Q1 2020 Earnings Call
[noise] welcome to the Hill Internationals incorporated first quarter earnings for fiscal year 2020 Investor call.
Let's call, John Brown, and invest a calm.
Entered actuarial marks on the content of the cop.
Calendar, followed by Hill International T.O., <unk>, Scali, Senior Vice President Chief Financial Officer, Taiwan, and China, as senior Vice President of Global marketing Liz.
Listened scali, what it's got the status of the company and expectations for hills immediate and long term future.
With the wire travel detail hilt first quarter results for 2020 and lives there were highlights some of the police awareness.
As I recall is being recorded.
John plays the game.
[noise]. Thank you to everyone on this call. Please note the following.
Certain statements made on this call are considered forward looking statements within the meaning of private Securities Litigation Reform Act of 1995, and it is our intent that any such statements be protected by the safe Harbor created thereby.
<unk> information that matters set forth urine.
Polluting any statements Oh belief or intent and any statements concerning our future plans and strategies or forward looking statements. These forward looking statements are based on our current expectations and assumptions are subject to risk uncertainties, which do not intended undertake no obligation to.
Beat any code book State.
What's that let me turn the call overturn ROE Golly International seat you go.
Thank you John and thank you to everyone on the call.
We hope that everyone is staying healthy and shave during this crisis wellbeing and safety of all our stakeholders is our priority and I think all our employees for that dedication as they continue working on our construction sites during this period.
We will start off the call was the highlights of our performances quarter.
And the steps, we have taken to endure the corona virus condemning.
Hello to provide details on our financial performance.
This would highlight some of our recent wins.
We would proceed with the questions and answers session.
And then I will give some closing remark.
So let's begin.
I am pleased to report we completed the first quarter with a 3.2 million adjusted EBITDA.
336.9 increase year over year.
Oh consulting P. revenue was 77.2 million, that's like decrease of 2.3% year over year.
This like decrease was mostly due to the current 19 impact the started to be fell in the latter part of March. Since then you have seen hour deliberately workforce at 95% of the total <unk> staff with most clients, allowing our teams to work from home on duty stuff can be performed.
Site and to rotate necessary staff.
To supervise onsite construction activities.
A new bookings this quarter <unk>, well slider and then plan.
Due to our clients priorities being focused on the current crisis and not on finding New awards.
We expect this trend to reverse as the global economy returns to some sort of knew normality.
We therefore.
Retract out previously stated guidance for fear par as the timing of the new bookings currently difficult to assess.
We want to note.
That in any given year a portion of the sheer far generally 25% to 35% is estimated from you bookings, which is now harder to predict.
Having said that.
Significant portion of new bookings or renewals extensions or variation orders on existing projects or task orders frame work on framework agreements and therefore, we're hopeful that these bookings when it come back in the second half of the year.
Last week alone.
With more global community is relaxing the Lockdowns, we received over 30 million of new bookings in Europe, Middle East and the USA.
This is this indeed is very encouraging.
We expect public investment terrain strong due to the need for infrastructure upgrades and the likelihood that a large portion of the global multi billion dollar stimulus packages will be spent on those upgrades as a reminder that.
The largest portion of our business is in the global infrastructure sector.
Many of the infrastructure upgrades will support deviation sector, we believe that government stimulus coupled with low traffic volumes would motivate airports to undertake construction projects to enhance capacity for future demands.
Additionally.
While airfield operations are down airports can focus on accelerating maintenance and capital projects that would normally affect flight operations and require implementation in phases over several months or longer.
We show similar behavior during the 911 and 2000, a financial crisis, one airport upgrades for accelerated to be proactive and ready for when traffic you Spike.
Despite covert 19 and plummeting oil prices are middle East business has had only minor disruptions to date with 95% of the billable workforce not impacted.
Has our businesses, mostly in the infrastructure sector and now growing in the facility management business, we are far less sensitive to oil crisis. Here again, we have seen a delaying you bookings, which we expect to correct itself in the coming quarters.
We know our middle East business is currently almost 30% of the sheer far.
In the U.S. most of our projects are considered.
Construction.
This allows 90% of our beloved of work force to continue during this period.
We already are seeing some of the suspend the project being recall in the mid Atlantic region. The hardest impacts remain in our New York organization.
