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CUI Global, Inc. Reports Unaudited Second Quarter 2018 Financial Results

TUALATIN, Ore., Aug. 6, 2018 /PRNewswire/ -- CUI Global, Inc. (CUI), (the "Company") today reported its unaudited financial results for the three months and six months ended June 30, 2018.

Note 1: Effective January 1, 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), utilizing the modified retrospective method. To allow for easier comparison with prior periods and as required under the modified retrospective transition method, results for the three months and six months ended June 30, 2018 under old revenue rules, ASC Topic 605, are provided following the 'Recent Business and Operational Highlights' section below.

Second Quarter 2018 Financial Performance Summary: (comparisons to prior year period)

  • Total revenues were $23.1 million compared to $22.5 million;
  • Gross profit was $7.6 million compared to $8.2 million;
  • Gross margin was 33.0% compared to 36.6%;
  • Consolidated net loss was $(4.8) million compared to $(1.6) million;
  • Loss per basic share was $(0.17) compared to $(0.07) per basic share;
  • Adjusted EBITDA was $(2.4) million compared to $(0.8) million;
  • Cash and cash equivalents were $7.3 million and restricted cash was $0.5 million at June 30, 2018;
  • Power and Electromechanical (P&EM) segment unaudited backlog was $26.5 million at June 30, 2018 as compared to $20.2 million at December 31, 2017; and
  • Energy segment unaudited backlog was $16.9 million at June 30, 2018 as compared to $12.6 million at December 31, 2017.

First Half 2018 Financial Performance Summary: (comparisons to prior year period)

  • Revenue was $45.1 million compared to $40.3 million;
  • Gross profit was $14.2 million compared to $13.9 million;
  • Gross margin was 31.5% compared to 34.5%;
  • Consolidated net loss was $(8.0) million compared to $(5.4) million;
  • Loss per diluted share was $(0.28) compared to $(0.26) per diluted share; and
  • Adjusted EBITDA was $(5.2) million compared to $(4.0) million.

Note 2: Second quarter and first half 2018 financial results include a $1.3 million goodwill impairment charge associated with the Company's Orbital UK subsidiary to reflect the impact on revenue, operating income and cash flow of the longer than expected temporary halt in shipping of GasPT devices under its current contract with an Italian customer and softness in its UK market due to post-Brexit-vote business uncertainty. Adjusted net loss was $(3.1) million, and $(6.0) million, for the second quarter and first half of 2018, respectively.

"Our second quarter performance illustrates continued strength in our P&EM segment that provides us with a stable and profitable foundation for our consolidated business as we pursue sizeable growth prospects in our Energy segment. Uptake of our advanced gas measurement systems, however, remains slow as we continue to seed the market with customers that can scale their orders as their confidence in our innovative gas products builds," stated William Clough, president and CEO of CUI Global. "During the quarter we saw signs of traction with a series of orders for biomethane applications in the U.K. following the recent broader certification of our GasPT analyzer by the U.K. energy regulator, Ofgem. In our P&EM segment, we continued to promote awareness of our key growth driver, our ICE technology, to the datacenter market following receipt of UL and TUV certifications.

"As we look ahead to the balance of the year, business development activities cultivated over the past two years offer us the opportunity for incremental Energy revenue as we await a restart to our Italian contract," concluded Mr. Clough "The recent passage of the Domestic Renewable Heat Incentive that incents biomethane generation in the U.K. is catalyzing demand for our integration capabilities and products in-country. Subsequent to the quarter we entered into a Memorandum of Understanding with SAMSON AG to establish our first global Energy products sales and distribution partnership and access to previously untapped large gas markets. We also secured key industry validation from one of Europe's leading manufacturers of biomethane-to-grid solutions for our GasPT technology as a direct replacement to its legacy gas analyzers, validation that was acknowledged by market leaders in attendance at our presentations at the recent World Gas Conference. The U.K. and other avenues for Energy segment revenue we have developed over the past two years, together with continued strong performance from our P&EM segment, keep us on a path to long-term growth."

