CUI Global Reports Third Quarter 2019 Financial Results
TUALATIN, Ore., Nov. 12, 2019 /PRNewswire/ -- CUI Global, Inc. (NASDAQ: CUI), (the "Company") today reported unaudited financial results for the three and nine months ended September 30, 2019.
Note: In accordance with ASC 360-10 Impairment and Disposal of Long-Lived Assets and ASC 205-20 Discontinued Operations, as a result of CUI Global's divestiture of its Electromechanical components business on September 30, 2019, and the classification of the majority of the remaining assets and liabilities that comprise the Power and Electromechanical segment, as held for sale within 12 months the Company has reclassified its Power and Electromechanical segment as discontinued operations for the three and nine-month periods ended September 30, 2019 and September 30, 2018. As a result, the review of the third quarter results presented here focuses on the Company's continuing operations, which consists of its Energy segment. On November 8, 2019, the Company entered into an asset purchase agreement to sell the majority of its Power business for $32.0 million.
Third Quarter 2019 Unaudited Financial Performance Summary: (comparisons to prior year period)
-- Total revenues were $6.1 million compared to $5.2 million;
-- Gross profit was $1.4 million compared to $1.3 million;
-- Gross margin was 23.4% compared to 25.6%;
-- Operating loss was $3.7 million compared to an operating loss of $3.3
million.
Nine Months 2019 Unaudited Financial Performance Summary: (comparisons to prior year period)
-- Total revenues were $17.8 million compared to $12.9 million;
-- Gross profit was $4.3 million compared to $3.0 million;
-- Gross margin was 24.3% compared to 23.6%;
-- Operating loss was $11.1 million compared to an operating loss of $13.3
million.
Balance Sheet and Backlog Summary:
-- Cash and cash equivalents were $1.7 million at September 30, 2019.
-- Debt as of September 30, 2019 was $0.9 million including $0.7 million on
a line of credit that is classified as liability held for sale.
-- Energy segment backlog was $10.8 million at September 30, 2019 as
compared to $15.7 million at December 31, 2018.
Financial Accounting Standard Board Accounting Standard Update 2016-02
Effective January 1, 2019, the Company adopted Financial Accounting Standard Board Accounting Standard Update 2016-02, Leases (Topic 842), which requires lessee recognition of lease assets and lease liabilities on the balance sheet, at the beginning of fiscal 2019. As a result of the new lease standard, at September 30, 2019, $5.6 million was included with non-current assets, $0.8 million with current liabilities and $5.0 million with non-current liabilities, on the condensed consolidated balance sheets.
"Our third quarter results reflect continued strength in our engineering and integration services in North America that offset lower revenue from our U.K. operations due to the continued headwinds associated with Brexit," said William Clough, executive chairman of CUI Global. "We also took steps to unlock the value of our Power and Electromechanical segment in support of CUI Global's strategy to become a diversified energy infrastructure services company. We completed the sale of our Electromechanical components business during the quarter and yesterday announced the sale of the majority of our remaining Power business to Bel Fuse for $32 million. With these transactions, we move forward with a recast balance sheet and the financial resources to support the company's Energy-centric growth strategy with Jim O'Neil as CEO."
Jim O'Neil, vice chairman and CEO of CUI Global, stated, "Secular trends in the oil and natural gas, electric power and telecommunications industries have created a sustained market opportunity that is ripe for a market entrant with a differentiated value proposition and disciplined acquisition strategy. With the divestiture of the majority Power and Electromechanical segment, we turn our full attention to executing on our strategy to diversify our Energy business into the infrastructure services market and build a recurring revenue and earnings stream through acquisitions and organic growth. With CUI Global as the foundation of a diversified platform for growth, we believe we have the right strategy and the financial means to establish the company as an industry leader and support a sustainable growth trajectory."
Conference Call
Management will host a conference call today, November 12, 2019 at 5:00 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 3962226. 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 November 28, 2019. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 3962226. 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 to create a diversified energy services platform. CUI Global's Energy business, Orbital Gas Systems is a leader in innovative gas solutions with more than 30 years of experience in design, installation and the commissioning of industrial gas sampling, measurement and delivery systems providing solutions to the energy, power and processing markets. Orbital Gas Systems manufactures and delivers a broad range of technologies including environmental monitoring, gas metering, process control, telemetry, gas sampling and BioMethane. As a publicly traded company, shareholders can participate in the opportunities, revenues, and profits generated by the products, technologies, and market channels of CUI Global and its subsidiaries. But most important, 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: http://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.
