ENGlobal Announces Second Quarter Financial and Operating Results

Rhea-AI Summary

ENGlobal (NASDAQ:ENG) reported its Q2 2024 financial results, showing progress in its business refocus strategy. The company's net loss decreased to $1.2 million for Q2 2024, compared to $1.4 million in Q1 2024 and $4.3 million in Q2 2023. Revenues for Q2 2024 were $6.1 million, down 37% year-over-year. Gross profit improved to $0.8 million, up from a $0.4 million loss in Q2 2023. SG&A expenses were reduced by 52% to $1.9 million. The company's backlog stood at $7.7 million as of June 29, 2024. ENGlobal is focusing on electric power infrastructure for data centers and new technologies, having signed a Master Services Agreement with a regional power infrastructure provider. The company aims to achieve run-rate profitability by year-end 2024.

Positive

• Net loss decreased to $1.2 million in Q2 2024, down from $4.3 million in Q2 2023
• Gross profit improved to $0.8 million in Q2 2024, up from a $0.4 million loss in Q2 2023
• SG&A expenses reduced by 52% to $1.9 million in Q2 2024
• Labor expense reduced by nearly 40%
• New Master Services Agreement signed for electric power infrastructure projects

Negative

• Revenues decreased 37% year-over-year to $6.1 million in Q2 2024
• Backlog declined to $7.7 million as of June 29, 2024
• Company still operating at a net loss
• Exploring options to improve cash position, indicating potential liquidity concerns

Insights

Financial Analyst

ENGlobal's Q2 2024 results show mixed signals. While the company is still reporting losses, there's a notable improvement in financial performance. The net loss of $1.2 million for Q2 2024 is better than the $1.4 million loss in Q1 2024 and significantly better than the $4.3 million loss in Q2 2023. However, revenue declined by 37% year-over-year to $6.1 million.

The company's cost-cutting measures are showing results, with SG&A expenses down by 52% year-over-year. The gross profit improved from a loss of $0.4 million in Q2 2023 to a profit of $0.8 million in Q2 2024. These improvements, coupled with the company's focus on higher-margin business, suggest a potential path to profitability by year-end, as management projects.

Market Research Analyst

ENGlobal's strategic pivot towards its core engineering, automation and government services is a calculated move in a challenging market. The company's focus on electric power infrastructure for data centers is particularly noteworthy, aligning with the growing demand in this sector. The recent Master Services Agreement with a regional power infrastructure provider could be a significant opportunity.

However, the decline in backlog to $7.7 million is concerning, despite management's optimism about future growth. The company's ability to secure new contracts in its refocused areas will be crucial for its turnaround. The broader economic uncertainties and their potential impact on ENGlobal's target markets remain a key risk factor to monitor.

Tech Expert

ENGlobal's strategic shift towards electric power infrastructure for data centers is a smart move. The rapid growth of cloud computing, AI and big data is driving unprecedented demand for data center capacity. This trend is expected to continue, creating a sustained need for power infrastructure solutions.

By leveraging its engineering and automation expertise in this sector, ENGlobal is positioning itself in a high-growth market. The company's ability to provide comprehensive solutions, from electrical and civil-structural engineering to control station solutions for substations, could be a significant differentiator. However, success will depend on ENGlobal's ability to quickly adapt to the specific requirements of data center projects and compete effectively in this new market segment.

HOUSTON, TX / ACCESSWIRE / August 8, 2024 / ENGlobal Corporation (NASDAQ:ENG) today announced results for the quarter ended June 29, 2024. ENGlobal's emphasis on refocusing its business on its core engineering, automation, systems integration, and government services businesses continued in the second quarter with steady progress on operational and financial fronts.

Through a continued reduction in costs and a focus on margins, ENGlobal financials continue to improve. While the Company reported a net loss of $1.2 million for the three-months ended June 29, 2024, that is an improvement compared to a loss of $1.4 million in the first quarter of 2024 and $4.3 million in the second quarter of 2023. For the first six months of 2024, the Company reported a net loss of $2.6 million, compared to a loss of $10.7 million in the first six months of 2023.

"While we still have a lot of work to do, we continue to make progress in our quest for profitability," said William A. Coskey, P.E., Chairman and Chief Executive Officer of ENGlobal. "The conclusion of legacy, money losing projects; our continued acute focus on corporate efficiency; and new, higher margin business opportunities should provide us a path to reach run rate profitability by year-end. We continue to explore options to improve our cash position as well as strategic growth opportunities as both are critically important to ENGlobal's future."

