Please press star zero for the operator. This call is being recorded on Thursday, May 11th, 2023. I'll now turn the call over to Daniel Kim, Executive Vice President, Corporate Development of Baylin Technologies.
Hello and welcome, everyone. Thank you for joining us this morning for the First Quarter 2023 Earnings Conference Call for Baylin Technologies. On the call with us today from Baylin are Leighton Carroll, Chief Executive Officer, and Dan Nohdomi, Chief Financial Officer. We will all be available for questions at the end of the presentation. Before we begin, let me make it clear that our comments today may include forward-looking statements and information and answers to questions that could imply future expectations about the prospects and financial performance of the business for 2023 and could include the use of IFRS measures. These statements are subject to risks, uncertainties and assumptions. Accordingly, actual performance could differ materially from statements made or information provided today, so you should not place undue reliance on them. We also do not intend to update forward-looking statements or information except as required by law.
I ask that you read our legal disclaimers and explanation for the use of non-IFRS measures and refer you to the risks and assumptions outlined in our public disclosures, in particular the sections entitled Forward-Looking Statements and Risk Factors in our Annual Information Form for the year ended December 31st, 2022, and other filings which are available on SEDAR. Our Q1 2023 results were released after market close yesterday. The press release, financial statements as well as MD&A are available on SEDAR and on our website at baylintech.com. I'd now like to turn the call over to Leighton.
Thank you, Daniel. Our business continued to perform well in the first quarter despite some challenges with supply chains and certainly the macroeconomic environment. We will provide additional detail about each of our business lines later, but I'd like to highlight the following for the first quarter. Despite lower revenue in the quarter, Adjusted EBITDA was CAD 0.9 million, the sixth consecutive quarter of positive Adjusted EBITDA, and this is CAD 0.7 million more than compared to the first quarter of 2022. The big first quarter typically is, for our business, is gonna be the lowest quarter. That's not always consistent, but the seasonality first quarter tends to be slow out of the gate with budgets for customers. Being able to do this, I was actually pretty pleased with.
During the quarter, we did recognize some government stimulus, tied to the U.S. Employee Retention Tax Credit program, which was recorded as a reduction of cost of sales. The cash benefit of this will not be expected until 2024, we saw that as a net positive thing for the business. Our Satcom team, I wanna call out, they managed through some really unique supply chain constraints and component delays, and despite those, we're able to deliver a strong quarter. One of the things that, you know, people talk about is supply chains are starting to get better and there is a lot of truth in that, except if you have very unique high-end components. Overcoming that to deliver a strong quarter was pretty important for us. Additionally, our infrastructure and embedded teams performed very well during the quarter.
Just extremely pleased with that, extremely pleased to see the infrastructure team deliver the results they did. Finally, our mobile and network business, previously referred to as Asia Pacific, or sometimes just mobile, it continues to deal with our primary customer's significant reduction in volume. All that's in the public record, it's not hard to figure out. That impacted all suppliers in the ecosystem. Despite the macroeconomic challenges during the quarter, overall the business, excuse me, was fairly resilient and overcame a bunch of challenges to continue delivering results. One of the things I do talk about a lot is backlog, because if you don't make things that people care about or need, it's a hobby, right? For us, seeing backlog actually continue to be at an elevated level is pretty positive.
One of the interesting things in this is our mobile and network, at least in the time that I've certainly been with the company, has the lowest backlog for that business it has ever had. That is a direct function of what is going on with our primary customer in Korea. The flip side of that is Satcom, embedded and infrastructure remain very consistent, very strong. Infrastructure is way over from where it was when I started in the business. Embedded has just been a consistent rock star and Satcom, you know, I don't worry if that team can sell. We're just trying to enhance production to continue delivering like we are.
Our notably high backlog, it's due to the good work of our teams and honestly, in many respects, some of the new innovative products that we've launched. You know, the engineering we do to develop these projects in many respects is our lifeblood. Having new products and having the level of customer reception we've received from the new products really makes a difference for our business. Despite a lot of the problems and even in some markets, lower spending by certain customers, we're still seeing those customers buy from us because of the launch of those new products. It's actually just... It speaks to volumes to the path we're on and the quality of what we're producing.
