Q2 2020 Earnings Call
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Quick service company second quarter fiscal 2020, <unk> results conference call.
At this time, all participants are gonna listen only mode.
After the speakers presentation that would be a question and answer session.
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I'd now like the hand, the conference over to your Speaker for today Kelly somebody you may begin.
Good morning, and welcome to Matrix Service company second quarter earnings call.
On today's call will include John Hewitt, President and Chief Executive Officer and Kevin.
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Huh, Vice President and Chief Financial Officer, the presentation materials, we will be using during the webcast. Today can also be found on the Investor Relations section of the matrix Service company website.
Before we begin please let me remind you that on today's call. The company may make various remarks about future expectations plans.
Aspects for matrix service company. They constitute forward looking statements [laughter] purposes at the private Securities Litigation Reform Act of 1995.
Actual results.
May differ materially from that as indicated by these forward looking statements as a result at the various factors including those.
In our annual report on form 10-K for fiscal year ended June Thirtyth 2019, and subsequent filings made by the company what I see it extends the company utilize this non-GAAP measure.
Reconciliations will be provided in various press releases periodic SEC filings and on.
The company's website I will now turn the call over to John Hewitt, President and CEO of Matrix Service company.
Thank you Kelly and good morning, everyone and thank you for joining us.
As we have referenced on our part earnings calls and countless conversations or corporate values and sense of purpose is at the heart of everything we do at majors and influence.
She is our thinking about companies long term strategy.
The issue a purpose for matrix service company is one that we have given a lot of thought to our purpose is to build brighter future improved quality of life and create long term value for our people business partners shareholders and communities. This focus is.
Ladies and our strategy and the commitments, we make everyday drilling our purpose requires that we also achieve a consistent level of performance, which allows us to invest in our people in our business.
Liver on our commitments and brand promise and achieve sustainable long term value for our stakeholders.
This quarter's call, we'll address strategic decisions made to ensure we were able to do so.
Turning now to our business discussion or second quarter results were decided the next as market challenges and performance issues and select parts of our business overshadow strong performance elsewhere.
As a result, we have made strategic.
Did you organizational decisions that we believe are necessary to better position the company for success and he end markets with the greatest potential for long term growth I'll discuss these decisions further as I comment on each segment.
Underpinning these decisions as a strong balance sheet and liquidity, which will allow us to execute our strategies.
Improved performance and growth.
Specifically into storage solutions segment or project performance and execution has been exceptional great earnings greater than plan and our opportunity pipeline continues to be strong.
Well the book to Bill for the second quarter May not numerically support this.
Subsequent bookings in January Verbal award the contract discussions along with a strong near term proposal outflow would indicate otherwise.
For example in January we announced a formal selection matrix service company as the EGPC contractor for Eagle LNG is Midscale LNG.
Export facility in Jacksonville, Florida.
Go LNG is investing over 500 million to bring this project to fruition.
BTC contract represents a significant portion of this investment. However, it is not in our reported Q2 backlog that facility level production capacity of approximately 1.65.
No again LNG gallons per day was 12 million gallons of storage plus marine terminal and truck loading capabilities. This facility is the most recent example of our position as a leader in the small to mid scale LNG terminal market.
Overall, yeah look for the second remains very strong with a potential value.
LNG and NGL storage and terminal work to matrix over the next 12 months to exceed 2 billion.
Our oil gas and chemicals segment performed at a high level with strong direct margins sort of soft turnaround season for our principal clients reduced overall volumes, leaving construction overhead.
I had costs under absorbed specifically turnaround turnaround activities in a quarter or smaller and scope than previous periods in our personal clients are off cycle for heavy turnarounds, both of which resulted in lower volumes.
We expect to run volumes to improve in the back half of the calendar year.
We're also.
All in other activity in the oil gas and chemical space. For example, our construction teams are executing installation at the previously announced first Anvil alkylation unit in the U.S. designed to use ironic liquids and Chevron Salt Lake City refinery this unit, replacing an existing HF isolation units.
