Orbit International Corp. Reports 2022 First Quarter Results

Rhea-AI Summary

Orbit International Corp. (OTC PINK:ORBT) reported first quarter 2022 net income of $466,000 ($0.14 per diluted share), down from $1,827,000 ($0.52 per diluted share) in 2021, primarily due to $1,618,000 in PPP loan forgiveness in the prior period. Net sales rose to $6,843,000 from $5,393,000, while gross margin improved to 37.6%. Excluding one-time acquisition costs and PPP loan effects, adjusted EBITDA was $738,000 ($0.21 per diluted share). Backlog decreased to $15.3 million from $17.9 million, reflecting delays in Department of Defense funding. Cash and equivalents stood at $5.3 million.

Positive

• Net sales increased to $6,843,000 from $5,393,000.
• Gross margin improved to 37.6% compared to 32.2%.
• Adjusted EBITDA was $738,000 ($0.21 per diluted share), up from $285,000 ($0.08 per diluted share) excluding prior year PPP loan forgiveness.

Negative

• Net income decreased significantly to $466,000 from $1,827,000 due to one-time PPP loan forgiveness in the prior period.
• Backlog declined to $15.3 million from $17.9 million, indicating potential future revenue challenges.
• Increased selling, general, and administrative expenses due to SPS integration and wage inflation.

First Quarter 2022 Net Income of $466,000 ($0.14 per diluted share) v. $1,827,000 ($0.52 per diluted share) in Prior Period. Prior Period Includes $1,618,000 ($0.46 per diluted share) of PPP Loan Forgiveness. Exclusive of PPP Loan Forgiveness, Prior Period Net Income was $209,000 ($0.06 per diluted share)

First Quarter EBITDA, as adjusted of $546,000 ($0.16 per diluted share) v. $1,903,000 ($0.54 per diluted share) in Prior Year Period. Exclusive of PPP Loan Forgiveness, Prior Period EBITDA, as adjusted was $285,000 ($0.08 per diluted share)

Exclusive of Costs Relating to the Panel Products Acquisition, First Quarter 2022 Net Income was $564,000 ($0.16 per diluted share) and EBITDA, as adjusted was $644,000 ($0.19 per diluted share)

HAUPPAUGE, N.Y., May 12, 2022 (GLOBE NEWSWIRE) -- Orbit International Corp. (OTC PINK:ORBT) today announced results for the first quarter ended March 31, 2022.

First Quarter 2022 vs. First Quarter 2021

• Net sales were $6,843,000, as compared to $5,393,000.
• Gross margin was 37.6%, as compared to 32.2%.
• Net income was $466,000 ($0.14 per diluted share), as compared to net income of $1,827,000 ($0.52 per diluted share). Net income for the current year quarter includes acquisition costs of $98,000 ($0.03 per diluted share). Net Income for the prior year period includes PPP loan forgiveness of $1,618,000 ($0.46 per diluted share). Exclusive of the PPP loan forgiveness, net income for the prior year first quarter was $209,000 ($0.06 per diluted share).
• Earnings before interest, taxes, depreciation and amortization, fair value adjustment on contingent liabilities and other non-current liability, and stock-based compensation (EBITDA, as adjusted) was $546,000 ($0.16 per diluted share), as compared to $1,903,000 ($0.54 per diluted share). Prior year EBITDA, as adjusted includes $1,618,000 of PPP loan forgiveness. Exclusive of the PPP loan forgiveness, EBITDA, as adjusted was $285,000 ($0.08 per diluted share).
• Backlog at March 31, 2022 was $15.3 million compared to $17.9 million, inclusive of the backlog of SPS, at December 31, 2021.

