Q4 2019 Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome.
So the showers solutions Inc. fourth quarter 2019 earnings conference call. At this time all participants are in listen only mode. After today's presentation. We will conduct a question and answers session instructions will be given at that time I would now like the hand, the conference over to Tony Semak head of Investor Relations.
First there Shira solutions. Please go ahead.
Thank you operator, good morning, everyone and thank you for joining US today. We appreciate your participation in our fourth quarter 2019 financial results conference call and look forward to sharing our prepared remarks in answering your questions.
I Hope you have had a chance to review the press release, we issued yesterday after market closed, but if not you can find the press release as well as a supplemental investor presentation. You may follow during our prepared remarks on the Investor section of our website at Www Dot shara, dotcom or IR dot sharp dot com.
Joining me today on our call, our Scott tool, President and Chief Executive Officer, and Roger Shannon, Chief Financial Officer and Treasurer.
Following their prepared remarks, we will conduct the customary question and answer session and continue the dialogue is needed.
Before we begin I'd like to remind you that our remarks regarding schar solutions include statements that we believed to be forward looking statements within the meaning of the private Securities Litigation Reform Act.
These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those disclosed in our earnings releases and conference calls.
Those risks include among others matters that we have described in our earnings release as well as in our filings with the Securities Exchange Commission, including our quarterly reports on form 10-Q, and our annual reports on form 10-K.
Expect to file our form 10-K for the year ended December 31st 2019. This Friday March 27.
Disclaim any obligation to update these forward looking statements.
During this conference call, we will refer to non-GAAP financial measures, we provide reconciliations to the applicable GAAP measures in our earnings release supplemental presentation and on our website.
Again, thank you for joining us today now I'd like to turn the call over to Scott tool, our president and CEO Scott. Thank you Tony and good morning, everyone. It's great to have you join us for our earnings call day, and I'm happy to be speaking with you again, providing an update on our fourth quarter performance and I look back over the full year 2019.
Also provide an overview of key business developments in our outlook for 2020 and beyond.
I'm pleased to report that our fourth quarter results evidenced the positive momentum, we're gaining by winning new business and executing on our strategic plan.
We also achieved important milestones and bolstering our liquidity and financial position through the recent announcement, we made regarding the successful third amendment to our credit agreement.
In preferred equity private placement.
With our strength.
Financial position.
Reliable customer base of which 80% are high quality.
Investment grade regulated utilities.
And our growth opportunities developing from favorable industry and regulatory dynamics, our leadership team and I are excited about the future of Star solutions.
This morning, I'll briefly review, our financial results and provide an update on current business developments, including a review of our significant accomplishments and I will highlight our pipeline of opportunities and recent regulatory and legislative actions.
Ill then transition in the call to Roger right deeper dive into our financial performance during the quarter and a discussion around our financing activities in our 2020 guidance.
But first I'll provide an overview of the actions we have taken to protect the safety of our employees and discuss the cobot 19 pandemic.
I want to first on behalf of Saar Solutions Express my sincere condolences and best wishes to those affected by the virus.
I also want to thank all first responders medical personnel and all others, who are working tirelessly to address the consequences of this pandemic.
Sure solutions, our commitment to safety is a core value and integral component of our culture.
As a run a virus disease continues to expand within the United States in around the world our highest priority remains the safety of our employees and customers Sars business was built on an unwavering commitment to safety.
That commitment will always compel our leadership team and me to pause and make sure we're putting safety and best interest of our employees and other stakeholders ahead of everything else.
To that end, we have taken immediate action to protect our people our customers and our business.
Mission critical nature of our customers operations.
Made it imperative to quickly initiate a series of contingency plans to ensure business continuity for our customers. The vast majority of whom are highly regulated and must continue operating to provide power to the country.
We have implemented measures to manage through possible service interruptions, and we are maintaining real time communication across our entire organization and with our customers.
To date, we have not had any work stoppages.
And further as of this time, we have not had any employees that have tested positive for cobot 19.
To better ensure the safety and health of our people, we have implemented policies that restrict nonessential travel and raise the approval standard for mandatory travel.
We also cancel or postponed nonessential in person team meetings instituted a work at home policy and communicated detailed guidance for a healthy behaviors for all of our employees.
Our ability to quickly adapt has always made sure a successful.
Our field and office teams have adapted exceptionally well during this challenging period, including working from home with a supportive increased information technology resources remote location communications and backup procedures. So that we are well prepared for these changes in future challenges.
With respect to our business operations, we have not observed any slowdown in activity on existing job sites. As a result of the co bid 19 outbreak and are in constant communication with our utility customers. We have a shared commitment to partner with them in keeping all employee safe biding with their health and hygiene policies and aligning with their health and risk.