To produce high octane cleaner burning fuels using a more environmentally friendly process.
In the midstream gas processing space. It is anticipated that the industry requires another 1.2 billion in new gas processing facilities to kick off in the next 12 months.
Our MPC service offering is gaining strong.
On brand awareness any opportunities available to us is growing we expect this work will add solid incremental value this segments and our business.
The operating results for the industrial segments were also strong in the quarter as we reach mechanical completion of a major capital construction project for you our steel.
Thats.
Said rapidly changing market dynamics in the iron and steel industry, which comprises the majority of the revenue for this segment have also resulted in a strategic decision to reduce our reliance on this end markets.
We do not come to this decision lightly but chose this path for the following reasons. We previously communicated that we saw.
Softening in the market in the second half of the year. This downturn is looking more significant than previously expected given the commodity price environment.
Contributing factors are trading global economic issues as well as supply demand imbalances all of which have resulted in these producers looking to alternative business models.
Shuttering facilities, Furloughing workers, and minimizing maintenance and capital spending.
This combined with the fact that there are very few integrated iron and steel producers left presents a look a level of client concentration and a business risk that has no longer aligns with our long term growth strategy or financial targets.
Finally, as communicated on previous calls over the past two years, we've been executing a major capital projects, where you are still that joint venture on called Protex that was scheduled to be complete at the end of our fiscal second quarter. We formerly achieved mechanical completion or late November and moved our construction team off site in late December with this project.
Should complete future earnings this part of a business were expected to decline that decline as I said earlier hasn't exasperated by the other market dynamics just discussed.
Or just Judy strategic decision to reduce our focus on this end market well Besley enterprise long term materially impacts our industrial segment revenue.
As long as related construction overhead cost recovery in margin. It also required us to take a noncash impairment charge in the quarter.
We are working to reorganize the operations to reflect the revised focus on this market.
As monetize the associated business assets that no longer fit that strategy.
Turning now.
Now to electric infrastructure segment results in the quarter continued to be disappointing. Despite the fact that matrix has enjoyed a long history of profitable performance as a contractor of choice in northeast as you may recall, we made a shift three years or three years ago away from full DTC project generation construction projects to.
One this focuses on smaller package work such as centerline erection mechanical or electric service to other EGPC contractors or generation orders that shift has been highly successful for us and as an underlying strength in the segment.
Bounce or the revenue in this segment is provided by power delivery services, where localized.
Operating issues have negatively impacted results access to the right Council has also been an impediment organic expansion of our transmission and distribution services and led to poor project execution and low volumes.
Well over 50% of this segment is it hasn't operating at or above our expected performance level.
Albeit with reduced volumes the impact of the issue just discussed have caused a noncash impairment in the quarter.
After extensive analysis the company has implemented a performance improvement plan for this portion of the operation.
Which we are confident will increase revenue volume gross margins and overall performance has it changed.
Isn't that plan take hold we remain confident in the strategic direction of this market and our ability to achieve our performance expectations and while also growing our base through strategic acquisitions. There is no question expanding our working electrical infrastructure segment remains an important part of a long term strategy that said before focusing.
Further on expansion you want to achieve performance improvement from the corrective actions, we have identified and implemented.
Despite the challenges in our industrial intellectual infrastructure segments Matrix service company continues to be in a strong position with very robust opportunities remain committed to entering markets long term.
Infrastructure spending needs diversified revenue streams to include markets that are not as commodity price sensitive and creating a better connection to the growing renewable energy market.
We have developed in our implementing that performance improvement plan that includes a reduction in resources overhead support and capital expenditures as well as organizational changes all of.
This will result in improved operating performance across the organization, while there'll be some restructuring costs incurred in the third quarter. We may see smaller near term topline. Our performance supports our adjusted strategic focus is designed to improve our competitive platform deliver higher standard the performance and achieve best better bottom.