In other news, in the company, we announced yesterday a proposal to amend the terms of the convertible debentures that are due on July 10th, 2023. The plan is to extend the maturity date of the debentures from July 10th, 2023 to July 10th, 2026, increase the interest rate from 6.5% to 8.5%, effective June 30th, 2023, and reduce the conversion price of the debentures from CAD 3.85 to CAD 1.00 per common share of the company. The company will be soliciting written consents and proxies from holders of the debentures to approve the amendments by way of an extraordinary resolution.
We also announced the intention to exercise the common share repayment right and elect to repay the principal amount of the debentures on the maturity date by issuing common shares to the debenture holders. This is permitted under the terms of the debentures rather than repay the debentures in cash, subject to any requirements and regulatory approvals, including from the TSX. The common share repayment right is effectively conditional on the outcome of the solicitation. If the extraordinary resolution to extend the debentures is passed and the amendments become effective before the maturity date, the common share repayment right will not occur and will be withdrawn. We also announced that the company's principal shareholder, 2385796 Ontario Inc., a corporation which is over which our Chairman of the Board of Directors, Jeffrey C.
Royer exercises control and direction over our investment decisions.
Or, over its investment decisions. Excuse me. I just completely misspoke. Has agreed to subscribe to the private placement basis for common shares of the company, subject to a maximum number of 8 million shares at a maximum proceed to the company of CAD 4 million. The company will be issued at a price based on the five-day volume-weighted average trading price of the common shares on the TSX. Subject to TSX approval, the private placement is expected to close around May 22, 2023. The proceeds of the private placement will be used to fund working capital of the business, including in our mobile business line. In early April 2023, we announced that our Satcom division had received, and this is it. Now I'm getting back to some of the more fun stuff.
In April 2023, we announced that our Satcom business line received an order valued at CAD 1.75 million from a major satellite services provider. The order was for Advantech's 3-kW Summit soft-fail redundant SSPAs. The Summit systems are some of the new systems, particularly the more recent versions that are based on the new architecture, the new approach. They are modular. You have four, eight, 16 of these high-power SSPAs phase combined, and they deliver thousands of watts of power, which is it's an interesting point in that if you look at the Satcom market, the low end is crowded and is probably seeing some of the tougher a little bit of a tougher time because of the guys like Starlink coming in and disintermediating part of that space.
The higher end, high power, and in particular, government military applications, big broadcast applications, you don't see that. That's not an application for that technology. What's interesting about that is Advantech is uniquely differentiated in that space. It's a, it's a pretty cool place to be. Kind of keeping with that, we received CAD 537 in an order from a U.S. government systems integrator, specifically for a U.S. DOD opportunity for frequency converters. It's another installment of an indefinite delivery, indefinite quantity program, IDIQ, specifically designed for radio converters. Once you get spec-ed in on those programs, those things can be gifts that keep giving.
Advantech has a full line of converters, filters, and SSPAs, across a big bunch of frequency bands and obviously that's going to be a place we're going to continue to lean in on. Also in February, we announced that Galtronics U.S. had received its first multibeam antennas directly from a European carrier. When I got here to the business, you know, I don't know that we had really much activity at all in Europe, and that's a huge untapped market. That's greenfield for us.
I always believed in the infrastructure team's products and the quality of their innovation and engineering. Being able to take that to Europe, particularly with the launch of the new products and see, you know, when you have something that is compelling that carriers need, it doesn't matter if they're in Canada, the U.S., or Europe, they're still gonna need them. If the technology is good enough, it opens the doors for you. That is really the response that we've seen. That has helped us a great deal. Now having, you know, not just one, but multiple European carrier sales is really cool. It's, and, you know, it's not, you know, we're not hiring an army to do it.
We're being super cost-effective with our relationships and distribution and adding additional markets, which is kind of the cool thing. The performance of our multibeams, and this is one of what I call our halo products that really is opening these doors. It is ideal for high density, high traffic situations, airports, venues. We've seen a U.S. carrier put it on, basically take down antennas from one of our competitors, two antennas, put one of these up on a macro tower at a raceway, a automotive raceway, and as a permanent fixed site, which is really cool. Why do they do that? Because when the race is in town, what do you have? You have 1 billion people streaming, using their services. Our stuff is perfect for that.