Revenues for the three-months ended June 29, 2024 were $6.1 million, a decrease of 37% from the same period a year ago and down 6% when compared to the first quarter of 2024. The year-over-year decline is primarily the result of the decision to stop self-performing fabrication, construction and field services projects which were not profitable. Revenues for the six-months ended June 29, 2024 were $12.7 million, compared to $22.9 million in the year-ago period.

Gross profit for the three-months ended June 29, 2024 was $0.8 million, an increase $1.2 million when compared to a gross loss of $(0.4) million in the second quarter of 2023. Gross profit for the six-month period ending June 29, 2024 was $1.2 million, compared to gross loss of $(2.2) million in the first six months of 2023.

Selling, General and Administrative expense for the three-months ended June 29, 2024 was $1.9 million, a reduction of $2 million, or 52%, when compared to $3.9 million in the year-ago period. For the six months ended June 29, 2024, SG&A expense declined $4.4 million, or 53%, to $3.9 million from $8.3 million.

"Our efforts to reduce costs are having an impact on our income statement," added Coskey. "We have reduced our labor expense by nearly 40% and made significant reductions in leasehold and technology expense. We continue to fine tune our cost structure and expect these reductions to continue to help our goal to reach profitability by year-end."

Backlog as of June 29, 2024 was approximately $7.7 million with new bookings of $3.3 million in the second quarter.

"While our backlog declined in the second quarter, a portion of the decline is related to a repositioning of our engineering business," said Coskey. "Our overall business development opportunities remain solid with a number of strong prospects across our business units. While we are watching the macroeconomic indicators carefully, we are optimistic about backlog growth in the second-half of the year and into 2025."

A renewed area of focus for ENGlobal's engineering and automation and integration groups is the increasing demand for electric power that will be required as new technologies and related data centers and warehousing continue to grow. ENGlobal recently entered into a Master Services Agreement ("MSA") with a regional provider of power infrastructure construction solutions for data center developers and other applications. ENGlobal's engineering team can partner with electric power developers and construction companies to provide a full range of electrical and civil-structural engineering services while the Company's automation and integration group has a wide-range of control station solutions for sub-stations and other power facilities for clients.

"While we remain focused on growing our core energy and government related businesses, we believe the acceleration of new technologies and growth in regional data centers offer a distinct business opportunity for ENGlobal," concluded Coskey. "We will accelerate our marketing activities related to these opportunities as well as look for strategic opportunities to expand our capabilities in and around the growing demand for new sources and delivery infrastructure for electric power."

"We continue to make slow but steady progress in repositioning ENGlobal for the future, a process that has presented unexpected challenges but that have been met head-on by our team," concluded Coskey. "In the second half of the year our goals are to continue our quest for run-rate profitability by year-end, inject additional liquidity into our business and continue to look for strategic opportunities to responsibly grow our Company. Our core group of ENGlobal team members is incredibly loyal and extremely capable of returning our Company to profitability. Our focus now is on finding the right partners to allow us to achieve those goals."

About ENGlobal

ENGlobal Corporation is a provider of innovative, delivered project solutions primarily to the energy industry. ENGlobal operates through two reportable segments: Commercial and Government Services. The Commercial segment provides engineering, design, fabrication, construction management and integration of automated control systems. 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. Further information about the Company and its businesses is available at www.englobal.com.

For further information, please email ir@englobal.com.

Cautionary Note Regarding Forward-Looking Statements

The statements above regarding the Company's expectations, including those relating to its future results, its future 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.

SOURCE: ENGlobal

View the original press release on accesswire.com

FAQ

What was ENGlobal's (ENG) net loss for Q2 2024?

ENGlobal (ENG) reported a net loss of $1.2 million for Q2 2024, an improvement from the $4.3 million loss in Q2 2023.

How much did ENGlobal's (ENG) revenue decrease in Q2 2024 compared to Q2 2023?

ENGlobal's (ENG) revenue decreased by 37% in Q2 2024 compared to Q2 2023, with Q2 2024 revenues at $6.1 million.

What was ENGlobal's (ENG) backlog as of June 29, 2024?

ENGlobal's (ENG) backlog as of June 29, 2024 was approximately $7.7 million.

What new business area is ENGlobal (ENG) focusing on according to the Q2 2024 report?

ENGlobal (ENG) is focusing on electric power infrastructure for data centers and new technologies, having signed a Master Services Agreement with a regional power infrastructure provider.