(See EBITDA, as adjusted table on following page, which accounts for non-recurring charges during the current and prior year quarters)

	Three months ended
	March 31,
		2022			2021
EBITDA, as adjusted	$	546,000		$	1,903,000
Acquisition costs		98,000			-
Charge to Cost of Sales under
Fair Value Accounting		94,000			-
PPP Loan forgiveness		-			(1,618,000	)
Total	$	738,000		$	285,000
Per diluted share	$	0.21		$	0.08

 

Mitchell Binder, President and CEO of Orbit International Corp. commented, “I am pleased to report strong operating performance for our first quarter of 2022 which includes the operations of our newly acquired Simulator Products Solution LLC (“SPS”) subsidiary that commenced operations following the closing of its acquisition of the assets and business of Panel Products, Inc. (“Panel”) on January 3, 2022. Our net income for the three months ended March 31, 2022, was $466,000 compared to $1,827,000 for the prior comparable period. Included in our current period results is the adverse effect of both $98,000 of one-time acquisition costs related to the acquisition of SPS and a $94,000 charge to SPS’ cost of sales due to the increase recorded to its work-in-process and finished goods beginning inventory under Fair Value Accounting (“FVA”), also related to the acquisition of SPS. Included in our prior year results is $1,618,000 representing the forgiveness of our loan, including accrued interest, from Peoples United Bank under the Paycheck Protection Program (“PPP”). Exclusive of the one-time acquisition costs and the charge to cost of sales under FVA and the PPP loan forgiveness, our net income for the three months ended March 31, 2022 was $658,000 ($0.19 per diluted share) compared to $209,000 ($0.06 per diluted share) in the comparable period of the prior year. Our EBITDA, as adjusted for the three months ended March 31, 2022, exclusive of the one-time acquisition costs and charge to cost of sales under FVA was $738,000 ($0.21 per diluted share).”

Mr. Binder added, “Our sales for the three months ended March 31, 2022, increased to $6,843,000 compared to $5,393,000 from the prior comparable period. This increase in sales was primarily attributable to sales from SPS, which is part of our Orbit Electronics Group (“OEG”). This increase was partially offset by a decrease in sales from our Orbit Power Group (“OPG”). Exclusive of sales from SPS, sales from our OEG also increased from the prior comparable period.”

Mr. Binder further added, “Our gross margin for the three months ended March 31, 2022, exclusive of adjustments to SPS’ work in process and finished goods under FVA, increased to 38.9% compared to 32.2% in the prior comparable period. This increase reflects a higher gross profit from both our OEG and OPG. The increase in gross margin during the quarter by our OEG was attributable to certain engineering deliverables, which had associated costs that were expensed in the current and prior periods, as well as a more profitable product mix. Our improved gross margin at our OPG was due to the completion of the lower gross margin CAATS contract during the prior comparable quarter which has been replaced by the higher gross margin shipments of our VPX power supplies and other COTS products. Selling, general and administrative expenses for the quarter, increased from the prior year, primarily due to the addition of expenses from SPS and higher corporate costs. Exclusive of SPS and corporate costs, selling, general and administrative expenses increased due to higher selling expenses and wage inflation.”

Mr. Binder continued, “Our backlog at March 31, 2022, was approximately $15,338,000 compared to approximately $17,900,000 at December 31, 2021, inclusive of the backlog of SPS. The reduction in backlog was due to a lower backlog at our OEG. Our backlog at March 31, 2022 for our OPG did not materially change from year-end. The reduction in backlog was expected as some follow-on orders were pushed back by our customers into the second half of 2022, primarily due to funding delays from the Department of Defense (“DoD”). These funding delays were principally the result of work restrictions related to the pandemic and a shifting of prioritization of certain contract awards from the DoD. Although timing is an uncertainty, we expect these purchase orders to eventually be received.”

David Goldman, Chief Financial Officer, noted, “At March 31, 2022, our cash and cash equivalents aggregated approximately $5.3 million and our financial condition continued to remain strong as evidenced by our 4.2 to 1 current ratio. In addition, our $4,000,000 line of credit with our primary lender remains unused. Our book value per share at March 31, 2022 was $6.00 which compares to $5.88 at December 31, 2021. (Note: book value per share does not include any additional value for our remaining reserved deferred tax asset). To offset future federal and state taxes resulting from profits, we have approximately $6.0 million and $0.5 million in available federal and New York State net operating loss carryforwards, respectively.”