I'm pleased to report that liquidity of the company remains healthy we witness to slow down and collection in March that was actually burst in April.
We have also been proactive managing our cost structure and made cost reductions of $10 million, mainly in R.S.T.N.A. to manage the possibility of the crisis being pro long.
Some of these costs will eventually be required once the economy's normalized but until then.
We believe we can manage our business without jeopardizing the quality of our service or future business with this scale down cost structure.
No I would have turned it over to dog for details.
Financial results.
Thank you write who and thank you to everyone on the call.
Interesting first quarter most of the world.
Navigate impact.
We grew are just to eat <unk> over last year and kept at roughly in mind, our expectations by continued attention to controlling costs, which more than the upset slightly lower levels.
Gross margin.
Oh address these results in more detail will also discuss <unk>, we've seen thus far.
Reactions we've taken.
Outlook for 2020 cost space on our current global view.
Forward looking disclaimer John downstairs at the beginning of the Qual has never been more relevant.
The uncertainty about quantity timing.
Yep. The pandemic will continue to have notwithstanding we believe it is critical to provide.
News items, we are able to control.
I looked for the quarter include one.
<unk> 3.2 million for the quarter, marking our fifth consecutive quarter positive address.
And the 36.9 per cent year over year improvement same period last year.
Two S.G.N.A. was 32 point.
Quarter, which included noncash items.
Later in my comments with the cost control actions, we implemented we expect to be well below 120 million S.G. need guidance, we gave previously.
Free I Backlogging 753 million down from the prior periods due to slow down to new bookings explaining his remarks.
Or.
Consulting P. revenue 77.2 million for the quarter down 2.3% from quarter water glass Dear negatively impacted by some project suspensions 12 and a quarter.
We had a net loss for the quarter 6.6 million.
Merrily duty noncash unrealized.
Exchange bosses non past leasehold improvement breakdowns related to the sublease I'm half, our corporate office space in Philadelphia.
Right now it more detail on the results for the corner.
Let's start with S.G.N.A.
Has been that after cutting costs 460 million down to 120 million between 2016 2019, we expected the hundred and 20 million level to be sustainable through the time be.
I guess g. and eight includes noncash items, such as Unreal I.
Appreciation amortization in stock compensation.
Depreciation amortization in stock Com are generally not subjects much variation.
This quarter. However, we recorded nonrecurring 1.6 million dollar charged to depreciation.
<unk> mandated that <unk> amortize portion of our leasehold improvements meet the portion of our corporate headquarters that we subleased as part of our cost cutting initiatives.
<unk>, we recorded 4.1 million non cash.
That's excellent inter company balances. Unlike the other noncash items <unk> subject or significant variations.
Important aspects points are one.
Yup.
Is nine cash waited almost entirely to intercompany balances you will not be realized until and unless these balances or cash settled over which management has complete discretion.
In two weeks food only the unrealized portion of F.X. from address either die.
Effects that is realized is included.
This is important context, because our headline extra money for the quarter seems high at 32.1 million compared to 420 million player guidance, but.
Adjusting forward the noncash unrealized <unk> nonrecurrent leasehold write down which together total over 5 million places or S.G.N.A. runrate well.
Hundred and 20.
<unk>.
Management has taken a number of actions to address the uncertainty.
<unk> impact.
On our business, one all travel conferences seminars and events I've been cancelled until further notice.
Employees on suspended projects will use any accrued paid time off and well that'd be placed on leave without eight for low until the project presumes.
Three.
Open indirect positions I've not in will not be filled until further notice for certain indirect employees have been laid off.
Five walkers cost that'd be caught as employees are working remotely <unk>.
<unk> company match four one k. contributions has been suspended.
I've been board of directors have agreed to wait 20% reduction east and eight certain vendor contracts have been renegotiated lower rates.
Based on these actions, we expect that you need to be approximately $10 million lower.
Lowering our 2020 guidance from approximately 120 million to approximately 110 million.
This assumes these temporary measures stay in place the remainder of the year.
Insulting be revenue was 77.2 million for the quarter down 2.3% from Q1 last year negatively impacted by some project suspensions toward the end of the corner.
Approximately 95% of our employees continue to service ongoing projects.