In line results.
The big picture for our strategic objectives is to improve overall project business profitability and predictability.
Jack to gas value chain from midstream processing to our core capabilities and specialty vessels and terminals for Ngls and LNG expand our refining services market.
Share in North America move into chemicals, and petrochemicals when our full suite of services and secure more fixed base maintenance operations role electrical infrastructure to a nationwide footprint for transmission distribution Substations and storm response, we will also the final rule and renewables batteries of digital technology.
We will maintain our brand leading position in crude tanks and terminals, while further expanding our tank products offering and finally, we will deploy our storage and terminal capabilities internationally ended the Caribbean, Mexico and South America.
While we were operating the business at a lower revenue run rate Masons matrix will be leaner more focused company.
Our business today is anchored by our storage solutions segment, where we are a leader in MPC fabrication of above ground storage tanks specialty vessels and terminals oil gas and chemical business lays a great foundation for process industry growth and we're intently focused on fixing issues that have played to our electrical segments and are confident.
That we will be able to do so.
Makers continues to maintain a strong balance sheet and liquidity position, which reflects the companys financial stability and ability to execute our business plan ill now turn call over to Kevin. Thanks, Sean I want to start off by discussing significant non cash items impacting our financial results.
First item was the goodwill impairment recorded in electrical infrastructure segments.
Howard delivery portion of the segment has a long history of strong financial performance segment, historically produced gross margins of 9% to 12%.
While portions of the segments power delivery business and the power generation package will still operate.
It's at historical level.
Units within the business have recently underperformed.
That poor performance increase in second quarter and deteriorated the overall operating results for the electrical segment.
Which required us to record adult $24.9 million repairable.
On an after tax basis.
Impairment charge electrical had a 70 cents for 74 cents per share impact as John said, the long term market opportunity remains strong and we're confident we will successfully correct. The underperforming portions of this business.
The second item is the impairment of the industrial segment.
Operating results.
For the industrial segment have been strong in recent quarters, Alberta prospects for the industrial segment deteriorated significantly in the quarter as John discussed based on that Al. We recorded an 8 million dollar impairment of goodwill and a 5.6 million dollar impairments of certain intangibles on an after tax basis.
The non cash impairment charges in industrial at a 40 cents per share impacts.
The next item is tied to the change in the industrial business and the associated impact to the operating performance in a specific entity in Canada.
This change required us to record a valuation allowance of 2.4 million.
Again.
On certain deferred tax assets, the non cash valuation allowance had a nine cents per share impact in the quarter.
The earnings per share for the quarter was a loss of one dollar and four cents, which included these three non cash items that reduced earnings by $1.23 cents per share.
In the non cash items the quarterly adjusted earnings per share was 19 cents.
It is important to note that many portions of the business performed well in the quarter, which I will discuss further in the segment discussion.
Now I will move to the operating results for the quarter in second quarter, we produced revenue of 319 million.
In a modest decrease of 6.4% from revenue of 341 million last year, our gross margin in the quarter was 9.4% as compared to 8.2% in the second quarter fiscal 2019.
Overall project execution was strong in all segments, except electrical infrastructure.
Margins were also impacted by under recovery of construction overhead costs in a couple of segments.
Our S. Una was 23.2 million in the quarter as compared to 22.4 million in the same quarter last year.
Our effective tax rate for the quarter was 10.5%.
At December 27.4% for the same period a year ago.
We previously expected our fiscal 2020 effective tax rate to be approximately 27%.
However, the rate was negatively impacted by the valuation allowance placed on certain deferred tax assets.
And goodwill impairment charges that were not fully.
Ductile.
We now expect effective tax rate to be approximately 28% for the remainder of the fiscal year.
Adjusted EBITDA for the quarter was 12.6 million or 3.9% of revenue compared to 10.4 million or 3% of revenue in the prior year.
