CUI Global, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results
TUALATIN, Ore., March 18, 2019 /PRNewswire/ -- CUI Global, Inc. (NASDAQ: CUI) ("the Company"), today reported its unaudited financial results for the fourth quarter and full fiscal year ended December 31, 2018.
Note 1: Effective January 1, 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), utilizing the modified retrospective method. To allow for easier comparison with prior periods and as required under the modified retrospective transition method, results for the three months and full year ended December 31, 2018 under old revenue rules, ASC Topic 605, are provided following the '2018 Fourth Quarter Highlights' section below.
Full Year 2018 vs. Full Year 2017
-- Revenue was $96.8 million compared to $83.3 million;
-- Gross profit was $28.9 million compared to $27.9 million;
-- Gross margin was 29.9% compared to 33.5%;
-- Consolidated net loss was $(17.3) million compared to $(12.6) million;
-- Loss per diluted share was $(0.61) compared to $(0.56) per diluted
share;
-- Adjusted EBITDA was $(8.0) million compared to $(7.4) million;
-- Cash and cash equivalents were $4.0 million and restricted cash was $0.5
million at December 31, 2018;
-- Power and Electromechanical (P&EM) segment unaudited backlog was $21.8
million at December 31, 2018 compared to $20.2 million at December 31,
2017;
-- Energy segment unaudited backlog was $15.7 million at December 31, 2018
compared to $12.6 million at December 31, 2017.
Fourth Quarter 2018 vs. Fourth Quarter 2017
-- Revenue was $27.0 million compared to $21.1 million;
-- Gross profit was $6.4 million compared to $6.5 million;
-- Gross margin was 23.9% compared to 30.9%
-- Consolidated net loss was $(7.8) million compared to $(5.3) million;
-- Loss per diluted share was $(0.27) compared to $(0.20) per diluted
share;
-- Adjusted EBITDA was $(2.1) million compared to $(2.3) million.
Note 2: Full year 2018 financial results include a $4.3 million impairment of goodwill ($3.1 million impairment to goodwill during the fourth quarter of 2018), a $1.5 million impairment to deposits and other assets included in cost of revenues and an inventory reserve of $1.4 million related to slow-moving inventory that reflect slower than anticipated revenue growth and delays associated with existing customer contracts that have not yet resumed in the Energy segment.
Subsequent Events:
-- CUI Inc. and CUI-Canada secured a binding commitment from Bank of
America Merrill Lynch on a revolving line of credit of up to $10
million. The new credit facility will replace the Company's existing
U.S.-based revolver facility and UK-based overdraft facility with more
favorable terms. The Company expects this loan to be closed by April 30,
2019;
-- The Company agreed to terms with Virtual Power Systems (VPS) for an
approximately 20% equity interest in VPS. In exchange for the equity
interest, CUI Global will invest another $345 thousand into VPS, convert
its $655 thousand of convertible notes receivable to equity, and
contribute ICE-related inventory, lab equipment, certifications,
intellectual property and other related assets into VPS. In conjunction
with the new equity position, CUI Global will receive a board seat and
also place an observational non-voting advisor to the VPS board.
2018 Fourth Quarter Highlights:
-- CUI Global announced that its wholly-owned energy division, Orbital Gas
Systems ("Orbital"), secured purchase orders for integration projects
totaling $3.3 million from a single customer;
-- The Company announced the sale and leaseback of its corporate
headquarters in Tualatin, Oregon. Net proceeds to CUI Global were $4.2
million after expenses and the payoff of a mortgage note payable and
interest rate swap derivative.
Fiscal 2018 Financial Performance Summary: (ASC Topic 605 basis)
-- Total revenues would have been $91.4 million compared to $83.3 million;
-- Gross profit would have been $26.9 million compared to $27.9 million;
-- Gross margin would have been 29.4% compared to 33.5%;
-- Consolidated net loss would have been $(19.1) million compared to
$(12.6) million; and
-- Loss per basic share would have been $(0.67) compared to $(0.56) per
basic share.
Fourth Quarter 2018 Financial Performance Summary: (ASC Topic 605 basis)
-- Total revenues would have been $24.3 million compared to $21.1 million;
-- Gross profit would have been $6.1 million compared to $6.5 million;
-- Gross margin would have been 25.0% compared to 30.9%;
-- Consolidated net loss would have been $(8.1) million compared to $(5.3)
million; and
-- Loss per basic share would have been $(0.28) compared to $(0.20) per
basic share.
