ORBIT INTERNATIONAL CORP. REPORTS 2020 SECOND QUARTER RESULTS
Second Quarter 2020 Net Loss of $396,000 ($0.11 loss per diluted share) v. Net Income of $584,000 ($0.16 per diluted share) in Prior Year Period
Second Quarter 2020 EBITDA, As Adjusted was a loss of $324,000 ($0.09 loss per diluted share) v. earnings of $630,000 ($0.18 per diluted share) in Prior Year Period
Six Months 2020 Net Loss of $376,000 ($0.11 loss per diluted share) v. Net Income of $654,000 ($0.18 per diluted share) in Prior Year Period
Six months 2020 EBITDA, As Adjusted was a loss of $238,000 ($0.07 loss per diluted share) v. earnings of $751,000 ($0.21 per diluted share) in Prior Year Period
Hauppauge, New York, August 18, 2020 – Orbit International Corp. (OTC PINK:ORBT) today announced results for the second quarter and six months ended June 30, 2020.
Second Quarter 2020 vs. Second Quarter 2019
- Net sales were $5,765,000, as compared to $6,911,000.
- Gross margin was 18.8%, as compared to 32.4%.
- Net loss was $396,000 ($0.11 loss per diluted share), as compared to a net income of $584,000 ($0.16 per diluted share).
- Earnings before interest, taxes, depreciation and amortization, fair value adjustment on contingent liability and stock-based compensation (EBITDA, as adjusted) was a loss of $324,000 ($0.09 loss per diluted share), as compared to EBITDA of $630,000 ($0.18 per diluted share).
Six Months 2020 vs. Six Months 2019
- Net sales were $11,617,000, as compared to $13,403,000.
- Gross margin was 24.6%, as compared to 29.3%.
- Net loss was $376,000 ($0.11 loss per diluted share), as compared to net income of $654,000 ($0.18 per diluted share).
- Earnings before interest, taxes, depreciation and amortization, fair value adjustment on contingent liability and stock-based compensation (EBITDA, as adjusted) was a loss of $238,000 ($0.07 loss per diluted share), as compared to EBITDA of $751,000 ($0.21 per diluted share).
- Backlog at June 30, 2020 was $21.8 million as compared to $21.9 million at March 31, 2020 and $20.8 at December 31, 2019.
Mitchell Binder, President and CEO of Orbit International Corp. commented, “Our net loss for the six months ended June 30, 2020 was $376,000 compared to net income of $654,000 from the prior comparable period. Our loss for the current period was a result of an anticipated reduction in productivity and a corresponding reduction in sales during the current second quarter, as a result of changes we made to our manufacturing operation in response to the PAUSE executive order issued by the Governor of New York State to safeguard the health and safety of our employees during the COVID-19 pandemic. These changes included the implementation of split shifts which had the effect of reducing hours by our manufacturing employees and support personnel. In addition, we closed our facility for several days in April to keep our employees home during the height of the pandemic in New York State. Despite the reduced hours worked, we maintained compensation levels for all our employees during the period. Consequently, our low gross margin is reflective of these inefficiencies that began at the end of the first quarter and continued though substantially all of the second quarter. Beginning in June 2020, we continued with our split shifts but returned to our normal working hours and we expect our efficiencies to improve during the remainder of the year barring any unforeseen circumstances related to the pandemic.”
Mr. Binder continued, “In particular, our reduction in productivity led to a reduction in sales in the current year second quarter from our Orbit Electronics Group (“OEG”) as compared to the first quarter. This reduction in sales was slightly mitigated by increased sales from our Orbit Power Group (“OPG”) during the current quarter due to an increase in the shipment of CAATS units. As previously mentioned, CAATS units have a lower gross margin than our other products. In addition, sales from both the OEG and OPG decreased during the current six months ending June 30, 2020 as compared to the prior comparable period. Finally, also because of the pandemic, our selling, general and administrative costs decreased during the quarter due to decreased selling costs as well as the cancellation of all trade shows. We expect these decreased costs will continue into the third quarter and possibly through the end of the year.”
