Orbital Energy Group Reports Third Quarter 2020 Financial Results

HOUSTON, Nov. 16, 2020 /PRNewswire/ -- Orbital Energy Group, Inc. (Nasdaq: OEG) ("Orbital Energy" or the "Company") today reported unaudited financial results for the three and nine months ended September 30, 2020.

Financial and Operating Highlights:

    --  Reported total revenues of $13.6 million for the third quarter of 2020,
        compared to $6.1 million for the third quarter of 2019, an increase of
        124%, primarily attributable to the addition of Reach Construction Group
        ("Reach") and the Company's Orbital Power Services group;
    --  Gross profit was $2.4 million for the third quarter of 2020, compared to
        $1.4 million for the third quarter of 2019 with the improvement mainly
        due to increased revenues; this improvement is expected to persist
        throughout the remainder of 2020 and into 2021;
    --  Gross margin was 17.3% for the third quarter of 2020, compared to 23.4%
        for the third quarter of 2019;
    --  Operating loss was $6.3 million for the third quarter of 2020, compared
        to $3.7 million in the prior year period, mainly due to higher SG&A
        expenses associated with Orbital Power Services and the addition of
        Reach during the second quarter;
    --  Held Cash and cash equivalents of $4.1 million and Restricted cash of
        $3.6 million as of September 30, 2020; and
    --  Total backlog was $52.0 million at September 30, 2020, up from $46.4
        million at June 30, 2020, reflecting backlog growth at both Reach
        Construction and Orbital Power Services.

Commentary

"In the third quarter, we continued our evolution into a diversified infrastructure services provider," said Jim O'Neil, vice chairman and CEO of Orbital Energy. "Our recently acquired solar engineering, procurement, and construction services company, Reach Construction Group, is engaged for multiple, utility scale solar programs starting in the fourth quarter and has a robust pipeline of additional project opportunities. Further, our new Orbital Power Services division, which focuses on electric transmission and distribution services, keeps gaining traction and increasing industry recognition. This resulted in several storm-related projects, which generated additional revenues for us in the third quarter and has extended into the fourth quarter."

Mr. O'Neil added, "As utilities continue to integrate renewable generation into their transmission and distribution systems, we believe it is imperative that infrastructure providers have the technology, expertise and construction resources they need to conduct these multi-faceted projects while adhering to increasing environmental, social and governance (ESG) standards. Looking ahead, we expect customer activity will continue to increase, as conditions improve since the onset of COVID-19 and renewable energy trends drive utilities' capital investment plans. We believe Orbital Energy Group is well suited to meet these needs, with our ability to offer a diverse service offering for these growing industry demands."

Conference Call

Management will host a conference call today, November 16, 2020 at 8:30 AM 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 6598596. 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 Orbital Energy Investor Relations website (www.orbitalenergygroup.com).

For those unable to attend the live call, a telephonic replay will be available until December 2, 2020. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 6598596. An archived copy of the webcast and slide presentation will also be available on the 'Events & Presentations' page of the Orbital Energy Investor Relations website.

About Orbital Energy Group

Orbital Energy Group, Inc. (Nasdaq: OEG), formerly known as CUI Global, Inc., is creating a diversified infrastructure services platform through the acquisition and development of innovative companies. Orbital Energy's group of businesses includes: Orbital Gas Systems, Inc., Orbital Power Services and Orbital Solar Services. Orbital Gas Systems is a 30-year leader in innovative gas solutions, serving the energy, power and processing markets through the design, installation and commissioning of industrial gas sampling, measurement and delivery systems. Orbital Power Services provides engineering, construction, maintenance and emergency response solutions to the power, utilities and midstream markets. Orbital Solar Services provides engineering, procurement and construction ("EPC") expertise in the renewable energy industry and established relationships with solar developers and panel manufacturers in the utility scale solar market. As a publicly traded company, Orbital Energy is dedicated to maximizing shareholder value. But most important, our 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.orbitalenergygroup.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 regarding 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.

Investor Relations:
KCSA Strategic Communications
David Hanover
T: 212-896-1220
orbital@kcsa.com




                                                                                                       
          Orbital Energy Group, Inc.




