EQM Technologies & Energy, Inc. Announces Third Quarter Results
Third Quarter Results Impacted by Reduced Federal Spending
EQM Technologies & Energy, Inc. (OTCQB:EQTE) (“EQM”), a leading provider of environmental services to government and commercial businesses, today announced results for the third quarter ended September 30, 2013.
Revenue from continuing operations for the quarter ended September 30, 2013 was $15.6 million compared to $24.4 million for the third quarter of the prior year. Operating loss from continuing operations for the third quarter was $1.1 million compared to operating income from continuing operations of $600 thousand for the third quarter of 2012. Net loss for the third quarter was $2.1 million, or $0.05 per share, compared to a net loss of $172 thousand, or $0.00 per share, for the third quarter of 2012. EBITDA from continuing operations (earnings before discontinued operations, interest, taxes, depreciation and amortization) for the third quarter of 2013 was negative $0.7 million compared to positive $1.2 million in 2012.
Revenue from continuing operations for the nine months ended September 30, 2013 was $37.7 million compared to $48.6 million for the same period in 2012. Operating loss from continuing operations for the nine months ended September 30, 2013 was $2.2 million compared to operating income from continuing operations of $0.4 million for the same period of 2012. Net loss for the nine months ended September 30, 2013 was $3.6 million, or $0.09 per share, compared to a net loss of $0.9 million, or $0.02 per share, for the same period in 2012. EBITDA from continuing operations (earnings before discontinued operations, interest, taxes, depreciation and amortization) for the nine months ended September 30, 2013 was negative $1.0 million compared to positive $2.3 million for the same period in 2012.
During the three months ended September 30, 2013, our decline in revenues was primarily the result of a decline in our revenues from the federal government, principally the Environmental Protection Agency (“EPA”), on account of both the lingering effects of the federal budget sequester and the anticipation of the shutdown of the federal government in October of 2013. As a result, we experienced delays in the funding of both existing and new projects, as well as a slowing of new contract awards. During November of 2013, most of our current government projects were restarted. However, we continue to experience delays in project funding and the start of new projects, which may adversely impact our revenue and our profitability.
In October 2013, Vertterre, our wholly owned subsidiary acquired last December, along with third party investors, began the development and construction of a landfill gas to electricity facility in the state of Texas. Vertterre will provide engineering services, equipment, and management services to the landfill facility.
“While work under our existing long-term contracts with the EPA had been delayed or temporarily stopped, we are expecting approximately $40.0 million in future near term revenues under these contracts,” said Jon Colin, Interim Chief Executive Officer of EQM. “We are cautiously optimistic regarding the continued demand in the government sector, yet we remain concerned that federal budget volatility may result in lower government spending and correspondingly limited revenue growth opportunities for us,” continued Colin.
Use of Non-GAAP Financial Information
In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, in this press release, the Company presents EBITDA from continuing operations, which is a non-GAAP measure. EBITDA from continuing operations is determined by taking net loss and adding back the income (loss) from discontinued operations, amortization of intangible assets, depreciation and amortization of property and equipment, income tax expense and interest expense. The Company believes that this non-GAAP measure, viewed in addition to and not in lieu of the Company’s reported GAAP results, provides useful information to investors by providing a more focused measure of operating results. This metric is an integral part of the Company’s internal reporting to evaluate its operations and the performance of senior management. A reconciliation to the comparable GAAP measure is available in the accompanying schedule. The non-GAAP measure presented herein may not be comparable to similarly titled measures presented by other companies.
EQM Technologies & Energy, Inc.
EQM, based in Cincinnati, OH, is a leading provider of environmental services - consulting & engineering, clean technology, and remediation & construction management - to the public and industrial sectors, with approximately 244 employees and satellite offices and operations in 11 states. EQM has longstanding relationships and multi-year contracts with numerous federal agencies, including the Environmental Protection Agency and the Department of Defense (including the Air Force Center for Engineering & Environment, Naval Facilities Engineering Command, and the Army Corps of Engineers), as well as private sector clients across numerous industries. For more information, please visit www.eqm.com.