Mr. Binder concluded, “Because our revenues are tied to our delivery schedules specified in our contracts, it is often difficult to judge our performance on a quarterly basis. We completed a solid year of operating results in 2021 due to improved gross margins, and also as a result of tight controls on our overall operating costs. We have followed with a very firm first quarter of operating results, as we layer on the SPS operation. During the second quarter of 2021, based on our improved outlook on our business regarding the COVID-19 pandemic and stability of our financial condition, our Board of Directors authorized the Company to recommence our share repurchase program and as a result of our 2021 financial performance and our financial condition, in March 2022, our Board of Directors approved to recommence our quarterly dividend program. We remain confident in our operating performance of our legacy businesses as we move through 2022, although the timing of contract awards and supply chain issues remain a concern and could impact the timing of deliveries in 2022. Our operating team continues to work on potential solutions whenever receipt of components is delayed. However, we expect SPS’ operating results to continue throughout 2022 and consequently, we remain confident that our operating results should further improve in the coming year.”

In January 2022, Orbit announced that its newly formed subsidiary, SPS, had completed its previously announced acquisition of the assets and business of Panel, a Carson, CA based company founded by Nabil Radi in 1999. The transaction valued Panel at approximately $6,500,000, subject to adjustment, with $4,000,000 of the purchase price paid in cash at closing, an aggregate of up to $1,200,000 in performance related payments payable at the end of 2022 and 2023, and the issuance to Panel of a 19.9% ownership interest in SPS. 

Orbit International Corp., through its Electronics Group, is involved in the development and manufacture of custom electronic device and subsystem solutions for military, industrial and commercial applications through its production facility in Hauppauge, New York. Orbit’s Power Group, also located in Hauppauge, NY, designs and manufactures a wide array of power products including AC power supplies, frequency converters, inverters, VME/VPX power supplies as well as various COTS power sources.

Certain matters discussed in this news release and oral statements made from time to time by representatives of the Company including, statements regarding our expectations of Orbit’s operating plans, deliveries under contracts and strategies generally; statements regarding our expectations of the performance of our business; expectations regarding costs and revenues, future operating results, additional orders, future business opportunities and continued growth, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. Although Orbit believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.

Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Many of these factors are beyond Orbit International's ability to control or predict. Important factors that may cause actual results to differ materially and that could impact Orbit International and the statements contained in this news release can be found in Orbit's reports posted with the OTC Disclosure and News service. For forward-looking statements in this news release, Orbit claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Orbit assumes no obligation to update or supplement any forward-looking statements whether as a result of new information, future events or otherwise.

CONTACT
David Goldman
Chief Financial Officer
631-435-8300

(See Accompanying Tables)

Orbit International Corp.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

	Three Months Ended March 31, (unaudited)
		2022				2021
Net sales	$	6,843			$	5,393
Cost of sales		4,273				3,659
Gross profit		2,570				1,734
Selling general and administrative expenses		2,054				1,492
Acquisition costs		98
PPP loan forgiveness		-				(1,618	)
Other (income) expense, net		(69	)			20
Income before income taxes		487				1,840
Income tax provision		21				13
Net income	$	466			$	1,827
Basic income per share	$	0.14			$	0.52
Diluted income per share	$	0.14			$	0.52
Weighted average number of shares outstanding:
Basic		3,447				3,511
Diluted		3,447				3,511

 

Orbit International Corp.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

	Three Months Ended March 31,
		2022				2021
EBITDA (as adjusted) Reconciliation
Net income	$	466			$	1,827
Income tax expense		21				13
Depreciation and amortization		101				27
Fair value adj-contingent liabilities & other non-current liability		(68	)			22
Stock-based compensation		26				14
EBITDA (as adjusted) (1)	$	546			$	1,903
EBITDA (as adjusted) Per Diluted Share Reconciliation
Net income	$	0.14			$	0.52
Income tax expense		0.00				0.00
Depreciation and amortization		0.03				0.01
Fair value adj-contingent liabilities & other non-current liability		(0.02	)			0.01
Stock-based compensation		0.01				0.00
EBITDA (as adjusted) per diluted share (1)	$	0.16			$	0.54

