Core Viewpoint - Transom Capital Group has initiated a cash tender offer to acquire all outstanding shares of SigmaTron International at a price of $3.02 per share, as part of a previously announced merger agreement [1][2]. Group 1: Tender Offer Details - The tender offer is set to expire on July 24, 2025, unless extended, and is subject to customary terms, including the tender of a majority of SigmaTron's voting shares [6]. - Transom has filed a tender offer statement with the SEC, and SigmaTron has filed a recommendation statement urging stockholders to accept the offer [5][7]. Group 2: Board of Directors' Recommendation - The SigmaTron Board unanimously recommends that stockholders tender their shares, having conducted a thorough review of financial and strategic alternatives [3]. - The Board considered SigmaTron's significant indebtedness and the certainty of value provided by the cash offer in their decision [4]. Group 3: Strategic Intent - Transom aims to provide immediate liquidity and value certainty to SigmaTron stockholders while committing to the company's long-term growth [2]. - The acquisition is positioned as a means to build on SigmaTron's legacy and drive future growth [2]. Group 4: Company Background - Transom Capital Group is an operationally focused private equity firm established in 2008, specializing in middle-market investments and complex situations [11][12]. - The firm employs a strategy that combines capital investment with operational expertise to unlock value and accelerate performance [12].

Group 1 - Monteverde & Associates PC has recovered millions for shareholders and is recognized as a Top 50 Firm in the 2024 ISS Securities Class Action Services Report [1] - The firm is investigating SigmaTron International, Inc. regarding its proposed merger with Transom Capital Group, LLC, where Transom will offer $3.02 per share in cash for all outstanding shares of SigmaTron [1] Group 2 - Monteverde & Associates PC is a national class action securities firm with a successful track record in trial and appellate courts, including the U.S. Supreme Court [2] - The firm operates from the Empire State Building in New York City [2]

Core Viewpoint - Transom Capital Group has entered into a merger agreement to acquire SigmaTron International, with a total enterprise value of approximately $83 million, representing a significant premium over the company's recent stock prices [2][3]. Transaction Details - The merger agreement has been unanimously approved by SigmaTron's Board of Directors, and the tender offer will be for $3.02 per share in cash, which is about 134% higher than the closing market price on May 20, 2025 [2]. - The transaction is expected to close in the third quarter of 2025, pending the successful completion of the tender offer and other customary closing conditions [3]. - The acquisition will result in SigmaTron being wholly owned by Transom, and its shares will no longer be listed on Nasdaq [3]. Company Background - SigmaTron International is an electronic manufacturing services company, providing services such as printed circuit board assemblies and electro-mechanical subassemblies, with manufacturing facilities in the U.S., Mexico, China, and Vietnam [9]. - Transom Capital Group is a private equity firm focused on middle-market investments, known for its operationally intensive strategy and expertise in various complex situations [7][8].

Core Viewpoint - SigmaTron International, Inc. has experienced a significant increase in share price following its earnings report, despite a decline in revenue and ongoing market challenges [1][2]. Financial Performance - For the fiscal third quarter ended January 31, 2025, SigmaTron's earnings per share (EPS) rose to 63 cents from 10 cents a year earlier [2]. - The company reported revenues of $71.1 million, a decline of 26% from $95.9 million in the same period a year ago [2]. - Net income improved significantly to $3.9 million from $0.6 million in the prior-year quarter, aided by a one-time gain of approximately $7.2 million from a sale-leaseback transaction [3][10]. Cost Structure and Operational Adjustments - Gross profit for the quarter fell to $5.6 million from $9.9 million in the prior-year period [4]. - Selling and administrative expenses slightly decreased to $6.4 million from $6.7 million, reflecting the company's focus on expense management [4]. - The company incurred an operating loss of $0.8 million, a reversal from an operating income of $3.2 million in the same period last year [4]. Management Insights - CEO Gary Fairhead noted that while revenue levels remain depressed, cost-cutting initiatives have begun to yield benefits, with an operating profit recorded in January 2025 [5]. - Management expressed confidence in navigating the downturn and capitalizing on potential recovery opportunities [5]. Market Conditions and Demand Trends - SigmaTron acknowledged a normalization in the electronic component marketplace, with shorter lead times and more stable pricing [6]. - There have been modest demand increases from several customers, although management remains cautious about declaring a full recovery [6]. - The company believes that excess customer inventory has been significantly reduced, which could stabilize revenue volatility in the coming quarters [6]. Future Outlook - SigmaTron expects fiscal fourth-quarter revenues to be higher than the fiscal third quarter based on its current backlog [7]. - The company continues to reduce inventory, contributing to its financial stability [7]. External Challenges - SigmaTron remains exposed to geopolitical risks, trade policies, and tariff uncertainties, which could impact operations [8]. - Ongoing trade issues and potential new tariff policies are highlighted as sources of volatility [8]. Strategic Initiatives - The company is exploring strategic opportunities with Lincoln International to enhance long-term shareholder value [9].

