Orbital Energy Group Reports Record Revenues in First Quarter 2022 of $70.3 Million - Form 8-K

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Revenues of $70.3 million, compared to $41.0 million in the prior quarter and $5.6 million for the first quarter of 2021;

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Gross profit of $11.6 million compared to a gross loss of $2.5 million in the first quarter of 2021;

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Operating loss of $1.8 million, an improvement of $13.8 million from the first quarter of 2021;

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Loss from continuing operations, net of income taxes of $36.7 million, including a non-cash charge of $26.0 million. Excluding this charge, loss from continuing operations would have been $10.4 million, a $5.3 million improvement from the prior quarter and a $5.9 million improvement from the first quarter of 2021;

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Adjusted EBITDA from continuing operations was a positive $3.8 million compared to a loss of $1.2 million in the prior quarter and a loss of $9.6 million in the first quarter of 2021;

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Backlog of $513.5 million as of March 31, 2022, with $294.6 million expected to be recognized in the next twelve months.

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Named Robert Burns as President of Orbital Solar Services

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Extended maturity on portion of seller notes to December 31, 2022

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Completed a registered direct offering of $21 million;

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Completed the sale of Orbital Gas Systems Ltd.

March 31,

December 31,

(in thousands, except share and per share amounts)

2022

2021

Assets:

Current Assets:

Cash and cash equivalents

Restricted cash - current portion

Trade accounts receivable, net of allowance

Inventories

Contract assets

Note receivable, current portion

Prepaid expenses and other current assets

Assets held for sale, current portion

Total current assets

Property and equipment, less accumulated depreciation

Investment

Right of use assets - Operating leases

Right of use assets - Financing leases

Goodwill

Other intangible assets, net

Restricted cash, noncurrent portion

Note receivable, noncurrent portion

Deposits and other assets

Total assets

Liabilities and Stockholders' Equity:

Current Liabilities:

Accounts payable

Notes payable, current portion

Line of credit

Operating lease obligations - current portion

Financing lease obligations - current portion

Accrued expenses

Contract liabilities

Financial instrument liability, current portion

Liabilities held for sale, current portion

Total current liabilities

Financial instrument liability, noncurrent portion

Deferred tax liabilities

Notes payable, less current portion

Operating lease obligations, less current portion

Financing lease obligations, less current portion

Other long-term liabilities

Total liabilities

Commitments and contingencies

Stockholders' Equity:

Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at March 31, 2022 or December 31, 2021

Common stock, par value $0.001; 325,000,000 shares authorized; 85,887,514 shares issued and 85,409,451 shares outstanding at March 31, 2022 and 82,259,739 shares issued and 81,906,676 shares outstanding at December 31, 2021

Additional paid-in capital

Treasury stock at cost; 353,063 shares held at March 31, 2022 and December 31, 2021

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Accumulated deficit

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Accumulated other comprehensive loss

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Total Orbital Energy Group, Inc.'s stockholders' equity

Noncontrolling interest

Total stockholders' equity

Total liabilities and stockholders' equity

For the Three Months

(in thousands, except share and per share amounts)

Ended March 31,

2022

2021

Revenues

Cost of revenues

Gross profit

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Operating expenses:

Selling, general and administrative expense

Depreciation and amortization

Recovery of bad debt

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Other operating expense

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Total operating expenses

Loss from operations

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Loss on extinguishment of debt

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Other income (expense)

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Interest expense

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Loss from continuing operations before taxes

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Income tax expense

Loss from continuing operations, net of income taxes

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Discontinued operations

Loss from discontinued operations, net of income taxes

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Net loss

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Less: net loss attributable to noncontrolling interest

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Net loss attributable to Orbital Energy Group, Inc.

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Basic and diluted weighted average common shares outstanding

Loss from continuing operations per common share - basic and diluted

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Income from discontinued operations - basic and diluted

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Loss per common share - basic and diluted

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For the Three Months

(in thousands)

Ended March 31,

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

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Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

Amortization of intangibles

Amortization of debt discount

Amortization of note receivable discount

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Stock-based compensation and expense, net of forfeitures

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Fair value adjustment to liability for stock appreciation rights

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Fair value adjustment to financial instrument liability

Loss on extinguishment of debt and debt modifications

Recovery of bad debt

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Inventory reserve

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Gain on sale of assets

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Non-cash unrealized foreign currency (gain) loss

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Change in operating assets and liabilities, net of acquisition:

Trade accounts receivable

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Inventories

Contract assets

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Prepaid expenses and other current assets

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Right of use assets/lease liabilities, net

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Deposits and other assets

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Accounts payable

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Accrued expenses

Contract liabilities

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NET CASH USED IN OPERATING ACTIVITIES

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CASH FLOWS FROM INVESTING ACTIVITIES:

Cash paid for acquisition, net of cash received

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Purchases of property and equipment

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Deposits on financing lease property and equipment

Proceeds from sale of property and equipment

Purchase of other intangible assets

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)

Proceeds from notes receivable

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

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CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit

Payments on line of credit

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Payments on financing lease obligations

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Proceeds from notes payable

Payments on notes payable

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Proceeds from sales of common stock

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

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Effect of exchange rate changes on cash

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Net increase (decrease) in cash, cash equivalents and restricted cash

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Cash, cash equivalents and restricted cash at beginning of period

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

Reconciliation of Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA from Continuing Operations for the Three Months Ended March 31, 2022 and 2021