Statements in this press release regarding the Company's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. The Company wishes to caution readers not to place undue reliance on such forward-looking statements, which speak only as of the date made. To the extent the content of this press release includes forward-looking statements; they involve various risks and uncertainties, including the successful integration of acquired businesses, projected financial information and the continued successful implementation of the Company's business strategy.
Certain of these risks and uncertainties are described in greater detail in EQM's filings with the Securities and Exchange Commission. EQM is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
EQM TECHNOLOGIES & ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of
September 30, 2013 December 31, 2012
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,116,807 $ 42,219
Accounts receivable, net 6,986,831 9,994,407
Cost and estimated earnings in excess of billings on uncompleted contracts, net 5,792,475 5,480,206
Prepaid expenses and other current assets 455,513 460,218
Deferred income taxes - 1,976,823
Current assets of discontinued operations 29,530 600,898
Total current assets 15,381,156 18,554,771
Property and equipment, net 637,357 773,095
Intangible assets, net 4,055,084 4,491,443
Goodwill 2,762,083 2,762,083
Other assets 603,206 850,309
Other assets of discontinued operations 2,339 4,250,777
Total assets $ 23,441,225 $ 31,682,478
EQM TECHNOLOGIES & ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of
September 30, 2013 December 31, 2012
(unaudited)
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,073,909 $ 9,341,047
Accrued expenses and other current liabilities 4,494,591 4,501,441
Billings in excess of costs and estimated earnings on uncompleted contracts 22,320 244,226
Loan agreement 5,101,258 4,910,773
Current portion of capitalized lease obligations 23,337 45,209
Derivative liabilities 5,822 81,663
Current portion of convertible promissory notes, net 2,860,894 -
Current liabilities of discontinued operations 405,206 1,160,142
Total current liabilities 20,987,337 20,284,501
Long-term liabilities:
Notes payable 250,000 250,000
Convertible promissory notes, net, less current portion 1,866,246 6,073,087
Capitalized lease obligations, less current portion 15,264 10,715
Deferred income taxes - 1,246,257
Deferred rent 117,585 126,971
Total long-term liabilities 2,249,095 7,707,030
Total liabilities 23,236,432 27,991,531
Commitments and contingencies (Note 10)
Redeemable preferred stock, $0.001 par value, 5,000,000 shares authorized:
Series A Convertible Preferred stock, 952,381 shares designated,
952,381 shares issued and outstanding at December 31, 2012
at stated value; liquidation preference of $3,000,000 - 3,000,000
Stockholders' equity:
Series A Convertible Preferred stock, $0.001 par value, 5,000,000 shares authorized:
952,381 shares designated, issued and outstanding at September 30, 2013 at stated value;
liquidation preference of $3,000,000 3,000,000 -
Common stock, $0.001 par value, 70,000,000 shares authorized;
41,473,570 shares issued and outstanding at September 30, 2013 and
December 31, 2012, respectively 41,474 41,474
Additional paid-in capital 7,602,949 7,482,615
Accumulated deficit (10,439,630) (6,833,142)
Total stockholders' equity 204,793 690,947
Total liabilities, redeemable preferred stock and stockholders' equity $ 23,441,225 $ 31,682,478
EQM TECHNOLOGIES & ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2013 2012 2013 2012
Revenues $ 15,623,405 $ 24,394,143 $ 37,718,888 $ 48,612,028
Cost of revenues 12,704,888 20,667,926 29,032,552 38,638,826
Gross profit 2,918,517 3,726,217 8,686,336 9,973,202
Operating expenses:
Selling, general and administrative expenses 3,681,568 2,880,276 9,802,871 8,901,192
Depreciation and amortization 365,575 245,763 1,073,468 715,910
Total operating expenses 4,047,143 3,126,039 10,876,339 9,617,102
Operating (loss) income (1,128,626 ) 600,178 (2,190,003 ) 356,100
Other (expense) income:
Change in fair value of derivative liabilities 13,277 90,347 76,458 1,021,224
Interest expense (308,786 ) (300,522 ) (890,491 ) (942,554 )
Other income 3,000 234,425 4,100 234,425
Other (expense) income, net (292,509 ) 24,250 (809,933 ) 313,095