CUI Global Investor Relations Counsel:
LHA Investor Relations
Sanjay M. Hurry
T: 212-838-3777
cuiglobal@lhai.com
CUI Global, Inc.
Condensed Consolidated Balance Sheets
September 30, December 31,
(in thousands, except
share and per share
amounts) 2019 2018
---
(unaudited)
Assets:
Current Assets:
Cash and cash
equivalents $
1,728 $
3,979
Trade accounts receivable, net of
allowance of $25
and $17, respectively 4,589 5,034
Inventories 1,580 1,622
Contract assets 2,567 1,744
Note receivable,
current portion - 318
Prepaid expenses and
other current assets 1,462 1,512
Assets held for sale -
current 30,486 21,272
Total current assets 42,412 35,481
Property and equipment, less
accumulated depreciation of
1,284 and $1,182,
respectively 4,211 4,536
Investment in VPS -
equity method 5,198
Right of use assets -
Operating leases 5,615
Other intangible assets, less
accumulated amortization of $9,462
and $8,889,
respectively 4,271 5,314
Restricted cash - 523
Note receivable -
related party 3,183
Convertible note
receivable - 655
Deposits and other
assets 69 508
Assets held for sale -
noncurrent - 23,150
Total assets $
64,959 $
70,167
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable $
3,096 $
1,520
Short-term overdraft
facility - 1,344
Notes payable -
current 269
Operating lease
obligations -current
portion 754
Accrued expenses 2,599 1,893
Contract liabilities 2,222 1,956
Deferred gain on
leaseback, current
portion - 289
Liabilities held for
sale -current 10,059 11,584
Total current
liabilities 18,999 18,586
Operating lease
obligations, less
current portion 4,977
Deferred tax
liabilities 1,584 1,914
Deferred gain on
leaseback, less
current portion - 2,599
Liabilities held for
sale -noncurrent - 5,327
Other long-term
liabilities 166 203
Total liabilities 25,726 28,629
Commitments and contingencies
Stockholders' Equity:
Preferred stock, par value $0.001;
10,000,000 shares authorized;
no shares issued at
September 30, 2019 or
December 31, 2018 -
Common stock, par value $0.001;
325,000,000 shares
authorized; 28,680,260 shares issued
and outstanding at
September 30, 2019 and 28,552,886
shares issued and
outstanding at
December 31, 2018 29 29
Additional paid-in
capital 170,049 169,898
Accumulated deficit (126,685) (123,993)
Accumulated other
comprehensive loss (4,160) (4,396)
Total stockholders'
equity 39,233 41,538
Total liabilities and
stockholders' equity $
64,959 $
70,167
CUI Global, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per For the three months ended September For the nine months ended September
share amounts) 30, 30,
2019 2018 2019 2018
---
Total revenues $
6,073 $
5,155 $
17,793 $
12,908
Cost of revenues 4,652 3,834 13,464 9,860
Gross profit 1,421 1,321 4,329 3,048
Operating expenses:
Selling, general and
administrative 4,793 4,222 14,092 13,773
Depreciation and
amortization 359 382 1,136 1,145
Research and development 20 47 123 116
Provision (credit) for bad
debt (18) 4 110 5
Impairment of goodwill - 1,263
Other operating income (11) (13)
Total operating expenses 5,143 4,655 15,448 16,302
Continuing loss from
operations (3,722) (3,334) (11,119) (13,254)
Loss from equity method
investment in VPS (354) (710)
Fair value gain on equity
method investment - 629
purchase
Other income (expense) (463) (43) (575) (79)
Interest expense (4) (60) (35) (164)
Loss from continuing
operations before taxes (4,543) (3,437) (11,810) (13,497)
Income tax benefit (1,310) (396) (1,598) (1,042)
loss from continuing
operations (3,233) (3,041) (10,212) (12,455)
Discontinued operations
Income from operations of
discontinued 3,944 1,760 5,598 3,656
electromechanical components business
(including
gain on disposal of $3,631)
Income tax expense 1,023 253 966 762
Income from discontinued
operations 2,921 1,507 4,632 2,894
Net loss $
(312) $
(1,534) $
(5,580) $
(9,561)
Basic and diluted weighted average
common shares outstanding 28,691,206 28,527,234 28,636,918 28,507,286
Loss from continuing
operations per common share $
(0.11) $
(0.11) $
(0.35) $
(0.44)
- basic and diluted
Earnings from discontinued
operations -basic and 0.10 0.06 0.16 0.10
diluted
Earnings per common share -
basic and diluted $
(0.01) $
(0.05) $
(0.19) $
(0.34)
CUI Global, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands) For the nine months ended September
30,
2019 2018
