ENGlobal (Nasdaq: ENG), a leading provider of engineering and
automation services, today announced results for the first quarter
ended March 31, 2018.
ENGlobal reported a net loss of $1.2 million for
the first quarter of 2018 which was an increase in net loss of $0.3
million as compared to the prior year period. Net loss per diluted
share was $0.04 for the first quarter just ended as compared to a
net loss of $0.03 for the first quarter of 2017. ENGlobal reported
an improved loss from operations, which was $1.2 million for the
first quarter of 2018, a decrease of $0.5 million as compared to
the $1.7 million operating loss for the prior year period.
Revenue increased $0.7 million to $13.2 million,
or a 5.7% increase, from $12.5 million for the three months ended
March 31, 2018, as compared to the three months ended April 1,
2017. Overall, SG&A expenses declined by $0.8 million for the
three months ended March 31, 2018 as compared to the prior year
period.
Management’s Assessment
William A. Coskey, P.E., Chairman and CEO of
ENGlobal stated: “I continue to believe that 2018 will prove to be
an inflection year whereby our Company returns to profitability.
There are several factors that appear to be coming together – the
most important of which are recent project awards and the growing
level of higher probability, targeted opportunities in our proposal
pipeline. A good leading indicator is that we are now hiring for
our operations again, after several years of downsizing staff. We
also expect both our mechanical fabrication and automation
integration operations to be very busy with new work during the
second and third quarters of this year.”
Mr. Coskey continued: “ENGlobal’s formula for
success is straightforward and achievable: 1) increasing our volume
of work and utilization of resources in an improving industry
environment, 2) incrementally improving margins given increased
demand and higher value service mix, 3) excellence in project
execution, and 4) achieving significant leverage on our reduced
fixed overhead structure. Obviously, the recovery in our business
and in our marketplace has taken much longer than anyone desires,
including myself. I would like to thank our shareholders for their
patience during this time, as we expect to be able to deliver
improving results in future quarters.”
Mark Hess, ENGlobal’s Chief Financial Officer
stated: “We continue to operate our Business with a clean capital
structure. The Company continues to have no bank debt, and at
quarter end had approximately $16 million of working capital which
is expected to provide for our near-term operations and growth. We
have previously recorded a $11.3 million valuation allowance
against our deferred tax assets and therefore these assets are
fully reserved and are no longer reflected as a net asset on the
Balance Sheet. There was no dilution to ENGlobal common
stockholders during the first quarter – as our shares outstanding
remained constant at approximately 27.5 million during the
quarter.”
ENGlobal Corporation provides its engineering
and professional expertise principally to the energy industry
through two segments: Engineering, Procurement and Construction
Management (“EPCM”) which includes mechanical fabrication, and
Automation engineering and integrated products (“Automation”).
The extension of ENGlobal’s service offerings
into fabrication has positioned the Company as a vertically
integrated service provider capable of engineering, project
execution, mechanical fabrication, automation engineering and
automation related systems integration. This positioning as a
full-service provider provides a differentiating factor, which
reduces clients’ coordination of multiple vendors and improves
control of their schedules. This strategy and positioning has also
allowed the Company to pursue larger scopes of work centered around
many different types of modularized engineered systems.
The Company has also started a multi-year
strategic initiative to significantly strengthen its Automation
capabilities in the areas of distributed control systems design and
replacement, advanced data capture design, human machine interface
design, machine learning, cyber security, and artificial
intelligence. One result of these strategies is that ENGlobal’s
proposal pipeline continues to increase both for its EPCM and
Automation services. Many of these proposals have not been awarded
and have exceeded our expected award timing, which would imply that
many customers will release awards when they are more comfortable
that commodity prices have stabilized at a sufficient level.