                                                                                                     
       Condensed Consolidated Balance Sheets




                                                                                                             
            (Unaudited)




                                                                                                                                               September 30,               December 31,



            (in thousands, except share and per share amounts)                                                                                         2020                        2019






            Assets:



            Current Assets:



            Cash and cash equivalents                                                                                                                        $
         4,060               $
          23,351



            Restricted cash - current                                                                                                                               2,562



            Trade accounts receivable, net of allowance of $63 and $47 at September 30, 2020 and                                                                   12,498                        5,290
    December 31, 2019, respectively



            Inventories                                                                                                                                             1,117                        1,631



            Contract assets                                                                                                                                         6,090                        2,314



            Note receivable, current portion                                                                                                                           44



            Prepaid expenses and other current assets                                                                                                               4,263                        2,215



            Assets held for sale - current                                                                                                                          6,482                        6,893




            Total current assets                                                                                                                                   37,116                       41,694







            Property and equipment, less accumulated depreciation of $1,972 and $1,441 at                                                                           5,776                        4,454
    September 30, 2020 and December 31, 2019, respectively



            Investments                                                                                                                                               741                        4,865



            Right of use assets - Operating leases                                                                                                                  6,990                        5,524



            Goodwill                                                                                                                                                7,006



            Other intangible assets, net                                                                                                                           14,887                        4,298



            Restricted cash                                                                                                                                         1,026



            Note receivable                                                                                                                                         3,525                        3,253



            Deposits and other assets                                                                                                                               1,306                           70




            Total assets                                                                                                                                    $
         78,373               $
          64,158






            Liabilities and Stockholders' Equity:



            Current Liabilities:



            Accounts payable                                                                                                                                $
         16,712                $
          2,904



            Notes payable, current                                                                                                                                  3,979                          473



            Line of credit                                                                                                                                            451



            Operating lease obligations - current portion                                                                                                           1,704                          821



            Accrued expenses                                                                                                                                        5,285                        5,159



            Contract liabilities                                                                                                                                    8,047                        1,668



            Liabilities held for sale, current                                                                                                                      3,894                        4,970




            Total current liabilities                                                                                                                              40,072                       15,995



            Notes payable, less current portion                                                                                                                     7,383



            Operating lease obligations, less current portion                                                                                                       5,282                        4,852



            Contingent consideration                                                                                                                                  720



            Other long-term liabilities                                                                                                                               287                          194




            Total liabilities                                                                                                                                      53,744                       21,041






            Commitments and contingencies





            Stockholders' Equity:



            Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at
    September 30, 2020 or December 31, 2019



            Common stock, par value $0.001; 325,000,000 shares authorized; 30,773,748 shares                                                                           31                           29
    issued and 30,420,685 shares outstanding at September 30, 2020 and 28,736,436 shares
    issued and 28,383,373 shares outstanding at December 31, 2019



            Additional paid-in capital                                                                                                                            171,344                      170,106



            Treasury stock at cost; 353,063 shares held at September 30, 2020 and December 31, 2019                                                                 (413)                       (413)



            Accumulated deficit                                                                                                                                 (142,142)                   (122,234)



            Accumulated other comprehensive loss                                                                                                                  (4,191)                     (4,371)




            Total stockholders' equity                                                                                                                             24,629                       43,117




            Total liabilities and stockholders' equity                                                                                                      $
         78,373               $
          64,158


                                                                                               
              Orbital Energy Group, Inc.



                                                                                            
      Condensed Consolidated Statements of Operations




                                                                                                      
              (Unaudited)




                                                                        
     For the Three Months                                        
              For the Nine Months



              (in thousands, except share and per share amounts)       
     Ended September 30,                                         
              Ended September 30,



                                                                                          2020                                              2019                                      2020                 2019






              Revenues                                                                              $
              13,615                                                $
           6,073          $
           27,078      $
            17,793





              Cost of revenues                                                                                  11,261                                                         4,652                   23,121                13,464






              Gross profit                                                                                       2,354                                                         1,421                    3,957                 4,329






              Operating expenses:



              Selling, general and administrative expense                                                        7,179                                                         4,793                   21,158                14,092



              Depreciation and amortization                                                                      1,454                                                           365                    3,285                 1,154



