CUI Global Reports Lower-than-Expected Q1 2015 Results
CUI Global, Inc. reported their unaudited financial results for the first quarter ended March 31, 2015, including; 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; and Gas segment unaudited backlog of $15.8 million as of March 31, 2015.
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.
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.
â€œThe 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, NovumÂ® and SolusÂ®. 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," Clough concluded.