ENGlobal Announces 2021 Strategic Update and Q2 Financial Results

Rhea-AI Summary

ENGlobal Corporation (NASDAQ:ENG) reported a major strategic transformation but faced significant challenges in Q2 2021. The company posted a net loss of $4.26 million, or $(0.14) per share, on revenues of $11.08 million, down from $17.88 million in the same period last year. Key moves included six new hires, a rebranding effort, and raising $19 million through a direct offering, leading to $29 million cash on hand. However, revenue decline was attributed to COVID-19 delays, resulting in a reduced gross margin of 0.7%. CEO Mark A. Hess anticipates improved results as the energy sector recovers.

Positive

• Raised $19 million through a registered direct offering, strengthening financial position.
• Achieved key strategic transformation objectives, including management enhancements and rebranding.
• Cash on hand increased to approximately $29 million, indicating improved liquidity.

Negative

• Net loss of $4.26 million in Q2 2021, compared to a net income of $68,000 in Q2 2020.
• Revenue decreased significantly to $11.08 million from $17.88 million year-over-year.
• Gross margin dropped to 0.7% from 13.7% due to higher operational costs and bad debt reserves.

Conference Call to Discuss Results at 9:00 am EDT Today

HOUSTON, TX / ACCESSWIRE / August 5, 2021 / ENGlobal Corporation (NASDAQ:ENG), a leading provider of innovative, project delivery solutions for the energy industry, today reported the achievement of key objectives in its strategic transformation.

Mark A. Hess, CEO stated: "While segments of the broader energy industry have begun recovering from the effects of the COVID-19 pandemic, ENGlobal's business - which traditionally lags behind that of the broader energy market by as much as nine months - had not improved by the end of the second quarter. We are, however, taking steps to better position the company to take advantage of the expected increase in business activity in our markets. We have been transitioning ENGlobal from an engineering consulting firm to a vertically integrated project delivery company for some time and, because of the recent changes in senior management, we have accelerated that transformation. Some of the key objectives we achieved this year include:

• Enhancing our management and business development teams with six key hires,
• Redefining our market focus and strategic growth plans,
• Rebranding the company with a new, more progressive logo,
• Enhancing the company's marketing program to include, among other things, social media, and
• Redesigning our website to better describe the company's safety record, product offerings, market focus and accomplishments.

Therefore, as an extension of our rebranding efforts, we now refer to the company as ENG."

Mr. Hess continued, "We are also taking steps to further improve our financial strength. Thus far this year we have:

• Filed a shelf registration statement with the SEC to assist with the company's capital raising activities,
• Raised approximately $19 million through a registered direct offering under the registration statement, and
• Implemented a facility, also under the registration statement, known as an ATM, where we may sell, from time to time, up to $25 million of common stock into the market at the then market price.

"As a result of these activities, the company's cash-on-hand was approximately $29 million at the end of Q2 2021. Also, ENG's PPP loan of approximately $4.9 million was completely forgiven in July, which leaves the company with very little debt and a very healthy balance sheet. This is important to our current and prospective clients as it provides them with greater comfort and puts us in an excellent position to execute on the many opportunities in our pipeline that may be awarded, including those in the expanding renewables and green energy sectors," added Mr. Hess.

"These opportunities, plus the continued energy industry recovery from the COVID pandemic, will, we believe, produce improved results for our company for the remainder of this year and beyond," Mr. Hess concluded.

ENG also announced that, for the second quarter ended June 26, 2021, it had a net loss of $4,256,000, or $(.14) per share, on revenue of $11,079,000, compared with net income of $68,000, or $.00 per share, on revenue of $17,882,000 for the second quarter ended June 27, 2020.

For the six months ended June 26, 2021, the company had a net loss of $4,210,000, or $(.15) per share, on revenue of $23,528,000, compared with net income of $1,169,000, or $.04 per share, on revenue of $37,142,000 for the six months ended June 27, 2020.

The decrease in the company's second quarter revenue compared with the same period last year was primarily due to the continuing COVID-related delays in securing government services and other projects intended to replace those projects completed by the company since Q2 2020. The decline in bottom line performance in Q2 2021, compared with the same period last year, was primarily a result of this decrease in revenue, an investment in essential personnel which, among other things, decreased gross margin to 1% from 14%, an investment of $0.5 million in business development personnel and other costs intended to enhance marketing and sales efforts, and a bad debt reserve of $1.4 million stemming from a commercial customer that suspended operations during the quarter and, subsequently, filed for bankruptcy.

The decrease in six-month revenue compared with the same period last year was primarily due to the continuing COVID-related delays in securing government services and other projects intended to replace those projects completed by the company since Q2 2020. The decline in bottom line performance for the first six months of 2021 compared with the same period in 2020 resulted primarily from this decrease in revenue, an investment in essential personnel which, among other things, decreased gross margin to 5% from 15%, an investment of $0.9 million in business development personnel and other costs intended to enhance marketing and sales efforts, and the bad debt reserve of $1.4 million. These effects were partially offset by an employee retention credit of $1.7 million recorded in the first quarter.