Moving.
The backlog our backlog was 872 million at December 30, Onest 2019, compared to 1.08 billion at September Thirtyth 2019.
The quarterly book to Bill ratio of 0.6 on project Awards of 1.97.
In addition.
The company had cancellation of previously awarded war previously awarded work.
88 million in the quarter related to the changes in the industrial segment.
Backlog at December 30, Onest 2019 does not include our selection 40 significant multiyear project with Eagle LNG announced in January 2000.
With construction expected to begin later this year.
Now, let's talk about specific results for each of our segments.
Revenue for the electrical infrastructure segment decreased from 58 million in the three months ended December 30, Onest 2000, $18 million to $28 million in the recently completed quarter.
The decrease is primarily due to lower volumes of power delivery and power generation package work segment gross margin was a negative 9.6% in the quarter compared to a positive 6.1% in the fiscal 2019 second quarter.
Fiscal 2020 gross margin was negatively impacted by poor execution.
Portions of the segment included a charge on a transmission and distribution upgrade project. The company is implementing a performance improvement plan well the electrical segment, which we are confident will increase revenue volume gross margins and overall performance as the changes from that plan take hold.
Revenue for the oil gas and chemicals segment was 56 million in the second quarter compared to 86 million to the same period last year. The decrease of 30 million is due to lower volumes of turnaround work.
While our crews were busy on turnarounds the size and scope of those turnaround activities was lower than normal in the quarter.
The second gross margin was 7.5% for the quarter compared to 10.6% in the same period last year.
Project execution was strong which resulted in good direct margins, but the lower volume will work led to under recovery of construction overhead costs, which negatively impacted gross margins.
Revenue volumes and gross margins are expected to increase in the last half of fiscal 2020 from increased capital and engineering work.
Revenue for the storage solutions segment was 143 million. The three months ended December 30, Onest 2019, compared to 126 million in the same period last.
Last year.
Increase resulted from tank and terminal construction works and higher levels of capital work from Canada.
Excellent project execution resulted in a segment gross margin of 13.9% in the quarter compared to 8.9% in the three months ended December 30, Onest 2018.
I will look for this.
Storage solutions segment remains strong for both revenue and margins for the remainder of fiscal fleet one.
Revenue for the industrial segment was 90 million in the quarter.
Compared to 70 million in the same period last year.
Increase was due to higher volumes on iron and steel work, including revenue from a large.
Capital project the segment gross margin was 9.9% compared to 5.7% in the same period of fiscal 2019.
Fiscal 2020 segment gross margin was positively impacted what good project execution on both capital and repair and maintenance projects.
However, as a.
Most of the changes business, we expect the revenue volume and the industrial segment to decrease significantly.
Getting in the third quarter.
Now I will briefly discuss the results for the year to date.
Saldate revenue was 657 million, but six months ended December 30, Onest two.
Was 19.
Compared to 659 million in the prior fiscal year on a segment basis revenue decreased 48 million in oil gas and chemical and $41 million electrical infrastructure. These decreases were partially offset by 54 million dollar increase in storage solutions and a $33 million.
In industrial.
Consolidated gross profit.
Increased to $62.5 million in the current year compared to 51.3 million in the same period in the prior fiscal year.
Margins increased to 9.5% in fiscal 2020 compared to 7.8%.
For fiscal 2019.
Fiscal 2020 gross margin was positively impacted by strong project execution in the storage solutions and industrial segments.
The oil gas and chemical segment project execution was strong with the lower volume of work led to under recovery of construction overhead costs gross margin and.
The electrical infrastructure segment was nearly negatively impacted by four project execution.
Consolidated EPS you know expenses were 46.9 million in the first six months of fiscal 2020 compared to 43.6 million in the same period a year earlier, the increase was primarily due to investments to support the.
Business and as well as a bad debt charge.
