Q1 2020 Earnings Call
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First quarter 2020 conference call.
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[music].
Good day and welcome to the building group first quarter 2020 Conference call Today's conference is being recorded.
At this time I would like to turn the conference over to Mr., Tony Rusty financial.
Please go ahead.
Thank you Kathy good afternoon, everyone and thank you for joining us to discuss will then group's financial results for the first quarter ended people through 2020.
Today for management, or Thomas Brisbin, cheer, Chairman and Chief Executive Officer, sticking Mcglaughlin, Chief Financial Officer, like Bieber President of Lilly and group.
Management will be prepared remarks, we'll then open up the called your questions statements made in the course of today's conference call, which are not purely historical are forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 90 flawed.
Forward looking statements involve certain risks and uncertainties and it's important to note that the company's future results could differ materially from those in any such forward looking statements.
Factors that could cause actual results could differ materially and other risk factors are listed from time to time in the company's that's if she reports, including but not limited to the form 10-K for the year ended December 27, 20 like GE.
Subsequent quarterly reports on form 10-Q.
The company cautions investors not to place undue reliance on the forward looking statements made during the course of this conference call Willdan group disclaims any obligation it does not undertake to update or revise any forward looking statements made today.
In addition to get financial results well, there and also provides non-GAAP financial measures that we believe it gets investors ability to analyzer business trends and performance.
Non-GAAP measures include net revenue adjusted EPS and adjusted EBITDA. We believe that revenue allows for improved measure, but revenue derived from the work performed by our employees.
Adjusted EPS as adjusted EBIT dollar supplemental measures of operating performance, which removes the impact of certain expense items from our operating results.
GAAP reconciliations for all of these non-GAAP measures are included at the end of the earnings release, we issued today.
With that I'll now turn the call over Chief Financial Officer Stakes in golf safety.
Thanks, Tony I'd like myself incidents joining us on todays call I'll start with an overview of our [laughter] Scott our gosh.
As we indicated in the press release issued last night, our financial results have been impacted but importantly in New York in California that have temporarily suspended benefit the work our direct install program [laughter].
Total revenues in the first quarter 2020 increased 15.5 per se.
$106 million from $91.8 million kind of first quarter claim they increase was driven by broken bones energy engineering consulting segment.
Net revenues define contract revenue subcontractor services another driver.
$49.6 million, an increase of 21.4% from $40.8 million for many years ago core what's in that segment revenue increased by 20.
By 28.2%, which was due to the contributions for everything.
We're getting the engineering and consulting segment.
<unk> increased 8.4%, which isn't entirely attributable to organic growth.
Right.
Revenues were $75.3 million for the first quarter 21.
Increased 14.4%.
$5.9 million over same period last year.
Increases primarily related to the growth in contract revenue, resulting from both our organic growth and our recent acquisition.
Our direct costs contract revenue was 71% or total contract revenue in the first quarter up from 67% in fourth quarter 2019, but down from 72% in the same period occur here.
The difference in each period, primarily reflects changes in the next and work and the degree to extend contractors are utilized.
General and administrative expenses for the first quarter with $39 million compared to $26.2 million to the prior year period.
The increase was primarily driven by higher personnel facilities and amortization expense, resulting from our recent acquisition.
As announced last month, we are taking another action to reduce our central Valley revenue was impacted by the Kobin nice things like that.
He's actually paid claims.
Approximately 300 employees on paper.
Breezy, all noncritical spending or travel capital expenditure and other discretionary expenses.
Temporarily reducing cash wages for salaried employees.
Suspending account fees paid to our board of directors.
These actions should result in a lower level of general and administrative expenses in the second quarter 2020.
We generated an operating loss of $8.3 million for the first quarter 2020, compared to operating loss of $234000 in the first quarter 2019.
Adjusted EBITDA was $1.3 million for the first quarter 2020, compared with $4.7 billion for the first quarter funny.
We heard $1.5 million net interest expense in the first quarter 2020 compared to $1.1 billion in the same period last year.
The increase was due to the debt utilizing the same <unk> RBC acquisition.
During the quarter, we recorded income tax benefit or $1.6 million, which was attributable to various tax deductions and credits.
We had a net loss in the first quarter of 20 $28.2 million or 71 cents per diluted share compared with a net loss was $417000 or four cents per diluted share in the same period last year.
