ORBIT INTERNATIONAL CORP. REPORTS 2022 THIRD QUARTER RESULTS
Third Quarter 2022 Net Loss of $303,000 ($0.09 loss per share) v. Net Income of $681,000 ($0.20 per diluted share) in Prior Year Period
Third Quarter 2022 EBITDA, As Adjusted, was a loss of $232,000 ($0.07 loss per share) v. $736,000 ($0.21 per diluted share) in Prior Year Period
Nine Months 2022 Net Loss of $249,000 ($0.07 loss per share) v. Net Income of $3,042,000 ($0.87 per diluted share) in Prior Year Period. Prior Period Includes $1,618,000 ($0.46 per diluted share) of PPP Loan Forgiveness. Exclusive of PPP Loan Forgiveness, Prior Period Net Income was $1,424,000 ($0.41 per diluted share)
Nine Months 2022 EBITDA, As Adjusted, was a loss of $63,000 ($0.02 loss per share) v. $3,255,000 ($0.93 per diluted share) in Prior Year Period. Exclusive of PPP Loan Forgiveness, Prior Period EBITDA, As Adjusted was $1,637,000 ($0.47 per diluted share)
Hauppauge, New York, November 10, 2022 – Orbit International Corp. (OTC PINK:ORBT) today announced results for the third quarter and nine months ended September 30, 2022.
Results for the current quarterly and nine-month periods include the results of Simulator Product Solutions LLC (“SPS”). Prior year quarterly and nine-month periods do not include SPS’ results.
Third Quarter 2022 vs. Third Quarter 2021
- Net sales were $5,968,000, as compared to $6,067,000.
- Gross margin was 30.6%, as compared to 38.1%.
- Net loss was $303,000 ($0.09 loss per share), as compared to net income of $681,000 ($0.20 per diluted share).
- Earnings before interest, taxes, depreciation and amortization, fair value adjustment on contingent liabilities and other non-current liability, and stock-based compensation (EBITDA, as adjusted) was a loss of $232,000 ($0.07 loss per share), as compared to income of $736,000 ($0.21 per diluted share).
Nine Months 2022 vs. Nine Months 2021
- Net sales were $18,612,000, as compared to $17,261,000.
- Gross margin was 32.5%, as compared to 35.9%.
- Net loss was $249,000 ($0.07 loss per share), as compared to net income of $3,042,000 ($0.87 per diluted share). Net Income for the prior year period includes PPP loan forgiveness of $1,618,000 ($0.46 per diluted share). Exclusive of the PPP loan forgiveness, net income for the prior year was $1,424,000 ($0.41 per diluted share).
- Earnings before interest, taxes, depreciation and amortization, fair value adjustment on contingent liabilities and other non-current liability, and stock-based compensation (EBITDA, as adjusted) was a loss of $63,000 ($0.02 loss per share), as compared to income of $3,255,000 ($0.93 per diluted share). Prior year EBITDA, as adjusted, includes $1,618,000 of PPP loan forgiveness. Exclusive of the PPP loan forgiveness, EBITDA, as adjusted, was $1,637,000 ($0.47 per diluted share).
- Backlog at September 30, 2022 was $16.6 million compared to $16.3 million at June 30, 2022 and $17.8 million at December 31, 2021 (inclusive of the backlog of SPS).
EBITDA, as adjusted, table which accounts for non-recurring charges during the current and prior year quarters and nine-month periods:
Mitchell Binder, President and CEO of Orbit International Corp. commented, “Our net loss for the nine months ended September 30, 2022, was $249,000 compared to net income of $3,042,000 for the prior comparable period. Included in our current nine-month period results is the adverse effect of both $98,000 of one-time costs related to the acquisition of our newly acquired SPS and a $183,000 charge to SPS’ cost of sales due to the increase recorded to its work-in-process and finished goods acquired beginning inventory under Fair Value Accounting (“FVA”). Included in our prior year results is $1,618,000 representing the forgiveness of our loan, including accrued interest, under the Paycheck Protection Program (“PPP”). Exclusive of the one-time acquisition costs and the charge to cost of sales under FVA and the PPP loan forgiveness, our net income for the nine months ended September 30, 2022, was $32,000 ($0.01 per diluted share) compared to $1,424,000 ($0.41 per diluted share) in the comparable period of the prior year. EBITDA, as adjusted, for the nine months ended September 30, 2022, exclusive of the one-time acquisition costs and charge to cost of sales under FVA, was $218,000 ($0.06 per diluted share). The weakness in our operating results was primarily due to lower revenue from our legacy businesses resulting from several previously reported factors that affected our second and third quarter delivery schedules. In addition, higher than expected labor costs that adversely affected results at SPS during the second quarter, slightly improved during the current quarter and we expect they will continue to improve through the end of the year.”
