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EC

ENGLOBAL CORP (ENG)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 2023 revenue was $9.5M, down 27% year over year, but net loss improved to $0.7M (vs. $2.3M YoY) and diluted EPS improved to -$0.02 (vs. -$0.07 YoY) as cost actions and a $1.5M U.S. Government contract adjustment boosted results .
  • Gross profit margin reached 19.4%, the first positive quarter in over a year; management cited improved utilization (~90% vs. ~70%) and exiting unprofitable legacy projects as drivers .
  • Bookings were ~$6.5M with backlog of $15.5M and a probability-weighted pipeline of ~$70M as of September 30, 2023, supporting near-term visibility .
  • No formal guidance or Wall Street S&P Global consensus estimates were available; comparisons to estimates are not possible at this time (consensus unavailable via S&P Global).

What Went Well and What Went Wrong

What Went Well

  • Margin inflection: “Our gross profit margin of 19.4% in the third quarter was a vast improvement over prior quarters and the first positive quarter in over a year” .
  • Cost/operational progress: Utilization improved from ~70% to nearly 90%; payroll costs reduced by >50%; streamlined engineering services to support higher-margin work .
  • Commercial momentum: ~$6.5M in new bookings; backlog $15.5M; ~$70M probability-weighted pipeline positions the company for improved revenue capture .

What Went Wrong

  • Revenue contraction: Q3 revenue declined to $9.5M from $13.1M YoY, reflecting lower activity in legacy areas and transition away from unprofitable projects .
  • One-time support: Results benefited from a ~$1.5M contract adjustment with the U.S. Government, indicating some dependence on non-recurring items in the quarter .
  • Prior quarter losses still elevated: Q2 2023 net loss was $4.3M and EPS -$0.11, highlighting the depth of restructuring and legacy project headwinds earlier in the year .

Financial Results

Sequential Comparison (Q1 → Q2 → Q3 2023)

MetricQ1 2023Q2 2023Q3 2023
Revenue ($USD Millions)$13.2 $9.7 $9.5
Net Loss ($USD Millions)$6.3 $4.3 $0.7
Diluted EPS ($USD)-$0.17 -$0.11 -$0.02

Year-over-Year Comparison (Q3 2022 → Q3 2023)

MetricQ3 2022Q3 2023
Revenue ($USD Millions)$13.1 $9.5
Net Loss ($USD Millions)$2.3 $0.7
Diluted EPS ($USD)-$0.07 -$0.02

Q3 2023 Details

MetricQ3 2023
Gross Profit Margin (%)19.4%
U.S. Government Contract Adjustment ($USD Millions)~$1.5

Estimates vs. Actual (Q3 2023)

MetricS&P Global ConsensusActual
Revenue ($USD Millions)N/A (consensus unavailable via S&P Global)$9.5
Diluted EPS ($USD)N/A (consensus unavailable via S&P Global)-$0.02

Segment Breakdown

SegmentDescriptionQ3 2023 Revenue
CommercialEngineering, design, fabrication, construction management, and integration of automated control systems Not disclosed in earnings releases
Government ServicesTurnkey automation/instrumentation systems primarily for U.S. Defense Not disclosed in earnings releases

KPIs

KPIQ3 2023Commentary
New Bookings ($USD Millions)~$6.5 Supports near-term revenue visibility
Backlog ($USD Millions)$15.5 (as of 9/30/23) Provides execution runway
Probability-Weighted Pipeline ($USD Millions)~$70 Indicates opportunities beyond backlog
Utilization (%)~90% (from ~70%) Driven by increased business opportunities and labor optimization
Payroll Cost Reduction (%)>50% Structural cost takeout

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/Q4 2023Not providedNot providedMaintained: No formal guidance provided
MarginsFY/Q4 2023Not providedNot providedMaintained: No formal guidance provided
OpExFY/Q4 2023Not providedNot providedMaintained: No formal guidance provided
Tax RateFY/Q4 2023Not providedNot providedMaintained: No formal guidance provided
Segment-specificFY/Q4 2023Not providedNot providedMaintained: No formal guidance provided

Earnings Call Themes & Trends

Note: No earnings call transcript was located for Q3 2023; themes summarized from Q1–Q3 press releases.