              Research and development                                                                               6                                                            20                       51                   123



              Provision for bad debt                                                                                15                                                          (18)                      23                   110



              Other operating (income) expense                                                                      23                                                          (11)                      23                  (13)






              Total operating expenses                                                                           8,677                                                         5,149                   24,540                15,466






              Continuing loss from operations                                                                  (6,323)                                                      (3,728)                (20,583)             (11,137)





              Other (expense) income                                                                               860                                                         (461)                      62                 (566)



              Interest expense                                                                                   (333)                                                          (4)                   (469)                 (35)






              Loss from continuing operations before income taxes and                                          (5,796)                                                      (4,193)                (20,990)             (11,738)
    equity in net loss of affiliate



              Net loss of affiliate                                                                                                                                           (354)                 (4,806)                (710)




              Loss from continuing operations before taxes                                                     (5,796)                                                      (4,547)                (25,796)             (12,448)





              Income tax benefit                                                                                  (61)                                                      (1,311)                 (3,211)              (1,765)






              Loss from continuing operations, net of income taxes                                             (5,735)                                                      (3,236)                (22,585)             (10,683)






              Discontinued operations



              Income from operations of discontinued power and                                                   3,403                                                         3,948                    3,512                 6,236
    electromechanical businesses



              Income tax expense                                                                                   870                                                         1,024                      835                 1,133




              Income from discontinued operations, net of income taxes                                           2,533                                                         2,924                    2,677                 5,103






              Net loss                                                                             $
              (3,202)                                               $
           (312)       $
           (19,908)    $
            (5,580)






              Basic and diluted weighted average common shares                                              30,430,422                                                    28,691,206               29,761,135            28,636,918
    outstanding






              Loss from continuing operations per common share - basic                              $
              (0.19)                                              $
           (0.11)         $
           (0.76)     $
            (0.37)
    and diluted





              Income from discontinued operations - basic and diluted                                 $
              0.08                                                 $
           0.10            $
           0.09        $
            0.18






              Loss per common share - basic and diluted                                             $
              (0.11)                                              $
           (0.01)         $
           (0.67)     $
            (0.19)




                                                                                        
              Orbital Energy Group, Inc.



                                                                                   Condensed Consolidated Statements of Cash Flows




                                                                                           
              (Unaudited)




                                                                                                                                   
          For the Nine Months



     (in thousands)                                                                                                               
          Ended September 30,



                                                                                                                                     2020                         2019




     CASH FLOWS FROM OPERATING ACTIVITIES:



     Net loss                                                                                                                               $
              (19,908)      $
         (5,580)



     Adjustments to reconcile net loss to net cash used in operating activities:



     Depreciation                                                                                                                                            573                  645



     Amortization of intangibles                                                                                                                           3,043                1,326



     Amortization of note receivable discount                                                                                                              (214)



     Stock issued and stock to be issued for compensation, royalties and services                                                                             12                  155



     Non-cash loss on equity method investment in affiliate                                                                                                4,806                  710



     Non-cash fair value gain on equity method investment purchase                                                                                                             (629)



     Gain on sale of business                                                                                                                               (14)             (3,631)



     Provision for bad debt expense                                                                                                                           23                   90



     Deferred income taxes                                                                                                                               (1,195)               (644)



     Inventory reserve                                                                                                                                     (185)                 135



     Non-cash unrealized foreign currency losses                                                                                                             516                  614



     Gain on disposal of assets                                                                                                                               23                 (13)



     Change in operating assets and liabilities, net of effects of acquisition:



     Trade accounts receivable                                                                                                                           (3,273)               1,196



     Inventories                                                                                                                                           2,601                 (31)



     Contract assets                                                                                                                                       (526)               (891)



     Prepaid expenses and other current assets                                                                                                               286                  362



     Right of use assets - Operating leases                                                                                                              (1,157)                 743



     Deposits and other assets                                                                                                                           (1,184)               (248)



     Accounts payable                                                                                                                                        351                2,406



     Operating lease liabilities                                                                                                                           1,005                (687)



     Accrued expenses                                                                                                                                      1,264                (122)



     Refund liabilities                                                                                                                                                        (367)



     Contract liabilities                                                                                                                                  3,227                  246