"We delivered record revenues and are reporting a very strong consolidated backlog exiting 2018 while executing on initiatives across our two business segments to sustain our growth trajectory," stated William Clough, president and CEO of CUI Global. "P&EM segment profitability increased on 19% higher revenue driven by broad-based strength across our product lines. Notably, we secured our first ICE Block award and initiated a proof of concept trial with SAP's Co-Innovation Lab that we take as confirmation by a marketplace leader of the ICE platform's market potential and validation of the platform's unique approach to data center power utilization. In our Energy business, our new, larger facility in Houston and the passage of a biomethane feed-in tariff in the U.K. resulted in segment revenue up 8%. We progressed opportunities in North American and Western Europe for direct sales of our gas technology solutions and globally through our new distribution channel with SAMSON. Finally, we bolstered our resources to fund our growth goals through the sale of the Tualatin facility.
"In 2019, we moved to secure additional non-dilutive capital with a $10 million line of credit with Bank of America Merrill Lynch that ensures we can continue to execute on our growth strategy without losing a step," continued Mr. Clough. "We also secured an equity investment in VPS that will enable us to monetize growing adoption of VPS' software-defined power platform beyond power utilization to include compute, storage and networking resources within data centers while continuing to supply ICE Switch and ICE Block for data center operators."
Concluded Mr. Clough, "Looking ahead, our optimism for continued growth is founded in a broadened Energy opportunity-set and continued strong P&EM performance. As the evolution of the global energy mix towards less carbon-intensive sources gains pace, we have positioned our gas technology solutions to take advantage of the shift towards natural gas and renewable natural gases (RNG), such as biomethane. The regulatory environment is also becoming increasingly favorable as energy authorities globally advance pipeline reform that include RNGs. Against this backdrop we remain focused on driving further adoption of our gas technology solutions: California's recent adoption of a biomethane procurement program advances the state's environmental and energy policies and should catalyze demand for our biomethane-to-grid solutions, joining an already robust biomethane market in the U.K.; the certification process for GasPT with a leading global turbine manufacturer has resumed, and we have line-of-sight to a limited-scale public utility deployment in North America; and our strategic partnership with SAMSON puts GasPT in front of every energy operator of significance globally."
Conference Call
Management will host a conference call today, March 18, 2019 at 4:30 PM ET to discuss these results as well as recent corporate developments. After management's opening remarks, there will be a question and answer period. To access the call, please dial (888) 734-0328 and provide conference ID 6496402. For international callers, please dial (678) 894-3054. The live webcast of the conference call and accompanying slide presentation can be accessed through the 'Events & Presentations' page of the CUI Global Investor Relations website (www.cuiglobal.com).
For those unable to attend the live call, a telephonic replay will be available until April 3, 2019. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 6496402. An archived copy of the webcast and slide presentation will also be available on the 'Events & Presentations' page of the CUI Global Investor Relations website.
About CUI Global, Inc.
Delivering Innovative Technologies for an Interconnected World . . . . .
CUI Global, Inc. is a publicly traded company dedicated to maximizing shareholder value through the acquisition and development of innovative companies, products and technologies. From Orbital Gas Systems' advanced GasPT2 platform targeting the energy sector, to CUI Inc.'s digital power platform serving the networking and telecom space, CUI Global and its subsidiaries have built a diversified portfolio of industry leading technologies that touch many markets. As a publicly traded company, shareholders are able to participate in the opportunities, revenues, and profits generated by the products, technologies, and market channels of CUI Global and its subsidiaries. But most importantly, a commitment to conduct business with a high level of integrity, respect, and philanthropic dedication allows the organization to make a difference in the lives of their customers, employees, investors and global community.
For more information please visit www.cuiglobal.com.
Important Cautions Regarding Forward Looking Statements
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in the forward-looking statements. The Company may experience significant fluctuations in future operating results due to a number of economic, competitive, and other factors, including, among other things, our reliance on third-party manufacturers and suppliers, government agency budgetary and political constraints, new or increased competition, changes in market demand, and the performance or reliability of our products. These factors and others could cause operating results to vary significantly from those in prior periods, and those projected in forward-looking statements. Additional information with respect to these and other factors, which could materially affect the Company and its operations, are included in certain forms the Company has filed with the Securities and Exchange Commission.
Media Contact:
External IR Counsel:
CUI Global, Inc.
LHA Investor Relations
Jeff Schnabel
Sanjay M. Hurry
Main: 503-612-2300
212-838-3777
press@cuiglobal.com
cuiglobal@lhai.com
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- Financial Tables to Follow -
CUI Global, Inc.