Having that capability gives us an advantage over what I would call traditional panel antennas for capacity. The alternatives are what are called lens-like, or these big, huge globe things. The globes are a fantastic technology, but they're extremely expensive, and we are much less expensive with competitive differentiation. It's a really cool place to be. To date, we've been on the multibeams, which is obviously a big focus for us. We've been approved by four North American carriers, two European carriers. We are in talks with more, and we have a goal of adding additional customer approvals in the coming months. Dan Nohdomi, our CFO, will now comment on first quarter results.
Thanks, Leighton. Really exciting news. That's great. I'll provide a summary of our first quarter 2023 results. Revenue in the first quarter of 2023 was CAD 25.1 million, a decrease of CAD 5.9 million or 18.9% compared to the same quarter last year. The decrease was primarily due to the reduction in volume of orders from one of our primary customers in the mobile and network business line, partially offset by stronger sales in the wireless infrastructure and Satcom business lines. Gross margin was 30.5% in Q1 of 2023. This compares favorably with 26% in the same quarter last year.
Gross profit in Q1 of 2023 was CAD 7.7 million, a moderate decrease of CAD 0.4 million compared to Q1 of 2022, and this despite the reduction in revenue as mentioned earlier. Their improved gross margin resulted from changes in products, product mix driven to new product sales, changes in pricing strategy, and continued focus, data-driven focus on margin at the business line level. In Q1 of 2023, the improvement was primarily generated by, one, revenue recovery and favorable product mix, including the new multibeam that Leighton mentioned earlier, and innovative small cell antennas in our infrastructure business line. Two, enhanced production efficiency and favorable product mix in the Satcom business line, despite the headwinds mentioned earlier, the supply chain constraints. Three, consistent operational efficiency in the embedded antenna business line.
Adjusted EBITDA in the quarter was positive CAD 0.9 million, the sixth consecutive quarter of positive Adjusted EBITDA. It increased by CAD 0.7 million compared to the same quarter last year. This increase was due to improving gross margin through both new product sales and pricing improvements, as well as a decrease of CAD 0.9 million in operating expenses. This excludes the gain and impairment recovery recognized as a result of the transfer of the lease for the MMU facility we announced just a little while ago. The decrease in operating expenses was attributable to the recognition of the ERTC that Leighton mentioned earlier in his opening remarks. Adjusted EBITDA increased in Q1 of 2023 despite the decrease in gross profit compared to the prior year period.
Net loss in Q1 of 2023 was CAD 1.2 million compared to a net loss of CAD 3.1 million in the same quarter last year. The net loss in the first quarter of 2023, it does include a lease termination gain and impairment recovery mentioned earlier for the MMU factory in Dai Dong, Vietnam, of CAD 2.7 million as a result of successfully transferring the lease there to a third party. The net loss in Q1 of 2023 was primarily attributable to interest in other finance expenses, despite having an operating income of CAD 0.4 million.
On a per share basis, what this translates into is a net loss of CAD 0.01 per share, essentially net neutral or break even in Q1 of 2023 compared to a net loss of CAD 0.04 per share in Q1 of 2022. Net debt was CAD 22.6 million at the end of the quarter, which was an increase of CAD 1.2 million from the end of last year. This was primarily due to debt interest payments and lease payments. Subsequent to quarter end in May of 2023, our North American lenders, RBC and HSBC Canada, agreed to further amend our credit facilities and to temporarily reduce the minimum liquidity financial covenant requirement. We're obviously very grateful to our lenders for their continued support of our business.
We are now required to maintain minimum liquidity of CAD 3 million until the end of May, and then it returns to CAD 4 million thereafter until maturity of the credit facilities. This was done in order to support the refinancing of our Chinese subsidiaries loan, given the unique requirement to fully repay the prior loan before close of a new loan. The company's Chinese subsidiary is arranging a new CNY 30 million multiple tranche secured credit facility with the Bank of Ningbo. This facility will be secured by the subsidiary's building and will replace what was CNY 17 million secured facility with the prior lender and increase liquidity by approximately CAD 2.5 million, which is obviously very supportive for the business.
I'll now turn the call back over to Leighton.
All right. Thanks, Dan. Six quarters in a row is fantastic. I'm pleased with it. I'm not pleased with the number. I still want us to have better. You know, look, and to be fair, this was a noisy quarter because there's like 17 different things going on in it. Moving from the factory is a good thing, meaning GTD and really getting to a place where we close out that chapter. Part of that lease transfer over time, and I don't know that we've really talked about this.