Financial Performance - Net sales decreased by $24,852,025, or 25.9%, to $71,067,863 for the three months ended January 31, 2025, compared to $95,919,888 for the same period in the prior fiscal year [142]. - For the nine months ended January 31, 2025, net sales decreased by $62,177,727, or 21.2%, to $230,564,201 compared to $292,741,928 for the same period in the prior fiscal year [153]. - Gross profit margin was 7.8% of net sales for the three months ended January 31, 2025, down from 10.3% for the same period in the prior fiscal year [144]. - Gross profit margin decreased to 8.2% of net sales for the nine months ended January 31, 2025, down from 10.0% in the prior fiscal year [155]. - Net income increased by $3,284,605 to $3,883,611 for the three months ended January 31, 2025, primarily due to a gain from a sale/leaseback transaction [150]. - Net loss increased to $8,872,218 for the nine months ended January 31, 2025, compared to net income of $889,367 for the same period in the prior fiscal year, a decrease of $9,761,585 [162]. Cost and Expenses - Cost of products sold decreased by $20,478,128, or 23.8%, to $65,514,800, representing 92.2% of net sales for the three months ended January 31, 2025 [143]. - Cost of products sold for the nine months ended January 31, 2025, decreased by $51,774,253, or 19.7%, to $211,701,740, which is 91.8% of net sales [154]. - Selling and administrative expenses decreased by $305,347, or 4.6%, to $6,378,141, which is 9.0% of net sales for the three months ended January 31, 2025 [146]. - Selling and administrative expenses decreased by $767,409, or 3.8%, to $19,372,518, representing 8.4% of net sales for the nine months ended January 31, 2025 [158]. Debt and Financing - As of January 31, 2025, the outstanding balance under the revolving loan facility was $12,792,559, down from $28,598,719 at April 30, 2024 [180]. - The TCW Term Loan outstanding amount was $38,407,418 as of January 31, 2025, compared to $37,503,301 at April 30, 2024 [183]. - Interest expense, net, increased to $3,328,267 for the three months ended January 31, 2025, compared to $2,568,824 for the same period in the prior fiscal year [148]. - Interest expense, net, rose to $10,297,650 for the nine months ended January 31, 2025, compared to $7,996,598 in the prior fiscal year [160]. - Cash used in financing activities was $21,390,793 for the nine months ended January 31, 2025, compared to $12,267,545 in the prior fiscal year [175]. Compliance and Regulatory Issues - The Company received default notices from JPM and TCW due to non-compliance with financial covenants, including a Fixed Charge Coverage Ratio of less than 1.10:1.00 and a Total Debt to EBITDA Ratio greater than 4.50:1.00 [185]. - As of January 31, 2025, the Company classified total debt as current liabilities due to ongoing covenant violations and lender demands for a Replacement Transaction by September 2025 [189]. - The Company received a delinquency notification from Nasdaq for failing to timely file its Form 10-K for the fiscal year ended April 30, 2024, which constituted a default under the Credit Agreements [190]. Transactions and Agreements - The company executed a sale/leaseback transaction for its Elk Grove Village, Illinois headquarters, with a sale price of $9,500,000 and net proceeds of $8,292,098 [173]. - The Company entered into amendments to its Credit Agreements, adjusting the Fixed Charge Coverage Ratio minimums from 0.70:1.0 to 1.00:1.0 and the Total Debt to EBITDA Ratio maximums from 6.50:1.0 to 3.50:1.0 by April 30, 2027 [192]. - The TCW Term Loan principal payment schedule was amended to $250,000 per quarter, with a potential extension of the PIK Period for three additional quarters if certain conditions are met [195]. - The Company recorded a liability of $2,263,000 for warrants issued as part of the Fee Letter, with a fair value of $1,188,546 as of January 31, 2025 [197]. Foreign Operations - The Company reported net foreign currency transaction losses of $981,372 for the nine-month period ended January 31, 2025, compared to losses of $512,885 for the same period in the prior year [208]. - The Company paid approximately $42,390,000 to its foreign subsidiaries for manufacturing services during the nine months of fiscal year 2025 [208]. - The Company has a credit facility with China Construction Bank allowing borrowing up to 10,000,000 Renminbi (approximately $1,400,000) with no outstanding balance as of January 31, 2025 [201]. - The Company entered into a mortgage agreement for $556,000 to finance its warehousing and distribution center, with an outstanding balance of $326,693 as of January 31, 2025 [202]. Future Outlook - The company anticipates continuing improvement in supply chain predictability in fiscal 2025 [139]. - The Company must pursue and close a Replacement Transaction to pay obligations in full no later than September 30, 2025 [165]. - Cash flow provided by operating activities was $13,714,684 for the nine months ended January 31, 2025, down from $16,837,855 in the prior fiscal year [171].