Mitigation procedures.
Mitch the backdrop of any potential severe domestic or global economic slowdown due to the Corona virus pandemic. It is important to highlight the during the global financial crisis in 2008, and a great recession that followed.
Our business activities and pipeline of projects did not slow and our company continue to experience growth over the next 10 years.
Of course, there can be no assurance that our company. We experienced the same continued pace of growth, but historically in normal pace of business activities at server solutions as more closely linked to environmental regulatory trends and the fact that over 80% of our work is performed for regulated investment grade utilities, who rely on our mission.
Critical services to operate 29 team with a transition year for Star solutions and our results were disappointing.
However, we are optimistic about our business going forward based on our record 583 million a new awards in 2019 and opportunities for award growth in 2020.
As we stated in our press release, the value of New Awards, one and 2019 exceeded 2018 by 450%.
We believe this growth reflects an increase response to state and federal regulatory environmental requirements by our customers.
As well as the compelling value proposition, we offer through our ability to deliver the full range of ash services.
We believe this acceleration in new contract awards reflects the expanding opportunities for asked remediation into 2020 and beyond as more of our utility customers address the 1000, plus regulatory mandated surface impoundment closures in the United States, we continue to develop and expand our byproduct sales capabilities through our.
Multisource platform.
And we expect that future infrastructure spend initiatives will increase demand for fly ash as a substitute for Portland cement.
Finally, we are optimistic about the continued performance of our nuclear and fossil maintenance business through our outlet power operation. We are a leading provider of mission critical nondiscretionary nuclear outage maintenance services.
Steady predictable business remains a solid source of revenue and EBITDA for us.
We believe that our momentum and winning new awards, coupled with the increased liquidity and financial flexibility provided by our recent credit agreement Amendment and successful capital raise and our increased focus on cash flow improvement through expense reductions strengthens our ability to compete and capitalize on our expanding market opportunities.
The recent uncertainties related to the current a virus and resulting impact on the U.S. economy may affect the timing of revenues and project awards in the near term our customer base is growing and our geographic reach is expanding as customer motivation for our environmentally friendly customized solutions to recycling or me.
Operating ash byproducts increases across the United States before turning to our financial results I want to touch on several significant accomplishments during the quarter that demonstrate the success of our growth strategy most notably.
As mentioned previously.
We achieved a record year of winning new business in 2019.
The 583 million awards.
This represents an increase of 450% over 2018.
The contracts won in 2019 increase the diversification of our customer base and broaden our geographic reach.
Contract negotiations with utilities for the launch of RMB 618 asked Beneficiation technology aren't advanced stages, and we anticipate signed contracts this year.
We continue to optimize our business and deliver on our business objectives.
And we continue to receive awards and recognitions for our excellent safety performance, which further demonstrates our commitment to our employees and our customers.
Now turning to our fourth quarter 2019 financial results revenue for the three months ended December 31, 2019 was $149.6 million, a decrease of $53.6 million or 26.4% from $203.2 million repo.
Boarded in a three month ended December 31 2018.
The decrease in revenue compared to the same quarter last year is due to the completion of projects in 2018 in our environmental solutions segment. There was not replaced with New awards in 2018.
This decline was partially offset by higher revenues in our maintenance and technical services segment gross profit for the three month ended December 31, 2019 decreased $8.2 million or 38.2% to 13.2 million from $21.4 million in a three month.
Ended December 31, 2018, and gross margin declined to 8.8% from 10.5% a year ago.
Due primarily to lower revenues in our environmental solutions segment.
Looking back at our balance sheet and liquidity.
Earlier. This month, we reached an agreement with our lender group to amend the company's senior secured credit agreement that among other things waived a mandatory term loan repayment.
He said financial covenants through the maturity of the facility and increased our borrowing capacity under our delayed draw term low.
We also closed transaction to sell 26000 shares of series, a preferred stock or approximately $25.2 million in a private placement.
16, 2020, we closed on the preferred stock offering.
And the credit agreement Amendment became effective.
These agreements significantly increased the company's liquidity profile and financial flexibility and deepened our customers' confidence in us to deliver our customized environmental solutions. Roger will provide additional details in his prepared remarks next I'd like to provide an update on important regulatory developments at the state and federal levels begin.
End of this year.
On January three 2020, Duke energy announced an agreement.
Carillon department of environmental quality and community groups that outlined a plan to permanently close the remaining nine coal ash surface impairments in the state of North Carolina.
This agreement provides clarity on the closure methods and timing.
In conjunction with this agreement, Duke energy announced that it estimated the total undiscounted cost to permanently close all aspirations in the Carolinas to be approximately $8 billion to $9 billion.
With approximately $2.4 billion already spent through 2019.