Our effective tax rate for the six months ended December 31, 2019 was 2.6% compared to 23.7% for the same period a year ago, the fiscal 2020 tax rate.
Was impacted by second quarter events, including the.
Valuation allowance placed on certain deferred tax assets.
And goodwill impairment charges that were not fully deductible.
With the six months ended December 30, Onest 2019, we produced a loss of 81 cents per fully diluted share compared to earnings of 23 cents per fully diluted share in the six months ended December 30.
One 2018, excluding the impact of the noncash charges. We've we produce adjusted earnings per share of 41 cents in the first six months of fiscal 40 Twond.
Adjusted EBITDA for the first six months of fiscal 2020 was 26.6 million% to 4.1% of revenue compared to 18 million.
For 2.7% of revenue in the prior year.
Moving onto our balance sheet and liquidity, our financial position remains strong with current liquidity of 276 million.
We ended the quarter with a cash balance of 110 million and borrowings of only 15 million.
Availability under our credit facility just.
166 million.
Our capital expenditures in the quarter were 5.8 million, which is about 1.8% of revenue our capital expenditures were 14.5 million or 2.2% of revenue for the six months of the here.
As we previously mentioned, we are reducing our capital spending.
Plans and the last after year and expect to end the year for capital expenditures of about 1.5% of annual revenue during the quarter, we executed on the stock buyback that we announced in early November.
Buyback consistent 500000 shares at a total cost of $9.9 billion.
On the strength of the company.
And our outlook on the business, we will utilize our financial resources appropriately to maintain shareholder value, including stock buybacks.
Our approach of maintaining a strong balance sheet and good liquidity remains we intend to continue to pursue acquisitions, but we'll do so in a manner.
That allows us to maintain strong financial.
Position our primary use of cash are designed to strengthen shareholder value. These uses includes certain strategic investments related to our business improvement plan and other organic growth initiatives strategic acquisitions capital expenditures in share repurchases.
Now, let's discuss guidance based on performance over electrical infrastructure segment.
Lower projected volumes in the industrial segments and other business priorities. The company is executing on a business for improvement plan.
Connection with this improvement plan the company anticipates a reduction in its annual operating costs of at least.
12 million and a reduction of approximately 10 million in fiscal 2020 capital spending.
The company also expect Super restructuring costs of four to 6 million primarily in the third quarter fiscal 2020 related to the plan.
Given the changes in our business.
Updating our.
Previous guidance, taking into account the company's positive outlook in the oil gas and chemical and storage solutions segments.
The business approved plan the electrical infrastructure segment.
And the expected revenue reduction in the industrial segment.
We now expect fiscal 2020 revenue to be between 1.2.
1.3 billion entry for a loss per fully diluted share of between 45 cents and 65 cents.
Excluding the non cash charges incurred in the second quarter and restructuring cost planned in the second half of the year. The company expects to to report adjusted fully diluted earnings per share.
Between 70 to 90 cents for fiscal 2020.
I'll now open the call for questions.
Thank you ladies and gentlemen is just to ask a question you would need to press Star then one on your telephone.
Withdraw your question press the pound cake.
Again that start wanted to ask the question.
Please standby, while we compile.
Off.
Our first question comes from a lot of John brands.
Your line is open.
Good morning, John and Kevin.
Good morning morning.
I guess I'm, let's start with industrial business.
Just kind of.
Clarify what your business plans. They are all you're getting out of just the steel side for the entire business.
What do you plans and what's what kind of timing are we thinking about it and exiting it.
So on industrial segment, John is made up of.
Several industries.
Markets that we work in iron and steel being the largest than that on both sides of the border.
Yes in Canada, we also have mining mineral operations, we work to fill vacuum chamber work we do.
Material handling kind of projects in Grand cement and so the iron and steel.
Piece is the is the one that we are minimizing our operations and.
You know right now we are.
The sort of downsizing, our our presence there from a day to day maintenance and small project capability.