The following is a summary of the income
statement for the three months ended March 31, 2018 and April 1,
2017:
(amounts in
thousands) |
|
Three months ended March 31, 2018 |
|
|
Three Months ended April 1, 2017 |
|
Revenue |
|
|
$ |
13,188 |
|
|
|
$ |
12,473 |
|
Gross Profit |
|
|
|
1,413 |
|
|
|
|
1,731 |
|
General &
Administrative Expenses |
|
|
|
2,582 |
|
|
|
|
3,406 |
|
Operating Loss |
|
|
|
(1,169 |
) |
|
|
|
(1,675 |
) |
Net Loss |
|
|
|
(1,200 |
) |
|
|
|
(878 |
) |
The following table presents certain balance
sheet items as of March 31, 2018 and December 30, 2017:
(amounts in
thousands) |
|
As of March 31, 2018 |
|
|
As of December 30, 2017 |
|
Cash |
|
|
$ |
6,767 |
|
|
|
$ |
9,648 |
|
Working capital |
|
|
|
15,888 |
|
|
|
|
16,846 |
|
The following table illustrates the composition
of the Company’s revenue and profitability for its operations for
the three months ended March 31, 2018 and April 1, 2017:
(amounts in
thousands) |
|
Three months ended March 31,
2018 |
|
|
Three Months ended April 1, 2017 |
|
|
|
|
|
|
% of |
|
|
Gross |
|
|
Operating |
|
|
|
|
|
% of |
|
|
Gross |
|
|
Operating |
|
|
|
Total |
|
|
Total |
|
|
Profit |
|
|
Profit |
|
|
Total |
|
|
Total |
|
|
Profit |
|
|
Profit |
|
Segment |
|
Revenue |
|
|
Revenue |
|
|
Margin |
|
|
Margin |
|
|
Revenue |
|
|
Revenue |
|
|
Margin |
|
|
Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering &
Construction |
|
|
$ |
5,095 |
|
|
|
38.6 |
% |
|
|
8.2 |
% |
|
|
(0.2 |
)% |
|
|
$ |
5,629 |
|
|
|
45.1 |
% |
|
|
8.8 |
% |
|
|
(1.3 |
)% |
Automation |
|
|
|
8,093 |
|
|
|
61.4 |
% |
|
|
12.3 |
% |
|
|
3.6 |
% |
|
|
|
6,844 |
|
|
|
54.9 |
% |
|
|
18.1 |
% |
|
|
7.3 |
% |
Consolidated |
|
|
$ |
13,188 |
|
|
|
100.0 |
% |
|
|
10.7 |
% |
|
|
(8.9 |
)% |
|
|
$ |
12,473 |
|
|
|
100.0 |
% |
|
|
13.9 |
% |
|
|
(13.4 |
)% |
The Company’s Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2018 is expected to be filed
with the Securities and Exchange Commission reflecting these
results by the end of the day on Thursday, May 10, 2018.
About ENGlobal
ENGlobal (Nasdaq: ENG) is a provider of
engineering and automation services primarily to the energy sector
throughout the United States and internationally. ENGlobal operates
through two business segments: Automation and Engineering.
ENGlobal’s Automation segment provides services related to the
design, fabrication and implementation of distributed control,
instrumentation and process analytical systems. The Engineering
segment provides consulting services for the development,
management and execution of projects requiring professional
engineering, construction management, and related support services.
Within the Engineering segment, ENGlobal’s Government Services
group provides engineering, design, installation and operation and
maintenance of various government, public sector and international
facilities, and specializes in the turnkey installation and
maintenance of automation and instrumentation systems for the U.S.
Defense industry worldwide. Further information about the Company
and its businesses is available at www.ENGlobal.com.
Safe Harbor for Forward-Looking Statements
The statements above regarding the Company’s
expectations regarding its operations and certain other matters
discussed in this press release may constitute forward-looking
statements within the meaning of the federal securities laws and
are subject to risks and uncertainties including, but not limited
to: (1) our ability to identify, evaluate, and complete any
strategic alternative; (2) the impact of the announcement of the
review of strategic alternatives on our business, including our
financial and operating results, or our employees, suppliers and
customers; (3) the effect of economic downturns and the volatility
and level of oil and natural gas prices; (4) our ability to retain
existing customers and attract new customers; (5) our ability to
accurately estimate the overall risks, revenue or costs on a
contract; (6) the risk of providing services in excess of original
project scope without having an approved change order; (7) our
ability to execute our expansion into the modular solutions market
and to execute our updated business growth strategy to position the
Company as a leading provider of higher value industrial automation
and Industrial Internet of Things services to its customer base;
(8) our ability to attract and retain key professional personnel;
(9) our ability to fund our operations and grow our business
utilizing cash on hand, internally generated funds and other
working capital; (10) our ability to obtain additional financing,
including pursuant to a new credit facility, when needed: (11) our
dependence on one or a few customers; (12) the risks of internal
system failures of our information technology systems, whether
caused by us, third-party service providers, intruders or hackers,
computer viruses, natural disasters, power shortages or terrorist
attacks; (13) our ability to realize revenue projected in our
backlog and our ability to collect accounts receivable and process
accounts payable in a timely manner; (14) the uncertainties related
to the U.S. Government’s budgetary process and their effects on our
long-term U.S. Government contracts; (15) the risk of unexpected
liability claims or poor safety performance; (16) our ability to
identify, consummate and integrate potential acquisitions; (17) our
reliance on third-party subcontractors and equipment manufacturers;
(18) our ability to satisfy the continued listing standards of
NASDAQ with respect to our common stock or to cure any continued
listing standard deficiency with respect thereto; and (19) the
effect of changes in laws and regulations, including U.S. tax laws,
with which the Company must comply and the associated cost of
compliance with such laws and regulations. Actual results and the
timing of certain events could differ materially from those
projected in or contemplated by the forward-looking statements due
to a number of factors detailed from time to time in ENGlobal’s
filings with the Securities and Exchange Commission. In addition,
reference is hereby made to cautionary statements set forth in the
Company’s most recent reports on Form 10-K and 10-Q, and other SEC
filings.
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Contact:
Mark Hess
Phone: 281-878-1000
E-mail: IR@ENGlobal.com
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