ENGlobal (NASDAQ: ENG), a leading provider of
engineering and automation services, today announced results for
the second quarter ended June 30, 2018.
ENGlobal reported a net loss of $1.0 million for
the second quarter of 2018 as compared to a $0.9 million net loss
reported for the prior year period. Net loss per diluted share was
$0.04 and $0.03 for the second quarter just ended and for the
second quarter of 2017, respectively.
Adjusted for non-recurring costs, the Company
posted a net loss of $0.3 million for the second quarter of 2018,
as compared to a net loss of $0.9 million for the second quarter of
2017. During the second quarter of 2018, the Company settled two
litigation matters, representing all outstanding litigation, and
retained an investment banking firm. The non-recurring costs
incurred during the quarter associated with these actions of
approximately $0.7 million were recorded as $0.3 million in
SG&A and $0.4 million in Other Expense.
Revenue decreased by $2.1 million to $13.9
million for the three months ended June 30, 2018 from $16.0 million
for the three months ended July 1, 2017 while gross profit margins
increased to 16.2% for the quarter ended June 30, 2018 as compared
to 15.7% for the quarter ended July 1, 2017.
Management's Assessment
Mark Hess, ENGlobal's Chief Financial Officer
stated: “Our revenue decline on a quarter over quarter basis is
primarily due to a couple of large projects that were completed
last year, including the Caspian Pipeline Consortium project, and a
reduction in procurement activities in our Automation segment. The
decline was partially offset by revenue resulting from our focus on
engineered modular solutions, which produced slightly higher
margins. Our SG&A for the quarter, adjusted for a
one-time cost, was $2.6 million, or a $10.4 million annual run
rate, which is the lowest SG&A level we have had in many
years.”
Mr. Hess continued: “As expected, with the shift
from a pure staffing business model to that of providing more
turnkey systems, we have seen a shift in our working capital from
cash to other components. We expect this shift to continue in the
near term as the volume of turnkey execution increases. However,
our overall working capital at the end of the quarter was $15.0
million, which we feel is sufficient to provide for our near-term
growth.”
William A. Coskey, P.E., Chairman and CEO of
ENGlobal added: “I am encouraged by the increase in volume of
engineered modular systems that we have produced thus far this year
and I expect that ENGlobal’s strategy of delivering these systems
with turnkey execution will continue to become a larger part of our
business going forward. We expect that long-term financial
improvement can be realized as a result of increasing project scope
which serves to better leverage our resources. Our management is
focused on eight well-defined areas of modular project execution,
which we are excited about and believe have excellent potential for
growing our Business.”
Mr. Coskey continued: “We have positioned
ourselves as a vertically integrated supplier and are proud to
offer our heritage of engineering and design capabilities combined
with modular fabrication and automation expertise. This combination
of skills, together with our complete project support services, is
a unique enhancement to our historical operation and a strategy
that is appealing to our clientele. Based on recent trends, I
continue to believe that we will see an inflection point and
improved financial metrics in future quarters.”
The following is a summary of the income statement for the three
months ended June 30, 2018 and July 1, 2017:
(amounts
in thousands) |
Three months ended June 30,
2018 |
|
Three months ended July 1,
2017 |
Revenue |
$ |
13,872 |
|
|
$ |
15,966 |
|
Gross Profit |
|
2,253 |
|
|
|
2,513 |
|
General &
Administrative Expenses |
|
2,869 |
|
|
|
3,057 |
|
Operating Loss |
|
(616 |
) |
|
|
(544 |
) |
Net loss |
|
(992 |
) |
|
|
(895 |
) |
The following table presents certain balance sheet items as of
June 30, 2018 and December 30, 2017:
(amounts in
thousands) |
As of June 30, 2018 |
As of December 30, 2017 |
Cash |
$ |
5,444 |
$ |
9,648 |
Working capital |
|
15,019 |
|
16,846 |
The following table illustrates the composition of the Company's
revenue and profitability for its operations for the three and six
months ended June 30, 2018 and July 1, 2017:
|
|
|
|
(amounts in
thousands) |
Three months ended June 30, 2018 |
|
Three Months ended July 1, 2017 |
|
|
% of |
Gross |
|
|
|
% of |
Gross |
|
|
|
Total |
Total |
Profit |
Operating |
|
Total |
Total |
Profit |
Operating |
|
Segment |
Revenue |
Revenue |
Margin |
Profit (Loss) |
|
Revenue |
Revenue |
Margin |
Profit (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Engineering &
Construction |
$ |
6,652 |
48.0 |
% |
20.0 |
% |
$ |
799 |
|
$ |
10,018 |
62.7 |
% |
14.1 |
% |
$ |
309 |
|
Automation |
|
7,220 |
52.0 |
% |
12.8 |
% |
|
260 |
|
|
5,948 |
37.3 |
% |
16.7 |
% |
|
1,008 |
|
Consolidated |
$ |
13,872 |
100.0 |
% |
16.2 |
% |
$ |
(616 |
) |
$ |
15,966 |
100.0 |
% |
15.7 |
% |
$ |
(544 |
) |
|
|
|
|
(amounts in
thousands) |
Six months ended June 30, 2018 |
|
Six Months ended July 1, 2017 |
|
|
% of |
Gross |
|
|
|
% of |
Gross |
|
|
|
Total |
Total |
Profit |
Operating |
|
Total |
Total |
Profit |
Operating |
|
Segment |
Revenue |
Revenue |
Margin |
Profit (Loss) |
|
Revenue |
Revenue |
Margin |
Profit (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Engineering &
Construction |
$ |
11,747 |
43.4 |
% |
14.9 |
% |
$ |
789 |
|
$ |
11,577 |
40.7 |
% |
11.5 |
% |
$ |
234 |
|
Automation |
|
15,312 |
56.6 |
% |
12.5 |
% |
|
552 |
|
|
16,863 |
59.3 |
% |
17.3 |
% |
|
1,505 |
|
Consolidated |
$ |
27,059 |
100.0 |
% |
13.5 |
% |
$ |
(1,786 |
) |
$ |
28,440 |
100.0 |
% |
14.9 |
% |
$ |
(2,218 |
) |
The Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2018 is expected to be filed
with the Securities and Exchange Commission reflecting these
results by the end of the day on Thursday, August 9, 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, integration and implementation of process distributed
control and analyzer systems, advanced automated data gathering
systems and information technology. Within the Automation
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. The Engineering segment provides
multi-disciplined engineering services relating to the development,
management and execution of projects requiring professional
engineering and related project management services. 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 plan to enter 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
continue 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.
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: 281-878-1040
E-mail: IR@ENGlobal.com
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