Performance of this work is expected to start in the near term and completion of most of these closures is expected to occur over the next 15 years.
In other developments at the state level, the EPA as approve Georges coal combustion residual or CCR regulatory program, making Georgia, the second state to receive such approval.
To receive this approval the state of Georgia had to prove that its program meets the intent of the EPA CCR rules and applies the federal rules as a minimum criteria.
There is a bill addressing these requirements currently circulating in the Georgia State legislature.
At the federal level.
Every last month announced its final proposal for stabilizing coal ash regulations for electric generation companies.
Among the proposed changes were provisions to modify some line or requirements.
However, the EPA stated.
There will likely be few basins able to meet the exemption requirements.
This is logical given more than 90% of EPA monitored coal ash ponds in the US we're determined to exhibit unsafe levels of groundwater contaminates.
Furthermore, regulations already require utilities to cease waste disposal in an impairment by August 2020.
Which will require a coal ash pond owner to make a decision on submitting an approval for an alternative liner well before they can demonstrate and underline parked meet the requirements.
And our view the collective impact of these proposals potentially increases remediation opportunities for Saar solutions.
And exemptions will only be allowed it to utility operator complete the entire application and review process under very stringent requirements and a limited timeframe.
In closing, we anticipate the growth in contract awards will contribute positive results in 2020, and even greater in 2021 and beyond.
We remain committed to taking actions expected to preserve cash support our balance sheet enhance long term value.
While positioning ourselves to take advantage of the expanding market opportunities.
Importantly, we are closely aligned with our utility partners environmental remediation and sustainability initiatives, which should provide schar solutions with significant growth potential for many years to come.
With that I'll turn it over to Roger who will discuss our outlook for 2020 in more detail and provide more clarity on our expectations in the current market environment.
Roger.
Thanks Scott.
I will continue with a review of our financial results and provide an update on our balance sheet liquidity in 2020 outlook before I begin to financial review I'd like to provide an update regarding our recently announced amendment to our credit agreement and our preferred stock private placement last week, we received the $25.2 million of proceeds.
From our series a preferred stock issuance in the amendment to our senior secured credit agreement became effective.
The combination of these events provides a meaningful enhancement to the company's liquidity and financial flexibility, primarily by eliminating the $40 million mandatory debt prepayment previously due by March 31 to 2020.
Modifying the terms of the existing financial covenants through the maturity of the facility.
And by removing the cap on the principal amount of the delayed draw term loan.
So did the maximum amount available to be borrowed under this facility increases from $15 million to $25 million.
We appreciate the commitment in support we've received from our banking partners and majority shareholder.
These transactions demonstrate the confidence we share in charter solutions ability to execute on our strategic plan and deliver on our promises.
The credit agreement Amendment and the proceeds from the preferred equity offering or an important step in enhancing our ability to capitalize on new business opportunities and strengthen our balance sheets.
Now turning to our financial results.
Revenue for the fourth quarter decreased $53.6 million or 26.4% for the year ago period to $149.6 million, primarily driven by project completions within our remediation and compliance services business, including the completion of the breakeven project during the.
First quarter 2019.
And a net overall decrease in revenue from our byproduct sales offerings, partially offset by an increase in revenue from our fossil services offerings.
For the full year 2019 revenue decreased by $185.6 million or 25.1% from the year ago period to $554.9 million, primarily driven by project completions within our remediation and compliance services business.
A decrease in the dollar value of projects one in 2018.
You are nuclear outages during the year.
These impacts were partially offset by increases in revenue from our byproduct sales and our fossil services offerings.
Our full year 2019 revenue exceeded the top end of our guidance provided in November by approximately 5% as a result of additional work during the fall nuclear refueling outages.
Gross profit decreased by $8.2 million or 38.2% to $13.2 million during the fourth quarter, while gross margin declined to 8.8%.
From 10.5% the same period last year.
These declines were primarily driven by project completions in our environmental solutions segment, partially offset by an increase in gross profit gross margin within our maintenance and technical services segment.
Resulting from the mix of services associated with our fossil offerings.
Generate higher gross margin.
We reported a GAAP net loss for the fourth quarter of $17.9 million compared to net income of $4.5 million in the year ago period.
The loss was primarily attributable to lower gross profit as previously discussed and an increase in general administrative expenses due to transaction expenses associated with amendments to our credit facilities.
In addition, we had lower noncash DNA expenses during the three months ended December 30, Onest 2018 associated with the amortization of the purchase option liability in connection with the deemed termination of the breakeven contract.
Finally income tax expense increased $11.3 million during the three months ended December 30, Onest 2019.
Due primarily to recording evaluation allowance against our deferred tax assets.
These increases were partially offset by a decline in net interest expense in the quarter due to a decrease in our debt balances.