We will continue to be often opportunistic.
To look at say turnarounds or larger capital projects, they're likely would would do really in any of our businesses, but the.
But the we're expecting a pretty big reduction in the revenues because of that change and just because of what's going on in in that market.
But but the iron and steel.
But just to be clear in the industrial segment down is still business, depending on what was going on in that market represented anywhere from 50% to 75% revenues in that segment.
Okay and that that steel businesses.
Thank you referencing your press release is the is the business you would look to sell not team.
Higher industrial business.
Yes, correct.
All right.
Okay.
And I guess just to stick with industrial.
I would your plans b to continue to grow the business the whole point of getting into this marketplace was it was diversification.
How do you continue to plan to.
Diversify the business mix or don't you.
For the foreseeable future.
No I mean, what we so one of the things we like about the electrical piece and obviously, we got to some pieces that we've got to we've got a fixed but we think there's a lot of growth potential for us in the electrical infrastructure piece there's.
Decades of capital spending requirements across North America.
Through the overall power delivery segment.
For the country, the grid and and it's not.
A commodity as commodity price sensitive as some of the other things that were into so whether that.
Being.
Connected to re into refining.
And that connection back up into the midstream markets for us So thats an area growth for us another area growth for US is in the chemical market. That's an area of business that we do virtually nothing in today.
So while we've got a great footprint in refining both in turnarounds and.
Projects and associated.
Storage facilities with that.
Our our work index chemical petrochemical market is really limited only to storage applications. So we feel that there was a lot of opportunity for us to grow their.
Leading with engineering content first and then bring in.
Our construction operations to that and then one of the on things other things we've identified as the international market. So when we talk about international market, we're looking into the Caribbean, Mexico, Latin and South America.
We're experiencing a lot of pull through opportunity there for us.
Domestic clients that are moving energy resources into those markets and so while we're building their facilities here in the US. We're also gives us the opportunity to to build the receiving terminals in those other markets. So those would be three the areas for us what we would see growth opportunities.
The electrical why what helpless.
Would help us to minimize the cyclicality of the rest of the business.
So.
Just to tie Barbara how long this process expected to take the finding of new personnel to run electrical the the drawdown and.
Deal is a so.
One quarter process, six month quarter process and I'll.
What are we talking about here.
I think both those things will be.
Fundamentally put in place by the end of this fiscal year.
And then the.
Improvement overall.
Proven in the electrical markets, while we expect some improvements through the back into this fiscal year.
We would hope within the 12 for the 12 month period will start to get back to.
Expected performance levels.
Okay, and that's all I'll get back into queue.
The Eagle project can you give.
So essentially the size scope of the project.
And you expected to hit the piano initially and how long of duration it will be.
It's approximately.
No the schedule completes play around 30 month project.
And we don't normally give up the project sizes, but we'll.
Contractors, so all the engineering procurement all the construction of the process facility the marine.
Following works all the things the storage is all the balance of plan all that is all within our our view.
So you can think about the size of that versus declines investment in.
And sort of the 60 to 70.
To be percent kind of range.
Okay fair enough thanks execute.
Thank you.
Thank you. Our next question comes from the line up.
With D.A. Davidson.
Okay.
Good morning, Thanks for taking my question.
My Bill good morning.
Yes, Kevin just the first one on the guidance I mean can you help us a little bit on.
What operating assumptions you are taking into account for these two businesses that are undergoing the strategic actions that the low in the high end.
Yes. So so first we look at an industrial.
We did you know about $90 million of revenue this quarter produced some good operating income.
You know as Sean said that the steel businesses, 50% to 75% of the that segment. So you know you know two thirds of segments kind of going away starting in the third quarter. So you know.
That that segments not going to produce.
Any measurable operating income in the last half year.
At least I wouldn't expect it to.
Now the electrical segment, we had 30 million a revenue this quarter, we did a similar number.