(1)

The EBITDA (as adjusted) tables presented are not determined in accordance with accounting principles generally accepted in the United States of America. Management uses EBITDA (as adjusted) to evaluate the operating performance of its business. It is also used, at times, by some investors, securities analysts and others to evaluate companies and make informed business decisions. EBITDA (as adjusted) is also a useful indicator of the income generated to service debt. EBITDA (as adjusted) is not a complete measure of an entity's profitability because it does not include costs and expenses for interest, depreciation and amortization, income taxes, fair value adj.-contingent liabilities and other non-current liability and stock-based compensation. EBITDA (as adjusted) as presented herein may not be comparable to similarly named measures reported by other companies.

	Three Months Ended March 31,
Reconciliation of EBITDA, as adjusted, to cash flows provided by (used in) operating activities (1)		2022				2021
EBITDA (as adjusted)	$	546			$	1,903
Income tax expense		(21	)			(13	)
Fair value adj-contingent liabilities and other non-current liability		68				(22	)
Stock-based compensation		(21	)			(14	)
Gain on forgiveness of PPP loan		-				(1,618	)
Net change in operating assets and liabilities		(313	)			(758	)
Cash flows provided by (used in) operating activities	$	259			$	(522	)

Orbit International Corp.
Consolidated Balance Sheets

	March 31, 2022 (unaudited)			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	5,259,000		$	9,215,000
Accounts receivable, less allowance for doubtful accounts		2,994,000			2,438,000
Inventories		11,813,000			8,540,000
Contract assets		613,000			648,000
Other current assets		402,000			416,000
Total current assets		21,081,000			21,257,000
Property and equipment, net		525,000			265,000
Right of use assets, operating leases		2,894,000			3,013,000
Goodwill		2,263,000			901,000
Intangible assets, net Deferred tax asset		3,752,000 545,000			- 545,000
Other assets		36,000			30,000
Total assets	$	31,096,000		$	26,011,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,024,000		$	504,000
Accrued expenses		918,000			1,014,000
Dividend payable		34,000			-
Lease liabilities, operating leases Contingent liabilities Other current liability	477,000 - 1,180,000			473,000 96,000 -
Customer advances		1,423,000			866,000
Total current liabilities		5,056,000			2,953,000
Other non-current liability		1,675,000			-
Contingent liabilities, net of current portion Lease liabilities, operating leases		1,198,000 2,476,000			208,000 2,596,000
Total liabilities		10,405,000			5,757,000
Stockholders’ Equity
Common stock		351,000			351,000
Additional paid-in capital		17,114,000			17,109,000
Treasury stock		(384,000	)		(384,000	)
Retained earnings		3,610,000			3,178,000
Stockholders’ equity		20,691,000			20,254,000
Total liabilities and stockholders’ equity	$	31,096,000		$	26,011,000

 

FAQ

What were Orbit International's first quarter 2022 earnings results for ORBT?

Orbit International reported a net income of $466,000 ($0.14 per diluted share) for Q1 2022.

How did Orbit International's net sales change in Q1 2022?

Net sales increased to $6,843,000 in Q1 2022, up from $5,393,000 in Q1 2021.

What is Orbit International's current backlog status as of Q1 2022?

As of March 31, 2022, Orbit's backlog was $15.3 million, down from $17.9 million at the end of 2021.

What impact did PPP loan forgiveness have on Orbit International's prior year results?

The prior year results included $1,618,000 in PPP loan forgiveness, significantly affecting net income.

What challenges is Orbit International facing regarding its backlog?

Orbit International's backlog decreased due to funding delays from the Department of Defense, affecting order timing.