ENGlobal (NASDAQ: ENG), a leading provider of engineered modular
solutions, today announced results for the third quarter ended
September 29, 2018.
ENGlobal reported a net loss of $197 thousand,
or $0.01 per diluted share, for the third quarter just ended
compared to $12.2 million, or $0.44 per diluted share, for the
third quarter of 2017. Adjusted for non-recurring litigation
expenses of $146 thousand and before non-cash charges for
depreciation, amortization and stock compensation expense of $145
thousand, earnings for the quarter ended September 29, 2018 would
have been $94 thousand, an indicator of adjusted cash earnings,
which management believes is helpful to its investors to understand
the earnings of our core business.
Revenue increased by $1.4 million to $14.3
million for the three months ended September 29, 2018 from $12.9
million for the three months ended September 30, 2017 while gross
profit margins increased to 16.1% for the quarter ended September
29, 2018 as compared to 12.6% for the quarter ended September 30,
2017.
Management's Assessment
Mark Hess, ENGlobal's Chief Financial Officer
stated: “We continue to see financial progress as represented by
the sequential net income improvement reported for each of the
three quarters this year, together with the positive adjusted
earnings reported for this third quarter. Our cash and working
capital are holding steady. Our working capital at the end of the
quarter was $14.9 million, which we feel is sufficient to provide
for near-term growth.”
Mr. Hess continued: “Another positive is the
significant reduction in SG&A expense on a year over year
basis. For the quarter, adjusted for non-recurring litigation
services expense, SG&A expense was $2.3 million, or a $9.2
million annual run rate. This SG&A result is a significant
improvement when compared to $3.0 million, or a $12.0 million
annual run rate in the year ago period. I’m also pleased to report
that ENGlobal’s firm and contracted backlog at the end of the third
quarter of 2018 was approximately $33 million, which is the highest
level achieved by the Company since early 2015.”
William A. Coskey, P.E., Chairman and CEO of
ENGlobal added: “Our mission for the near to midterm is
straightforward and about growth – this being for our Company to
generate significant internal revenue and margin growth while
holding overhead costs down. We plan to accomplish this goal by
leveraging our talents and resources to take on larger scopes of
work, primarily for turnkey, engineered modular solutions which
have technological differentiation. We are now developing larger
opportunities for our vertically integrated business model -
engineering, mechanical fabrication, automation design, systems
integration and project support services, as clients desire for
their projects to be supported by a single source supplier.”
Mr. Coskey continued: “Given the above mission,
our management team has defined seven business strategies, each
with its own internal champion and execution plan. These seven
areas of focus cover the range of upstream, midstream and
downstream energy-related systems, and all fit very well with our
engineering, automation and project execution heritage and
experience. I look forward to reporting on the Company’s progress
regarding these initiatives.”
The following is a summary of the income statement for the three
months ended September 29, 2018 and September 30, 2017:
(amounts in thousands) |
Three months
ended September 29, 2018 |
|
Three months
ended September 30, 2017 |
Revenue |
$ |
14,255 |
|
|
$ |
12,896 |
|
Gross Profit |
|
2,293 |
|
|
|
1,621 |
|
General & Administrative Expenses |
|
2,483 |
|
|
|
3,041 |
|
Operating Loss |
|
(190 |
) |
|
|
(1,420 |
) |
Net loss |
|
(197 |
) |
|
|
(12,154 |
) |
The following table presents certain balance sheet items as of
September 29, 2018 and December 30, 2017:
(amounts in thousands) |
As of September 29,
2018 |
As of December 30,
2017 |
Cash |
$ |
5,252 |
$ |
9,648 |
Working capital |
|
14,942 |
|
16,846 |
The following table illustrates the composition of the Company's
revenue and profitability for its operations for the three and
nine months ended September 29, 2018 and September 30,
2017:
|
|
|
|
(amounts in thousands) |
Three months ended
September 29, 2018 |
|
Three Months ended
September 30, 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 |
$ |
6,821 |
47.9 |
% |
16.6 |
% |
$ |
664 |
|
$ |
5,399 |
41.9 |
% |
7.6 |
% |
$ |
(105 |
) |
|
Automation |
|
7,434 |
52.1 |
% |
15.6 |
% |
|
527 |
|
|
7,497 |
58.1 |
% |
16.1 |
% |
|
511 |
|
|
Consolidated |
$ |
14,255 |
100.0 |
% |
16.1 |
% |
$ |
(190 |
) |
$ |
12,896 |
100.0 |
% |
12.6 |
% |
$ |
(1,420 |
|
) |
|
|
|
|
(amounts in thousands) |
Nine months ended
September 29, 2018 |
|
Nine Months ended
September 30, 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 |
$ |
18,568 |
44.9 |
% |
15.5 |
% |
$ |
1,453 |
|
$ |
16,976 |
41.1 |
% |
10.3 |
% |
$ |
128 |
|
Automation |
|
22,746 |
55.1 |
% |
13.5 |
% |
|
1,079 |
|
|
24,360 |
58.9 |
% |
16.9 |
% |
|
2,017 |
|
Consolidated |
$ |
41,314 |
100.0 |
% |
14.4 |
% |
$ |
(1,976 |
) |
$ |
41,336 |
100.0 |
% |
14.2 |
% |
$ |
(3,638 |
) |
The Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 29, 2018 is expected to be
filed with the Securities and Exchange Commission reflecting these
results by the end of the day on Thursday, November 8, 2018.
About ENGlobal
ENGlobal (Nasdaq: ENG) is a leading provider of
engineered modular solutions 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 StatementsThe
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: 281-878-1000E-mail: IR@ENGlobal.com
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