Financial Performance - Revenues for the third quarter of fiscal 2025 decreased by $24.8 million, or 26%, to $71.1 million compared to $95.9 million in the same quarter of the prior year[2] - Net income for the third quarter was $3.9 million, a significant increase from $0.6 million in the same period last year, aided by a $7.2 million gain from a sale/leaseback transaction[2] - For the nine-month period ended January 31, 2025, revenues decreased by $62.1 million, or 21%, to $230.6 million compared to $292.7 million for the same period in the prior year[3] - The company reported a net loss of $8.9 million for the nine-month period, compared to a net income of $0.9 million in the prior year[3] - Basic and diluted income per share for the third quarter was $0.63, compared to $0.10 for the same period in the prior year[2] Market Conditions - The company is seeing signs of normalization in the electronic component marketplace, with shorter lead times and stable pricing, and expects fourth-quarter revenue to be higher than the third quarter[5] Cost Management - The company has been actively reducing its cost structure, which contributed to an operating profit in January 2025[5] Asset and Liability Management - Current assets decreased to $150.3 million as of January 31, 2025, down from $175.9 million in April 2024[12] - Total liabilities decreased to $135.4 million as of January 31, 2025, compared to $157.7 million in April 2024[12] Strategic Initiatives - The company continues to work on strategic initiatives with Lincoln International and is focused on resolving supply chain issues amid existing trade challenges[6]

Core Insights - SigmaTron International, Inc. reported a significant revenue decline of 26% year-over-year for the fiscal quarter ended January 31, 2025, with revenues at $71.1 million compared to $95.9 million in the same quarter of the previous year [2] - Despite the revenue drop, the company achieved a net income of $3.9 million for the quarter, a notable increase from $0.6 million in the prior year, largely due to a gain from a sale/leaseback transaction [2][4] - For the nine-month period ending January 31, 2025, revenues decreased by 21% to $230.6 million, with a net loss of $8.9 million compared to a net income of $0.9 million in the same period last year [3] Financial Performance - The company’s net sales for the three months ended January 31, 2025, were $71.1 million, down from $95.9 million in the same period of 2024, while for the nine months, sales were $230.6 million compared to $292.7 million [10] - Gross profit for the three months was $5.6 million, down from $9.9 million year-over-year, and for the nine months, gross profit was $18.9 million compared to $29.3 million [11] - The basic and diluted income per share for the quarter was $0.63, up from $0.10 in the prior year, while for the nine months, the loss per share was $1.44 compared to a profit of $0.15 [11] Operational Insights - The CEO noted that the third quarter typically experiences lower revenue due to the holiday period, and the company is seeing signs of a potential recovery in the electronic component marketplace [4][5] - The company has been actively reducing its cost structure, which has contributed to an operating profit in January 2025, and anticipates higher revenue in the fourth quarter based on current backlog [5] - The company is addressing trade issues and potential tariff changes that could impact operations, while also working on strategic initiatives with Lincoln International [6] Company Overview - SigmaTron operates as an independent provider of electronic manufacturing services, with facilities in the U.S., Mexico, China, and Vietnam, focusing on printed circuit board assemblies and fully assembled electronic products [7][8] - The company maintains an International Procurement Office and a Sustainability Center in Taipei, Taiwan, and provides design services in Elk Grove Village, Illinois [8]