Consolidated Balance Sheets
December 31, December 31,
(In thousands, except
share and per share
data) 2018 2017
---
Assets:
Current Assets:
Cash and cash
equivalents $
3,979 $
12,646
Trade accounts receivable, net of
allowance of $167
and $135, respectively 14,416 10,833
Inventories, net of
allowance of $2,495
and $946,
respectively 13,042 13,892
Contract assets 1,744 2,299
Note receivable,
current portion 318 13
Prepaid expenses and
other 1,982 1,593
Total current assets 35,481 41,276
Property and equipment, less
accumulated depreciation of
$4,234 and $4,155, respectively 5,973 11,242
Goodwill 13,089 17,641
Other intangible assets, less
accumulated amortization of $13,190
and $11,900,
respectively 13,861 15,568
Restricted cash 523
Note receivable, less
current portion - 317
Convertible notes
receivable 655
Deposits and other
assets 585 1,865
Total assets $
70,167 $
87,909
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable $
6,480 $
5,110
Short-term overdraft
facility 1,344
Line of credit 979
Mortgage note payable,
current portion - 94
Accrued expenses 4,851 4,186
Contract liabilities 2,226 8,829
Refund liabilities 2,417 695
Deferred gain on
leaseback, current
portion 289
Total current
liabilities 18,586 18,914
Long term note
payable, related
party 5,304 5,304
Long term mortgage
note payable, less
current portion - 3,256
Derivative liability - 356
Deferred tax
liabilities 1,922 2,414
Deferred gain on
leaseback, less
current portion 2,599
Other long-term
liabilities 218 179
Total liabilities 28,629 30,423
Commitments and contingencies
Stockholders' Equity:
Preferred stock. par value $0.001;
10,000,000 shares authorized
no shares issued at
December 31, 2018 or
2017 -
Common stock, par value $0.001;
325,000,000 shares
authorized; 28,552,886 shares issued
and outstanding at
December 31, 2018 and 28,406,856 shares
issued and
outstanding at
December 31, 2017 29 28
Additional paid-in
capital 169,898 169,527
Accumulated deficit (123,993) (108,559)
Accumulated other
comprehensive loss (4,396) (3,510)
Total stockholders'
equity 41,538 57,486
Total liabilities and
stockholders' equity $
70,167 $
87,909
CUI Global, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share For the three months ended December
31, For the year ended December 31,
amounts)
2018 2017 2018 2017
---
Total revenues $
26,952 $
21,135 $
96,789 $
83,275
Cost of revenues 20,516 14,614 67,879 55,406
Gross profit 6,436 6,521 28,910 27,869
Operating expenses:
Selling, general and administrative 9,396 8,443 36,341 33,921
Depreciation and amortization 535 526 2,152 2,163
Research and development 714 605 2,802 2,525
Provision (credit) for bad debt 43 7 33 (13)
Impairment of goodwill and intangible assets 3,084 3,152 4,347 3,155
Other operating expenses 10 38 13 47
Total operating expenses 13,782 12,771 45,688 41,798
Loss from operations (7,346) (6,250) (16,778) (13,929)
Other (expense) income (213) 65 (251) 234
Interest expense (132) (126) (502) (500)
Loss before taxes (7,691) (6,311) (17,531) (14,195)
Income tax expense (benefit) 74 (1,046) (206) (1,606)
Net loss (7,765) $
(5,265) $
(17,325) $
(12,589)
Basic and diluted weighted average number of shares
outstanding 28,547,149 26,635,684 28,517,339 22,397,865
Basic and diluted loss per common share $
(0.27) $
(0.20) $
(0.61) $
(0.56)
CUI Global, Inc.