Mr. Binder added, “Our sales for the nine months ended September 30, 2022, increased to $18,612,000 compared to $17,261,000 from the prior comparable period. This increase in sales was primarily attributable to sales from SPS, which is part of our Orbit Electronics Group (“OEG”) and accounted for $4,150,000 during the current nine-month period. Our sales for the three months ended September 30, 2022, were $5,968,000, which was slightly less than the sales of $6,067,000 from the prior comparable period despite the inclusion of sales from SPS in the current three-month period. The current nine-month period was adversely affected by lower sales recorded by both our OEG (exclusive of SPS) and our Orbit Power Group (“OPG”). The current three-month period was adversely affected by lower sales from our OEG (exclusive of SPS) and despite higher sales from our OPG.”
Mr. Binder further added, “Our gross margin for the nine months ended September 30, 2022, exclusive of adjustments to SPS’ work in process and finished goods under FVA, decreased to 33.5% compared to 35.9% in the prior comparable period. Notwithstanding this slight decrease in gross margin during the first nine months of 2022, our OEG (exclusive of SPS) reported increased gross margin attributable to certain engineering deliverables, some of whose costs were expensed in prior periods, as well as a more profitable product mix. Our gross margin at our OPG decreased from the prior comparable period due to a decrease in sales.”
Mr. Binder added, “Selling, general and administrative expenses for the quarter increased from the prior year comparable period, primarily due to the addition of expenses from SPS and slightly higher corporate costs. Selling expenses at SPS included the hiring during the second quarter of two highly experienced sales personnel who have begun to make a material impact to bookings during 2022. Exclusive of SPS and corporate costs, selling, general and administrative expenses increased due to higher selling expenses and wage inflation.”
Mr. Binder continued, “Backlog at September 30, 2022, was approximately $16,645,000 compared to approximately $17,800,000 at December 31, 2021, both inclusive of the backlog of SPS. The reduction in backlog was due to a lower backlog at our OEG, which was partially offset by an increase in backlog at our OPG. The reduction in backlog at our OEG was primarily due to lower bookings by our Orbit/TDL divisions which was partially offset by higher bookings and backlog at our Q-Vio and SPS subsidiaries. The reduction in OEG backlog was expected as some follow-on orders were pushed back by our customers, primarily due to funding delays from the Department of Defense (“DoD”). These funding delays were principally the result of work restrictions related to the pandemic, a shifting of prioritization of certain contract awards from the DoD and other timing delays. Although timing is an uncertainty, we expect these purchase orders to eventually be received. Furthermore, in November 2022, we announced that bookings in October 2022 exceeded $5,000,000 which was our highest booking month for 2022. This resulted in an increase of our backlog for both of our operating segments.”
David Goldman, Chief Financial Officer, noted, “At September 30, 2022, our cash and cash equivalents aggregated approximately $3.4 million and our financial condition remained strong as evidenced by our 3.9 to 1 current ratio. During the current quarter, we increased the amount available under our line of credit with our primary lender to $6,000,000 from $4,000,000. Our book value per share at September 30, 2022 was $5.75, which compares to $5.86 at June 30, 2022 and $5.88 at December 31, 2021. (Note: 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 $6.5 million and $0.6 million in available federal and New York State net operating loss carryforwards, respectively.”
Mr. Binder concluded, “Because our revenues are tied to delivery schedules specified in our contracts, it is often difficult to judge our performance on a quarterly basis. We completed a solid year of operating results in 2021 due to improved gross margins, and as a result of tight controls on our overall operating costs. This was followed by very firm operating results in our current first quarter with weaker than expected second and third quarter results. Our second and third quarter results were affected by reduced revenues from our legacy businesses and higher labor costs at SPS. Based on delivery schedules, we expect fourth quarter revenue levels to improve at our legacy businesses and we remain confident in the future of our newly acquired SPS operation. During the second quarter of 2021, based on our improved outlook for our business regarding the COVID-19 pandemic and stability of our financial condition, our Board of Directors authorized the Company to recommence our share repurchase program and in March 2022, our Board of Directors authorized the Company to recommence our quarterly dividend program. Through November 2, 2022, we have purchased approximately 144,185 shares under the program. We are encouraged by the strong booking month in October 2022 and several other business opportunities we continue to pursue. However, the timing of the receipt of follow-on contract awards and supply chain issues remain a concern and could impact the timing of deliveries. Our operating team continues to work on potential solutions whenever receipt of components is delayed.”
Orbit International Corp., through its Electronics Group, is involved in the development and manufacture of custom electronic device and subsystem solutions for military, industrial and commercial applications through its production facilities in Hauppauge, NY and Carson, CA. 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, VME/VPX power supplies as well as various COTS power sources.
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.
Chief Financial Officer