Core Insights - SigmaTron International, Inc. reported a net loss of $1.55 per share for the second quarter of fiscal 2025, compared to breakeven earnings per share in the same quarter last year, with revenues declining by 24% year over year to $74.7 million [2][4] - The company's stock has seen a 3.2% increase since the earnings report, but a significant decline of 40.7% over the past month, underperforming the S&P 500 index [1] Financial Performance - Gross profit for the quarter was $6.9 million, down from $9.7 million in the prior year, with gross margin contracting due to lower revenues and supply chain challenges [4] - Operating income decreased to $0.5 million from $3.1 million a year ago, while selling and administrative expenses slightly decreased to $6.4 million from $6.6 million [4] Management Commentary - CEO Gary R. Fairhead noted ongoing revenue softness attributed to economic challenges and supply chain volatility, including previous overordering of electronic components leading to inflated inventory levels [5] - Despite the loss, the company achieved operating profitability in October 2024, driven by restructuring efforts, with management optimistic about demand recovery in calendar 2025 [6] Influencing Factors - Revenue decline was influenced by weaker backlog levels and inventory destocking in the electronics manufacturing industry, along with supply chain disruptions and previous component overordering [7] - One-time costs of approximately $3.3 million related to debt restructuring negatively impacted the quarter's net income [7] Guidance - Management did not provide formal guidance but indicated expectations for continued weak revenues in the fiscal third quarter, exacerbated by seasonal slowdowns in North America and Asia [8] - There is cautious optimism for improved demand trends in calendar 2025, supported by customer activity and new opportunities [8] Other Developments - SigmaTron completed a significant sale and leaseback transaction for its Elk Grove Village property, reducing bank debt and expected to result in a one-time capital gain of about $7 million in the fiscal third quarter [9] - The company made progress in inventory reduction and remains committed to further deleveraging its balance sheet [10]