Q4, adjusted EBITDA of $6 million was down $16.9 million from year ago period, due primarily to lower gross profit.
But ahead of the $5.5 million as adjusted EBITDA reported last quarter.
Full year 2019, EBITDA missed the low end of our guidance provided in November by $6.9 million due primarily to a delay in the anticipated sale of portion of certain owned property and the associated reversal of the related asset retirement obligation.
We still expect that we will transfer of the ownership other property to a third party in 2020.
Capex for the quarter was approximately $4.4 million down from $7.1 million during the year ago period, primarily as result of an increase in higher equipment efficiency and lease financing activity.
Capital expenditures for the full year of 2019 were $18.1 million.
Capital expenditures in the fourth quarter was primarily related to maintenance requirements in growth in our remediation compliance services business.
Now I'll discuss results at our reporting segment level.
And our environmental solutions segment revenue decreased $62.3 million or 61.5%.
To $39.1 million from the fourth quarter of 2018.
Primarily driven by project completions within our remediation in compliance services component.
Including the previously mentioned the breakeven project, resulting from the deemed termination.
Gross profit decreased to $9.4 million are 62.7% for three months ended December 31, 2000, $19 million to $5.6 million as compared to $15 million from the three months ended December 30, Onest of 2018 due to project completions within our remediation and compete.
Client services component.
Gross margin declined slightly to 14.4% from 14.8% in the fourth quarter of 2080.
And our maintenance in technical services segment revenue increased $8.7 million or 8.5% to $110.5 million as compared to $101.8 million for three months ended December 30, Onest 2018.
The increase was primarily attributable to growth in our fossil services offerings, partially offset by fewer nuclear outages.
For the full year 2019, we completed 10 nuclear outages compared to 13 outages during the year ago period.
As expected fewer outages led to lower nuclear services revenue as compared to last year.
Maintenance in technical services gross profit increased approximately $1.3 million or 19.9% to $7.6 million, primarily as a result of an increase in gross profit for the mix of services within our fossil and nuclear offerings.
Maintenance in technical services gross margins increased to 6.9% from 6.2% again, driven by the mix and services associated with fossil services offerings that generate higher gross margin.
Turning to our balance sheet and liquidity at December 30, Onest 2019, we had gross consolidated debt of $204.6 million, which is an increase of approximately $5.2 million from the prior quarter.
On a decrease of approximately $54.8 million for the year end 2018 levels.
The increase in total debt during the fourth quarter as compared to the previous quarter is primarily due to increases in working capital associated with the fall nuclear outage and the launch of new business one during the period.
The decrease in total debt from the prior year end period was primarily due to a 50 million dollar debt repayment during the third quarter following the receipt.
Of the $80 million in proceeds from the breakeven deem termination payment.
Our liquidity was approximately $28.9 billion as of year end 2019.
Down from the $40.4 million at the end of the third quarter and down from $50 million at the end of the fourth quarter of 2018.
Our current liquidity position has improved from $29 million again in 2000 $19 million to $37 million as of March Twentyth 2020.
This improvement in liquidity was the result of the $25 million capital infusion from the preferred stock offering proceeds received on March 16.
And the $10 million additional borrowing capacity under the delayed draw term loan facility.
Partially offset by increases in Allied working capital, resulting from their large spring outage work.
Additional liquidity should improve significantly in April as seasonal working capital needs associated with the ramp up in schedule nuclear outage maintenance services that began in the first quarter reverse.
[noise] Nextel address our 2020 guidance.
We provide mission critical services to a diversified base of customers, 80% of whom our regulated investment grade utilities. They must continue to produce power through the current corona virus uncertainties.
Well, we are not currently seeing any significant disruptions to our business due to the mission critical nature of our customers operations.
Uncertainties surrounding the cobot 19 pandemic.
And related resulting potential for significant future business disruptions beyond our control have created a high level of uncertainty.
For this reason, we're issuing 2020 guidance at this time based solely on our booked backlog of business and executed contracts.
Our current 2020 guidance is as follows.
We expect revenue of $560 million.
Net loss of $50 million.
Adjusted EBITDA of $37 million, and we expect to be free cash flow positive for the year.
This guidance is based on existing contracts and our current expectations of no material worsening the cobot 19 pandemic.
And specifically, including but not limited to no material customer work stoppages, no significant employee absences and no government mandated quarantines any worsening of the Tobin 19 pandemic could materially affect our 2020 outlook.
With that I'll turn the call back over to Scott.
Thanks, Roger 2019, when they transition year and our results in the fourth quarter demonstrate the positive momentum or gaining from our success in winning new business at a record pace.
We anticipate meaningful positive contributions to revenue EBITDA and free cash flow in 2020 from the success.
