DURHAM, NC – May 15, 2015 – EMRISE CORPORATION (OTCQB: EMRI), (“EMRISE” or the “Company”) a multi-national manufacturer of defense and aerospace electronic devices and communications equipment, today announced its financial results for the first quarter ended March 31, 2015.
Due to the proposed sale of the Company’s wholly owned subsidiary EMRISE Electronics Ltd. (“EEL), which makes up EMRISE’s Electronic Devices segment, and its announced intention to dispose of its Communications Equipment segment, the assets and operations of both these segments are being reported as discontinued operations and classified as assets held for sale. Details of these previously announced transactions and the Company’s previously disclosed Plan of Liquidation and Dissolution can be found in the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission (“SEC”) on May 11, 2015, and first mailed to stockholders on that date. Unless otherwise indicated, the financial results reported in this news release are from discontinued operations for all periods presented.
2015 First Quarter Financial Results
Total net sales in the 2015 first quarter were $8.4 million compared with $7.8 million in the 2014 first quarter. The year-over-year sales increase in the 2015 first quarter was due to sales growth in the Company’s Electronic Devices business segment, offset by a decline in sales in its Communications Equipment business segment.
Gross margin as a percentage of net sales for the 2015 first quarter was 33.5 percent compared with 25.8 percent for the first quarter of 2014.
Net income from discontinued operations for the first quarter of 2015 was $518,000, or $0.05 per basic and diluted share, compared with adjusted net loss from discontinued operations for the 2014 first quarter of $5,000, or $0.00 loss per basic and diluted share. Net loss from continuing operations for the first quarter of 2015 was $694,000, or $0.06 loss per basic and diluted share, compared with net loss from continuing operations for the 2014 first quarter of $780,000, or $0.07 loss per basic and diluted share.
The Company’s total net loss for the first quarter of 2015 was $176,000, or $0.01 loss per basic and diluted share, compared with a total net loss for the 2014 first quarter of $785,000, or $0.07 loss per basic and diluted share.
Electronic Devices Segment
Net sales of EMRISE’s Electronic Devices segment in the 2015 first quarter were $6.3 million compared with $5.2 million in the prior year’s first quarter. The increase in net sales for the Company’s Electronic Devices segment stems principally from an increase in demand for power supplies, but the first quarter of 2015 also includes an increase in demand for radio frequency (‘RF’) products for the commercial market.
Gross margin as a percentage of net sales for this year’s first quarter in Electronic Devices was 31.5 percent, compared to 20.9 percent in the 2014 first quarter. The year-over-year improvements in gross margin were influenced by increased sales, a sales mix that included higher margin products, design and production contracts, and the completion of design projects for both military and civilian applications.
Communications Equipment Segment
Communications Equipment net sales in the 2015 first quarter were $2.1 million, compared with $2.6 million in the first quarter of 2014. The Company’s French subsidiary generated a 15 percent year-over-year increase in sales in local currency in the 2015 first quarter; however, there was an overall decline in Communications Equipment sales for the quarter due to the impact of the strong dollar on the segment’s Euro-denominated sales when translated into U.S. Dollars and the absence of sales from the operations of the Company’s U.S. Communications Equipment subsidiary, which was shut down in the final quarter of 2014.
Gross margin as a percentage of net sales in the Communications Equipment segment for the 2015 first quarter was 39.5 percent, compared to 33.5 percent in the 2014 first quarter. Gross profit in the segment in this year’s first quarter declined as a result of the closure of its U.S. communications business at the beginning of the 2014 fourth quarter. This closure, however, resulted in an increase in the gross margin percentage in this year’s first quarter as it allowed the Company to concentrate on the Communications Equipment business of its subsidiary in France, which has traditionally enjoyed better margins.
Backlog, all of which is included in discontinued operations, was $38.0 million as of March 31, 2015, compared to $36.8 million as of December 31, 2014 and $26.8 million at March 31, 2014. As of March 31, 2015, approximately 94 percent of the Company’s backlog related to its Electronic Devices business, which has variable lead times for its manufacturing processes due to the custom nature of the products. Approximately 6 percent of the March 31, 2015 backlog is related to the Company’s Communications Equipment business, which tends to deliver standard or modified standard products from stock as orders are received.
Adjusted EBITDA (including discontinued operations) for the 2015 first quarter was $314,000, an improvement of $835,000 when compared with Adjusted EBITDA of $(521,000) for the first quarter of 2014.
EMRISE plans to file its Quarterly Report on Form 10-Q for the period ended March 31, 2015, with the SEC today, May 15, 2015.
Non-GAAP Financial Measures - Reconciliation of Non-GAAP Measures
This news release includes a non-GAAP financial measure, as defined by SEC Regulation G, which management believes provide a meaningful trend of operating performance, and measure of liquidity and the Company's ability to service debt. The non-GAAP measure included in this news release is Adjusted EBITDA. EMRISE defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, and net other income. Reconciliation between net income (loss) and Adjusted EBITDA is provided in the financial tables at the end of this news release.
About EMRISE Corporation
EMRISE designs, manufactures and markets electronic devices, sub-systems and equipment for aerospace, defense, industrial and communications markets. EMRISE products perform key functions such as power supply and power conversion; radio frequency (RF) and microwave signal processing; and network access to public and private communications networks. The use of its network products in public and private, legacy and latest Ethernet and Internet Protocol (IP) networks is a primary growth driver for the Company's Communications Equipment business units. The use of its power supplies, RF and microwave signal processing devices and subsystems in on-board In-Flight Entertainment and Connectivity (IFE&C) systems is a primary growth driver for the Company's Electronic Devices business units. EMRISE serves the worldwide base of customers it has built in North America, Europe and Asia through operations in England and France. For more information on EMRISE, go to www.emrise.com.
EMRISE common stock trades under the symbol EMRI on OTCQB, the venture marketplace for companies that are current in their reporting with a U.S. regulator. Investors can find Real-Time quotes and market information for EMRISE at www.otcmarkets.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
With the exception of historical information, certain matters discussed in this press release may include statements about future-oriented matters that are forward looking statements within the meaning of the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. For this purpose, any such statements that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements regarding our expectations, beliefs, or intentions that are signified by terminology such as “subject to,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates,” “may,” “will,” “should,” “can,” the negatives thereof, variations thereon and similar expressions. Such forward-looking statements reflect the Company’s current views with respect to future events, based on what the Company believes are reasonable assumptions; however, such statements are subject to certain risks and uncertainties. The Company disclaims any intention or obligation to update or review any forward-looking statements or information, whether as a result of new information, future events or otherwise. The Company also refers you to those factors contained in the "Risk Factors" section of EMRISE's Annual Report on Form 10-K for the year ended December 31, 2014, the Company’s Quarterly Reports on Form 10-Q, its recent Current Reports on Form 8-K, its Definitive Proxy Statement dated May 11, 2015 and other EMRISE filings with the SEC.