Financial Performance - Net loss for the three-month period ended October 31, 2024, was $9,466,669, a decrease of $9,494,931 compared to a net income of $28,262 for the same period in the prior fiscal year [183]. - The Company reported a net loss of $12,755,829 for the six-month period ended October 31, 2024, a decrease of $13,046,190 compared to net income of $290,361 for the same period in the prior fiscal year [186]. - Net sales for the three months ended October 31, 2024, decreased by $23,972,324, or -24.3%, to $74,719,360 compared to $98,691,684 for the same period in the prior fiscal year [200]. - Net sales for the six months ended October 31, 2024, decreased by $37,325,702, or -19.0%, to $159,496,338 compared to $196,822,040 for the same period in the prior fiscal year [205]. - Gross profit margin for the three months ended October 31, 2024, was 9.2%, down from 9.8% for the same period in the prior fiscal year [202]. - Gross profit margin for the six months ended October 31, 2024, was 8.3%, down from 9.8% for the same period in the prior fiscal year [207]. Expenses and Costs - Selling and administrative expenses decreased by $243,123, or 3.7%, to $6,370,511, representing 8.5% of net sales for the three-month period ended October 31, 2024 [179]. - Selling and administrative expenses decreased by $462,062, or -3.4%, to $12,994,377 for the six months ended October 31, 2024 [209]. - Cost of products sold for the three months ended October 31, 2024, decreased by $21,188,773, or -23.8%, to $67,815,156, representing 90.8% of net sales [201]. - Cost of products sold for the six months ended October 31, 2024, decreased by $31,296,125, or -17.6%, to $146,186,940, which is 91.7% of net sales [206]. Interest and Tax Expenses - Interest expense, net, increased to $4,701,108 for the three-month period ended October 31, 2024, compared to $2,708,696 for the same period in the prior fiscal year [181]. - Interest expense, net, increased to $6,969,383 for the six months ended October 31, 2024, compared to $5,427,774 for the same period in the prior fiscal year [211]. - Income tax expense increased by $4,329,588 to $4,673,254 for the three-month period ended October 31, 2024, with an effective tax rate of (61.46)% [182]. - Income tax expense increased by $5,285,936 to $5,475,467 for the six months ended October 31, 2024, compared to $189,531 for the same period in the prior fiscal year [243]. Cash Flow and Financing - Cash flow provided by operating activities decreased to $12,931,640 for the six months ended October 31, 2024, down from $15,766,616 in the prior fiscal year, primarily due to a decrease in inventory of $12,798,326 [190]. - Cash used in financing activities was $10,657,216 for the six months ended October 31, 2024, primarily due to net payments under the line of credit and term loan agreement [250]. - Cash flow provided by operating activities was $15,766,616 for the six months ended October 31, 2023, primarily due to a decrease in inventory of $19,214,849 and accounts receivable of $5,244,132 [248]. Debt and Liabilities - The Company has reduced its debt by selling assets and reducing workforce, and is exploring additional activities to further reduce its debt load [188]. - The TCW Term Loan has a principal amount of $40,000,000, with an outstanding balance of $38,245,241 as of October 31, 2024 [222]. - The Revolving Commitment was reduced from $70 million to $55 million as part of the 2024 Amendments [228]. - The Company is obligated to meet certain debt ratios by August 31, 2025 or find a Replacement Transaction by September 30, 2025 [246]. - The Company was not in compliance with financial covenants as of August 19, 2024, with the Fixed Charge Coverage Ratio being less than 1.10:1.00 and the Total Debt to EBITDA Ratio exceeding 4.50:1.00 for the twelve-month period ending April 30, 2024 [258]. Compliance and Internal Controls - The Company has identified a material weakness in its internal controls related to revenue recognition, which continues to exist as of October 31, 2024 [239]. - The Company received a delinquency notification from Nasdaq on August 16, 2024, for failing to timely file its Form 10-K annual report for the fiscal year ended April 30, 2024, which constituted a default under the Credit Agreements [259]. - The Company entered into waivers with JPM and TCW on April 28, 2023, to address non-compliance with financial covenants, including modifications to the definition of EBITDA [257]. Asset Management - The Company’s right-of-use assets for operating leases increased to $10,090,512 as of October 31, 2024, compared to $7,463,301 as of April 30, 2024 [165]. - The Company’s operating lease current liabilities increased to $3,155,101 as of October 31, 2024, compared to $2,789,107 as of April 30, 2024 [165]. - The Company executed a sale/leaseback transaction for its principal facility in December 2024, with a sale price of $9,500,000 intended to reduce debt [194]. - The Company recorded a liability of $2,263,000 for warrants classified as a derivative liability, which were valued at $2,889,000 as of October 31, 2024 [264]. Foreign Operations - The Company incurred net foreign currency transaction losses of $767,167 for the six-month period ended October 31, 2024, compared to losses of $461,859 for the same period in the prior year [268]. - The Company paid approximately $28,440,000 to its foreign subsidiaries for manufacturing services during the six months of fiscal year 2025 [268].

Financial Performance - For the six-month period ended October 31, 2024, revenues decreased by $37.3 million, or 19%, to $159.5 million compared to $196.8 million for the same period in the prior year[2] - The net loss for the six-month period ended October 31, 2024, was $12.8 million, compared to a net income of $0.3 million for the same period in the prior year[2] - For the three-month period ended October 31, 2024, revenues decreased by $24 million, or 24%, to $74.7 million compared to $98.7 million for the same quarter in the prior year[8] - The net loss for the three-month period ended October 31, 2024, was $9.5 million compared to break even for the same period in the prior year[8] - Basic and diluted loss per share for the six-month period ended October 31, 2024, was $2.08, compared to income per share of $0.05 for the same period in the prior year[2] Expenses and Financial Adjustments - The company recorded approximately $3.3 million in expenses during the second quarter related to debt modification and deferred financing costs[8] - A sale/leaseback of the Elk Grove Village property was completed, resulting in a one-time capital gain of approximately $7 million expected to be reported in the third quarter[3] Future Outlook - The company anticipates that the current trend of depressed revenue levels will continue into the third fiscal quarter due to seasonal factors[15] - Customers are starting to indicate a stronger economic outlook for calendar 2025, with modest orders being pulled in and increased activity in new opportunities[24] - The company is focused on reducing inventory further, with expectations for significant gains in reduction efforts during the third quarter[24]