And our liquidity and financial flexibility have been significantly enhance since year end.
Our customers' confidence in our ability to bring our full suite of mission critical services to meet their specialized needs has grown as a result of our enhanced financial position.
We believe we remain the partner of choice for the power generation industry with an exceptional quality safety and compliance record and extremely strong domain experience that we have not observed a significant disruptions to our business due to the mission critical nature of our customers operations, we are aware of attack.
Phil macroeconomic disruptions beyond our control and we will continue to monitor the situation very closely.
We believe we are well prepared to protect our staff and ensure continuity of service to our clients. During this uncertain period.
We remain committed to keeping our people safe addressing our customers' needs and growing the business.
This is predicated upon several factors that contribute to our ability to execute during the current pandemic and position ourselves for future success. These factors include.
Enhanced liquidity and financial position.
In existing customer base, consisting of 80% investment grade regulated utilities that rely on our mission critical services.
Routine nuclear reactor maintenance that is nondiscretionary specialized and predictable.
A very large installed base of legacy coal ash disposal ponds that require remediation.
Our plant operators that are increasingly focused on an environmental stewardship and regulatory compliance.
And.
Recycling waste by products continues to be a critical component of the current and future infrastructure needs.
As we pursue our expanding pipeline of opportunities, we're committed to making further adjustments to improve our operating efficiency reduce our debt levels and increase our margin potential.
Thank you again for your interest the participation and with that operator, let's begin the Q and a session.
Certainly at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad that star one are your telephone keypad to ask a question.
Our first question comes from Toni Kaplan from Morgan Stanley. Your line is open. Please go ahead.
Thank you it sounds like you're not really seeing any significant disruptions from Cowen 19, yet.
But maybe you can help us with.
Areas of how it could play out are there areas of the business that could be more exposed to disruption than others, but it could basically this impact the start of any.
<unk>.
New wins.
Yes.
Sure Good morning, Tony.
And you're right.
She has been built on our services to his mission critical utilities, and we have not seen any work stoppages to date.
Our teams are going to work every day, our office teams have been.
Very resilient.
And adapting to working from home so everything today.
Has gone as planned for our for our team. So again very strong demand for our services at this time.
And that's really why we also chose.
To give guidance based on.
Outperform in our existing work today and or not.
For the any additional work in hand, right, we didnt want to speculate on.
Upside or downside so we're just.
Very transparent there with you.
So.
To that regard if you think about our business in out of the and all of our made some technical services are out as teams are performing outages today, we don't see any.
Stopping of that critical nature of work.
At this juncture same with our.
Legacy asset management work.
Our guys are going on so power plants every single day and doing their their critical tasks. So.
So we haven't seen anything in that regard.
I would say the one area that we do have our eye on though is.
The the byproduct sales component of our business.
Construction slows down there may be a.
Slowdown in and in some of the S sales potentially.
However, we haven't seen that yet.
But it is something that we're keeping around.
Thank you.
No awards for 19 went from three to 5000 for last quarter.
Hi, maybe three or this quarter and you mentioned 175 million of no warrants and 2020.
This is a higher level of new wins and new our previously anticipating and I guess, what do you have raised 2020 guidance if not for.
And then what's driving that the new wins.
Sure.
Yeah. This is we were.
We are expecting that pace in the in 2019.
2020 is tracking exactly how we wanted to track, we actually signed a extremely large contract this week and on the middle of everything else going on right now.
We're still able to secure secure work. So we're excited about that excite about the fact that our teams are still.
Working hard and in the field out there.
Again not sure.
We would have adjusted guidance, one one way or the other specifically with what we've got going on right now I mean, you're reading the headlines a lot of companies or pull and guidance and.
There's a lot of different.
Factors out in the in the in the in the industry right now.
We are committed to continue to.
Gain new work.
Throughout the course of this year and we haven't seen any trends yet that will.
So thats going to stop at this point in time.
And Tony as Roger I'll, just add that we we typically we historically have had.
New awards that occur within the year that would contribute to.
Earnings within that year, so as we pointed out our guidance we have chosen to not include that.
This time in our 2020 outlook, we were trying to work.
With the with as much certainty as we have with what we know right now.
So.
It is certainly very possible.
That the disruption could affect the timing.
Of New awards as you noted we.
We have secured 175 million to date.
As with a number of these large projects that you have the timing of those tend to.
You start a little later in rent over an extended period of time.
Again, as Scott said were based in our guidance on what we have.
Both didn't sign contracts at this point.
And we'll just to see how the year progresses as it relates to the impact on New awards of what effect I might have.
Thanks, guys.
Our next question comes from Michael Hoffman from Stifel. Your line is open.
Thank you very much for taking a question say.
And I'm glad to hear that all your employees and families earn good order.