Recent Business and Operational Highlights:

CUI Global saw stronger order flow for its Energy products for biomethane applications independently and as a result of the recent passage of a U.K. Government program under which tariff rates for biomethane generation were increased (the "RHI"): 

  • The Company's Orbital Gas Systems ("Orbital") was awarded a GasPTi order for biomethane applications from one of Europe's largest industrial manufacturers. The order marks the first sale of the Company's GasPT technology as a replacement to legacy gas analyzer (gas chromatography) in a biomethane-to-grid solution;
  • Orbital secured a contract for large-scale biomethane-to-grid skids from a major UK-based gas operator. The contract, valued at $660,000, includes the Company's GasPT analyzer and VE Technology sample probe;
  • Orbital was awarded a contract valued at approximately $1.8 million from a major European industrial company for three biomethane-to-grid units that includes the Company's GasPT® analyzer;
  • Orbital was awarded a contract valued in excess of $500,000 for a biomethane-to-grid unit by a major European industrial company. This marks the second contract by this customer, an operator of biomethane-to-grid plants throughout Europe;
  • Orbital received an order for its proprietary VE Technology sample probe combined with a custom analytical integration system from a leading North American petrochemical company and natural gas major.

The Company moved to establish its first global sales distribution channel for certain of its Energy products:

  • Orbital signed a Memorandum of Understanding ("MoU") with SAMSON AKTIENGESELLSCHAFT ("SAMSOM") to establish global sales and distribution of the Company's proprietary GasPT®, VE Technology® and combined GasPTi analyzer. A market leader in flow control solutions for industrial processes with representation in 66 countries, SAMSON offers CUI Global access to previously untapped large gas markets, such as Russia and China. 

CUI Global strengthened its partnership with VPS and moved to further the companies' collaboration and innovation of Software-Defined Power Solutions:

  • The Company's CUI Inc. subsidiary and Virtual Power Systems entered into an amended partnership agreement whereby CUI Inc. extended its exclusive relationship with VPS to 2024, secured an automatic renewal provision and enhanced protections around CUI's intellectual property as it relates to ICE Block and ICE Switch. Separately in July 2018, CUI Global made an investment in a convertible note for a minority stake in VPS in support of the companies' continued collaboration and development of industry transforming Software Defined Power technologies.

Orbital undertook sales, marketing and research and development initiatives to drive broader global awareness of is integration expertise and next-generation energy sampling and metering systems:

  • Orbital presented at the recent 27th World Gas Conference in Washington, D.C. where it had the opportunity to showcase its integrated analytical solutions and energy products to the global community of gas operators in attendance;
  • Orbital hosted an Open House/Technical Workshop at its Stone facility in May to promote its GasPT technology following the receipt of broad regulatory approval of the Technology by the Office of Gas and Electricity Markets (Ofgem), the U.K.'s government regulator for electricity and downstream natural gas markets.
  • Orbital announced a collaboration with Keele University in the U.K. to develop new technology suitable for future gas networks. Orbital will open a satellite Research & Development facility at the Keele University Science and Innovation Park to work closely with the University's Smart Energy Network Demonstrator (SEND) project to develop new sensor technologies to support "green gas" monitoring and control.

Second Quarter 2018 Financial Performance Summary: (ASC Topic 605 basis)

  • Total revenues would have been $21.8 million compared to $22.5 million;
  • Gross profit would have been $7.1 million compared to $8.2 million;
  • Gross margin would have been 32.5% compared to 36.6%;
  • Consolidated net loss would have been $(5.2) million compared to $(1.6) million; and
  • Loss per basic share would have been $(0.18) compared to $(0.07) per basic share.

First Half 2018 Financial Performance Summary: (ASC Topic 605 basis)

  • Total revenues would have been $43.5 million compared to $40.3 million;
  • Gross profit would have been $13.0 million compared to $13.9 million;
  • Gross margin would have been 30.0% compared to 34.5%;
  • Consolidated net loss would have been $(9.0) million compared to $(5.4) million; and
  • Loss per basic share would have been $(0.32) compared to $(0.26) per basic share.

