CUI Global Reports First Quarter 2015 Financial Results

TUALATIN, Ore., May 11, 2015 /PRNewswire/ -- CUI Global, Inc. (NASDAQ: CUI), a platform company dedicated to the acquisition, development, and commercialization of new, innovative products and technologies, today reported their unaudited financial results for the first quarter ended March 31, 2015.

First Quarter 2015 Financial Performance Summary: (Comparisons to Q1 2014)

• Revenue was $16.9 million, essentially flat year over year
• Gross Profit margin was 37%, as compared to 41%
• Consolidated net loss of $(4.1) million or $(0.20) per share versus $(488 thousand) or $(0.02) per share
• Adjusted EBITDA was $(2.6) million or $(0.13) per share, as compared to $900 thousand or $0.04 a share in Q1 2014
• Cash and cash equivalents were $9.6 million with an additional $5.5 million in short-term investments
• Power and Electro-Mechanical segment unaudited backlog of $23.7 million as of March 31, 2015
• Gas segment unaudited backlog of $15.8 million as of March 31, 2015

First Quarter 2015 Highlights:

• GE Preferred Solution Partners Program
• Opening of Orbital Gas Systems, North America in Houston
  • Backlog generated by OGSNA at March 31 of $1.7 million
• Launch of distribution partner, Mouser Electronics for the power segment
• Acquisition of CUI-Canada
• Certification by Snam Rete Gas as a pre-qualified supplier

For the quarter ended March 31, 2015, CUI Global produced consolidated total revenues of $16.9 million.  The power and electro-mechanical segment contributed $10.7 million and the gas segment contributed $6.2 million.  Revenues for the first quarter declined 9% sequentially from fourth quarter 2014 revenues of $18.6 million and were essentially flat when compared to the first quarter of 2014.  That decline, as compared with the fourth quarter of 2014, was based primarily on the effects of the West Coast labor strike by the International Longshore and Warehouse Union ("ILWU"), which settled in late February and increased worldwide lead times for components for the entire electronics industry.

SG&A increased as a percentage of revenues from 37% in Q1 2014 to 52% in Q1 2015.  This increase is primarily associated with the addition of the SG&A activities of the newly opened Orbital Gas Systems, North America, the SG&A from the first month of operations of CUI-Canada since acquisition and the ongoing activities to reach new customers and promote new product lines, including our advanced gas and power technologies, and expenses associated with the acquisition of CUI-Canada.  Gross profit for the quarter was $6.2 million, or 37% as compared to $7.0 million, or 41% in the first quarter 2014.  Both the power and electro-mechanical segment and the gas segment generated quarterly gross profit margins of 37%. 

The sales order backlog at March 31, 2015 was a consolidated $39.5 million.  Of that, the power and electro-mechanical segment held a backlog of customer orders of approximately $23.7 million and the gas segment held a backlog of approximately $15.8 million.

For the three months ended March 31, 2015, cost of revenues was $10.6 million versus $9.9 million for the same period in 2014.  The cost of revenues as a percentage of revenue for the three months ended March 31, 2015 increased to 63% from 59% during the prior year comparative period.  This percentage will vary based upon the product mix sold during the period, the mix of natural gas systems sold during the period, contract labor necessary to complete gas related projects, and is also dependent upon the competitive markets in which the company competes as well as foreign exchange rates.  Additional impact to the margin during the first quarter of 2014 is related to the delivery of product that was acquired as WIP with the Tectrol acquisition and had a mark-up as part of the purchase price allocation in accordance with US GAAP requirements, which equated to approximately 1% of the increase in cost of revenues as a percentage of revenue.  This will not have a material effect going forward. 