Could you help us with the 560, just split between yes, and the MTV and ask so we understand what that mix looks like.
Hey, good morning, Michael.
Okay.
It's that hopefully you're doing wells as well, but yes, I split is that splits roughly.
60, 40 on the MTS side at this point.
40, MTS and 16, or what's where I've just sorry follow that Carl.
Sorry, Michael 60% MTS, 40%.
Yes.
Okay, and and the way to think about this would be.
They do they work you do it utilities is relatively stable with some modest level of underlying organic maybe for.
Price, a little bit of iron and.
Byproduct since probably stable borrowing.
Construction in their variability than is on water would be where are we in.
Nuclear maintenance and where are we on remediation contract backlog conversion, but thats the way to think about it inside those two pieces.
Okay.
I believe so Michael was having a little bit trouble. Following your thought process on the tail and their unless Roger disease, Yeah, I would just.
I.
I would agree that where it would be more along the the environmental solutions to remediation.
Compliant services projects.
Where we have a pretty good handle on the number of nuclear outages that are said to occur in 2020.
And our guidance reflects.
What we see happening.
With those outages over the course of the year.
The outages that theyre going to be 12 outages. This year the spring outage season is.
Is heavier than the fall outage season. So we're.
In the.
And getting into that are.
Approach in the middle stages of that right now.
Our work continues but where there is I think where there's more uncertainty is around the remediation compliance services projects.
We've talked about in our release.
And our expectations you setting aside the impact of grown virus.
Our expectations is that we expect to see growth in that area as.
More of the regulations that Scott talked about in his comments.
Or are you are driving actions by our utility customers within that space.
At the same time that is the area of the greatest uncertainty.
As it pertains to the potential impacts of the virus so weve.
We've taken a more conservative approach to how we are going to.
Addressed that factored that in and guide on that at this point.
Okay, and I apologize I, probably asked at clumsy.
If I if I took the two segments.
Byproduct business will have I can look at it year over year in say, there's some modest level growth and fossil would have some modest level growth and then nuclear is all tied to the sheer number of outages.
On the variability as left as remediation.
That's exactly right Michael.
Okay got it alright.
And then just to follow in sorry.
I'll now, saying sorry for not falling earlier in your question.
No not by asset clumsy.
The.
The 583 does that include this 177 million that was closed in the first quarter already or is that incremental I wanted to make sure. It's falling all that right yet yes. Good question in the five athree.
Does so I mean, thats, a 100% of our are booked work right now.
And it.
As you know that work does ramp up over the course of the year. So it's not.
Oh, sorry.
I thought you are asking on our on our guidance now the fiveeighty backlog backlog yet so.
We think about our guidance our revenue for Fivesixty.
It does include a portion of that 175 that we've already.
Act up here in Q1.
The five Athree 583 of New awards that we that we got in and in 2019 does not include the 175.
Right. So how if you were to say your current backlog is today, what would that number be.
That's that's something that we haven't.
Shared.
Publicly something we can consider.
But I will I will say that.
We obviously see our 20.
[music].
20 backlog here for our 2020 contracts in hand.
And also know that.
Majority of our work is on long term contracts so that that.
Tail outlet 2021 in 2022 is very strong for us.
Okay.
My incorrectly.
If you did give a number it's bigger than the Fiveeighty threes cause you add one some more stuff.
App not absolutely without without as much larger than the combination of those two numbers come on.
Right, Okay, and Mike, let Michael drugs, you'd just just keep in mind is we've talked about in the past.
The.
The.
The decrease in the challenges we saw in.
2019 were results, primarily result of that large project rolling off that.
It was not replaced in 2017, and particularly 2080, we provided a graph in our presentation that shows you the new awards and.
You know how that dipped in 2017 to 2080 as his expectations of these remediation projects developed but were became more complex got pushed out.
The.
Requirements for.
Rate relief and all that so.
So we're in 2090, we started to see more of those coming we view as Scott talked about we see.
The opportunity for that.
Growing across 2020 and forward. So we've talked about that we do expect the growth in our backlog in our new awards to be.
In environmental solutions, but so what you again just to recap that are just to reiterate what we've done for our 2020 guidance is his previous backlog that.
Coming into 2019 that carries on there are there was 583 of New awards and.
2019, the portion of that that we believe will be performed in 2020.
Is in our guidance and then you to the extent of the of the 175 that we have one so far this year to the extent that any of that will be performed.
Under under that forecast in this year that is in our guidance, but certainly our.
Our.
The backlog of business is well beyond that.
Got it okay.
Okay.
Hi.
And that backlog again, we expect that backlog to grow as we have years.
Assuming are provided that the trend that we saw in 29 team continues that that backlog will be even further reestablished in bolstered too.