It actually will because of the way that we set up the arrangement with the folks who took that over, there will actually be additional funds flow in consideration of us exiting, at least from a cash perspective we've already recognized, obviously the IFRS leasehold piece in results. Obviously the situation with the loan in China is unique. Every year you've got to pay it back, that means, guess what? You get tight on working capital because repaying it means cash is king in many respects. Having a transient event and having the trust and partnership of our banks is important. I think it speaks volumes to how far we've come from, gosh, when I walked in the door almost two years ago.
Obviously, if, we, you know, we had some negativity in the mobile business, and we were able to figure out a path to get a tax credit in the U.S. for something that helped. There's a bunch of puts and takes in this. The net effect is, you know, just to summarize, you know, this has been a turnaround, but right now all of our North American businesses are doing well, have good customer relationships, are able to sell and sell with consistency, in some cases sell at higher levels than I've ever seen it since I've been here. We have new products. All that's pretty cool stuff. You know, look, at the end of the day, I don't do anything.
It's the people in this company and just helping them do what they're great at. I'm just grateful for their commitment and engagement, you know, in Canada, in the U.S., and around the world. You know, the resiliency of our company and our people on this journey have been super important, and seeing the potential that our business has start to become a reality is pretty cool. As we, as we go forward and look at this, we had a lot of challenges. We had from a bottom line Adjusted EBITDA number, a good number, where, you know, how is this gonna play out over the rest of the year? Honestly, You know, I've always said that this was kind of our transition year.
I think we're gonna hit some good numbers. There's certainly a headwind we're dealing with our mobile business. The other businesses are performing well which means we're not gonna have explosive growth. We're not going to be a sinking ship. We're going to continue to do what we said we will do. We're gonna continue to be conservative in a lot of our comments, and we're gonna continue to deliver despite whatever life throws us, right? Dog doesn't eat your homework, get on with it. Now let me speak about each of the businesses. The embedded business line continues to be just solid, just consistent. You know, home networking, public safety, and automotive, they're all resilient.
This is despite some of the things we're seeing in terms of degradation in consumer spending, which you do see more in the mobile business, more pronounced in the mobile business. That business certainly has some level of consumer exposure to it because who the ultimate end customers for some products are. Yet that business remains very resilient. Wireless infrastructure has performed strongly. It's had a great Q1. We've seen improvements in revenue and Adjusted EBITDA. Stadium and DAS products have strengthened. I think the company announced that we have won several large scale in building wireless stadiums, and I think we're about to do another press release to talk about some additional large scale stadiums, which is pretty cool.
I think we're just waiting on one PO to get that, to get that press release out. The other thing is that, you know, look, I get geeked out about the multibeams, but the multibeams are a good product, right? Anytime you have something that's competitively differentiated that provides real value to your customers and they get it, they understand the value of it, and they start buying that quickly, and they start approving that quickly, it's cool. It, it's a, you know, full credit to our engineering team in Canada. It's a very modular architecture and the, and, you know, sometimes I talk about modularity in terms of manufacturing.
In this case, the modularity in architecture and the quality of the engineering allows us to bring new variants to market much quicker, in my opinion, than our competitors do in just traditional antennas, not something as innovative as this. We've been able to launch a pretty broad portfolio of these guys in a very short amount of time. To give you an example, in one major U.S.-based carrier, we already have nine of them approved, nine different models. That's a good opportunity. We still got to sell it. We still got to deliver it. We still got to make hay. We've built out, I think, a really interesting product portfolio that our guys can start getting after. Satcom.
Satcom is just, you know, it is, it is crazy some of the things that those guys have had to put up with. You know, we talk about, you know, their chipset shortages and all this other stuff. You know, memory chips, for example, have been in a glut. Certain types of chips have been in a glut. High-end FETs have not been in a glut, and that's important because that's bread and butter for solid-state amplifiers. Dealing with that has been a challenge. Believe it or not, power bricks, you know, DC-to-DC power converters, which used to be just off-the-shelf things, backordered still. The demand has still been there.