On an adjusted basis, our net loss was $1.5 million or 13 cents per diluted share. The most significant adjustments from our GAAP net income for stock based compensation and intangible amortization, which are both noncash items.
Turning to the balance sheet and cash flow from operation.
We started here and a heavy emphasis on cash collection, particularly from some of our large utility customer.
Your next quarter. These efforts are very successful at April 30, 2020 accounts receivable that in contrast assets totaling $123.3 million.
Decreased to $35.6 million or 22.4% from December 27, 20 Nike.
In the first quarter, we generated strong cash flow from operation, we got to kick it seems like $5 million in cash flow from operation an increase of 55% and the same period last year.
As of April 30, 2020, we had $126.7 million outstanding on our total credits in Philly and $66 million remaining available within our credit facility.
On May 620, funny, we finalize alignment with our lending group that we feel provides enough financial covenant cushion in the next Friday.
Yeah, nice temporarily changes in interest rate for borrowing under the company's credit facility provides additional flexibility within our debt covenant and makes other temporary modification.
In terms of our credit facility and then it will be provided in the 10-Q.
This will have to your second increase parent interest expense to approximately $6 million from here.
From our previous estimate of $4.5 million as of today, we haven't talked balance of approximately $25 million.
On April 16th we went through our financial targets for medical 2020, due to the uncertainty resulting from the co lending teams have done well.
When the economy reopens didn't we had a greater visibility on a reduction of activity on our direct consult program. We would look for examination financial targets I'd now like turn the call over to Tom.
Thanks, Stacey and good afternoon, everyone.
First I would like to thank all are important.
Corporate nitrate pandemic has caused rapid change.
Financial sacrifice for all.
The first quarter all indicators were on target.
We had it for January February with wrapping quickly and the first weeks at March we head into a record core.
The remainder of bar some off drastically.
Even with the work temporarily suspended we had 1% organic growth for the quarter.
So I'll give some more detail on depends on mix effect to our business [noise].
Well then unfortunately, that's 60% over work can be perform from Paul.
Energy efficiency direct install approximately 40%.
Temporarily impacted.
Especially in the New York in California, Mark.
This business requires correct.
<unk> costs were primarily to small business.
Well, there's objective is to protect the physical health of our employees and the financial help overcome.
Sure that's kinda other.
We have taken many actions to balance revenue was call.
None of our work has been lost because of the pandemic.
And it's been pod and must still be completed within the framework over a long term utility contracts.
And let me say work has continued at a reduced level.
We're looking at restarts no even in parts of New York in California.
Now, let's get a little bit more specific so our shareholders can understand where we are today.
The first address revenue lease impact.
I stated, 60% of our business is professional services. It can be done for home or has been deconcentrate, because their engineering or construction management.
Of course, there are interruptions and this revenue stream due to lets just say and door stop and start.
We have committed industry that this interruption was less than 20%.
Today is about 10% for 60% of our revenue.
For example.
Additionally, we had major project for the dormitory authority for the state of New York stock.
Well within two weeks.
They were bigger sexual because for hospitals dormitories must operate or be there.
Hey school districts that we're doing infrastructure and energy upgrades at a very short pod.
And left in two weeks it was rapidly decided.
No I feel time.
To do the upgrades because.
Instruction will not to interrupt after schools for after building and John.
Now, let's turn to the both impact as part of what business.
Sure so small to medium energy efficiency upgrade.
This is where we make commercial buildings more energy efficient you can likely heating and cooling technology.
Sure I heard a paybacks are less than two years and greatly help commercial businesses reduce operating costs.
That's a perfect time to reduce operating costs due to the shelter in place restriction, we can topic sales or entered the facilities.
Therefore, 40% over revenue has been reduced by 80%.
There was a spectrum of.
Reactions from New York City, Washington State.
Most impact to the Chicago suburbs, and Utah, where there was less true.
Across the spectrum effect, we saw very quick response to stop anymore.
About two weeks within two weeks.
Several workarounds smaller firms.
Such as virtual audits or Saudi releases to protect utilities and working in open spaces.
That's true weeks ago more work around such as Los Angeles Unified School District L.A.U.S. Steve.
Third operating the schools like empty.
Los Angeles should be competitive for work other greenhouse gas cool and safe manner during the pandemic.
The last two to four rigs.
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L.A. J.
Oh, It was considered a major star.
Workarounds are really everyone effort to go back to work.
The discussions have gone from style for worker. While today. This discussion is how to restart wednesbury from middle age or early June no predictions are just cautious optimism.
