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Orbital Energy Group 1Q21 results -3

09:52 17-May-21


The Orbital call has just concluded and I think some follow up is merited to detail how infrastructure growth is challenged in multiple areas, but far from dead.  Most importantly, to me, solar has been seeing delays both in panel deliveries from China and project decisions.  BSF work will only be commencing as early as the fourth quarter of this year, with most of the opportunity next year.  Some other projects could get going in the second half, with the nearest being final discussion on a 200MW project in Pennsylvania.  Domestic equipment delays, particularly for bucket trucks and other specialized equipment is also a problem.  That color has some bearing on AMSC even though Orbital is NOT exposed to the major transmission and distribution projects that Amsc is cultivating.  This validates my caution in rebuilding an AMSC position, but I am inclined to continue doing so to the extent the stock continues to drop.

The investment strategy is different and dicier for OEG, as it expects to provide quantified figures on a just-finalized GTS contract to expand fiber over 3-5 years, with work commencing in fourth quarter.  That will increase the backlog figure and should give GTS $50M revenue with $8M EBITDA for 2021.  The gas business is also set for growth, with a significant 5-year contract award on the Irish gas network, and work starting this year.  All of these could be negatively impacted by the domestic supply problems that I referenced above and before; recall that the first federal supply chain reports are due in early June.

Orbital is cash flow positive and that should continue through at least the first half, with most of the one-time costs done.  It has also applied for forgiveness of $1.9M of PPP loans.  However, the company is still targeting acquisitions and could continue to dilute massively via the $150M shelf, which is less than one third used.  Doing so near current prices would be much less effective than those we saw in February.  OEG is down a further 5% at the moment.  Small moves like that don't interest me.  Thus, I will be staying hands off for now, but taking a no news is good news approach and possibly establishing small positions that can limit loss but benefit from volatility.

On 5/17/21 8:21 AM, Esekla wrote:
Orbital Energy Group has released its first quarter resuts:
  • a loss of 40 cents per share misses by 25 cents
  • from $9.5M of revenue, which misses by $6.5M
Management says it expects operating margins to improve over the course of the year, but provided no quantified guidance.  There is $34.7M on the balance sheet and the backlog was at $62.1M.  Integration expenses seem to have exceeded quarterly revenue as SG&A costs rose $10.2M YoY to $17.3M.  The company has diluted investors by 57% over that time, which makes the bottom line miss that much worse.

OEG hasn't moved much in the pre-market so far.  The conference call is at 8:30am.  I'll see how convincing management can be about upcoming growth, but may not write again.