ENGLOBAL CORP (ENG)·Q2 2024 Earnings Summary

Executive Summary

• Revenue declined 36.9% year over year to $6.14M and fell 6.0% sequentially; however, gross margin improved to 12.2% from -3.9% a year ago as restructuring and exiting unprofitable self-perform activities took hold . Net loss narrowed to $1.21M from $4.34M in Q2 2023 and modestly improved versus Q1 2024’s $1.4M loss .
• Backlog fell to ~$7.7M (from $10.8M in Q1) with $3.3M of Q2 bookings; management expects backlog growth in H2 2024 and into 2025 as it repositions toward higher-margin work .
• Liquidity remains tight (cash $0.23M at Q2-end; $2.25M long-term debt; ~$0.03M revolver availability), and going concern risks persist; an ongoing Nasdaq listing deficiency process adds execution risk .
• Strategic focus: cost discipline, mix shift away from low-margin fabrication/field services, and new opportunities in electric power infrastructure for data centers via a new MSA; management targets run-rate profitability by year-end 2024 (qualitative) .

What Went Well and What Went Wrong

• What Went Well

  • Gross margin inflected to positive 12.2% (from -3.9% YoY), driven by indirect cost reductions and stopping self-performed fabrication, construction and field services .
  • SG&A fell 52% YoY to $1.9M, reflecting labor, facility, and technology cost reductions; management notes “labor expense reduced by nearly 40%” .
  • CEO highlighted progress toward profitability: “The conclusion of legacy, money losing projects… and new, higher margin business opportunities should provide us a path to reach run rate profitability by year-end” .

• What Went Wrong

  • Revenue fell 36.9% YoY to $6.14M, with declines in both Commercial (exit of self-perform) and Government Services (contract roll-offs) .
  • Backlog decreased to ~$7.7M (from $10.8M in Q1), reflecting engineering business repositioning and weaker bookings ($3.3M in Q2 vs $5.7M in Q1) .
  • Liquidity is strained (cash $0.23M; ~$(2.2)M working capital deficit; ~$.03M revolver availability), with going concern uncertainty and a Nasdaq listing deficiency under appeal .

Financial Results

Consolidated results (oldest → newest):

Segment mix (oldest → newest):

KPIs (backlog/bookings trajectory; oldest → newest):

Liquidity snapshot (Q2 2024):

Drivers and deltas:

• Revenue declines stemmed from the strategic decision to stop self-performing fabrication, construction and field services, and government contract roll-offs; margin expansion came from indirect cost reductions and mix shift away from unprofitable work .
• SG&A reductions reflect broad cost actions across labor, facilities, and technology, aiding loss reduction YoY and sequentially .

Guidance Changes

Note: No numeric revenue/EPS/margin guidance ranges were issued in Q2 materials .

Earnings Call Themes & Trends

No Q2 2024 earnings call transcript was available in the document set. Thematic evolution is synthesized from the FY2023 and Q1/Q2 press releases and the Q2 10-Q.

Management Commentary

• “The conclusion of legacy, money losing projects; our continued acute focus on corporate efficiency; and new, higher margin business opportunities should provide us a path to reach run rate profitability by year-end.” — William A. Coskey, Chairman & CEO .
• “A renewed area of focus… is the increasing demand for electric power… as new technologies and related data centers… grow. ENGlobal recently entered into a Master Services Agreement with a regional provider of power infrastructure construction solutions…” .
• “We will… look for strategic opportunities to expand our capabilities in and around the growing demand for new sources and delivery infrastructure for electric power.” — Coskey .
• “We continue to explore options to improve our cash position as well as strategic growth opportunities as both are critically important to ENGlobal’s future.” — Coskey .

Q&A Highlights

No Q2 2024 earnings call transcript was available; therefore, no Q&A highlights or guidance clarifications could be extracted from a call record [ListDocuments showed none].

Estimates Context

• Wall Street consensus via S&P Global for Q2 2024 revenue and EPS was unavailable for ENG; as such, no beat/miss comparison to estimates can be provided at this time (GetEstimates returned no mapping).

Key Takeaways for Investors

• Margin inflection with materially lower SG&A suggests restructuring is working; consolidated gross margin reached 12.2% vs -3.9% a year ago, and net loss narrowed meaningfully YoY .
• Revenue pressure likely persists near term given exit from self-perform and lower government volumes; H2 inflection depends on converting identified Commercial opportunities and stabilizing Gov’t Services .
• Backlog dipped to $7.7M (from $10.8M in Q1), but management expects growth in H2 and 2025; bookings cadence will be a key leading indicator .
• Liquidity is constrained (cash $0.23M; ~$0.03M revolver headroom; working capital deficit), and going concern and Nasdaq listing risks elevate execution/financing risk; any financing or strategic action would be a stock catalyst .
• New MSA and efforts targeting data center power infrastructure could open a higher-margin growth leg if converted into backlog; watch for contract wins and scale-up in this vertical .
• Near-term trading setup likely hinges on signs of backlog rebuild, liquidity events, and clarity on Nasdaq compliance; medium-term thesis requires sustained gross margin >10% and opex discipline to reach run-rate profitability as targeted .

Supporting references:

• Q2 2024 press release (8-K 2.02): results, cost actions, backlog, bookings, data center MSA, profitability target .
• Q2 2024 10-Q: detailed financials, segment performance, liquidity/credit, going concern, Nasdaq risk factors .
• Q1 2024 press release: sequential baseline for revenue, net loss, gross margin, backlog, bookings, utilization .
• Nasdaq listing 8-K: hearing/appeal status .