In the first quarter, we do have an improvement plan in place.
This will take time to get it.
Changes made so we're not expecting significant.
Improvement on the topline.
In the back half I mean, you know.
The revenue should be in that 30 to 40 million range I would think per quarter and then if you think about margins.
You know, we think we'll get it back to that historical range. Eventually I wouldn't expect that in this fiscal year.
So you're still going to have.
Mid single digit margin probably in that business this year.
As we implement the changes now.
When you.
Looked at the.
Other key segments.
No. The storage segment was extremely strong or 140 million to revenue I think that will grow some here in the last half a year and the margin performance should continue to be really stronger that a good backlog of projects.
And when you look at the oil gas and chemicals segment. We noted that the project execution was strong in the quarter was just the volume will slow.
And we think that volumes going to increase in the last half on additional capital work and additional engineering work. So no I think we should see a decent increasing volume for.
For gas and chemical so those are the two segments, they're going to carry the operating results for the company in the last half.
Got it.
I guess any.
Any additional color on what gives you comfort that the volumes in oil gas and chemical will recover here in the near term.
Yes.
Yeah I guess.
Any any help you can give us there I think we're all looking for those volumes to recover here in the December quarter, If I guess, what gives you guys.
Offense, you'll see it.
In March I think that.
Thank the expectation this recent quarter was more around turnaround and Waller crews were busy.
You know the.
The scope of those turnarounds did not end up being you know the.
And that being the type of turnarounds that the lend themselves to.
A strong quarter like we had in the.
In the third and fourth quarter last year.
And when we think about what we're expecting the Bath App, it's not based on turnaround improvement is based upon.
On.
Projects.
In that or new construction capital projects or engineering that are that are either.
Either book door, very high probability of being booked.
So so that gives us more confidence in and where that increases coming so the other thing to think about two is that.
Contractors turnaround contractors fall declines and and so we may one of our competitors may be.
Saying, they're having a strong turnaround session in the fall or the spring and Thats because declines that they normally do business with on a consistent basis or.
And to be.
In that cycle at that time and as to owners that we do business for maybe out off cycle. So so we've had this year is little bit off cycle year for our clients lower levels of heavy turnarounds and kind of small smaller scope.
Mechanical turnarounds, we expect that slipped for us.
Probably probably not in the fall and I'm, sorry, probably not in the spring, but as you move into the fall as.
This calendar year, we expect those that turnaround.
Mix to to flip towards more towards clients that we do we.
We do consistent business with.
In the engineering work I referenced as well, that's really gas value chain, which is a growth area. We've we've talked about.
Got it that's helpful.
And that is another one on electrical I mean, it sounds like.
There is.
One specific PND project that's.
A lot of the headaches there I mean any color on how much you guys have left on that project.
I think we're about 70% complete yeah.
Alright.
Okay. Thank you.
And just one quick kind of housekeeping.
The 12 million an operating cost reduction.
Any having it sound I mean, it's all going be obviously, an electrical and industrial any any color on how you expect that split as we kind of thing about modeling it out.
Split between like line items on the income statement.
Or segment no just in terms of I mean, how much.
How much of the coffee taking out of electrical versus how much of the cost will be coming out of industrial.
Just how is that any.
Kind of how will be allocated between the two segment.
I think more of its coming out of the industrial piece, but there are probably 60, 70% of industrial but but.
For both businesses. There's also support related costs that are included in that amounts to support the whole business because that's part of a larger subsidiary that the volume for them mortgage subsidiaries is decreasing so they've got to rightsize. The overall structure and that's already been going on.
Got it.
I got a couple more about jump back in queue for now thanks guys.
Thank you.
As a reminder, ladies and gentlemen.
Asked the question.
We have a follow up question from the line of John.
Your line is open.
Yes, just maybe continued a little bit on the electrical.
John when you look at the bookings.
No you you've been working to kind of rightsize that business, making more profitable.