A lot of stuff on the high end of the market, which is where we live, and it's a good place to live because of the competitive differentiation, still difficult in dealing with those issues. The team did a remarkable job of managing through their suppliers, their base, dealing with it, juggling, and still delivering a really, really solid quarter. Additionally, the Genesis line, super cool, just because customers have been buying it, and it's not just a customer buying it. The new Genesis line, which will improve our efficiencies over time as we roll that out across additional power levels and additional frequencies, that's going to help our business become more effective. Seeing multiple customers now buy that product is a positive.
Additionally, sales of our military and other government-related businesses continue very strongly in 2023. We still see many Western-based countries, which is where we, our bread and butter, continue to spend on defense and in some cases increase defense spending. Obviously what we do and the technology upgrades we have been doing sets us up for success in that market. Finally, the order book continues to be very strong, and we continue to just grind on improving our production efficiencies. The mobile business, in some contrast, faced significant challenges due to the volume reductions. The reductions affect the customer smartphone market. I think I saw something recently.
I think it was Light Reading, that they said that quarter, you know, compare year-over-year, the customers' volume declined by approximately 20% year-over-year. That's meaningful. When you have a high volume, lower margin business, a decline of that level is significant. Depending on which products are selling versus which are not within their portfolio, there can be additional implications in terms of the volumes that one produces. Obviously, look, we've been working to manage our costs as much as possible. We have been aggressive in that space, even when it's been tough, because we've had to. We need to keep things moving, and preserve strategic optionality. We've also been working to diversify that business.
That was, you know, walking in the door, you know, what percent of business with that primary customer, I mean, we've got to get to work on this, guys. That's been a focus. We have won multiple new customers in that market with that business and expect that we will see some benefit from the growth in our non-mobile business, if you will, more towards the back half of the year. Doesn't help us in the front half, will help us in the back half. As, as things slowly start to recover in that business in 2023, the goal is to set 2024 up to be a, in a much more sustainable level. In the meantime, you know, management continues to seek financial support for the business in South Korea and elsewhere.
There are actually governmental programs, for example, in Korea, given the scenarios that are going on over there, that can assist us in weathering the storm. Including, you know, look, long term, we have to take a hard look in the mirror and make a determination of whether this business should remain part of the company's long-term strategy. That is affirmatively on the table now. Reflecting on the quarter, I am happy with the improvements in gross margin percentage. You know, look, at the end of the day, you look at our number, and you say, "Wow, CAD 25.5, that's a huge drop in revenue." Yet the profitability was pretty decent. That's not just new products. It's not like, you know, we're not raising prices like crazy people.
You know, we have been really grinding. These things are not overnight, right? We have been working for two years on operational efficiencies, cost control, getting synergies between facilities that was never here before, and being really efficient with what we do. By the way, efficient in the architecture of what we do, because that actually matters when you go to produce it. All of those things in, you know.
We're not done, but all those things improve your gross margin profile within your product set, so that when a business like our mobile business has had a very tough quarter, and you have started to sell at really decent, sustainable levels, that additional gross margin is a large part of why we have been improving, a large part of why we were able to deliver the results we did. Look, overall, we're on a good trajectory and I remain confident that our best times are ahead of us. I like how well things here have been going, and I like how much the teams are engaged and excited about the opportunities we have in front of us.
None of this is possible without the commitment of our people, and I'm grateful for their support and their urgency and their excitement and passion for what we're building. That, you know, for me, that makes it fun. That concludes our formal remarks. Operator, we're pleased to take questions.
Thank you. Ladies and gentlemen, we will now conduct a question-and-answer session. If you have a question, please press star followed by the number one on your touch- tone phone. You will hear a one-tone prompt acknowledging your request. One moment please for your first question. Once again, if you have a question, please press star one on your telephone keypad.
That's unusual. We always get questions.
Once again, it is star one to ask a question.
Interesting. Maybe we're having a technical difficulty there. Look, hearing nothing, happy with the performance of the business, happy with the progress we've made, dealing with some challenges in the mobile division. Satcom, Embedded, Infrastructure are doing well, in many respects are doing better than, particularly Infrastructure, and to an extent, Satcom doing better than I think at any time since I've been with the company. We've got a lot of upside in the future, given some of the product innovations that we've been doing. Pretty excited about it. You know, it's like everything else, some good, some bad.
You just gotta keep grinding on it and look forward to seeing what our future holds as we get through this year and to the onto some additional really positive years for this business. I think we're headed in that direction. Thank everybody for the time, I think that probably wraps us up.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.