CUI Global Reports Fourth Quarter and Full Year 2014 Financial Results

TUALATIN, Ore., March 16, 2015 /PRNewswire/ -- CUI Global, Inc. (NASDAQ: CUI), a platform company dedicated to the acquisition, development, and commercialization of new, innovative products, today reported their unaudited financial results for the fourth quarter and full fiscal year ended December 31, 2014.

Financial Performance Summary

• Revenue for the full fiscal year of 2014 increased 25% to $76.0 million, as compared to $60.7 million the previous year
• For the fourth quarter, revenue increased 22% to $18.6 million, as compared to $15.2 in the fourth quarter of 2013
• Gross profit margin was 38% in 2014, as compared to 39% in 2013
• Gross profit margin for the fourth quarter was 31%, compared to 40% in the prior year quarter
• Basic and diluted (loss) per common share of $(0.14) in 2014, compared to $(0.05) per share in 2013
• Basic and diluted (loss) per common share for the fourth quarter of 2014 was $(0.09), as compared to $(0.08) in the fourth quarter of 2013
• Adjusted EBITDA for the full year 2014 was $3.2 million or $0.16 per share, as compared to $3.6 million or $0.20 per share for the previous year
• Adjusted EBITDA for the fourth quarter was $(0.7) million as compared to $0.2 million for the fourth quarter of 2013
• Cash and cash equivalents were $11.7 million with an additional $11.2 million in short term investments as of December 31, 2014 as compared to $16.6 in cash and cash equivalents and $10.9 million in short term investments as of December 31, 2013
• Power and Electro-Mechanical segment unaudited backlog of $12.5 million as of December 31, 2014
• Gas segment unaudited backlog of $15.9 million as of December 31, 2014

"The company delivered solid financial performance for the fourth quarter as well as the full year, with revenues for both periods growing over 20% from the prior year," commented William Clough, CUI Global's President & CEO.  "Our backlog remains strong, and we had a number of significant announcements which will help drive our future business initiatives and revenue growth.  One of the most significant was the recent acquisition of Canadian-based equipment manufacturer, Tectrol Inc.  Tectrol is a leading designer and manufacturer of standard and custom power solutions; and the acquisition is expected to provide immediate incremental revenue growth and manufacturing capabilities."

"In December 2014 we successfully completed 'engine' testing of our GasPTi device on large-frame, two-stroke natural gas compressors owned by one of North America's most respected natural gas compression companies, along with successfully completing eight (8) months of field trials with the largest pipeline company in Europe.  In addition, we announced the opening of Orbital Gas Systems North America in January 2015 which we expect will further extend our gas segment reach into the North American market," remarked Clough.  

"We began the year with the announcement of distribution agreements with Ives Equipment Corporation and Benchmark Instrumentation, both representing significant progress in our plan to develop a substantial distribution network for our technology," continued Mr. Clough.  "During the First Quarter, we announced the adoption of our IRIS-RTU units by National Grid in conjunction with GE Intelligent Platforms Group.  CUI Inc., our electronics division, introduced a new family of digital point of load dc-dc modules, products that we believe will be a significant driver of future revenue growth.  Additionally, in early May National Grid announced that they had selected our IRIS technology for use in remotely controlling their entire grid."

Other Recent News Highlights

• A distribution agreement was announced between CUI's wholly owned subsidiary, Orbital Gas Systems and Branom Instrument Company, which will have a significant impact on the North American Natural Gas Industry going forward
• CUI was named as one of three founding members of the Architects of Modern Power, a new power industry consortium representing a significant step forward in terms of developing advanced power conversion technology for distributed power architects
• CUI Global was added to the Russell 2000 Index, giving the company increased visibility in the financial markets
• CUI Global's GasPT® and VE technology® selected as 2014 Institution of Engineering and Technology Award Finalists

Financial Highlights

Revenues were $76,045,217 for fiscal year 2014, up 25% from revenues of $60,651,665 in 2013.  The increase in revenues during 2014 is attributable to the full year operations of Orbital Gas Systems Limited which was acquired in April 2013 (Gas segment) and accounts for approximately $9.5 million of the increase resulting from increased sales during the second through fourth quarter periods and owning Orbital for the first quarter of 2014, in addition to increases through the Power and Electro-Mechanical segment of approximately $5.9 million which is the result of continued product introductions, sales and marketing efforts, further expansion through the distribution sales channel, and the increased back log of CUI orders on hand at December 31, 2013.