I can comment go to rebound from the effect for Walmart.
Energy efficiency in general and energy efficiency for small businesses specifically.
Our being discussed as can cause Tory recover strategy.
Utilities have already increased incentive.
Through our son of project cost in order to help restarted common.
This would pay the payback.
Other properties to zero.
Federal legislation under consideration includes multiple programs to assist state local governments and utilities.
Funds to private energy efficiency recover.
Program, but provide as much in 6 billion talk to small business cost for participation.
While corporate banking has had a significant impact on our short term revenue and earnings.
Born to reiterate that it does not impact the total amount of revenue that we will earn our progress programs just.
Right.
We've had no program cancellations or changes in the scope of activity.
As restriction from that.
Spectrum rigs of work and recognized all over revenue we have under contract.
I'll just be pushed out to later quarters.
In addition, we do not see any meaningful impact.
The funding for our Boulder.
60% of our revenue comes from utilities, and there'll be no effect to funding in this area, 10% over revenue comes from commercial customers and this point, we are actually saying more funding being allocated.
Largest commercial crossword agency and they are increasing it was then on energy efficiency programs.
30% or other imagine revenue comes from state and local government. During this period, we saw 8% organic growth.
And our civil Engineering segment.
Primarily local government.
Colgate like gene our city outsource more war.
Before.
The crisis, we continue to see it's very healthy pipeline of new business opportunities.
It appears our customers are utilizing their time at home to work I get into RFP.
Oh, we have continued to win new programs they studied grade.
Recently won $21 billion blunder design build projects to school districts in Colorado.
These projects these projects will make the schools more energy efficient.
Upgrade the building infrastructure and enhance educational environment with improved air.
Right quadrant air and like quality and new spark classroom technologies.
We also recently my major new assignments for major change made through 1700 central offices across the country more energy efficient reliable. This project will help us build our track record and industrial market.
This is 40% larger than the commercial market and represent significant growth opportunities in years ahead.
In terms of her California procurement and schedule for the awards remains on track.
Jamie said, you haven't gas electric and southern California Edison continues to be an active negotiations.
Can't provide any more details other than that.
These are working towards meeting or deadline Mexican award that we bring the level of outsourcing programs opened 25% by the end of June.
Our play Dr. 20 play there.
Our playbook for 2020 hasn't changed.
We're primarily focused on organic growth this year.
Given the amount of work we have in the pipeline and the California procurement opportunities.
We believe that's where our focus should be in 2021, we'll look to return more acquisition activity and take advantage of some of the new opportunities.
While the current environment certainly challenging we when we remain bullish about long term opportunity for go there.
Reducing operating costs.
Sustainability resiliency upgrading building them restructure reducing greenhouse gas or not the casualty of the pandemic.
Trend towards electrification containers and once they kind of it opens up again.
With that there will be you're going to more demand for services.
If we can take questions.
Thank you if he would like to ask a question. Please signal pressing star one on your telephone keypad.
If you're using a speakerphone. Please make sure your mute function is turned off to align your signal to reach our equipment.
Again press Star one to ask a question well pause for just a moment.
The first thing.
Yeah, So it's a different thing yes.
That's a good thing you have it you have a great big.
Hundred and table, there so lots of room distinction distance.
And he looked down the runway right 2020.
It's obvious that it's going to be a difficult year. This is you know.
Just looking at the stock it wasn't that long ago that we were trading between 35 and $40 for sure.
Now in in in the low twenties.
Lot of it she's already reflected.
But the real question, it's sorta, how lucky we go in the short term.
And how long for that backlog, but you've been building for a long time to to to really reconvert.
So.
Can you help me.
Understands you know your first quarter was obviously impacted by covert.
But the impact on the second quarter, it's going to be more significant.
And then you know is it for believer instead of a swish.
Ah shaped recovery aware that CIRCOR would definitely be up from second.
Quarter, you know may may even be higher than first.
How do we how do we factor. This I mean, it's is this consistent with your own thinking.
And.
Any color you can ride to help us shape out the impact on real dance operations over the next step of course.
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How long will fall.
Gosh.
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[noise] programs have already started <unk>.
<unk> [noise].
Sorry.
We expect more restarts quiet more actually next week so.
Oh, the trough was actually.
A week or two ago.
<unk>.
Okay.
Yeah. It was the monitor that question.
Right.