The company reported a net loss of $(4.1) million or $(0.20) per share (EPS) for the quarter ended March 31, 2015.  In the prior year period, the company reported a net loss of $(488) thousand or $(0.02) per share.  The net loss for the first quarter was primarily the result of increased selling, general and administrative expenses related to the opening of the Orbital Gas Systems, North America facility in January 2015 and the addition of CUI Canada, Inc. in March 2015, as well as the ongoing amortization of intangible assets related to the Orbital Gas Systems Limited acquisition and CUI Canada acquisition in addition to the negative impacts from extended component lead times and cargo delivery issues within the power segment which negatively impacted revenues.  The earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter were $(3.0) million or $(0.15) EBITDA per share as compared to EBITDA of $728 thousand or $0.04 per share for the first quarter 2014.

Operating activities generated negative cash flow of $1.4 million during the quarter ended March 31, 2015, versus negative cash flow of $88 thousand for the same period in 2014.  The change in cash from operations is primarily the result of the first quarter net loss before non-cash expenses offset by changes in assets and liabilities.

As of March 31, 2015, CUI Global held cash and cash equivalents of $9.6 million, a decrease of $2.1 million since December 31, 2014.  The company had additional short term investments of $5.5 million, a decrease of $5.7 million since December 31, 2014.  The change in cash and cash equivalents and short term investments is the result of the funds used to acquire CUI-Canada, to fund the launch and first quarter operating activities of Orbital Gas Systems, North America, the consolidated net loss and the changes in assets and liabilities during the period.

CUI Global's president & CEO, William Clough commented, "While the gas side of the business was stable, the power and electro-mechanical segment experienced challenges that impacted our top and bottom line.  These factors included delays in receiving product associated with cargo stoppages at West Coast Ports due to an extended labor action by the ILWU and its affiliates.  In addition, the entire electronics industry has experienced extensive supply chain delays due to a worldwide shortage of certain raw materials.  As we look ahead, our backlog is quite strong at $39.5 million and the fundamentals of our business remain unchanged."

"While the numbers in the quarter were lower than we expected, largely due to circumstances out of our control, there were several positive events that transpired during the first quarter which leave us well positioned moving forward," continued Mr. Clough.  "Our recent distribution agreement with Mouser Electronics, as well as our acquisition of CUI-Canada, were very significant events for the company.  We believe that partnering with an industry icon such as Mouser will help us achieve our goal of increasing our global market share, and ultimately demonstrates management's commitment to creating value for shareholders.  With respect to CUI-Canada, we remain very excited about this opportunity and the positive impact we expect to our top and bottom lines over the course of the next several years.  The acquisition gives CUI a greater presence in the electronics space as well as further enhances our status as a well-recognized manufacturer.  We continue to believe that this transaction will enable us to deliver our customers the most advanced power solutions from the AC front-end all the way to the DC point of load.  We are very excited about the synergies between the companies and our advanced power technologies, Novum® and Solus®.  The integration has already enhanced the capabilities of our Power Group and we are currently analyzing our ability to manufacture more of our product line at CUI-Canada, including certain components associated with our GasPT units."

Conference Call
The company will conduct a conference call and webcast to review the results today at 5:00 PM ET (2:00 PM PT).  To access the call, please dial the toll free number at (888) 734-0328 and provide the Conference ID: 36265652.  For international callers, please dial (678) 894-3054.

At the conclusion of the call, a replay will be available until May 22, 2015.  To access the replay of the call dial (855) 859-2056 and provide the same Conference ID: 36265652.

A simultaneous webcast will be available via the company's investor relations website at: http://www.cuiglobal.com/Investor-Relations

A simultaneous webcast will also be available via: http://www.media-server.com/m/p/a26hbi9s 

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 GasPT2 platform targeting the energy sector, to CUI Inc's digital 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 are able to participate in the opportunities, revenues, and profits generated by the products, technologies, and market channels of CUI Global and its subsidiaries. But most importantly, 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 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.

Reconciliation of Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA and Adjusted Net Income are a 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 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 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 are not terms defined by GAAP and as a result our measure of EBITDA, Adjusted EBITDA and Adjusted Net Income might not be comparable to similarly titled measures used by other companies. However, EBITDA, Adjusted EBITDA and Adjusted Net Income 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 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 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, warrants, options and notes issued for compensation and services during the period ended.

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SOURCE CUI Global, Inc.

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