from debt modifications .

Q3 FY2025 vs Q3 FY2024 (YoY)

End-market revenue (Q3 FY2025 vs Q3 FY2024)

Balance sheet and liquidity KPIs

Guidance Changes

Earnings Call Themes & Trends

Note: No earnings call transcript appears to have been held for Q3 FY2025 (MarketBeat lists “Conference Call Date: N/A”) .

Management Commentary

• “We believe that we have reached the bottom of the revenue downturn and are starting the slow path upwards… Based on our current backlog, we expect the revenue for the fourth quarter to be higher than the third quarter.” — Gary R. Fairhead, CEO (Q3 press release) .
• “We posted an operating profit in January 2025… we have positioned the Company for significant upside… both at a historical level of revenue and even at the recent lower revenue level.” — Gary R. Fairhead (Q3 press release) .
• “The electronic component marketplace has started to normalize… we have seen modest increases in demand from several of our customers.” — Gary R. Fairhead (Q3 press release) .
• Q2 note: “Operating profit in October, demonstrating that our restructuring efforts are now showing a significant impact… sale/leaseback of our Elk Grove Village property… one-time capital gain of approximately $7 million to report in our third quarter results.” — Gary R. Fairhead (Q2 press release) .

Q&A Highlights

• No formal Q3 FY2025 earnings call transcript available; conference call listed as N/A by MarketBeat .
• Guidance clarifications were provided via press release: Q4 revenue expected to be higher than Q3 based on backlog; management cautious on calling a recovery .
• Tone: Constructive on cost/inventory actions and supply chain normalization; cautious due to tariffs/macro and financing covenant overhang .

Estimates Context

• S&P Global consensus estimates for EPS and revenue were unavailable via our tool for SGMA in Q3 FY2025 (missing mapping). Therefore, no consensus comparison can be provided at this time.
• Given the lack of published consensus, the quarter’s apparent “beat/miss” cannot be assessed relative to Wall Street expectations. Future coverage/mapping may enable estimate comparisons.

Key Takeaways for Investors

• Q3 optics benefited from a one-time ~$7.2M sale-leaseback gain; underlying operations were weak (operating loss, margin compression), so normalize earnings when modeling .
• Revenue trend is sequentially lower for two quarters, but backlog implies Q4 uptick; management suggests the downturn has likely bottomed and demand is modestly improving .
• Inventory reduction is progressing and cash from operations was solid over nine months ($13.7M), but equity declined and debt/covenants remain pressure points; going concern language is a meaningful risk flag .
• Interest expense is elevated and sensitive to financing structure; covenant waivers and the requirement for a Replacement Transaction by Sept 2025 create timeline risk and potential dilution (warrants) .
• End-market declines were most pronounced in Industrial and Medical/Life Sciences; Consumer was relatively resilient, but overall mix remains pressured .
• Tariff policy uncertainty and macro volatility could impact margin/revenue trajectory; supply chain normalization is a positive offset .
• Near-term trading: watch for Q4 revenue confirmation vs backlog, additional strategic actions (deleveraging/refinancing), and any tariff/macro headlines; medium-term thesis hinges on sustained demand recovery, cost discipline, and resolving financing overhang .