CUI Global Reports Unaudited Third Quarter 2014 Financial Results

TUALATIN, Ore., Nov. 10, 2014 /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 third quarter, ended September 30, 2014.

Third Quarter 2014 Financial Performance Summary: (Comparisons to 3Q 2013)

• Quarterly revenue increased 24% to $21.4 million from $17.2 million and year to date revenue increased 27% to $57.5 million from $45.4 million
• Quarterly gross profit margin was 37%, as compared to 38% while year to date gross profit margin was 40% as compared to 38%
• Quarterly consolidated loss of $(349) thousand or $(0.02) per share versus $737 thousand profit or $0.04 per share and year to date consolidated loss of $(903) thousand or $(0.04) per share versus $712 thousand profit or $0.04 per share
• Quarterly adjusted EBITDA was $1.8 million or $0.09 per share, as compared to $1.6 million or $0.08 per share in Q3 2013 and year to date adjusted EBITDA was $4.0 million or $0.19 per share, as compared to $3.4 million or $0.20 per share in 2013
• Quarterly adjusted net income was $1.4 million or $0.07 per share, as compared to $1.6 million or $0.08 per share in Q3 2013 and year to date adjusted net income was $3.0 million or $0.14 per share, as compared to $2.6 million or $0.15 per share in 2013
• Cash and cash equivalents were $17.1 million as of September 30, 2014 with an additional $10.4 million in short-term investments
• Power and Electro-Mechanical segment unaudited backlog of $12.4 million as of September 30, 2014
• Gas segment unaudited backlog of $18.8 million as of September 30, 2014
• Company to initiate a $3 million share repurchase program beginning in the fourth quarter

CUI Global's President & CEO, William Clough commented, "The third quarter of 2014 was a good quarter for CUI Global and most especially for CUI Inc., the power and electro-mechanical segment, as we continue to build on the momentum created during the first half of the year." 

"We were particularly pleased with our performance from a revenue perspective, as we saw nice increases both sequentially as well as compared to the prior year quarter.  The gas segment, revenue growth was driven primarily by an influx of Biomethane projects in the UK, as the British government continues to incentivize the production of renewable energy.  Growth in the power and electro-mechanical segment was related to continued market penetration of its expanding product portfolio as well as growth within its distribution channels. On a year-to-date basis, we saw increases in revenues in both segments compared to 2013."

"It was an eventful quarter for our Company beginning with the mid-September announcement of a distribution agreement between our wholly own subsidiary Orbital Gas Systems and Branom Instrument Company, which we feel will have a significant impact on the North American Natural Gas Industry going forward," Clough continued.

"Additionally, last month CUI was named as one of three founding members of the Architects of Modern Power, a new power industry consortium.  The formation of this consortium, which includes two other globally recognized industry leaders, is a significant step forward in terms of developing advanced power conversion technology for distributed power architects," added Clough.

The Company also announced today that its Board of Directors has authorized a one-year program to repurchase up to an aggregate $3 million of the Company's common stock.  The authorization is effective immediately.  The amount and timing of any such repurchases will be determined by the Company based on its financial condition, business opportunities, and the market conditions at the time.

As explained by CUI Global's Board of Directors, "This buyback reflects our view that the current trading level of the Company's common shares does not always reflect the significant, near-term business opportunity set in front of the Company.  The Board is committed to maximizing shareholder value and therefore has authorized this program to opportunistically repurchase the Company's shares in the public market as and when appropriate."

For the quarter ended September 30, 2014, CUI Global produced consolidated total revenues of $21.4 million and year to date consolidated total revenues of $57.5 million.  Total revenues for the third quarter grew 11% sequentially from second quarter revenues of $19.2 million and 24% year-over-year, when compared to $17.2 million in the third quarter of 2013. 

The cost of revenue for the quarter ended September 30, 2014, was $13.4 million, versus $10.7 million for the same period in 2013.  The increase when compared to the third quarter of 2013 is primarily the result of increased revenues associated with growth in both the gas and power and electro-mechanical segments.  As a percentage of sales, the cost of revenue increased slightly to 63% for Q3 2014 compared with 62% in Q3 2013 with the change associated with the product mix delivered during the period.  For the year to date period ended September 30, 2014, cost of revenue was $34.8 million, versus $27.9 million for the comparable period in 2013.  This increase is associated with overall increase in revenues during the year to date period.

