Orbit International Corp. Reports 2022 Third Quarter Results

Rhea-AI Summary

Orbit International Corp. (OTC PINK:ORBT) reported a third quarter 2022 net loss of $303,000 ($0.09 per share) compared to a net income of $681,000 ($0.20 per diluted share) in the prior year. EBITDA also declined to a loss of $232,000 from a profit of $736,000 year-over-year. For the first nine months, net sales increased to $18.6 million but net loss stood at $249,000 compared to net income of $3.0 million in 2021, heavily impacted by PPP loan forgiveness last year. Backlog increased slightly to $16.6 million. The company continues to face challenges from labor costs and delivery schedules.

Positive

• Net sales increased for the nine months to $18.6 million, up from $17.3 million in the prior year.
• Backlog increased to $16.6 million as of September 30, 2022, indicating potential future sales.

Negative

• Third quarter 2022 net loss of $303,000 compared to a net income of $681,000 in the third quarter of 2021.
• Third-quarter EBITDA as adjusted was a loss of $232,000, down from a profit of $736,000 year-over-year.
• Nine-month net loss of $249,000 compared to a net income of $3.0 million, excluding prior year PPP loan forgiveness.

Third Quarter 2022 Net Loss of $303,000 ($0.09 loss per share) v. Net Income of $681,000 ($0.20 per diluted share) in Prior Year Period

Third Quarter 2022 EBITDA, As Adjusted, was a loss of $232,000 ($0.07 loss per share) v. $736,000 ($0.21 per diluted share) in Prior Year Period

Nine Months 2022 Net Loss of $249,000 ($0.07 loss per share) v. Net Income of $3,042,000 ($0.87 per diluted share) in Prior Year 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 $1,424,000 ($0.41 per diluted share)

Nine Months 2022 EBITDA, As Adjusted, was a loss of $63,000 ($0.02 loss per share) v. $3,255,000 ($0.93 per diluted share) in Prior Year Period. Exclusive of PPP Loan Forgiveness, Prior Period EBITDA, As Adjusted was $1,637,000 ($0.47 per diluted share)

HAUPPAUGE, N.Y., Nov. 10, 2022 (GLOBE NEWSWIRE) -- Orbit International Corp. (OTC PINK:ORBT) today announced results for the third quarter and nine months ended September 30, 2022.

Results for the current quarterly and nine-month periods include the results of Simulator Product Solutions LLC (“SPS”). Prior year quarterly and nine-month periods do not include SPS’ results.

Third Quarter 2022 vs. Third Quarter 2021

• Net sales were $5,968,000, as compared to $6,067,000.
• Gross margin was 30.6%, as compared to 38.1%.
• Net loss was $303,000 ($0.09 loss per share), as compared to net income of $681,000 ($0.20 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 a loss of $232,000 ($0.07 loss per share), as compared to income of $736,000 ($0.21 per diluted share).

Nine Months 2022 vs. Nine Months 2021

• Net sales were $18,612,000, as compared to $17,261,000.
• Gross margin was 32.5%, as compared to 35.9%.
• Net loss was $249,000 ($0.07 loss per share), as compared to net income of $3,042,000 ($0.87 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 was $1,424,000 ($0.41 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 a loss of $63,000 ($0.02 loss per share), as compared to income of $3,255,000 ($0.93 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 $1,637,000 ($0.47 per diluted share).
• Backlog at September 30, 2022 was $16.6 million compared to $16.3 million at June 30, 2022 and $17.8 million at December 31, 2021 (inclusive of the backlog of SPS).

EBITDA, as adjusted, table which accounts for non-recurring charges during the current and prior year quarters and nine-month periods:

				Three months ended						Nine months ended
				September 30,						September 30,
				2022			2021			2022			2021
EBITDA, as adjusted				$	(232,000	)	$	736,000		$	(63,000	)	$	3,255,000
Acquisition costs					-			-			98,000			-
Charge to Cost of Sales under Fair Value Accounting					15,000			-			183,000			-
PPP Loan forgiveness					-			-			-			(1,618,000	)
Total				$	(217,000	)	$	736,000		$	218,000		$	1,637,000
Per diluted share				$	(0.06	)	$	0.21		$	0.06		$	0.47

Mitchell Binder, President and CEO of Orbit International Corp. commented, “Our net loss for the nine months ended September 30, 2022, was $249,000 compared to net income of $3,042,000 for the prior comparable period. Included in our current nine-month period results is the adverse effect of both $98,000 of one-time costs related to the acquisition of our newly acquired SPS and a $183,000 charge to SPS’ cost of sales due to the increase recorded to its work-in-process and finished goods acquired beginning inventory under Fair Value Accounting (“FVA”). Included in our prior year results is $1,618,000 representing the forgiveness of our loan, including accrued interest, 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 nine months ended September 30, 2022, was $32,000 ($0.01 per diluted share) compared to $1,424,000 ($0.41 per diluted share) in the comparable period of the prior year. EBITDA, as adjusted, for the nine months ended September 30, 2022, exclusive of the one-time acquisition costs and charge to cost of sales under FVA, was $218,000 ($0.06 per diluted share). The weakness in our operating results was primarily due to lower revenue from our legacy businesses resulting from several previously reported factors that affected our second and third quarter delivery schedules. In addition, higher than expected labor costs that adversely affected results at SPS during the second quarter, slightly improved during the current quarter and we expect they will continue to improve through the end of the year.”