The cost of revenue for the year ended December 31, 2014 was $47,494,283 compared to $37,147,182 for the same period last year.  The significant increase during 2014 compared to the prior year is primarily the result of the increase in sales in both the Power and Electro-Mechanical Segment and the Gas Segment which included the operations of Orbital during the first quarter of 2014.  As a percentage of sales, the cost of revenue remained relatively consistent at 62.46% for 2014 compared with 61.25% in 2013.

Gross profit was $28,550,934 or 38%, up from the previous year's total of $23,504,483 or 39%. 

SG&A as a percentage of total revenue increased to 34.3% for 2014 as compared to 32.1% in 2013.  SG&A expenses increased to $26,061,667 for the year ended December 31, 2014 from $19,498,526 for the same period during 2013.  This increase of $6,563,141 is primarily the result of having Orbital Gas Systems included for the first quarter of 2014 SG&A activities of Orbital which accounted for approximately $2.0 million of the increase, increased stock compensation expense of $1.7 million related to stock issuances and vesting expense of options related to consultants for strategic services including customer marketing and investor relations, to directors and employees for services, as well as the overall increase in operations throughout the organization associated with increased revenues of approximately $15.4 million including continued investment in reaching new customers and markets and continuing existing customer relationships.

Operating requirements generated negative cash flow from operations of approximately $3.1 million during the year ended December 31, 2014 and positive cash flow from operations of approximately $1.7 million during the year ended December 31, 2013. 

The 2014 change in cash used by operations is primarily the result of the increased net loss during the year ended December 31, 2014 of $2.8 million of which significant non-cash items impacted profitability.  A significant portion of this increased net loss includes the previously discussed stock compensation expense of $1.7 million as well as increased amortization of intangible assets of $0.9 million associated primarily with amortization of Orbital acquisition related intangible assets, and the decreased deferred income taxes benefit of $0.1 million.  At the same time as these costs increased, the Company increased revenues $15.4 million and increased gross profits of $5.0 million, which contributed to covering operating requirements.  Of this increase, the Gas segment increased approximately $9.5 million related to having Orbital Gas Systems for the full year in 2014 as well as general sales growth for this segment.  The Power and Electro-Mechanical segment increased revenues approximately $5.9 million related to continued market penetration through both new and existing customers, including growth within the distribution sales channels.

Further impacting the cash used in operations in 2014 was the significant increase in trade accounts receivables of approximately $3.3 million associated primarily with the increased fourth quarter revenues and the related sales terms on those deliveries.  During 2014, the Company experienced a decrease of approximately $0.6 million to costs in excess of billings associated with progress on the related projects, increased prepaid expenses of $1.0 million associated primarily with prepaid royalties increases of $0.4 million and increased prepaid taxes of $0.4 million.  Unearned revenue increased $0.5 million associated with the timing of related customer orders and the terms granted.  Billings in excess decreased $2.9 million during the year related to progress on gas segment projects.

Adjusted EBITDA for 2014 was $3.2 million or $0.16 a share versus $3.6 million or $0.20 for 2013. 

The company had common shares outstanding of 20,747,740 at the end of the year compared to 20,566,663 for the 2013 year end. 

At December 31, 2014, the Company had cash and cash equivalents balances of $11,704,361 and short term investments held to maturity of $11,159,765.  Operations, other intangible assets, investments, and equipment, have been funded through cash on hand during the year ended December 31, 2014.

Backlog Data (unaudited)

As of December 31, 2014, the Power and Electro-Mechanical segment held a backlog of customer orders of approximately $12.5 million as compared to a backlog of customer orders of approximately $13.4 million as of December 31, 2013.  This decrease is reasonable given the overall growth within the Power and Electro-Mechanical segment and the variable timing of customer order and delivery requirements.  At December 31, 2014, Orbital Gas Systems Limited held a backlog of customer orders of approximately $15.9 million as compared to a backlog of customer orders of approximately $25.0 million as of December 31, 2013.  The decrease in Orbital backlog is associated with several items, including the increase of approximately $3.3 million for the third and fourth quarter revenues of 2014 in comparison to 2013, and approximately $1.0 million change related to the changes in the Sterling Pound versus US Dollar exchange rate.  Additionally, Orbital is still being affected by the restructuring of the UK operations of its largest customer related to the "Revenue = Incentives + Innovation + Outputs" (RIIO) program and other transformation related initiatives, which have significantly impacted that customer's ability to place large contract orders.

Conference Call

The Company will conduct a conference call and webcast to review the results today at 5:00 PM ET.  To access the call, please dial the toll free number at (888) 734-0328 and provide the Conference ID: 3356003.  For international callers, please dial (678) 894-3054

At the conclusion of the call, a replay will be available until March 27, 2015.  To access the replay of the call dial (855) 859-2056 and provide the same Conference ID: 3356003.

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

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 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 in April 2013 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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