Gross profit was $22.7 million year to date versus $17.5 million in the same period of 2013 and $8.0 million for the quarter ended September 30, 2014 versus $6.5 million during the prior year quarter.

As a percentage of total revenue, SG&A increased during the three month period ended September 30, 2014 to 32%, from 29% during the prior year comparable period. The quarterly increase in 2014 is associated with the ongoing activities to reach new customers, promote new product lines, new product introductions as well as the overall growth in expense in relation to the revenue growth during the quarter.  The 2014 quarterly increase includes $738 thousand of equity compensation expense for strategic consulting services that were completed regarding the testing and demonstration of the GasPT technology in accordance with the terms of the consulting agreement.  For the nine months ended September 30, 2014 SG&A as a percentage of revenue increased to 34% from 31% for the prior year comparable period.  The increase during the nine months ended September 30, 2014 is associated with the ongoing activities to reach new customers, promote new product lines, new product introductions, the expenses necessary to support the overall growth in revenues as well as the addition of the SG&A activities of Orbital Gas Systems Limited which was acquired in April 2013 and accounted for approximately $2.0 million of additional expenses during the first quarter of 2014.  Additionally, the nine months ended September 30, 2014 increase includes the $738 thousand of equity compensation expense for strategic consulting services that were completed regarding the testing and demonstration of the GasPT technology in accordance with the terms of the consulting agreement.

The company reported a net loss of $(349) thousand or $(0.02) per share (EPS) for the quarter ended September 30, 2014 as compared with a net profit of $737 thousand or $0.04 per share in the prior year period.  For the nine months ended September 30, 2014, the company reported a net loss of $(903) thousand or $(0.04) per share (EPS) as compared with a net profit of $712 thousand or $0.04 per share in the prior year period.  The net loss reported for both the quarter and nine months ended September 30, 2014 as compared to the prior year periods are primarily the result of consistent increases for selling, general and administrative expenses related to the increased revenues and selling and marketing efforts associated with introducing new technologies and Orbital to the global marketplace

The earnings before interest, taxes, depreciation and amortization (EBITDA) for the three and nine months ended September 30, 2014 were $839 thousand and $2.4 million, respectively, or $0.04 and $0.12 EBITDA per share, respectively. Adjusted EBITDA for the three and nine months ended September 30, 2014 was $1.8 million and $4.0 million, respectively, or $0.09 and $0.19 per share, respectively.

Operating activities generated positive cash flow of $1.2 million during the nine months ended September 30, 2014, versus positive cash flow from operations of $2.4 million for the same period in 2013.  The change in cash from operations is primarily the result of the increases in assets and reduction in billings in excess of cost from operating activities offset by the net income earned before non-cash expenses.  

In addition, as an operating unit, the power and electro-mechanical segment posted revenues of $12.9 million for the quarter, which represented a $1.8 million (15%) increase as compared to the same period in 2013. The gas segment posted revenues of $8.4 million in the third quarter as compared with $6.0 million during the same period in 2013, an increase of $2.4 million (40%).  For the nine months ended September 30, 2014 the power and electro-mechanical segment generated revenues of $37.3 million as compared with $33.4 million in 2013.  The gas segment generated $20.2 million for the nine months ended September 30, 2014 as compared with $12.0 million during the prior year comparable period. 

The power and electro-mechanical segment unaudited order back log was $12.4 million and the gas segment unaudited order back log was $18.8 million as of September 30, 2014.

As of September 30, 2014 the Company had $17.1 million of cash and cash equivalents as well as $10.4 million in short-term investments.

CONFERENCE CALL

The Company will conduct a conference call and webcast to review the results on Tuesday, November 11, 2014 at 9:00am ET.

To access the call, please dial the toll free number at (888) 734-0328 and provide the Conference ID: 30729434. For international callers, please dial (678) 894-3054. At the conclusion of the call, a replay will be available until November 22, 2014.  To access the replay of the call dial (855) 859-2056 and provide the same Conference 30729434.  

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 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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