You can.
Move past.
The decrease we saw in 17 and 18.
Fair enough so to that end now that there's been a wave of.
Positive news, Georgia, hitting its approval to reaching agreement with the state even the state Pcs coming back and saying you can get rate really for this work.
How do you what are you seeing as far as the activity level around restarting or in the case, Georgia, starting a bidding process that.
Creates an opportunity to win some piece of that and walks the backlog.
Where what's your visibility on that activity re being reignited.
And Michael you're you're exactly right our activities stronger than we've we've ever seen it.
So I think we talked about.
Our largest new awards to date in 2019.
Yeah, we got our largest and even though we haven't given the exact number our largest backlog ever in hand right now.
And our BD teams aren't in the kind of.
In process work that's out there for a forbid an award and in a and 22020 right now that activity is through the roof from the our teams are.
Working on multiple multiple opportunities that are very significant size and we're really opened to see those things awarded here in the near term and start executing on them and in 2021 and beyond and it's really you know as we've seen that shift we really see it as the tipping.
Point, right now and the Orencia side for for that growth trajectory that we that we've been planning on so now now's the time.
And we're seeing that activity.
Okay. So hi, fair enough that you need to talk about should you share a total backlog that you have today could you share.
And this isn't that you're going to win. This this is your win some peace what's the total amount a dollar value of bids being reviewed.
Or at least give us a.
Scope is that a couple of million dollars, a four or five I mean, just so we understand what's been restarted activity wise and I get you can't when all that you're going to win some piece of it.
So.
Oh.
Yeah, I think the best the best way to say that Michael is and we've given.
I think.
Last year, when we started given.
You know some some guidance and some insight into two or business development activity.
We are sharing with everybody that kind of.
Bids in process number previously and we're we're much in line with that right now on that roughly 3 billion in process and.
Yes.
Talk to our BD teams in the in the.
What they see that.
Coming out for bid are available to a.
For us to provide a proposal on in the next.
Call at 18 months to.
24 months is another.
Roughly 12.
Billion, so I mean, theres a lot out they're happening right now.
And we're just hoping.
The we work through the krona virus piece.
Here Oh, everybody continues to stay healthy we focus on keeping our teams working and then.
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Kind of bolstering on the the new work.
As we get out of this situation right now.
Okay, and then last question for me the recapitalization, because that remove any or all challenges for us getting performance funds in place. So that you you can go on and do this work and prior to that I get that maybe the binding industry.
Ultra conservative.
I had some concerns but now you fix solve this from a liquidity standpoint, and so that shouldn't be an issue right.
Yeah, I mean, it's definitely helpful and that's that's why we've done we've done that's why the banks of support us through this that's that's why our or that's what barnhart capital support us through this and I think it's a huge sign for both the bonding.
Agencies out there as well as our customers to show the strength in the belief in our in our business and nine that's that's our objective.
Terrific. Thanks for taking the questions and again I hope everybody stay safe healthy right.
Your next question comes from Michael Feniger from Bank of America. Your line is open.
Hey, guys. Thanks for taking my questions.
I was just good morning, everyone. I was just curious if you could help us.
So you have EBITDA.
For the guidance.
Doubling off of revenues just up I think it's just a 10 million or one or 2% you guys kind of provide three buckets really driving now margin improvement.
Cost saving the mix and finishing up some quarter mediation contract anyway. You can just Scott can you just less some of that out for us just stuff some of those buckets for us just gets more comfortable with that.
Sure I think you did [laughter] you did a very good job of Oh of reciting the three three buckets, there and I was really are the Vicki movers. So we we as Weve talked about before 19 was a transition year for us absolutely in many fronts.
So a lot of.
Optimization of our our teams the way, we deliver and driving SDMA down so that was a key component.
We've talked a lot about the.
The discrete one time events that fell in 19 specific too.
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The large structural fill project that we had in North Carolina that coming to an end.
The issues with.
Another remediation and compliance services project.
Oh man and a couple of opportunities that that we invested in some of this development standpoint that didn't come to fruition, but.
With that all in the rear view mirror for us that's really how you're able to see the.
The increase performance in 2020.
Got it and then just I mean, you mentioned, you're going to free cash flow positive for it for 2020.
Is there any kind of help us quantify that and I guess.
Wondering is as you start up some of these projects getting you guys had this.
The strong year last year in New awards and he started these projects that are working capital where I get in a sense as we as we go through through 2020 anthem These projects ramp.
And there's probably a little bit of a short term drag, but again as we as we did our work and as we move forward.
And getting New awards, our objective is always to make them a cash flow positive.
As we.
As we structure our contracts with our customers are Roger if there's anything you want to add to that.
Yes, I think there.
You look at.
You look at.
Contract assets on our balance sheet.