(Loss) income from continuing operations before income taxes (1,421,135 ) 624,428 (2,999,936 ) 669,195
Income tax expense from continuing operations 684,266 306,021 568,729 332,789
(Loss) income from continuing operations (2,105,401 ) 318,407 (3,568,665 ) 336,406
Discontinued operations:
Loss from discontinued operations, net of tax - (490,069 ) (385,994 ) (1,227,212 )
Gain on disposal of Biodiesel Production Facility, net of tax 27,296 - 348,171 -
Income (loss) from discontinued operations, net of tax
27,296 (490,069 ) (37,823 ) (1,227,212 )
Net loss $ (2,078,105 ) $ (171,662 ) $ (3,606,488 ) $ (890,806 )
Basic and diluted net loss per share:
Continuing operations $ (0.05 ) $ 0.01 $ (0.09 ) $ 0.01
Discontinued operations, net of tax - (0.01 ) - (0.03 )
Net loss per common share $ (0.05 ) $ - $ (0.09 ) $ (0.02 )
Weighted average number of common shares outstanding -
basic and diluted 40,650,387 40,650,387 40,650,387 39,106,399
EQM TECHNOLOGIES & ENERGY, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
(unaudited)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2013 2012 2013 2012
EBITDA and Adjusted EBITDA from continuing operations
Net loss (GAAP) $ (2,078,105 ) $ (171,662 ) $ (3,606,488 ) $ (890,806 )
Add back the items:
Loss (income) from discontinued operations (27,296 ) 490,069 37,823 1,227,212
Depreciation and amortization 365,575 245,763 1,073,468 715,910
Interest expense 308,786 300,522 890,491 942,554
Income tax (benefit) expense 684,266 306,021 568,729 332,789
EBITDA from continuing operations $ (746,774 ) $ 1,170,713 $ (1,035,977 ) $ 2,327,659
EQM Technologies & Energy, Inc.
Robert Galvin, 800-229-7495 or 513-742-7219
Chief Financial Officer
Fax: 513-825-7495
rgalvin@eqm.com
Third Quarter Results Impacted by Reduced Federal Spending
EQM Technologies & Energy, Inc. (OTCQB:EQTE) (“EQM”), a leading provider of environmental services to government and commercial businesses, today announced results for the third quarter ended September 30, 2013.
Revenue from continuing operations for the quarter ended September 30, 2013 was $15.6 million compared to $24.4 million for the third quarter of the prior year. Operating loss from continuing operations for the third quarter was $1.1 million compared to operating income from continuing operations of $600 thousand for the third quarter of 2012. Net loss for the third quarter was $2.1 million, or $0.05 per share, compared to a net loss of $172 thousand, or $0.00 per share, for the third quarter of 2012. EBITDA from continuing operations (earnings before discontinued operations, interest, taxes, depreciation and amortization) for the third quarter of 2013 was negative $0.7 million compared to positive $1.2 million in 2012.
Revenue from continuing operations for the nine months ended September 30, 2013 was $37.7 million compared to $48.6 million for the same period in 2012. Operating loss from continuing operations for the nine months ended September 30, 2013 was $2.2 million compared to operating income from continuing operations of $0.4 million for the same period of 2012. Net loss for the nine months ended September 30, 2013 was $3.6 million, or $0.09 per share, compared to a net loss of $0.9 million, or $0.02 per share, for the same period in 2012. EBITDA from continuing operations (earnings before discontinued operations, interest, taxes, depreciation and amortization) for the nine months ended September 30, 2013 was negative $1.0 million compared to positive $2.3 million for the same period in 2012.
During the three months ended September 30, 2013, our decline in revenues was primarily the result of a decline in our revenues from the federal government, principally the Environmental Protection Agency (“EPA”), on account of both the lingering effects of the federal budget sequester and the anticipation of the shutdown of the federal government in October of 2013. As a result, we experienced delays in the funding of both existing and new projects, as well as a slowing of new contract awards. During November of 2013, most of our current government projects were restarted. However, we continue to experience delays in project funding and the start of new projects, which may adversely impact our revenue and our profitability.