Mr. Binder added, “Our sales for the nine months ended September 30, 2022, increased to $18,612,000 compared to $17,261,000 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”) and accounted for $4,150,000 during the current nine-month period. Our sales for the three months ended September 30, 2022, were $5,968,000, which was slightly less than the sales of $6,067,000 from the prior comparable period despite the inclusion of sales from SPS in the current three-month period. The current nine-month period was adversely affected by lower sales recorded by both our OEG (exclusive of SPS) and our Orbit Power Group (“OPG”). The current three-month period was adversely affected by lower sales from our OEG (exclusive of SPS) and despite higher sales from our OPG.”

Mr. Binder further added, “Our gross margin for the nine months ended September 30, 2022, exclusive of adjustments to SPS’ work in process and finished goods under FVA, decreased to 33.5% compared to 35.9% in the prior comparable period. Notwithstanding this slight decrease in gross margin during the first nine months of 2022, our OEG (exclusive of SPS) reported increased gross margin attributable to certain engineering deliverables, some of whose costs were expensed in prior periods, as well as a more profitable product mix. Our gross margin at our OPG decreased from the prior comparable period due to a decrease in sales.”

Mr. Binder added, “Selling, general and administrative expenses for the quarter increased from the prior year comparable period, primarily due to the addition of expenses from SPS and slightly higher corporate costs. Selling expenses at SPS included the hiring during the second quarter of two highly experienced sales personnel who have begun to make a material impact to bookings during 2022. Exclusive of SPS and corporate costs, selling, general and administrative expenses increased due to higher selling expenses and wage inflation.”

Mr. Binder continued, “Backlog at September 30, 2022, was approximately $16,645,000 compared to approximately $17,800,000 at December 31, 2021, both inclusive of the backlog of SPS. The reduction in backlog was due to a lower backlog at our OEG, which was partially offset by an increase in backlog at our OPG. The reduction in backlog at our OEG was primarily due to lower bookings by our Orbit/TDL divisions which was partially offset by higher bookings and backlog at our Q-Vio and SPS subsidiaries. The reduction in OEG backlog was expected as some follow-on orders were pushed back by our customers, 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, a shifting of prioritization of certain contract awards from the DoD and other timing delays. Although timing is an uncertainty, we expect these purchase orders to eventually be received. Furthermore, in November 2022, we announced that bookings in October 2022 exceeded $5,000,000 which was our highest booking month for 2022. This resulted in an increase of our backlog for both of our operating segments.”

David Goldman, Chief Financial Officer, noted, “At September 30, 2022, our cash and cash equivalents aggregated approximately $3.4 million and our financial condition remained strong as evidenced by our 3.9 to 1 current ratio. During the current quarter, we increased the amount available under our line of credit with our primary lender to $6,000,000 from $4,000,000. Our book value per share at September 30, 2022 was $5.75, which compares to $5.86 at June 30, 2022 and $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 $6.5 million and $0.6 million in available federal and New York State net operating loss carryforwards, respectively.”

Mr. Binder concluded, “Because our revenues are tied to 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 as a result of tight controls on our overall operating costs. This was followed by very firm operating results in our current first quarter with weaker than expected second and third quarter results. Our second and third quarter results were affected by reduced revenues from our legacy businesses and higher labor costs at SPS. Based on delivery schedules, we expect fourth quarter revenue levels to improve at our legacy businesses and we remain confident in the future of our newly acquired SPS operation. During the second quarter of 2021, based on our improved outlook for 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 in March 2022, our Board of Directors authorized the Company to recommence our quarterly dividend program. Through November 2, 2022, we have purchased approximately 144,185 shares under the program. We are encouraged by the strong booking month in October 2022 and several other business opportunities we continue to pursue. However, the timing of the receipt of follow-on contract awards and supply chain issues remain a concern and could impact the timing of deliveries. Our operating team continues to work on potential solutions whenever receipt of components is delayed.”