Conference Call

Management will host a conference call today, August 6, 2018 at 8:30 a.m. 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 7162558. 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 August 21, 2018. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 7162558. 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, products and technologies. From Orbital Gas Systems' advanced GasPT® platform targeting the energy sector, to CUI Inc.'s advanced power platform serving the networking and telecom space, CUI Global and its subsidiaries have built a diversified portfolio of industry leading technologies that touch many markets. 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.

 

Media Contact:                                

External IR Counsel:

CUI Global, Inc.                                 

LHA Investor Relations

Jeff Schnabel                                      

Sanjay M. Hurry

Main: 503-612-2300                             

212-838-3777

press@cuiglobal.com                             

cuiglobal@lhai.com

 

- Financial Tables to Follow -


 

CUI Global, Inc.
Condensed Consolidated Balance Sheets



June 30,


December 31,

(in thousands, except share and per share amounts)

2018


2017


(unaudited)



Assets:




Current Assets:




Cash and cash equivalents

$

7,312



$

12,646


Trade accounts receivable, net of allowance of $100




and $135, respectively

12,473



10,833


Inventories, net of allowance of $1,047 and $946, respectively

14,684



13,892


Contract assets

1,058



2,299


Note receivable, current portion

336



13


Prepaid expenses and other

1,113



1,593


Total current assets

36,976



41,276






Property and equipment, less accumulated depreciation of




$4,631 and $4,155, respectively

11,059



11,242


Goodwill

16,288



17,641


Other intangible assets, less accumulated amortization of $12,662




and $11,900, respectively

14,851



15,568


Note receivable, less current portion



317


Restricted cash

523




Deposits and other assets

1,820



1,865






Total assets

$

81,517



$

87,909






Liabilities and Stockholders' Equity:




Current Liabilities:




Accounts payable

$

6,796



$

5,110


Short-term overdraft facility

736




Mortgage note payable, current portion

96



94


Accrued expenses

4,950



4,186


Contract liabilities

4,690



8,829


Refund liabilities

2,137



695


Total current liabilities

19,405



18,914






Long term mortgage note payable, less current portion

3,207



3,256


Long term note payable, related party

5,304



5,304


Derivative liability

230



356


Deferred tax liabilities

1,941



2,414


Other long-term liabilities

181



179


Total liabilities

30,268



30,423






Commitments and contingencies








Stockholders' Equity:




Preferred stock, par value $0.001; 10,000,000 shares authorized;




no shares issued at June 30, 2018 or December 31, 2017




Common stock, par value $0.001; 325,000,000 shares




authorized; 28,505,054 shares issued and outstanding at




June 30, 2018 and 28,406,856 shares issued and




outstanding at December 31, 2017

28



28


Additional paid-in capital

169,808



169,527


Accumulated deficit

(114,695)



(108,559)


Accumulated other comprehensive loss

(3,892)



(3,510)


Total stockholders' equity

51,249



57,486


Total liabilities and stockholders' equity

$

81,517



$

87,909


 

CUI Global, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)


(In thousands, except per share amounts)

For the Three Months Ended June 30,


 For the Six Months Ended June 30,



2018


2017


2018


2017











Total revenues

$

23,127



$

22,500



$

45,093



$

40,345












Cost of revenues

15,492



14,276



30,881



26,437












Gross profit

7,635



8,224



14,212



13,908












Operating expenses:









Selling, general and administrative

9,245



8,712



18,446



17,268



Depreciation and amortization

553



564



1,082



1,115



Research and development

783



614



1,403



1,224



Provision (credit) for bad debt

(40)



(23)



(34)



(51)



Impairment of goodwill and intangible assets

1,263



3



1,263



3



Other operating expenses



4





9












Total operating expenses

11,804



9,874



22,160



19,568












Loss from operations

(4,169)



(1,650)



(7,948)



(5,660)












Other income (expense)

(308)



46



22



92



Interest expense

(124)



(121)



(238)



(237)












Loss before taxes

(4,601)



(1,725)



(8,164)



(5,805)












Income tax expense (benefit)

164



(157)



(137)



(383)












Net loss

$

(4,765)



$

(1,568)



$

(8,027)