A majority of the projects we service have been classified as essential services by the appropriate authorities.
Well, we cannot predict how the pandemic will ultimately adapt Walmart projects and what percent of our billable workforce will be able to continue we do not believe they will be significant variation to the current workforce if the pandemic stabilizes at current levels for declines.
So in summary, we have not seen a significant impact to date on or C.F.R. from pandemic and we currently believe the C.F.R. would generate from existing projects for most of the continue.
However.
And given here is a combination of C.F. bar ongoing projects in C.F. or new projects.
Mentioned girl your or new bookings are down as many projects schedule rewarded this year I've been deferred.
We are there for attracting fires are guidance 330 million to 350 million for 2020.
We are not getting any revised guidance on 2020, C.F. or this time due to the uncertainty regarding the future economic impact of the pandemic.
We intend to provide your vice guidance, when we have a higher level of confidence of the impact of the pandemic on C.F. or.
We had negative free cash flow of 11.8 million for the corner.
The first quarter is historically spoke for collections at some public sector clients wait funding new budget should become available.
Cash flow deteriorated more this year as we saw significant slow down and collection just the latter part at March. We believe this was due to an initial disruption in processing at some of our clients as back office location shut down from Corona buyer <unk>.
Collections have returned to more normal levels April and our unrestricted cash balance out things has increased my approximately 3 million March 31st levels to approximately 19 million April 3rd yet.
We also had 3.8 million of capacity under revolving credit facilities at April 3rd yet for a total of approximately 23 million and available liquidity.
We believe this level liquidity is sufficient support our cash requirements pointing foreseeable future.
In addition to the cost saving actions discussed earlier, yeah opted into cares act programs mid us to the burden employer portion of quite good taxis until 2021, 2022, and we intend to apply to the refundable payroll tax credit for employees unable to work due to the pandemic.
Also negotiated deferrals I'm certain second quarter lease payments until 2021, all these auctions wall cystoscopy preserving liquidity.
Side from the actions discussed we believe we will qualify for a long it onto the main street renting program announced in April by the Treasury.
We are waiting to see the final terms and conditions to verify we qualified and determined the loan amount for which we may qualify and intend to based on currently available information to apply once the final program application process is announced.
During the qual overworked zip to highlight some major aboard since our last call.
Thank you Todd.
I was Rowe said health core business operation, So modified have not been seriously <unk> disrupted by the pandemic in most cases.
Employees commitment to working through the challenge is presented by remote or otherwise modified working conditions have enabled the continuous flow of quality services for whichever is known.
Now let's proceed to some of our latest when.
In Europe has recently awarded the contract by the Cyprus Tourism and development company.
Accompany owned by in the real estate and and per D. investments.
To provide project management services for the redevelopment.
Connick landmark Cozy, a hotel into a distinct mixed use hospitality and lifestyle destination in Cyprus.
Development plan for this historic 294 keys hotel involves upgrading and Modernising the hotel and building a new mixed use development of approximately 23000 square meters.
First floor area I'm in the Jason plot.
The project will include state of the our conference facilities.
Restaurants, and bars, a new spawn fitness center and more.
In real call Poland has been collected by base camp to provide project management and multi discipline technical supervision services.
Or the transformation of the historic might not be great.
Into approximately 45000 square meters.
Shouldn't housing and a four star hotel.
It's a store complex might include a 775 rooms student apartment building with a wide range of multi purpose comments basis, and a new for scar six story hotel, including a 236 double rooms and four apartments.
And amenities such as the 360 square meter Conference Center, a fitness area, a restaurant, Bobby with a bar and underground car Park.
In North Africa, Hell will provide project management services for the Arab African International Bank for two headquarters project in 196 District, New Cairo, Egypt.
This project above the design and construction of a new headquarters building of ground floor in five typical floors, where the total area of approximately 28100 square meters. In addition to three basement levels for car parking and facility with a total area of about 25300 square meters.
In the U.S.L. is also has some significant recent when in Texas.
Has been collected by the Texas A.N.N. University system to provide project management and specially surfaces on the 546 million to park construction of a new medical and housing complex and the Texas Medical Center area Houston.
The first project involves the purchase and renovation of an 18 story building, which will be used to host taxes and m. is unique and med program.