TopicQ-2 (Q2 2023)Q-1 (Q1 2023)Current Period (Q3 2023)Trend
Cost actions & restructuringContinued losses; significant cost savings rolling through; repayment/refinancing of credit facility; NASDAQ extension Dramatic steps to refocus team; >$10M annual run-rate personnel savings; consolidation of engineering groups Payroll costs reduced >50%; streamlined engineering; moving from triage to recovery Improving execution
Legacy projects exitCompleting legacy projects that do not meet margin standards Transition toward engineering/automation-driven work; considering strategic alternatives Largely completed unprofitable renewables/field services/fabrication projects Largely resolved
Utilization & marginsMargin expansion goal; focus on core businesses Emphasis on time-and-materials engineering work to stabilize profitability Utilization ~90%; GP margin 19.4% (first positive in >1 year) Positive inflection
Liquidity & creditRefinanced line of credit with term loan from Mr. Coskey; NASDAQ extension Working with lender/investors to improve liquidity Receivables/tax credits collection improvements; pursuing unpaid legacy receivables Stabilizing
Backlog & pipeline~$6.9M bookings; backlog nearly $18M (as of Aug 1) ~$9M bookings in Q1 ~$6.5M bookings; backlog $15.5M; pipeline ~$70M Normalizing/backfilling
Government contractsHighlighted as business strength Highlighted ~$1.5M U.S. Government contract adjustment benefiting Q3 results Supportive

Management Commentary

  • “Our financial performance has improved meaningfully throughout the year… Our gross profit margin of 19.4% in the third quarter was a vast improvement over prior quarters and the first positive quarter in over a year.” — William A. Coskey, CEO .
  • “Improved utilization of our billable resources from approximately 70% to nearly 90%… Largely completed unprofitable legacy projects… Reduced overall payroll costs by more than 50%” .
  • “I am confident we have largely moved from the triage phase to the recovery phase… The entire ENGlobal team is focused on engaging with clients… Both our engineering group… and our automation and government services group… are working diligently to meet both our revenue and profit objectives in the year ahead.” .
  • Earlier in the year: “We have taken dramatic steps to refocus our team, reduce costs and improve margins with a focus on returning ENGlobal to its roots” .

Q&A Highlights

  • No Q3 2023 earnings call transcript was available; therefore, Q&A highlights and any clarifications from live commentary are unavailable in the company’s document set for the period.

Estimates Context

  • Wall Street consensus estimates via S&P Global for Q3 2023 were unavailable for ENG; as a result, comparisons to consensus (revenue, EPS) cannot be provided at this time.
  • Implication: Without a consensus benchmark, the notable sequential improvement in EPS and net loss, and the positive gross margin, stand out on an absolute basis rather than relative to expectations .

Key Takeaways for Investors

  • Sequential inflection: Steep improvement in net loss (-$0.7M) and EPS (-$0.02) supported by cost takeout, utilization gains, and a $1.5M contract adjustment; monitor sustainability absent one-time items .
  • Margin recovery: First positive gross margin in over a year (19.4%) is a critical datapoint; continued exit from legacy projects and disciplined pricing should underpin margin durability .
  • Pipeline/backlog: ~$6.5M bookings, $15.5M backlog, and ~$70M pipeline provide visibility; focus near-term on conversion and mix to support profitability .
  • Liquidity and credit: Refinancing and receivables/tax credit collections aid liquidity; watch legacy receivable recovery to further strengthen the balance sheet .
  • Operational narrative: Clear shift from triage to recovery; execution on higher-margin engineering/automation work is the medium-term thesis anchor .
  • Risk factors: Revenue volatility amid portfolio repositioning; reliance on government adjustments this quarter; absence of segment-level disclosure constrains detailed mix analysis .
  • Trading setup: Near-term catalysts include backlog conversion, government project awards, and demonstrable margin consistency; any additional strategic actions or receivable recoveries could be stock-positive .