The following is a summary of the income statements for the three- and six-months periods ended June 26, 2021 and June 27, 2020:

		For the Three Months Ended								For the Six Months Ended
		June 26, 2021				June 27, 2020				June 26, 2021				June 27, 2020
Revenue		$	11,079			$	17,882			$	23,528			$	37,142
Gross profit			82				2,453				1,086				5,713
Selling, general and administrative expenses			4,264				2,314				6,825				4,447
Operating profit (loss)			(4,182	)			139				(5,739	)			1,266
Net income (loss)			(4,256	)			68				(4,210	)			1,169

The following table illustrates the composition of the company's revenue and profitability for its operations for the three- and six-months periods ended June 26, 2021 and June 27, 2020:

	Three Months Ended				Three Months Ended
(amounts in thousands)	June 26, 2021				June 27, 2020
Segment	Total Revenue	% of Total Revenue	Gross Profit Margin	Operating Profit Margin	Total Revenue	% of Total Revenue	Gross Profit Margin	Operating Profit Margin
Commercial	$9,157	82.7%	(2.2)%	(32.9)%	$14,803	82.8%	12.9%	7.3%
Government Services	1,922	17.3%	14.7%	4.9%	3,079	17.2%	17.6%	12.8%
Consolidated	11,079	100.0%	0.7%	(37.7)%	17,882	100.0%	13.7%	0.8%

		Six Months Ended																Six Months Ended
(amounts in thousands)		June 26, 2021																June 27, 2020
Segment		Total Revenue				% of Total Revenue				Gross Profit Margin				Operating Profit Margin				Total Revenue				% of Total Revenue				Gross Profit Margin				Operating Profit Margin
Commercial		$	19,206				81.6	%			3.7	%			(17.7	)%		$	31,313				84.3	%			15.2	%			9.9	%
Government Services			4,322				18.4	%			8.6	%			(0.6	)%			5,829				15.7	%			16.4	%			10.9	%
Consolidated			23,528				100.0	%			4.6	%			(24.4	)%			37,142				100.0	%			15.4	%			3.4	%

The following table presents certain balance sheet items as of June 26, 2021 and December 26, 2020:

(amounts in thousands)		As of June 26, 2021				As of December 26, 2020
Cash		$	29,175			$	13,706
Working capital			28,691				14,039

ENGlobal Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
(amounts in thousands, except per share data)

		For the Three Months Ended								For the Six Months Ended
		June 26, 2021				June 27, 2020				June 26, 2021				June 27, 2020
Operating revenues		$	11,079			$	17,882			$	23,528			$	37,142
Operating costs			10,997				15,429				22,442				31,429
Gross profit			82				2,453				1,086				5,713
Selling, general and administrative expenses			4,264				2,314				6,825				4,447
Operating profit (loss)			(4,182	)			139				(5,739	)			1,266
Other income (expense):
Other income, net			6				1				1,690				2
Interest expense, net			(57	)			(36	)			(115	)			(41	)
Income (loss) from operations before income taxes			(4,233	)			104				(4,164	)			1,227
Provision for federal and state income taxes			23				36				46				58
Net income (loss)			(4,256	)			68				(4,210	)			1,169
Basic and diluted income (loss) per common share:		$	(0.14	)		$	0.00			$	(0.15	)		$	0.04
Basic and diluted weighted average shares used in computing income (loss) per share:			29,599				27,413				28,573				27,413

ENGlobal Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(amounts in thousands, except share and per share amounts)

		June 26, 2021				December 26, 2020
ASSETS
Current Assets:
Cash		$	29,175			$	13,706
Trade receivables, net of allowances of $1,636 and $386			6,572				7,789
Prepaid expenses and other current assets			398				891
Payroll taxes receivable			1,676				-
Contract assets			2,900				4,090
Total Current Assets			40,721				26,476
Property and equipment, net			1,135				1,263
Goodwill			720				720
Other assets
Right of use asset			1,210				1,628
Deposits and other assets			402				351
Total Other Assets			1,612				1,979
Total Assets		$	44,188			$	30,438
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable		$	1,974			$	2,138
Accrued compensation and benefits			2,479				3,048
Current portion of leases			1,180				1,541
Contract liabilities			560				1,258
Current portion of note			4,974				3,707
Current portion of deferred payroll tax			519				-
Other current liabilities			344				745
Total Current Liabilities			12,030				12,437
Deferred payroll tax			519				1,037
Long-term debt			1,600				2,733
Long-term leases			467				608
Total Liabilities			14,616				16,815
Commitments and Contingencies (Note 8)
Stockholders' Equity:
Common stock - $0.001 par value; 75,000,000 shares authorized; 35,134,564 shares issued and outstanding at June 26, 2021 and 27,560,686 shares issued and outstanding at December 26, 2020			35				28
Additional paid-in capital			57,309				37,157
Accumulated deficit			(27,772	)			(23,562	)
Total Stockholders' Equity			29,572				13,623
Total Liabilities and Stockholders' Equity		$	44,188			$	30,438