---
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $
(5,580) $
(9,561)
Adjustments to reconcile net loss to net cash
used in
operating activities:
Depreciation 645 816
Amortization of intangibles 1,326 1,429
Stock issued and stock to be
issued for compensation,
royalties and services 155 188
Unrealized gain on
derivative liability - (164)
Non-cash loss on equity
method investment in VPS 710
Non-cash fair value gain on
equity method investment
purchase (629)
Gain on sale of
electromechanical
components business (3,631)
Provision for (credit to)
bad debt expense 90 (10)
Deferred income taxes (644) (352)
Inventory reserve 135 274
Non-cash unrealized foreign
currency gains 614 135
Impairment of goodwill - 1,263
(Gain) loss on disposal of
assets (13) 3
(Increase) decrease in operating assets:
Trade accounts receivable 1,196 (1,439)
Inventories (31) (3,727)
Contract assets (891) 160
Prepaid expenses and other
current assets 362 (285)
Right of use assets -
Operating leases 743
Deposits and other assets (248) 13
Increase (decrease) in operating liabilities:
Accounts payable 2,406 520
Operating lease liabilities (687)
Accrued expenses (122) 684
Refund liabilities (367) 953
Contract liabilities 246 (853)
NET CASH USED IN OPERATING
ACTIVITIES (4,215) (9,953)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment (278) (644)
Proceeds from sale of
property and equipment 14
Cash paid for other
intangible assets (269) (348)
Cash paid for convertible
notes receivable - (500)
Cash paid for equity-method
Investment (1,615)
Proceeds from Notes
receivable 313
Proceeds from sale of
restricted investment 400
Proceeds from components
division sale 4,696
NET CASH PROVIDED BY (USED
IN) INVESTING ACTIVITIES 3,261 (1,492)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from overdraft
facility 6,842 13,895
Payments on overdraft
facility (8,208) (12,570)
Proceeds from line of credit 20,889 6,696
Payments on line of credit (21,188) (6,039)
Payments on financing lease
obligations (3) (2)
Payments on mortgage note
payable - (71)
Payments on notes payable (88)
Payments on contingent
consideration - (45)
NET CASH (USED IN) PROVIDED
BY FINANCING ACTIVITIES (1,756) 1,864
Effect of exchange rate
changes on cash (64) 148
Net decrease in cash, cash
equivalents and restricted
cash (2,774) (9,433)
Cash, cash equivalents and
restricted cash at
beginning of period 4,502 12,646
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $
1,728 $
3,213
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 stock and stock options for compensation, royalties and services during the period, impairment of goodwill, the non-cash gains and loss on the Company's equity-method investment and the non-cash gain on the sale of a discontinued operation.
(in thousands)
For the Three Months Ended
For the nine months ended
September 30,
September 30,
2019 2018 2019 2018
EBITDA *:
Net loss $
(312) $
(1,534) $
(5,580) $
(9,561)
Plus: Interest
expense 105 132 309 370
Plus: Income tax
expense (benefit) (287) (143) (632) (280)
Plus: Depreciation
and amortization 602 742 1,971 2,245
EBITDA 108 (803) (3,932) (7,226)
Adjusted EBITDA *:
Gain on disposal of
discontinued
operation (3,631) (3,631)
Plus: Provision
(credit) for bad
debt (48) 24 90 (10)
Plus: Impairment of
goodwill 1,263
Plus: Unrealized
gain on derivative (38) (164)
Plus: Stock and
options issued and
stock to be issued
for 44 42 155 188
compensation,
royalties and
services
Fair value gain on
equity method
investment purchase (629)
Plus: Non-cash loss
on equity-method
investment 354 710
Adjusted EBITDA $
(3,173) $
(775) $
(7,237) $
(5,949)
Adjusted net loss *:
Net loss $
(312) $
(1,534) $
(5,580) $
(9,561)
Gain on disposal of
discontinued
operation (3,631) (3,631)
Plus: Impairment of
goodwill 1,263
Plus: Amortization
expense of Orbital
and CUI - 286 300 883 936
Canada acquisition
intangibles
Plus: Stock and
options issued and
stock to be issued
for 44 42 155 188
compensation,
royalties and
services
Fair value gain on
equity method
investment purchase (629)
Plus: Non-cash loss
on equity-method
investment 354 710
Adjusted net loss $
(3,259) $
(1,192) $
(8,092) $
(7,174)
* Includes the combined totals from continuing and discontinued operations.
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SOURCE CUI Global, Inc.