And now its sweeping changes on the managerial and mid level managerial levels.
Could you just talk about what you feel that the.
Opportunities that you've been missing out on.
That warrants such as changes I mean, what type of business have you not gotten your fair share of.
Some sort of color as what you think.
This unit has missed.
Some of the things is going on there's been some some structural changes in.
That markets Weve talk forever about being.
Two centered on the northeast that were too dependent on too few clients and you know it's necessary for us to grow that business that that.
Yeah.
Thesis still exists and is still something we need to do.
And there is just but there's been some changes there on how are those.
Clients, particularly as an associated with this one is one unit within that business, they're buying their their work. So theyre used there there are used to used to be a lot of.
More reimbursed for kind of projects they were.
More call out of kind of maintenance they.
We're not bidding as many of them as possible and so the the people within that business unit, we're not necessarily used to operate in that fashion and as that market changed over that.
It changes the dynamics of how we chase work I wouldn't work I've asked you work that we estimated and so those are things that.
We've got a catch up on and we've got to fix.
In those businesses so.
And there's been a lot of money spent there over the last few years on storm hardening. Some things that were done associated with hurricane Sandy a lot of that work has been identified has been completed and and so now as the as those utilities move.
Back into store, so more of a normal.
Cadence and repair cycle.
We've got to get ourselves aligned with where they're spending there their dollars. So.
Yes, those are kind of the issues and so we've kind of changes are the way we sell ourselves there the way we.
Marked at our services into those regions and so we got to make sure that we've got to.
The right folks in place to be able to market and sell the business. So it's.
It's more there's got to be more aggressive selling by the organization.
Then as opposed to classics is a fun and gives your goal.
So so to expand geographically.
Are you are you thinking that.
We need some sort of outside the northeast some nearby.
Adjacent geography is the best way to go or do you have a further out for the opportunities that might be in.
I don't know southwest from so something out there right.
How does that work.
So I think for the.
The purposes of expansion.
We're going to be looking for acquisitions to do that.
If you're moving or you're moving.
Manically, especially in this business the ability to bring and know the local labor market to bring the.
Capabilities into know the clients you know kind of one of the things that stand us on the transmission distribution project, we talked about where we've had some charges on.
From an acquisition standpoint, you're buying into the you're buying.
Going into that client resources as client context.
The.
Labor resources the supervision.
Into companies that are operated in regions. So it's probably less some it's less important on an acquisition standpoint for that that acquired business to be adjacent to our existing operations.
Because you're really.
There, you're you're buying that know how you're buying that knowledge of the clients in the region and.
As opposed to try to put your own on folks in there.
Okay, Okay fair enough and one last question did I hear correctly that you use about half.
If your share repurchase authorization.
Well, our authorization is limited to 30 million a year calendar year.
So.
No I wouldn't expect us to do that much but.
We're in a position where we could do a significant buyback it was which is doing.
Okay, all right guys. Thanks, taking my questions.
Thank you.
Thank you.
A reminder, ladies and gentlemen that star one to ask the question.
Yes.
Our next question comes.
From a line of Noel deal.
<unk>.
Hi, Hi, guys. Thanks, just one really quick question on T.D. project that 70% complete.
Just looking the remainder of that revenue at no margin at this point or on a lower margin just curious how the rest about plays out.
I would expect to be booked at it is zero margin assuming the forecast we have been there is correct. Okay perfect. Thanks, so much.
Yes.
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I'm not showing any further questions I would now like to turn the call over to John Hewitt for closing remarks.
Well, thank you for visiting with us today.
I will remind everybody in the wintery driving conditions, we've got all around the country of late and please keep say to be mindful of the Supreme roads.
And finally remind everybody that our business is strong our storage opportunities are very deep our strategic positioning is built for growth and we will fulfill our purpose. So.
Thank you again for joining us today and before to talking to you on future calls.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect everyone have a wonderful day.
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