ENGlobal Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(amounts in thousands)

		For the Six Months Ended
		June 26, 2021				June 27, 2020
Cash Flows from Operating Activities:
Net income (loss)		$	(4,210	)		$	1,169
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization			187				205
Share-based compensation expense			107				132
Changes in current assets and liabilities:
Trade accounts receivable			1,217				1,569
Contract assets			1,190				(1,256	)
Other current assets			(1,234	)			344
Accounts payable			(164	)			(166	)
Accrued compensation and benefits			(569	)			977
Contract liabilities			(698	)			(3,109	)
Income taxes payable			(54	)			219
Other current liabilities, net			(347	)			(192	)
Net cash used in operating activities		$	(4,575	)		$	(108	)
Cash Flows from Investing Activities:
Property and equipment acquired			(88	)			(126	)
Net cash used in investing activities		$	(88	)		$	(126	)
Cash Flows from Financing Activities:
Issuance of common stock, net			20,052				-
Payments on finance leases			(55	)			(42	)
Proceeds from PPP loan			-				4,925
Interest on PPP loan			25				-
Proceeds from revolving credit facility			110				1,445
Net cash provided by (used in) financing activities		$	20,132			$	6,328
Net change in cash			15,469				6,094
Cash at beginning of period			13,706				8,307
Cash at end of period		$	29,175			$	14,401
Supplemental disclosure of cash flow information:
Cash paid during the period for interest		$	115			$	12
Right of use assets obtained in exchange for new operating lease liability		$	256			$	1,182
Cash paid during the period for income taxes (net of refunds)		$	151			$	86
Debt issuance costs		$	-			$	131

For further information on ENG's second quarter 2021 financial results, please refer to its Form 10-Q filing on the company's website at www.englobal.com, or on the SEC's website at www.sec.gov.

Conference Call
Management will host a conference call at 9:00 am Eastern time today to discuss the company's second quarter 2021 financial results, provide updates on potential contract awards, and discuss the company's growth outlook for the remainder of 2021.

To participate in the conference call, please dial in five to ten minutes before the call:

(Toll Free) 888-506-0062 domestically, or 973-528-001 internationally. Entry code: 624859

The conference call will also be broadcast live over the Internet and can be accessed at: https://www.webcaster4.com/Webcast/Page/2272/42162

The teleconference replay will be available shortly after the completion of the live event through 9:00 am Eastern time on August 12, 2021. You may access the replay by dialing (Toll Free) 877-481-4010 domestically, or 919-882-2331internationally, and referencing conference ID 42162.

You may also access the replay by visiting the company's web site: https://www.englobal.com/events-and-presentations/

About ENGlobal
ENGlobal (NASDAQ:ENG) is a leading provider of complete project solutions for renewable and traditional energy throughout the United States and internationally. ENGlobal operates through two business segments: Commercial and Government Services. The Commercial segment provides engineering, design, fabrication, and integration of automated control systems as a complete packaged solution for our clients. The Government Services segment provides engineering, design, installation, operations, and maintenance of various government, public sector, and international facilities, specializing in turnkey 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, including those relating to its future results, 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. For a discussion of risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ENGlobal's filings with the Securities and Exchange Commission, including the Company's most recent reports on Form 10-K and 10-Q, and other SEC filings.

Click here to join our email list: https://www.englobal.com/investors/

CONTACT:
Market Makers - Investor Relations
Jimmy Caplan
512-329-9505
Email: jimmycaplan@me.com

Market Makers - Media Relations
Rick Eisenberg
212-496-6828
Email: eiscom@msn.com

SOURCE: ENGlobal

View source version on accesswire.com:
https://www.accesswire.com/658484/ENGlobal-Announces-2021-Strategic-Update-and-Q2-Financial-Results

FAQ

What were ENGlobal's earnings for Q2 2021?

ENGlobal reported a net loss of $4.26 million, or $(0.14) per share, for Q2 2021.

How much revenue did ENGlobal generate in Q2 2021?

ENGlobal generated $11.08 million in revenue for the second quarter of 2021.

What initiatives did ENGlobal undertake for business improvement?

ENGlobal enhanced its management team, implemented a rebranding strategy, and filed a shelf registration for capital raising.

How did COVID-19 impact ENGlobal's business results?

COVID-19 caused delays in securing government services, significantly affecting revenue and profitability.

What is ENGlobal's outlook following the recent press release?

ENGlobal expects improved results due to recovering energy sector activity and pipeline opportunities.