The following table presents reconciliations of the non-GAAP financial measures of EBITDA and Adjusted EBITDA from continuing operations to loss from continuing operations, net of taxes for the three months ended March 31, 2022 and 2021. These reconciliations are intended to provide useful information to investors and analysts as they evaluate the Company's performance. EBITDA from continuing operations is defined as loss from continuing operations before interest, taxes, depreciation and amortization, and Adjusted EBITDA from continuing operations is defined as EBITDA from continuing operations adjusted for certain other items as described below. We believe that the exclusion of these items from loss from continuing operations enables management and investors to more effectively evaluate the Company's operations period over period and to identify operating trends that might not be apparent when including the excluded items. However, these measures should not be considered as an alternative to loss from continuing operations or other measures of performance that are derived in accordance with GAAP. As to certain of the items below, (i) stock-based compensation and expense may vary from period to period due to fair value adjustments from changes in market conditions, forfeiture rates, accelerated vesting and amounts granted; (ii) acquisition costs vary from period to period depending on the Company's level of acquisition activity; (iii) gains and losses loss on disposal of assets varies from period to period depending on operational wear and tear and condition of the Company's fixed assets; (iv) gains and losses on extinguishment and modification of debt varies from period to period depending on changes in the Company's financing activities and the exercise of certain debt-to-equity conversion features; and (v) fair value adjustments to equity-linked financial instrument liabilities varies from period to period depending on changes in the market price of Orbital Energy's common stock and certain assumptions used in fair valuation calculations. Because EBITDA and adjusted EBITDA from continuing operations, as defined, exclude some, but not all, items that affect loss from continuing operations, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, loss from continuing operations, net of income taxes and information reconciling the GAAP and non-GAAP financial measures, are included below. See notes to follow:

For the Three Months Ended

(In thousands)

March 31,

(Unaudited)

2022

2021

Loss from continuing operations, net of income taxes (GAAP)

Interest expense, net

Income tax expense (benefit)

Depreciation and amortization

EBITDA from continuing operations (a)

Stock-based compensation and expense, net of forfeitures (b)

Acquisition costs (c)

(Gain) loss on disposal of assets (d)

(Gain) loss on extinguishment and modification of debt (e)

Fair value adjustment to equity-linked financial instruments (f)

Adjusted EBITDA from continuing operations (a)

(a)

The calculations of EBITDA and Adjusted EBITDA from continuing operations for the three months ended March 31, 2021 have been amended to conform to the current period calculations of EBITDA and Adjusted EBITDA from continuing operations.

(b)

The amounts include non-cash expenses recognized from the vesting of stock-based compensation awards issued to employees, executives, directors and consultants for services provided, net of forfeitures. The amount for the three-month period ended March 31, 2021 includes non-cash expenses recognized from modifications to executive stock appreciation rights (SARS) compensation awards that were exchanged for restricted stock units (RSUs).

(c)

The amounts for the three months ended March 31, 2022 includes certain acquisition-related costs incurred for the acquisition of Coax Fiber Solutions, Inc.

(d)

The amounts relate to net gains or losses recognized on the disposal of the Company's assets.

(e)

The amounts for the three months ended March 31, 2022 include the net gains and losses recognized for the modification of seller financed notes payable issued for the acquisition of Front Line Power Construction, LLC and the issuance of shares of common stock in exchange for payment on certain notes payable.

(f)

The amounts for the three months ended March 31, 2022 include fair value adjustments related to certain down-round and anti-dilutive protections on equity-linked financial instruments issued to the lenders of the Company's syndicated debt.

Estimated EBITDA and Adjusted EBITDA from Continuing Operations for the Full Year 2022

The following table presents reconciliations of the non-GAAP financial measures of EBITDA and Adjusted EBITDA from continuing operations to loss from continuing operations, net of income taxes for the full year ending December 31, 2022. These reconciliations are intended to provide useful information to investors and analysts as they evaluate the Company's expected performance. EBITDA from continuing operations is defined as loss from continuing operations before interest, taxes, depreciation and amortization, and Adjusted EBITDA from continuing operations is defined as EBITDA from continuing operations adjusted for certain other items as described below. We believe that the exclusion of these items from loss from continuing operations enables management and investors to more effectively evaluate the Company's operations period over period and to identify operating trends that might not be apparent when including the excluded items. However, these measures should not be considered as an alternative to loss from continuing operations or other measures of performance that are derived in accordance with GAAP. As to certain of the items below, stock-based compensation expense may vary from period to period due to fair value adjustments from changes in market conditions, forfeiture rates, accelerated vesting and amounts granted. Because EBITDA and adjusted EBITDA from continuing operations, as defined, exclude some, but not all, items that affect loss from continuing operations, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, loss from continuing operations, net of income taxes and information reconciling the GAAP and non-GAAP financial measures, are included below. See notes to follow:

Estimated Range

(In thousands)

(Unaudited)

Full Year Ending
December 31, 2022

Loss from continuing operations, net of income taxes (as defined by GAAP) (a)

Interest expense, net

Income tax expense (benefit) (b)

Depreciation and amortization

EBITDA from continuing operations

Stock-based compensation and expense

Adjusted EBITDA from continuing operations

(a)

The Company incurred a loss on extinguishment of $26.0 million as a result of non-cash losses incurred during the period ended March 31, 2022 from fair value adjustments made to certain equity-linked financial instruments. The estimated financial results are reflective of an expected net impact of $0 on the Company's financial results during the full year ending December 31, 2022 as the Company expects these factors will be offset by changes in market factors and estimated financial results from continuing operations during the full year ending December 31, 2022. Actual results of this non-cash item would not have an impact on Adjusted EBITDA from continuing operations.

(b)

These amounts include estimated state minimum tax expenses determined using the statutory tax rates of the jurisdictions where taxable income is expected to be earned. These amounts do not include federal and foreign income tax expense (benefits) as the Company does not expect to generate taxable income related to its US and foreign jurisdictions and expects valuation allowance reserves to be recognized on any deferred tax assets realized during the full year 2022.