     NET CASH USED IN OPERATING ACTIVITIES                                                                                                               (9,926)             (4,215)






     CASH FLOWS FROM INVESTING ACTIVITIES:



     Cash paid for acquisition, net of cash received                                                                                                     (2,981)



     Purchases of property and equipment                                                                                                                 (1,474)               (278)



     Cash paid for working capital adjustment on Power group disposition                                                                                 (2,804)



     Sale of discontinued operations, net of cash                                                                                                          (227)



     Proceeds from sale of property and equipment                                                                                                             94                   14



     Purchase of other intangible assets                                                                                                                    (10)               (269)



     Purchase of convertible notes receivable                                                                                                              (260)



     Purchase of investments                                                                                                                               (210)             (1,615)



     Proceeds from notes receivable                                                                                                                                              313



     Proceeds from sale of restricted investment                                                                                                                                 400



     Proceeds from electromechanical components business sale                                                                                                                  4,696




     NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                                                                                                 (7,872)               3,261






     CASH FLOWS FROM FINANCING ACTIVITIES:



     Proceeds from overdraft facility                                                                                                                                          6,842



     Payments on overdraft facility                                                                                                                                          (8,208)



     Proceeds from line of credit                                                                                                                            100               20,889



     Payments on line of credit                                                                                                                             (99)            (21,188)



     Payments on financing lease obligations                                                                                                                 (3)                 (3)



     Proceeds from notes payable                                                                                                                           3,864



     Payments on notes payable                                                                                                                           (1,747)                (88)




     NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                                                                                   2,115              (1,756)






     Effect of exchange rate changes on cash                                                                                                                (20)                (64)




     Net decrease in cash, cash equivalents and restricted cash                                                                                         (15,703)             (2,774)



     Cash, cash equivalents and restricted cash at beginning of period                                                                                    23,351                4,502






     CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD                                                                               $
              7,648         $
         1,728

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, CUI-Canada and Reach Construction as well as non-cash expenses associated with impairments, Gains on sale of businesses, non-cash gains and losses related to the Company's equity method investment in VPS and stock and stock options for compensation, royalties and services during the period.



              (in thousands)                                               For the Three Months Ended        For the Nine Months Ended



              (Unaudited)                                             
              September 30,             
         September 30,



                                                                       2020                            2019                             2020            2019




              EBITDA:



              Net loss                                                         $
              (3,202)              $
              (312)           $
      (19,908)    $
      (5,580)



              Plus Interest expense                                                            333                             105                     469             309



              Plus: (Benefit) provision for taxes                                              809                           (287)                (2,376)          (632)



              Plus: Depreciation and amortization                                            1,581                             602                   3,616           1,971




              EBITDA                                                             $
              (479)                $
              108            $
      (18,199)    $
      (3,932)







              Adjusted EBITDA:



              Minus: Gain on disposal of discontinued operation                               (14)                        (3,631)                   (14)        (3,631)



              Plus: Bad debt                                                                    15                            (48)                     23              90



              Plus: Stock and stock to be issued for compensation,                               5                              44                      12             155
    royalties and services



              Minus: Pretax gain on assets contributed as part of the                                                                                             (629)
    purchase of VPS



              Plus: Non-cash loss on equity method investment in VPS                                                          354                   4,806             710




              Adjusted EBITDA                                                    $
              (473)            $
              (3,173)           $
      (13,372)    $
      (7,237)



              Adjusted net income (loss):





              Net loss                                                $
     (3,202)   $
       (312)  $
     (19,908)   $
     (5,580)



              Minus: Gain on disposal of discontinued operation             (14)      (3,631)         (14)      (3,631)



              Plus: Amortization expense of Orbital, CUI-Canada and        1,316           286         2,872           883
    Reach Construction acquisition intangibles



              Plus: Stock and stock to be issued for compensation,             5            44            12           155
    royalties and services



              Minus: Pretax gain on assets contributed as part of the                                             (629)
    purchase of VPS



              Plus: Non-cash loss on equity method investment in VPS                      354         4,806           710




              Adjusted net loss                                       $
     (1,895) $
       (3,259)  $
     (12,232)   $
     (8,092)

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SOURCE Orbital Energy Group, Inc.