$

(5,422)












Basic and diluted weighted average









common shares outstanding

28,506,154



20,967,957



28,497,146



20,958,656












Basic and diluted loss per common share

$

(0.17)



$

(0.07)



$

(0.28)



$

(0.26)












 

CUI Global, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)


(in thousands)

For the Six Months Ended June 30,


2018


2017

CASH FLOWS FROM OPERATING ACTIVITIES:




Net loss

$

(8,027)



$

(5,422)


Adjustments to reconcile net loss to net cash used in




operating activities:




Depreciation

541



482


Amortization of intangibles

962



945


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

146



204


Unrealized gain on derivative liability

(126)



(35)


Provision for (credit to) bad debt expense and returns allowances

(34)



(51)


Deferred income taxes

(329)



(490)


Inventory reserve

123



173


Non-cash unrealized foreign currency (gains) losses

21



(274)


Impairment of goodwill and intangible assets

1,263



3


Loss on disposal of assets



9






(Increase) decrease in operating assets:




Trade accounts receivable

(1,625)



(2,039)


Inventories

(2,214)



(570)


Contract assets

704



1,175


Prepaid expenses and other current assets

396



(283)


Deposits and other assets

2



(27)


Increase (decrease) in operating liabilities:




Accounts payable

1,730



(391)


Accrued expenses

1,060



523


Refund liabilities

572



(30)


Contract liabilities

146



2,893


NET CASH USED IN OPERATING ACTIVITIES

(4,689)



(3,205)






CASH FLOWS FROM INVESTING ACTIVITIES:




Purchases of property and equipment

(511)



(473)


Proceeds from sale of property and equipment



2


Investments in other intangible assets

(325)



(339)


Proceeds from notes receivable



19


NET CASH USED IN INVESTING ACTIVITIES

(836)



(791)






CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from overdraft facility

8,458




Payments on overdraft facility

(7,691)




Proceeds from line of credit

1,546



9,530


Payments on line of credit

(1,546)



(8,464)


Payments on capital lease obligations

(2)



(25)


Payments on mortgage note payable

(47)



(45)


Payments on contingent consideration

(45)



(61)


NET CASH PROVIDED BY FINANCING ACTIVITIES

673



935






Effect of exchange rate changes on cash

41



231


Net decrease in cash, cash equivalents and restricted cash

(4,811)



(2,830)


Cash, cash equivalents and restricted cash at beginning of period

12,646



4,617






CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

$

7,835



$

1,787


 

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 and impairment of goodwill and intangible assets.

 


(in thousands)











For the Three Months Ended


For the Six Months Ended



June 30,


June 30,



2018


2017


2018


2017

EBITDA:









Net (loss)


$

(4,765)



$

(1,568)



$

(8,027)



$

(5,422)


Plus:  Interest expense


124



121



238



237


Plus:  Income tax expense (benefit)


164



(157)



(137)



(383)


Plus:  Depreciation and amortization


773



727



1,503



1,427


EBITDA


$

(3,704)



$

(877)



$

(6,423)



$

(4,141)




















Adjusted EBITDA:









Plus: Provision (credit) for bad debt


$

(40)



$

(23)



$

(34)



$

(51)


Plus: Impairment of goodwill and intangible assets


1,263



3



1,263



3


Plus:  Unrealized (gain) loss on derivative


(42)



(2)



(126)



(35)


Plus:  Stock and options issued and stock to be issued for
compensation, royalties and services


80



113



146



204


Adjusted EBITDA


$

(2,443)



$

(786)



$

(5,174)



$

(4,020)











Adjusted net income (loss):









Net (loss)


$

(4,765)



$

(1,568)



$

(8,027)



$

(5,422)


Plus: Impairment of goodwill and intangible assets


1,263


3



1,263


3


Plus:  Amortization expense of Orbital and CUI -
    Canada acquisition intangibles


311



306



636



604


Plus:  Stock and options issued and stock to be issued for
compensation, royalties and services


80



113



146



204


Adjusted net income (loss)


$

(3,111)



$

(1,146)



$

(5,982)



$

(4,611)











 

Cision

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