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 facilities in Hauppauge, NY and Carson, CA. 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 September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Net sales		$	5,968			$	6,067			$	18,612			$	17,261
Cost of sales			4,141				3,757				12,565				11,058
Gross profit			1,827				2,310				6,047				6,203
Selling general and administrative			2,185				1,628				6,382				4,706
expenses
Acquisition costs			-				-				98				-
PPP loan forgiveness			-				-				-				(1,618	)
Other (income) expense, net			(45	)			(13	)			(213	)			24
(Loss) income before income taxes			(313	)			695				(220	)			3,091
Income tax (benefit) provision			(10	)			14				29				49
Net (loss) income		$	(303	)		$	681			$	(249	)		$	3,042
Basic (loss) earnings per share		$	(0.09	)		$	0.20			$	(0.07	)		$	0.87
Diluted (loss) earnings per share		$	(0.09	)		$	0.20			$	(0.07	)		$	0.87
Weighted average number of shares outstanding:
Basic			3,396				3,457				3,428				3,489
Diluted			3,396				3,457				3,428				3,489

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
EBITDA (as adjusted) Reconciliation
Net (loss) income		$	(303	)		$	681			$	(249	)		$	3,042
Income tax (benefit) expense			(10	)			14				29				49
Depreciation and amortization			111				28				312				81
Fair value adj-contingent liabilities & other non-current liability			(33	)			(13	)			(195	)			27
Stock-based compensation			3				26				40				56
EBITDA (as adjusted) (1)		$	(232	)		$	736			$	(63	)		$	3,255
EBITDA (as adjusted) Per Diluted Share Reconciliation
Net (loss) income		$	(0.09	)		$	0.20			$	(0.07	)		$	0.87
Income tax (benefit) expense			0.00				0.00				0.01				0.01
Depreciation and amortization			0.03				0.01				0.09				0.02
Fair value adj-contingent liabilities & other non-current liability			(0.01	)			0.00				(0.06	)			0.01
Stock-based compensation			0.00				0.00				0.01				0.02
EBITDA (as adjusted), per diluted share (1)		$	(0.07	)		$	0.21			$	(0.02	)		$	0.93

(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.

		Nine Months Ended September 30,
Reconciliation of EBITDA, as adjusted, to cash flows (sed in) provided by operating activities (1)		2022				2021
EBITDA (as adjusted)		$	(63	)		$	3,255
Income tax expense			(29	)			(49	)
Fair value adj-contingent liabilities and other non-current liability			195				(27	)
Stock-based compensation			14				(56	)
Gain on forgiveness of PPP loan			-				(1,618	)
Net change in operating assets and liabilities			(990	)			(308	)
Cash flows (used in) provided by operating activities		$	(873	)		$	1,197

Orbit International Corp.
Consolidated Balance Sheets

	September 30, 2022 (unaudited)			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	3,408,000		$	9,215,000
Accounts receivable, less allowance for doubtful accounts		3,267,000			2,438,000
Inventories		10,598,000			8,540,000
Contract assets		773,000			648,000
Other current assets		960,000			416,000
Total current assets		19,006,000			21,257,000
Property and equipment, net		557,000			265,000
Right of use assets, operating leases		2,776,000			3,013,000
Goodwill		2,263,000			901,000
Intangible assets, net Deferred tax asset		3,605,000 545,000			- 545,000
Other assets		44,000			30,000
Total assets	$	28,796,000		$	26,011,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,057,000		$	504,000
Accrued expenses		931,000			1,014,000
Dividend payable		34,000			-
Note payable		14,000			-
Lease liabilities, operating leases		549,000		473,000
Contingent liabilities		583,000		96,000
Other current liability		1,012,000		-
Customer advances		648,000			866,000
Total current liabilities		4,828,000			2,953,000
Note payable, net of current portion		17,000			-
Other non-current liability		1,676,000			-
Contingent liabilities, net of current portion Lease liabilities, operating leases		486,000 2,292,000			208,000 2,596,000
Total liabilities		9,299,000			5,757,000
Stockholders’ Equity
Common stock		352,000			351,000
Additional paid-in capital		17,162,000			17,109,000
Treasury stock		(844,000	)		(384,000	)
Retained earnings		2,827,000			3,178,000
Stockholders’ equity		19,497,000			20,254,000
Total liabilities and stockholders’ equity	$	28,796,000		$	26,011,000

FAQ

What was the net loss for Orbit International in Q3 2022?

Orbit International reported a net loss of $303,000 in the third quarter of 2022.

How did Orbit International's EBITDA perform in Q3 2022?

EBITDA for Q3 2022 was a loss of $232,000, compared to a profit of $736,000 in Q3 2021.

What were the sales figures for Orbit International in the first nine months of 2022?

Net sales for the first nine months of 2022 were $18.6 million, compared to $17.3 million in the same period of 2021.

How did the backlog change for Orbit International by September 30, 2022?

The backlog increased slightly to $16.6 million as of September 30, 2022, from $16.3 million at June 30, 2022.

What impact did PPP loan forgiveness have on Orbit International's previous financial results?

The prior year net income included $1.6 million from PPP loan forgiveness, which significantly inflated the figures.