November 7, 2018 - 5:30 AM EST
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CUI Global, Inc. Reports Unaudited Third Quarter 2018 Financial Results

- Strong Quarterly Performance Driven by Rebound in Energy Segment Revenue -

TUALATIN, Ore., Nov. 7, 2018 /PRNewswire/ -- CUI Global, Inc. (NASDAQ: CUI), (the "Company") today reported its unaudited financial results for the three and nine months ended September 30, 2018.

CUI Global, Inc. Logo. (PRNewsFoto/CUI Global, Inc.) (PRNewsFoto/)

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 and nine months ended September 30, 2018 under old revenue rules, ASC Topic 605, are provided following the 'Recent Business and Operational Highlights' section below.

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

  • Total revenues were $24.7 million compared to $21.8 million;
  • Gross profit was $8.3 million compared to $7.4 million;
  • Gross margin was 33.4% compared to 34.1%;
  • Consolidated net loss was $(1.5) million compared to $(1.9) million;
  • Loss per basic share was $(0.05) compared to $(0.09) per basic share;
  • Adjusted EBITDA was $(0.8) million compared to $(1.1) million;
  • Cash and cash equivalents were $2.7 million and restricted cash was $0.5 million at September 30, 2018;
  • Power and Electromechanical (P&EM) segment unaudited backlog was $25.6 million at September 30, 2018 as compared to $20.2 million at December 31, 2017; and
  • Energy segment unaudited backlog was $16.0 million at September 30, 2018 as compared to $12.6 million at December 31, 2017.

Nine Months 2018 Financial Performance Summary: (comparisons to prior year period)

  • Revenue was $69.8 million compared to $62.1 million;
  • Gross profit was $22.5 million compared to $21.3 million;
  • Gross margin was 32.2% compared to 34.4%;
  • Consolidated net loss was $(9.6) million compared to $(7.3) million;
  • Loss per diluted share was $(0.34) compared to $(0.35) per diluted share; and
  • Adjusted EBITDA was $(5.9) million compared to $(5.1) million.

Note 2: Nine months 2018 financial results include a $1.3 million goodwill impairment charge associated with the Company's Orbital U.K. 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 U.K. market due to post-Brexit-vote business uncertainty. Adjusted net loss was $(7.2) million for the nine months of 2018.

"We are pleased to report a very strong start to the second-half of the year with effective execution in our Power & Electromechanical segment and a sharp rebound in our Energy segment that resulted in higher total revenues and smaller losses on both a sequential and year-over-year basis," stated William Clough, president and CEO of CUI Global. "In our Power and Electromechanical segment, end-market demand remains favorable and we are advancing a sizable emerging opportunity for our ICE technology enhanced by our recent investment in ICE technology partner Virtual Power Systems. Our Energy segment was a standout as strong backlog growth in the first-half of the year began converting to revenue following the passage of a multi-year biomethane incentive program in the U.K. With project funding secured and a sizeable number of proposed new biomethane-to-grid terminal build-outs, our bid activity for integration project work and Energy products sales prospects has improved.  

"Looking ahead, multiple inflection points give us confidence in a revenue ramp in 2019 driven by higher Energy product sales and order flow for our ICE technology," concluded Mr. Clough. "We are implementing pre-sales initiatives and pilot projects in North America to expand our opportunity-set for GasPT as a fiscal monitoring solution while progressing the certification of GasPT for process control applications. Our exclusive global distributor relationship with SAMSON AG is helping build market awareness and speed adoption of our GasPT solution and puts us directly in front of their global customer base's transition to a low carbon future centered on natural gas and biogas. Energy segment momentum extends to our VE sampling systems where several existing customers are expanding their deployments. We also announced yesterday a partnership with Mitsubishi Electric for our next generation IRIS system with the first production units expected to market early next year. In our Power and Electromechanical segment, we are working on multiple proof of concepts with data center ecosystem participants, as illustrated by SAP Innovation Labs' recent selection of the ICE Block for a field trial, to secure volume orders in 2019.  Growing market adoption for our products across our two business segments and more diversified revenue opportunities put us firmly on a path for growth."

Recent Business and Operational Highlights:

  • CUI Global announced that its wholly-owned energy division, Orbital Gas Systems ("Orbital"), entered into a technical collaboration with Mitsubishi Electric Europe BV ("Mitsubishi Electric") to further enhance Orbital's remote telemetry unit (RTU) and BioMethane product lines with Mitsubishi Electric's leading-edge automation control platforms. The collaboration allows Orbital to continue to build on its efforts in the RTU market with units that are more responsive to industry needs;
  • Orbital announced that it will host multiple technical training sessions in China for its distribution partner SAMSON AG ("SAMSON") to provide the SAMSON salesforce with the technical skills and knowledge to effectively position the Company's GasPTi technology to China-based natural gas transmission companies. The training sessions will be followed by joint customer visits and additional business development activities;
  • Orbital announced the receipt of the third of three purchase orders from a major European industrial company for the production of BioMethane-to-grid terminals. The purchase order was awarded under a contract signed in May 2018 and valued at approximately $1.7 million;
  • Orbital announced that SAMSON showcased its proprietary GasPTi Technology at the recent Conference Catalyst Producer's Danzig Polen 2018 in Gdansk, Poland;
  • Orbital signed a definitive Cooperation Agreement with SAMSON for the global sales and distribution of Orbital's proprietary GasPT®, VE Technology® and combined GasPTi analyzer. Under the terms of the Agreement, SAMSON will distribute Orbital's solutions globally, excluding North America and the U.K., and be its exclusive distributor. The Agreement also contains specific performance milestones SAMSON must achieve to become and maintain its exclusivity;
  • Orbital presented its gas measurement solutions and cutting-edge products at two gas industry events – Gastech and ASGMT – to showcase its proprietary gas technologies – GasPT® and VE® Technology – to leading natural gas operators;
  • CUI Inc. ("CUI"), CUI Global's wholly-owned Power & Electromechanical division, announced that the SAP® Co-Innovation Lab ("COIL") selected Virtual Power Systems' ("VPS") proprietary Intelligent Control of Energy® ("ICE") Software Defined Power® ("SDP") infrastructure solutions following the successful completion of a 90-day proof of concept trial. The move to SAP's COIL lab will allow the integration of CUI's ICE Switch and ICE Block to intelligently control power infrastructure and gain greater utilization by adding energy storage for peak demands. CUI's proprietary hardware platform is the industry's first SDP ICE-compatible devices based on VPS's ICE software platform. CUI is the exclusive hardware design and development partner to VPS for the ICE Switch and Block solutions;
  • Orbital was awarded an exclusive contract to provide routine maintenance, repair, and calibration for a major U.K. natural gas transmission company valued at approximately $1.5 million , that began on September 1 and includes a one-year extension option;
  • Orbital signed a Framework Agreement with Cadent Gas Limited ("Cadent"), the U.K.'s largest gas distribution network. The Agreement aligns with Cadent's long-term infrastructure plans to provide for its customers in a low carbon economy through, in part, the use of new sources of distributed gas, and particularly, biomethane.

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

  • Total revenues would have been $23.6 million compared to $24.7 million;
  • Gross profit would have been $7.8 million compared to $8.3 million;
  • Gross margin would have been 33.0% compared to 33.4%;
  • Consolidated net loss would have been $(2.0) million compared to $(1.5) million; and
  • Loss per basic share would have been $(0.07) compared to $(0.05) per basic share.

Nine Months 2018 Financial Performance Summary: (ASC Topic 605 basis)

  • Total revenues would have been $67.1 million compared to $69.8 million;
  • Gross profit would have been $20.8 million compared to $22.5 million;
  • Gross margin would have been 31.1% compared to 32.2%;
  • Consolidated net loss would have been $(11.0) million compared to $(9.6) million; and
  • Loss per basic share would have been $(0.39) compared to $(0.34) per basic share.

Conference Call
Management will host a conference call today, November 7, 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 5194720. 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 November 22, 2018. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 5194720. 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

[email protected]

[email protected]  

- Financial Tables to Follow -

 

 

CUI Global, Inc.

Condensed Consolidated Balance Sheets






September 30,


December 31,

(in thousands, except share and per share amounts)

2018


2017


(unaudited)



Assets:




Current Assets:




Cash and cash equivalents

$

2,690



$

12,646


Trade accounts receivable, net of allowance of $124




and $135, respectively

12,174



10,833


Inventories, net of allowance of $1,204 and $946, respectively

16,052



13,892


Contract assets

1,575



2,299


Note receivable, current portion

337



13


Prepaid expenses and other

1,769



1,593


Total current assets

34,597



41,276






Property and equipment, less accumulated depreciation of




$4,905 and $4,155, respectively

10,906



11,242


Goodwill

16,243



17,641


Other intangible assets, less accumulated amortization of $13,014




and $11,900, respectively

14,397



15,568


Note receivable, less current portion



317


Restricted cash

523




Convertible note receivable

500




Deposits and other assets

1,791



1,865






Total assets

$

78,957



$

87,909






Liabilities and Stockholders' Equity:




Current Liabilities:




Accounts payable

$

5,712



$

5,110


Short-term overdraft facility

1,278




Line of credit

657




Mortgage note payable, current portion

97



94


Accrued expenses

4,528



4,186


Contract liabilities

3,657



8,829


Refund liabilities

2,518



695


Total current liabilities

18,447



18,914






Long term mortgage note payable, less current portion

3,182



3,256


Long term note payable, related party

5,304



5,304


Derivative liability

192



356


Deferred tax liabilities

1,922



2,414


Other long-term liabilities

195



179


Total liabilities

29,242



30,423






Commitments and contingencies








Stockholders' Equity:




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




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




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




authorized; 28,529,606 shares issued and outstanding at




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




outstanding at December 31, 2017

28



28


Additional paid-in capital

169,856



169,527


Accumulated deficit

(116,229)



(108,559)


Accumulated other comprehensive loss

(3,940)



(3,510)


Total stockholders' equity

49,715



57,486


Total liabilities and stockholders' equity

$

78,957



$

87,909


 


