Orbital Infrastructure Group Reports Second Quarter 2022 Results - Form 8-K

●

Revenues of $93.9 million, compared to $70.3 million in the prior quarter and $11.5 million for the second quarter of 2021;

●

Gross profit of $9.8 million compared to a gross loss of $2.9 million in the second quarter of 2021;

●

Operating loss of $7.7 million, an improvement of $9.9 million from the second quarter of 2021;

●

Adjusted EBITDA from continuing operations was a positive $2.1 million compared to a positive $3.8 million in the prior quarter and a loss of $10.0 million in the second quarter of 2021;

●

Backlog of $495.3 million as of June 30, 2022, with $291.0 million expected to be recognized in the next twelve months.

●

Rebranded to Orbital Infrastructure Group to better reflect Company's go-forward strategy

June 30,

December 31,

(in thousands, except share and per share amounts)

2022

2021

Assets:

Current Assets:

Cash and cash equivalents

Restricted cash - current

Trade accounts receivable, net of allowance

Inventories

Contract assets

Note receivable, current portion

Prepaid expenses and other current assets

Assets held for sale - current

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

Note receivable

Deposits and other assets

Total assets

Liabilities and Stockholders' Equity:

Current Liabilities:

Accounts payable

Notes payable, current

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

Total current liabilities

Financial instrument liability, noncurrent portion

Warrant liabilities

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 June 30, 2022 or December 31, 2021

Common stock, par value $0.001; 325,000,000 shares authorized; 111,256,659 shares issued and 110,903,596 shares outstanding at June 30, 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 June 30, 2022 and December 31, 2021

Accumulated deficit

Accumulated other comprehensive loss

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

Noncontrolling interest

Total stockholders' equity

Total liabilities and stockholders' equity

For the Three Months

For the Six Months

(in thousands, except share and per share amounts)

Ended June 30,

Ended June 30,

2022

2021

2022

2021

Revenues

Cost of revenues

Gross profit

Operating expenses:

Selling, general and administrative expense

Depreciation and amortization

Recovery of bad debt

Other operating expense

Total operating expenses

Loss from operations

Gain (loss) on extinguishment of debt

Loss on financial instrument

Gain on warrant liabilities

Other income (expense)

Interest expense

Loss from continuing operations before income taxes

Income tax expense (benefit)

Loss from continuing operations, net of income taxes

Discontinued operations

Income (loss) from operations of discontinued businesses

Net loss

Less: net loss attributable to noncontrolling interest

Net loss attributable to Orbital Infrastructure Group, Inc.

Basic and diluted weighted average common shares outstanding

Loss from continuing operations per common share - basic and diluted

Loss from discontinued operations - basic and diluted

Loss per common share - basic and diluted

For the Six Months

(in thousands)

Ended June 30,

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

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

Stock-based compensation and expense, net of forfeitures

Fair value adjustment to liability for stock appreciation rights

Fair value adjustment to financial instrument liability

Fair value adjustment to warrant liabilities

Loss (gain) on extinguishment of debt and debt modifications

Gain on sale of business

Recovery of bad debt

Deferred income taxes

Inventory reserve

Gain on sale of assets

Non-cash unrealized foreign currency (gain) loss

Liquidated damages

Change in operating assets and liabilities, net of acquisition:

Trade accounts receivable

Inventories

Contract assets

Prepaid expenses and other current assets

Right of use assets/lease liabilities, net

Deposits and other assets

Accounts payable

Accrued expenses

Contract liabilities

NET CASH USED IN OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash paid for acquisitions, net of cash received

Purchases of property and equipment

Deposits on financing lease property and equipment

Proceeds from sale of business, net of cash included in the business

Proceeds from sale of property and equipment

Purchases of investments

Purchase of other intangible assets

Proceeds from notes receivable

NET CASH USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit

Payments on line of credit

Payments on financing lease obligations

Proceeds from notes payable

Payments on notes payable

Proceeds from sales of common stock and warrants

NET CASH PROVIDED BY FINANCING ACTIVITIES

Effect of exchange rate changes on cash

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

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 and Six Months Ended June 30, 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 and six months ended June 30, 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 level of Orbital Infrastructure's acquisition activity; (iii) gains and losses on the 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 (v) fair value adjustments to equity-linked financial instrument liabilities varies from period to period depending on changes in the market price of Orbital Infrastructure'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:

(In thousands)

For the Three Months Ended

For the Six Months Ended

(Unaudited)

June 30,

June 30,

2022

2021

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 adjustments 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 and six months ended June 30, 2021 have been amended to conform to the current period calculations of EBITDA and Adjusted EBITDA from continuing operations, net of income taxes.

(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 six months ended June 30, 2022 includes non-cash expenses recognized from modifications to executive stock appreciation rights (SARS) compensation awards.

(c)

The amounts for the six months ended June 30, 2022 include costs incurred for the acquisition of Coax Fiber Solutions, Inc. The amounts for the six months ended June 30, 2021 include costs incurred for the acquisition of Gibson Technical Services, Inc.

(d)

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

(e)

The amounts for the three and six months ended June 30, 2022 relate to losses recognized on the modification of the Company's seller financed notes payable issued for the acquisition of Front Line Power Construction, LLC, the issuance of shares of common stock in exchange for payment on notes payable with an institutional investor, and liquidated damages incurred on notes payable with an institutional investor. The amounts for the three and six months ended June 30, 2021 relate to a gain recognized for the forgiveness of payroll protection loans by the U.S. government offset by a loss from the modification of certain convertible notes payable.

(f)

The amounts for the three and six months ended June 30, 2022 relate to changes in fair value of certain down-round and anti-dilutive protections on equity-linked financial instruments issued to the lenders of the Company's syndicated debt and changes in fair value of warrant liabilities from pre-funded warrants and common stock warrants issued to an institutional investor.

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, (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 level of Orbital Infrastructure's acquisition activity; (iii) gains and losses on the 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 (v) fair value adjustments to equity-linked financial instrument liabilities varies from period to period depending on changes in the market price of Orbital Infrastructure'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:

Estimated Range

(In thousands)

(Unaudited)

Full Year Ending
December 31, 2022

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

)

Interest expense, net

Income tax expense (benefit) (a)

Depreciation and amortization

EBITDA from continuing operations

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 adjustments to equity-linked financial instruments (f)

Adjusted EBITDA from continuing operations

(a)

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.

(b)

The amount includes 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, and modifications to executive stock appreciation rights (SARS) compensation awards.

(c)

The amount includes costs incurred for the acquisition of Coax Fiber Solutions, Inc.

(d)

The amount includes net gains and losses recognized on the disposal of the Company's fixed assets.

(e)

The amount includes losses recognized from the modification of the Company's seller financed notes payable issued for the acquisition of Front Line Power Construction, LLC, the issuance of shares of common stock in exchange for payment on notes payable with an institutional investor, and liquidated damages.

(f)

The amount represents changes in fair value of certain down-round and anti-dilutive protections on financial instruments issued to the lenders of the Company's syndicated debt and changes in fair value of warrant liabilities from pre-funded warrants and common stock warrants issued to an institutional investor.