Well I kinda first before we recover we have to know how far down we calling set expectations correctly right. So <unk>, maybe can you show that's approximately how much.
Avenue was all in but then <unk> April versus the average revenue production and the fourth quarter, but are we talking about teams or or or maybe 20% reduction or was it oh more significantly given the.
The way that comes that hit the brakes for everything.
And then we have to figure out how to get people out there and working.
Hmm.
Let me address it for the first.
And we probably knows.
Around $10 million Oh gross revenue.
Porter, where did you have impacted profit $4 million to $5 million.
Okay.
This quarter, depending on when we.
Oh and how quickly.
Open.
The.
You know 25 plus million dollars gross.
We have recognized otherwise.
Relative profit impact this quarter will be much less than it was last four because our cost cutting measures.
In fact, we're already seeing back so I woke me up you know a one one problem.
We are starting to see acceleration of revenue over the past couple of weeks as I mentioned.
You know Jews looks to be we've got a lot of basketball. So question is how quickly from the wreckage.
Yep Yep.
Yes, it does ships it does actually so you.
You know as me services type things and it's an engineering and technical services business compensation is a large part of the expense base. So your actions there we're pretty significance I I understand the the relative impact that that that'll make sense to investors.
Every with changing something that everybody wants to own you stop for the energy efficiency programs coming down the Pike in California.
You know.
Utilities themselves published numbers about you know where and when and how much they expect to get out you know.
Obviously into negotiations for certain programs and can't say too much.
But you know some of those programs are supposed to have awards good summer now.
You know and others me me back into someone's fault.
Is it a fair assumption to say that this is probably do get punched and we're we're really looking you know more like the fall for activity.
You know utilities are not the best with keeping time lines in the first place.
It is that is that a parent's vacation.
[noise] for the first time I would say for utilities are right on schedule.
Oh.
N.G.N.A.S.P.G.N.A.
Are very quickly then they there.
Deadline.
We are.
Happy with.
Back and forth with though.
So.
Yeah.
Coming along.
And.
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Scripted remarks, you know.
<unk> seems to be helping thing.
Oh.
I mean.
I've never been more on target.
That is fantastic news and consistent with something I think the Wall Street Journal reported not too long ago that all all of US in this environment seem to be working fleet for more hours a day then.
Then we would've than a normal environment.
You know the utility either obviously benefiting from that too. So that's that's a very positive thing <unk>.
So.
In fact, there this summer that's that's that's great.
<unk> magnitude potential go away.
Right before that.
I'm sure for contract a war by July one.
Yeah.
Oh cool.
And then there's were.
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<unk> <unk> understood understood.
Okay.
That that that means that makes sense, but the the magnitude of of the scope.
You are negotiating for or are they maybe but you've submitted for.
Where we could see decision that she or can you can be update us on what what the total scope that you're looking at.
Not at this time.
It's really a very except for the time to have it could go <unk>.
Okay. So they're they're all they're calling factors that are line so that's and.
Even though you're the big it's doesn't have the longest track record.
I learned so aggressively pursue that businesses that is out.
What we should should understand for.
Okay, that's what's going on.
Okay. Okay.
Opportunities outside of California. This has been something that's sort of come on the table off the table over the last couple of quarter <unk>.
You know do for example expanded quite a bit for you I know there was a potential opportunity and in New York State.
Can you maybe update us on any potential elephants out there outside of California in the energy efficiency space you know maybe.
It's it's a t. at the utility upside down the.
In fact award.
That's helped some of those projects I mean, what what should we be thinking about potential opportunity.
And the engineering World.
We're we're looking at five it cracks in the code in New York dangers in New York City housing authority.
It's more.
<unk> construction measure were.
To read too.
Oh, how many buildings.
10000.
Come on unbelievable number.
But ah.
Really we were one of four selected and that's going along with <unk>.
Which is pretty exciting.
Are intriguing group.
I mean there.
They're they're really taken all parts of real bad.
A very flat.
As a road map.
And then we propose on the actual implementation that rolled out for city.
And they have the full service so.
Strategic thinking Oh wait through implementation.
Paying dividends.
Yeah.
Hopefully in the near future so the other day Oh.
Well.
Electrification.
If our customers.
To get rid of yeah.
Natural gas.
Electrify.
Everything they do from hot water to heat.
We're not very good position to go from writing H.V.C. to all electrification their customer base for him forward.