 

CUI Global, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)






(In thousands, except per share
amounts)

For the three months ended
September 30,


 For the nine months ended
September 30,



2018


2017


2018


2017











Total revenues

$

24,744



$

21,796



$

69,837



$

62,141












Cost of revenues

16,482



14,356



47,363



40,793












Gross profit

8,262



7,440



22,474



21,348












Operating expenses:









Selling, general and
administrative

8,499



8,212



26,944



25,480



Depreciation and amortization

535



521



1,618



1,636



Research and development

685



696



2,088



1,920



Provision (credit) for bad debt

24



30



(10)



(21)



Impairment of goodwill and
intangible assets





1,263



3



Other operating expenses

3





3



9












Total operating expenses

9,746



9,459



31,906



29,027












Loss from operations

(1,484)



(2,019)



(9,432)



(7,679)












Other income (expense)

(61)



77



(39)



169



Interest expense

(132)



(137)



(370)



(374)












Loss before taxes

(1,677)



(2,079)



(9,841)



(7,884)












Income tax benefit

(143)



(177)



(280)



(560)












Net loss

$

(1,534)



$

(1,902)



$

(9,561)



$

(7,324)












Basic and diluted weighted
average









common shares outstanding

28,527,234



20,991,534



28,507,286



20,969,735












Basic and diluted loss per
common share

$

(0.05)



$

(0.09)



$

(0.34)



$

(0.35)













 

 

CUI Global, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



(in thousands)

For the nine months ended September 30,


2018


2017

CASH FLOWS FROM OPERATING ACTIVITIES:




Net loss

$

(9,561)



$

(7,324)


Adjustments to reconcile net loss to net cash used in




operating activities:




Depreciation

816



744


Amortization of intangibles

1,429



1,388


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

188



313


Unrealized gain on derivative liability

(164)



(55)


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

(10)



(21)


Deferred income taxes

(352)



(666)


Inventory reserve

274



317


Non-cash unrealized foreign currency (gains) losses

135



(307)


Impairment of intangible assets

1,263



3


Loss on disposal of assets

3



9






(Increase) decrease in operating assets:




Trade accounts receivable

(1,439)



(1,667)


Inventories

(3,727)



(902)


Contract assets

160



1,402


Prepaid expenses and other current assets

(285)



(562)


Deposits and other assets

13



(515)


Increase (decrease) in operating liabilities:




Accounts payable

520



(321)


Accrued expenses

684



(499)


Refund liabilities

953



(30)


Contract liabilities

(853)



2,932


NET CASH USED IN OPERATING ACTIVITIES

(9,953)



(5,761)






CASH FLOWS FROM INVESTING ACTIVITIES:




Purchases of property and equipment

(644)



(635)


Proceeds from sale of property and equipment



2


Investments in other intangible assets

(348)



(448)


Proceeds from notes receivable



19


Investment in convertible note receivable

(500)




NET CASH USED IN INVESTING ACTIVITIES

(1,492)



(1,062)






CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from overdraft facility

13,895



2,146


Payments on overdraft facility

(12,570)



(1,174)


Proceeds from line of credit

6,696



19,585


Payments on line of credit

(6,039)



(17,653)


Payments on capital lease obligations

(2)



(27)


Payments on mortgage note payable

(71)



(66)


Payments on contingent consideration

(45)



(61)


NET CASH PROVIDED BY FINANCING ACTIVITIES

1,864



2,750






Effect of exchange rate changes on cash

148



214


Net decrease in cash, cash equivalents and restricted cash

(9,433)



(3,859)


Cash, cash equivalents and restricted cash at beginning of period

12,646



4,617






CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

$

3,213



$

758


 

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 nine months ended



September 30,


September 30,



2018


2017


2018


2017

EBITDA:









Net (loss)


$

(1,534)



$

(1,902)



$

(9,561)



$

(7,324)


Plus:  Interest expense


132



137



370



374


Plus:  (Benefit) provision for taxes


(143)



(177)



(280)



(560)


Plus:  Depreciation and amortization


742



705



2,245



2,132


EBITDA


$

(803)



$

(1,237)



$

(7,226)



$

(5,378)




















Adjusted EBITDA:









Plus: Provision (credit) for bad debt


$

24



$

30



$

(10)



$

(21)


Plus: Impairment of goodwill and intangible assets






1,263



3


Plus:  Unrealized (gain) loss on derivative


(38)



(20)



(164)



(55)


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


42



109



188



313


Adjusted EBITDA


$

(775)



$

(1,118)



$

(5,949)



$

(5,138)











Adjusted net income (loss):









Net (loss)


$

(1,534)



$

(1,902)



$

(9,561)



$

(7,324)


Plus: Impairment of goodwill and intangible assets






1,263


3


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


300



312



936



916


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


42



109



188



313


Adjusted net income (loss)


$

(1,192)



$

(1,481)



$

(7,174)



$

(6,092)











 

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SOURCE CUI Global, Inc.


Source: PR Newswire (November 7, 2018 - 5:30 AM EST)

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