In October 2013, Vertterre, our wholly owned subsidiary acquired last December, along with third party investors, began the development and construction of a landfill gas to electricity facility in the state of Texas. Vertterre will provide engineering services, equipment, and management services to the landfill facility.
“While work under our existing long-term contracts with the EPA had been delayed or temporarily stopped, we are expecting approximately $40.0 million in future near term revenues under these contracts,” said Jon Colin, Interim Chief Executive Officer of EQM. “We are cautiously optimistic regarding the continued demand in the government sector, yet we remain concerned that federal budget volatility may result in lower government spending and correspondingly limited revenue growth opportunities for us,” continued Colin.
Use of Non-GAAP Financial Information
In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, in this press release, the Company presents EBITDA from continuing operations, which is a non-GAAP measure. EBITDA from continuing operations is determined by taking net loss and adding back the income (loss) from discontinued operations, amortization of intangible assets, depreciation and amortization of property and equipment, income tax expense and interest expense. The Company believes that this non-GAAP measure, viewed in addition to and not in lieu of the Company’s reported GAAP results, provides useful information to investors by providing a more focused measure of operating results. This metric is an integral part of the Company’s internal reporting to evaluate its operations and the performance of senior management. A reconciliation to the comparable GAAP measure is available in the accompanying schedule. The non-GAAP measure presented herein may not be comparable to similarly titled measures presented by other companies.
EQM Technologies & Energy, Inc.
EQM, based in Cincinnati, OH, is a leading provider of environmental services - consulting & engineering, clean technology, and remediation & construction management - to the public and industrial sectors, with approximately 244 employees and satellite offices and operations in 11 states. EQM has longstanding relationships and multi-year contracts with numerous federal agencies, including the Environmental Protection Agency and the Department of Defense (including the Air Force Center for Engineering & Environment, Naval Facilities Engineering Command, and the Army Corps of Engineers), as well as private sector clients across numerous industries. For more information, please visit www.eqm.com.
Statements in this press release regarding the Company's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. The Company wishes to caution readers not to place undue reliance on such forward-looking statements, which speak only as of the date made. To the extent the content of this press release includes forward-looking statements; they involve various risks and uncertainties, including the successful integration of acquired businesses, projected financial information and the continued successful implementation of the Company's business strategy.
Certain of these risks and uncertainties are described in greater detail in EQM's filings with the Securities and Exchange Commission. EQM is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
EQM TECHNOLOGIES & ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of
September 30, 2013 December 31, 2012
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,116,807 $ 42,219
Accounts receivable, net 6,986,831 9,994,407
Cost and estimated earnings in excess of billings on uncompleted contracts, net 5,792,475 5,480,206
Prepaid expenses and other current assets 455,513 460,218
Deferred income taxes - 1,976,823
Current assets of discontinued operations 29,530 600,898
Total current assets 15,381,156 18,554,771
Property and equipment, net 637,357 773,095
Intangible assets, net 4,055,084 4,491,443
Goodwill 2,762,083 2,762,083
Other assets 603,206 850,309
Other assets of discontinued operations 2,339 4,250,777
Total assets $ 23,441,225 $ 31,682,478
EQM TECHNOLOGIES & ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of
September 30, 2013 December 31, 2012
(unaudited)
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,073,909 $ 9,341,047