Mr. Binder added, “On May 5, 2020, we announced that we closed on a $1,606,000 loan (“Loan”) from People’s United Bank under the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”). Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of such loans based on the use of such loan proceeds for payment of payroll costs, mortgage interest, rent and utilities. As previously mentioned, we have made several changes throughout our organization to deal with the health and safety of our employees and productivity has suffered as a result. In addition, bookings and revenue have been impacted, particularly at our OPG’s commercial division, whose customer base has been especially hurt by the pandemic, and Q-Vio, which is also experiencing delays for most of its commercial and industrial opportunities. Despite these challenges, the PPP Loan has enabled us to preserve our workforce with full employment and will hopefully mitigate the impact resulting from the inefficiencies created by the pandemic.”
Mr. Binder continued, “Our backlog at June 30, 2020 was approximately $21,824,000 compared to approximately $20,834,000 at December 31, 2019, an increase of 4.8% . The increase in backlog from year-end of $990,000 was obtained despite a decrease in CAATS backlog in excess of $2,500,000.”
David Goldman, Chief Financial Officer, noted, “At June 30, 2020, our cash and cash equivalents aggregated approximately $4.4 million, an increase of $1,611,000 as compared to the cash balance at March 31, 2020. This increase was primarily related to the receipt of our PPP loan during the current quarter. Our tangible book value per share at June 30, 2020 was $4.41 which compares to $4.52 at March 31, 2020 and $4.57 at December 31, 2019 (Note: tangible book value per share does not include any additional value for our remaining reserved deferred tax asset) To offset future federal and state taxes resulting from profits, we have approximately $9.0 million and $0.7 million in available federal and New York State net operating loss carryforwards, respectively.”
Mr. Binder concluded, “Because our revenue is tied to the delivery schedules specified in our contracts, it often is difficult to judge our performance on a quarterly basis. We endured a very difficult period beginning in mid-March that lasted through most of the second quarter. During that timeframe, when it became evident that the pandemic was going to affect our business, our Board of Directors decided to suspend our share repurchase program as well as our future quarterly dividend payments. It remains very difficult to predict the full extent of what the short and long-term impact that the COVID-19 pandemic will have on our business. Like many companies throughout the world, our operating performance suffered. With the receipt of the PPP loan and barring any further adverse effects of COVID-19, we believe that our financial condition will not be adversely affected, our efficiencies will be restored in the second half of 2020 and, based on our delivery schedules, revenue and operating performance should improve.”
Orbit International Corp., through its Electronics Group including its new Q-Vio subsidiary, is involved in the development and manufacture of custom electronic device and subsystem solutions for military, industrial and commercial applications through its production facility in Hauppauge, New York. Orbit’s Power Group, also located in Hauppauge, NY, designs and manufactures a wide array of power products including AC power supplies, frequency converters, inverters, uninterruptible power supplies, VME/VPX power supplies as well as various COTS power sources. The Company also has a sales office in Bradenton, FL.
On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The Company was classified as an essential business by New York State and therefore was exempt from the state’s mandate that all non-essential businesses close their business locations until further notice. In addition, as a member of the Defense Industrial Base (“DIB”), the Company is mandated by the Secretary of Defense to continue to provide the essential products and services required to meet national security commitments to the Federal Government and the U.S. Military. The Company remains open while following guidance from the Centers for Disease Control (“CDC”) to best protect our employees. At this time, the length and severity of the COVID-19 pandemic is still unknown.
Certain matters discussed in this news release and oral statements made from time to time by representatives of the Company including, statements regarding our expectations of Orbit’s operating plans, deliveries under contracts and strategies generally; statements regarding our expectations of the performance of our business; expectations regarding costs and revenues, future operating results, additional orders, future business opportunities and continued growth, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. Although Orbit believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.
Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Many of these factors are beyond Orbit International’s ability to control or predict. Important factors that may cause actual results to differ materially and that could impact Orbit International and the statements contained in this news release can be found in Orbit’s reports posted with the OTC Disclosure and News service. For forward-looking statements in this news release, Orbit claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Orbit assumes no obligation to update or supplement any forward-looking statements whether as a result of new information, future events or otherwise.
President & Chief Executive Officer