Consolidated Statements of Cash Flows
(in thousands) For the year ended December 31,
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $
(17,325) $
(12,589)
Adjustments to reconcile net loss to net
cash used in
operating activities:
Depreciation 1,103 1,009
Amortization of
intangibles 1,902 1,841
Stock issued and stock
to be issued for
compensation,
royalties and services 229 425
Non-cash gain and
unrealized gain on
derivative liability (129) (111)
Non-cash royalties,
net (7) (3)
Provision (credit) for
bad debt expense 33 (13)
Deferred income taxes (352) (1,767)
Non-cash unrealized
foreign currency loss
(gain) 246 (362)
Impairment of goodwill
and intangible assets 4,347 3,155
Inventory reserves 1,592 138
Impairment of deposits
and other assets 1,509
Loss on disposal of
assets 13 47
(Increase) decrease in operating assets:
Trade accounts
receivable (3,841) (1,150)
Inventories (2,235) (411)
Contract assets (61) 591
Prepaid expenses and
other current assets (392) (421)
Deposits and other
assets (59) (506)
Increase (decrease) in operating
liabilities:
Accounts payable 1,436 (1,163)
Accrued expenses 1,116 (464)
Refund liabilities 852 130
Contingent
consideration - 3
Contract liabilities (2,260) 2,252
NET CASH USED IN
OPERATING ACTIVITIES (12,283) (9,369)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on sale of
building, net 7,720
Payment for restricted
investment (400)
Purchase of property
and equipment (1,042) (893)
Proceeds from sale of
property and equipment - 8
Investments in other
intangible assets (492) (638)
Investment in
convertible notes
receivable (655)
Proceeds from notes
receivable 19 39
NET CASH PROVIDED BY
(USED IN) INVESTING
ACTIVITIES 5,150 (1,484)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from overdraft
facility 19,532 9,782
Payments on overdraft
facility (18,122) (9,782)
Proceeds from line of
credit 19,955 22,332
Payments on line of
credit (18,976) (22,332)
Payments on capital
lease obligations (3) (29)
Payments on mortgage
note payable (3,350) (89)
Payment to closeout
derivative liability (227)
Payments on contingent
consideration (45) (61)
Proceeds from sales of
common stock, net of
offering costs - 18,905
NET CASH (USED IN)
PROVIDED BY FINANCING
ACTIVITIES (1,236) 18,726
Effect of exchange rate
changes on cash 225 156
Net (decrease) increase
in cash, cash
equivalents and
restricted cash (8,144) 8,029
Cash, cash equivalents
and restricted cash at
beginning of year 12,646 4,617
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH AT
END OF YEAR $
4,502 $
12,646
Reconciliation of Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) are non-GAAP financial measures and are reconciled in the table below. These non-GAAP financial measures do not represent funds available for management's discretionary use and is not intended to represent cash flow from operations. EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) should not be construed as a substitute for net loss or as a better measure of liquidity than cash flow from operating activities, which is determined in accordance with United States generally accepted accounting principles ("GAAP"). EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) exclude components that are significant in understanding and assessing the company's results of operations and cash flows. In addition, EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) are not terms defined by GAAP and as a result our measure of EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) might not be comparable to similarly titled measures used by other companies. However, EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) are used by management to evaluate, assess and benchmark the company's operational results and the company believes EBITDA, Adjusted EBITDA, and Adjusted Net Income (loss) are relevant and useful information which are often reported and widely used by analysts, investors and other interested parties in the Company's industry. Accordingly, the Company is disclosing this information to permit a more comprehensive analysis of its operating performance, to provide an additional measure of performance and liquidity and to provide additional information with respect to the Company's ability to meet future debt service, capital expenditure and working capital requirements. Adjusted Net Income (loss) eliminates the amortization expenses associated with intangible assets acquired with Orbital Gas Systems Limited and CUI-Canada, as well as non-cash expenses associated with impairments and stock and stock options for compensation, royalties and services during the period.
(In thousands)
(Unaudited) For the Three Months Ended
For the year ended
December 31
December 31
2018 2017 2018 2017
EBITDA:
Net (loss) $
(7,765) $
(5,265) $
(17,325) $
(12,589)
Plus: Interest
expense 132 126 502 500
Plus: (Benefit)
provision for taxes 74 (1,046) (206) (1,606)
Plus: Depreciation
and amortization 760 718 3,005 2,850
EBITDA $
(6,799) $
(5,467) $
(14,024) $
(10,845)
Adjusted EBITDA:
Plus: Bad debt 43 7 33 (13)
Plus: Impairment of
goodwill and
intangible assets 3,084 3,152 4,347 3,155
Plus: Impairment of
Energy segment
deposits and other
assets 1,509 1,509
Non-cash loss (gain)
and unrealized gain
on derivative
liability 35 (56) (129) (111)
Plus: Stock and
options issued and
stock to be issued
for compensation,
royalties and
services 41 112 229 425
Adjusted EBITDA $
(2,087) $
(2,252) $
(8,035) $
(7,389)
Adjusted net income
(loss):
Net (loss) $
(7,765) $
(5,265) $
(17,325) $
(12,589)
Plus: Impairment of
goodwill and
intangible assets 3,084 3,152 4,347 3,155
Plus: Impairment of
Energy segment
deposits and other
assets 1,509 1,509
Plus: Amortization
expense of Orbital
and CUI - 297 316 1,233 1,232
Canada acquisition
intangibles
Plus: Stock and
options issued and
stock to be issued
for compensation,
royalties and
services 41 112 229 425
Adjusted net income
(loss) $
(2,834) $
(1,685) $
(10,007) $
(7,777)
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SOURCE CUI Global, Inc.