Accrued expenses and other current liabilities 4,494,591 4,501,441
Billings in excess of costs and estimated earnings on uncompleted contracts 22,320 244,226
Loan agreement 5,101,258 4,910,773
Current portion of capitalized lease obligations 23,337 45,209
Derivative liabilities 5,822 81,663
Current portion of convertible promissory notes, net 2,860,894 -
Current liabilities of discontinued operations 405,206 1,160,142
Total current liabilities 20,987,337 20,284,501
Long-term liabilities:
Notes payable 250,000 250,000
Convertible promissory notes, net, less current portion 1,866,246 6,073,087
Capitalized lease obligations, less current portion 15,264 10,715
Deferred income taxes - 1,246,257
Deferred rent 117,585 126,971
Total long-term liabilities 2,249,095 7,707,030
Total liabilities 23,236,432 27,991,531
Commitments and contingencies (Note 10)
Redeemable preferred stock, $0.001 par value, 5,000,000 shares authorized:
Series A Convertible Preferred stock, 952,381 shares designated,
952,381 shares issued and outstanding at December 31, 2012
at stated value; liquidation preference of $3,000,000 - 3,000,000
Stockholders' equity:
Series A Convertible Preferred stock, $0.001 par value, 5,000,000 shares authorized:
952,381 shares designated, issued and outstanding at September 30, 2013 at stated value;
liquidation preference of $3,000,000 3,000,000 -
Common stock, $0.001 par value, 70,000,000 shares authorized;
41,473,570 shares issued and outstanding at September 30, 2013 and
December 31, 2012, respectively 41,474 41,474
Additional paid-in capital 7,602,949 7,482,615
Accumulated deficit (10,439,630) (6,833,142)
Total stockholders' equity 204,793 690,947
Total liabilities, redeemable preferred stock and stockholders' equity $ 23,441,225 $ 31,682,478
EQM TECHNOLOGIES & ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2013 2012 2013 2012
Revenues $ 15,623,405 $ 24,394,143 $ 37,718,888 $ 48,612,028
Cost of revenues 12,704,888 20,667,926 29,032,552 38,638,826
Gross profit 2,918,517 3,726,217 8,686,336 9,973,202
Operating expenses:
Selling, general and administrative expenses 3,681,568 2,880,276 9,802,871 8,901,192
Depreciation and amortization 365,575 245,763 1,073,468 715,910
Total operating expenses 4,047,143 3,126,039 10,876,339 9,617,102
Operating (loss) income (1,128,626 ) 600,178 (2,190,003 ) 356,100
Other (expense) income:
Change in fair value of derivative liabilities 13,277 90,347 76,458 1,021,224
Interest expense (308,786 ) (300,522 ) (890,491 ) (942,554 )
Other income 3,000 234,425 4,100 234,425
Other (expense) income, net (292,509 ) 24,250 (809,933 ) 313,095
(Loss) income from continuing operations before income taxes (1,421,135 ) 624,428 (2,999,936 ) 669,195
Income tax expense from continuing operations 684,266 306,021 568,729 332,789
(Loss) income from continuing operations (2,105,401 ) 318,407 (3,568,665 ) 336,406
Discontinued operations:
Loss from discontinued operations, net of tax - (490,069 ) (385,994 ) (1,227,212 )
Gain on disposal of Biodiesel Production Facility, net of tax 27,296 - 348,171 -
Income (loss) from discontinued operations, net of tax
27,296 (490,069 ) (37,823 ) (1,227,212 )
Net loss $ (2,078,105 ) $ (171,662 ) $ (3,606,488 ) $ (890,806 )
Basic and diluted net loss per share:
Continuing operations $ (0.05 ) $ 0.01 $ (0.09 ) $ 0.01
Discontinued operations, net of tax - (0.01 ) - (0.03 )
Net loss per common share $ (0.05 ) $ - $ (0.09 ) $ (0.02 )
Weighted average number of common shares outstanding -
basic and diluted 40,650,387 40,650,387 40,650,387 39,106,399
EQM TECHNOLOGIES & ENERGY, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
(unaudited)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2013 2012 2013 2012
EBITDA and Adjusted EBITDA from continuing operations
Net loss (GAAP) $ (2,078,105 ) $ (171,662 ) $ (3,606,488 ) $ (890,806 )
Add back the items:
Loss (income) from discontinued operations (27,296 ) 490,069 37,823 1,227,212
Depreciation and amortization 365,575 245,763 1,073,468 715,910
Interest expense 308,786 300,522 890,491 942,554
Income tax (benefit) expense 684,266 306,021 568,729 332,789
EBITDA from continuing operations $ (746,774 ) $ 1,170,713 $ (1,035,977 ) $ 2,327,659
EQM Technologies & Energy, Inc.
Robert Galvin, 800-229-7495 or 513-742-7219
Chief Financial Officer
Fax: 513-825-7495
rgalvin@eqm.com
