ENG 2Q Release

ENGlobal Reports Second Quarter 2018 Results
   
HOUSTON, TX, Aug. 09, 2018 (GLOBE NEWSWIRE) --

ENGlobal, a leading provider of engineering and automation services, today announced results for the second quarter ended June 30, 2018.

ENGlobal reported a net loss of $1.0 million for the second quarter of 2018 as compared to a $0.9 million net loss reported for the prior year period. Net loss per diluted share was $0.04 and $0.03 for the second quarter just ended and for the second quarter of 2017, respectively.

Adjusted for non-recurring costs, the Company posted a net loss of $0.3 million for the second quarter of 2018, as compared to a net loss of $0.9 million for the second quarter of 2017. During the second quarter of 2018, the Company settled two litigation matters, representing all outstanding litigation, and retained an investment banking firm. The non-recurring costs incurred during the quarter associated with these actions of approximately $0.7 million were recorded as $0.3 million in SG&A and $0.4 million in Other Expense.

Revenue decreased by $2.1 million to $13.9 million for the three months ended June 30, 2018 from $16.0 million for the three months ended July 1, 2017 while gross profit margins increased to 16.2% for the quarter ended June 30, 2018 as compared to 15.7% for the quarter ended July 1, 2017.

Management's Assessment

Mark Hess, ENGlobal's Chief Financial Officer stated: "Our revenue decline on a quarter over quarter basis is primarily due to a couple of large projects that were completed last year, including the Caspian Pipeline Consortium project, and a reduction in procurement activities in our Automation segment. The decline was partially offset by revenue resulting from our focus on engineered modular solutions, which produced slightly higher margins.  Our SG&A for the quarter, adjusted for a one-time cost, was $2.6 million, or a $10.4 million annual run rate, which is the lowest SG&A level we have had in many years."

Mr. Hess continued: "As expected, with the shift from a pure staffing business model to that of providing more turnkey systems, we have seen a shift in our working capital from cash to other components. We expect this shift to continue in the near term as the volume of turnkey execution increases. However, our overall working capital at the end of the quarter was $15.0 million, which we feel is sufficient to provide for our near-term growth."

William A. Coskey, P.E., Chairman and CEO of ENGlobal added: "I am encouraged by the increase in volume of engineered modular systems that we have produced thus far this year and I expect that ENGlobal's strategy of delivering these systems with turnkey execution will continue to become a larger part of our business going forward.  We expect that long-term financial improvement can be realized as a result of increasing project scope which serves to better leverage our resources. Our management is focused on eight well-defined areas of modular project execution, which we are excited about and believe have excellent potential for growing our Business."

Mr. Coskey continued: "We have positioned ourselves as a vertically integrated supplier and are proud to offer our heritage of engineering and design capabilities combined with modular fabrication and automation expertise. This combination of skills, together with our complete project support services, is a unique enhancement to our historical operation and a strategy that is appealing to our clientele. Based on recent trends, I continue to believe that we will see an inflection point and improved financial metrics in future quarters."

The following is a summary of the income statement for the three months ended June 30, 2018 and July 1, 2017:

 (amounts in thousands)

	Three months ended June 30, 2018				Three months ended July 1, 2017
Revenue	$	13,872			$	15,966
Gross Profit		2,253				2,513
General & Administrative Expenses		2,869				3,057
Operating Loss		(616	)			(544	)
Net loss		(992	)			(895	)

The following table presents certain balance sheet items as of June 30, 2018 and December 30, 2017:

(amounts in thousands)	As of June 30, 2018		As of December 30, 2017
Cash	$	5,444	$	9,648
Working capital		15,019		16,846

The following table illustrates the composition of the Company's revenue and profitability for its operations for the three and six months ended June 30, 2018 and July 1, 2017:

(amounts in thousands)	Three months ended June 30, 2018									Three Months ended July 1, 2017
			% of		Gross							% of		Gross
	Total		Total		Profit		Operating			Total		Total		Profit		Operating
Segment	Revenue		Revenue		Margin		Profit  (Loss)			Revenue		Revenue		Margin		Profit (Loss)
Engineering & Construction	$	6,652	48.0	%	20.0	%	$	799		$	10,018	62.7	%	14.1	%	$	309
Automation		7,220	52.0	%	12.8	%		260			5,948	37.3	%	16.7	%		1,008
Consolidated	$	13,872	100.0	%	16.2	%	$	(616	)	$	15,966	100.0	%	15.7	%	$	(544	)

(amounts in thousands)	Six months ended June 30, 2018									Six Months ended July 1, 2017
			% of		Gross							% of		Gross
	Total		Total		Profit		Operating			Total		Total		Profit		Operating
Segment	Revenue		Revenue		Margin		Profit  (Loss)			Revenue		Revenue		Margin		Profit (Loss)
Engineering & Construction	$	11,747	43.4	%	14.9	%	$	789		$	11,577	40.7	%	11.5	%	$	234
Automation		15,312	56.6	%	12.5	%		552			16,863	59.3	%	17.3	%		1,505
Consolidated	$	27,059	100.0	%	13.5	%	$	(1,786	)	$	28,440	100.0	%	14.9	%	$	(2,218	)

The Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 is expected to be filed with the Securities and Exchange Commission reflecting these results by the end of the day on Thursday, August 9, 2018.