At year end.
It was about $20 million, you that that will turn to cash.
Over the.
Cost of the year, we had.
Project started up in the fourth quarter.
That did have some working capital build to it.
And then.
Over the course of the ended the year.
Thinking about the.
The beat on revenue in the increase in.
Revenue from our maintenance and taken services side.
That had some working capital build associated with the kind of push that cycle out in to the ended the year with you with the unwind or the collection is that happening past year end now that was you kind of immediately offset at the beginning of year by this.
Very large spring outage season, but like we mentioned in our comments that you that will quickly unwind over.
The April may timeframe, so you really see that in Q2.
As we worked out of the.
Large.
SPRI outage season.
But.
We havent.
We havent given a number in terms of free cash flow, but.
It's.
Thank you will see it significantly better.
Then what you saw in 2019.
And just the on on the awards I mean again ton 19 was a big year, if I, if we look back on another big year.
Let's say 2016.
Yes.
How's the profitability of the some of these awards.
And the margins on these awards.
If if if we look back even just a few years ago is the environment.
More competitive I I know that.
For you guys spoke up about how this project getting more complex.
Larger in scope.
I'm wondering if you compare like a 583 too when we look at 2016 you had over 400 award that was a good year as well like the is the mix of awards is the profitability. These awards that are or is it a more competitive environment due to try to after this this market.
Hey, Hey, Michael Good good question before I answer that some of that Roger.
Talking about cash flow second would say when does just my last comment about free cash flow this year versus last year I'm.
I just need to you kind of preface are you kind of frame that setting aside the the deem termination payment I was obviously that that payment created a tremendous amount of cash flow in 2019, but I was thinking about specifically referring to.
Kind of normal operations and setting that aside so when it make sure that was clear.
But.
But back to the question on on margins and new work one of the things that I'm really excited about those at the inside of that 583, we're really able to diversify our customer base in our contract mix and it wasn't wouldn't centered around.
One customer or two customer or one or two large projects. So thats a huge positive for us as we as we move forward.
And the margins that we see today you know on it in a competitive environment are similar to where they were.
In 16, 17, 18, and we track that very very closely we have a very good.
You know.
Intelligence on a where projects are being one and what the what the margins are I will say, though in 16, we did have a few projects in there.
That were kind of.
One off in nature.
But.
It had some some pretty good margins it in them, but they were outside of normal course of business. So if we think about a normal course business margins have been.
You know exactly where we've we've seen for the last couple of years.
Thanks, everyone.
Thank you.
Your next question comes from Michael Hoffman from Stifel. Your line is open.
Thanks, just for one quick follow up two questions. Sir one rent one wasn't a and B. What is your definition of the calculation for free cash flow into what is capital spending for 2020.
Yes, so on.
Capital spending again, I want to just kind of.
Caveat that a bit.
Based on the current environment, we're we're.
Certainly working too.
Uh huh.
Shepherd and reduce our cash flow out we we do have different ways of financing so.
It it will depend over the course of the year just on.
How we decide to financings and how how the startup of these projects or affected so and we are still.
Available or.
You are eligible to do operating lease type financing, so which can give us some advantageous rates and obviously that does fall.
Into the capital number so.
We.
We would expect.
2020 to kind of be.
On par with.
Winning 19, maybe little bit lower from a from a maintenance perspective and in the wildcard still is.
Around.
[noise] technology projects.
And where we are making progress on those.
The way those would be financed certainly would be you would be a wildcard in that and the timing of that.
From a for maintenance perspective, we expected to be a little bit less.
You know to our definition of free cash flow.
His operating cash flow less capex.
So.
Im operations in the cash will stay unless all capital side.
Yes.
Yes, Okay, and then could you just remind me this whole remote working remote thing.
Missing lots of pieces or data well, what was maintenance spending and 21 so.
You roughly what roughly.
10 million.
Okay.
What I heard is you're going to be about that plus or minus a tad and then anything up to that is if you.
Do any of the by product [noise].
[noise] plants.
Then that changes the number.
So yeah, I'll give you a precise number the the maintenance.
For 2090 was 8.5 million.
Maintenance in growth.
Okay.
Okay cool thank you.
Thanks, Michael.
There are no further questions at this time I turn the call back over to Scott School for closing remarks.
Thank you and thanks, everyone for taking the time out today to.
Have interest in in our business and everything that we're doing right now I know, there's a lot happened in the in the world where buys attention as elsewhere, so really do value your.
Your interest in the business and I hope that you guys are all somewhere safe right now in Europe.
Your families and yourself for all in our thoughts right now.
As we work through this but again I'm very excited about the business when we go from here.
And look forward to communicating future successes to everyone on the call. So thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
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Hi.
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Hi.
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