And not utilities room customers. So I think of those are some elephants.
Yeah.
So if you're prepared remarks, she mentioned 18 cheap I had one of your shareholders asking about 18 T.V. just this last week.
Maybe.
Give a little bit of color about the potential growth there.
Have you been seeing both with 18 T. before this pull that situation materialize.
Do you expect now that.
Combinations are there to to work on facilities in this environment, even though.
You know social distancing has an effect.
But but we can continue to see <unk> customers like 18 see growth will damage.
In the next couple of course.
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Mm.
<unk>.
T through our on site.
But workload relatively low Oh gosh.
The major major first major war last week.
We were want to just a couple of crime structures.
<unk>.
Great.
2234, you know, we're looking at I don't know.
Plus million dollars.
You know maybe several that are more next year, there's a lot of work.
So.
Performance.
Good that that's part of the momentum anything else you would call out for on site, obviously that that's improved to touch Keating right now.
Any other customers you can talk about.
Oh, Oh folder industrial site and are also very well on utility side.
<unk>.
Work is actually contained.
Through the code, so you're doing well.
I just think well.
Relations on the progress everybody knows this environment, it's a challenge and a willed and seems to be stepping right up to to meeting had on so.
Well.
Thank you.
<unk>.
Asking questions. Please press star.
It will take my next question from the check.
<unk>.
Hi, Thanks for I think my question questions I guess first one.
Touched on a little bit, but maybe just have to different way if I look at the.
Load balancing or the need for load balance with respect to c. and I versus residential.
Ah load chefs from this pandemic or.
Actually a ship from virtualization.
And kind of a work from home trend.
That it.
Could you quantify or help frame what that does in terms of.
Opportunity for me utility perspective.
[noise] or decide who should answer that.
I think bikes answer.
You didn't exactly have a panda yeah.
Although one knows what's going on.
How long this little last.
[noise] utilities are telling us right now.
Wanting to incentivize.
Smell commercial.
Verse immediately coming out of this and then.
Sorry.
[noise] told us there may be a longer term low shift away from C., four driven neutral on wrestling pointing to but none of our customer [noise].
On that.
Focus on restarting the commercial or industrial.
And.
Increased incentives to small businesses as homage.
Any other longer term sure we have to be longer conversation, we go to herve directly from utility shit.
More and more important to them I don't think they care whether get it.
God, if that's helpful and that's it probably a good segue into my next question.
Which you had mentioned.
You had mentioned the 10000 buildings in New York and cracking that code.
When I rented division for a company that that sold into that market I know L. 88 was.
You know a a pretty good opportunity, but one that wasn't adhere to in terms of the submetering. So I'm curious is is that shifted where there's a enforcement of some of the local laws that are driving some.
That opportunity for you or or is it something else. That's that's that's going to driving the the energy efficiency in in New York It Manhattan in particular.
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Overall L.L.
Ones L. 97, I believe to.
Gets a new York comply with the greenhouse gas goals.
Which that's kind of what I would talk about where he three is critical.
Because they are the ones that creates a pathway for the state of New York, and New York City and then.
The rest of will then right down through the guys who are working on the actual engineering construction.
I for the night your housing the other ones on the ground during the engineering as well.
Yeah, that's in New York during the smaller buildings in New York right now is looking at their own New York City on 4000 buildings how to get it.
L. nine so.
So.
Yes, I wouldn't say regulatory is dry it's based on greenhouse gas cool.
Got it so New York is is so on the regulatory side, there's a level of enforcement, which would seem to be a shift from from other local laws that that it had been put out there in the in the past in the past I know that most of the results in the in the property owners.
You know would would look for compliance is a function of trying to sell the value prop to the to the tenants, which was mixed at best but it sounds like there has been a shaft in the New York area with respect to regulatory compliance.
There's a shift in that they've put these goals up there and they're really scratching that had on how they're gonna Amir.
So they are trying to figure it out.
<unk>.
That's experience shows.
They don't want to get there.
Yep, but either way sounds like that that should be a positive for.
For for your business.
Well, yes, I mean, we seen New York City Mercy match moving.
So.
Yeah.
Great I'll jump back in the queue. Thank you.
Once again.
Question. Please press start.
I don't think we have any more further question. So we'd like to thank you all today for participating have a safe.
I would say day week hopefully left.
Oh.
Going forward and I think for <unk>.
[noise] presentation.
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[music].
Yeah.
Yeah.
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