The second project, we use a p. three delivery method to build two towers adjacent to the end that building.
The first phase will include the construction of a new 19 story 714 bed student housing building and the base of the second tower, including a 1.2 million square feet parking garage with 2700 spaces.
10000 square feet of retail space, and 8700 square feet of Greenspan.
Second phase will be integrated medical plan, that's a 17 story medical office building a top the parking garage.
New England.
Was awarded the contract by the University of Massachusetts Building Authority.
Serve as soon as representative for the University of Massachusetts, Substructure demolition and quadrangle development project on the institution is Boston campus.
This project involves the demolition of the Science Center pool building and the majority of the existing closet construction of a new quadrangle restoration of the remaining part the area and construction of a new 500, plus based service the parking lot.
In the mid Atlantic region, how recently, one pen not district 12 signal upgrade project.
Project involves the installation of two new traffic signals that state root 18, and state Route 40, 22, and the replacement of three existing traffic signal in Washington County, Pennsylvania.
In addition to the signal upgrade state root 18 will be resurfaced and receive various roadway improvements is sidewalks E.D.A. Rams.
Upgrades to drainage assigning and pavement markings.
It was providing inspection services for this project.
And recently in Ohio, Hell received a contract to support the Ohio Turnpike and infrastructure commissions project number 39, 20, O., two which involves pavement reconstruction from milepost 46.5 to milepost 50.9 to that'd be Ohio Turnpike in Photoshop and Lucas County.
The project well also construct a toll plaza from mild post 48.8 to my post 49.1.
Who will be supporting the project with construction management inspection services.
This project as part of the Ohio Turnpike, an infrastructure commissions more than 250 million dollar program, along the Ohio Turnpike since 2013.
[noise] I continued success and when you work. Despite these difficult times is a testament to the hard work and commitment every Helen.
I will now pass to call back to the operator for culinary.
Thank you.
Late isn't going to ask a question you will need to pop star one on your touched on telephones. So dry your questions about class a parakeet.
When you stand by what what the product.
Our first question copied and a lot of math partners. Your line is open.
Thank you.
Sounds like you've been very busy and have accomplished a lot actually.
On that the decline of about 7% and the.
Bookings.
<unk> did that also reflects some cancellation or referrals.
Not just basically not getting as much new business.
<unk>.
Very good question this is row.
It didn't code cancellations, we had some <unk> cancellations that were.
More than the Norman cancellations because of the ongoing crisis. So did include a a sizable figure on that can you give us some I do you know what that means.
Sizeable tens of 20.
Above 20 to 30 million <unk>.
That's very helpful and.
Pricing pressure.
You see a bar.
In terms of general.
Contracting terms going forward.
We had very very few instances, where our existing clients have asked for.
Minor discounts and temporarily minor discounts just for for the ongoing.
We weren't able to negotiate something with but again it was only for a very few months.
And these were the exceptions rather than the rule.
Got it and accounts receivable terms.
Aside from the disruptions in your experience.
<unk>.
You think that.
They may likely stretch out over there.
Basically no real change in the typical terms under normal circumstances.
Hi peak Todd.
So we're we're not seeing any changes in terms under normal circumstances.
What we did see is a slowdown in collections at the end of March and we've we've recovered and returned to normal levels of collections in April. So you know we believe that.
As as this was all beginning.
And do too everybody working remote.
And that the normal slowed down that that caused in just the processing of payments. We we did see an impact at the end of March you'll notice that our cash balance is a little bit lower than normal would it be at the end of March but we have seen that recover April are collections are back to normal <unk>, yeah and as.
I think we discussed in the in the press release and and the 10 Q. are you know a cash levels have I have come back and we've actually increased our cash during the month equal by about $3 million. During a month of April as as collections have have come in so it has returned good nor more normal and we're not really see.
Saying that that term something okay.
Oh, thanks that I'd like that's a couple of questions that relate.
Relate to the longer term strategic outlook and potential for the company.
What is our their areas of infrastructure spending.
You know relatively lower market share.
You could address.
Yeah.
Fill in type acquisitions, or some direct hiring I mean, not now but over a longer period of time and then the second question is.
Historically, you worked with a lot of larger.
Project management in the construction management company you know for example.
Quite a bit.
But.
<unk> well increase.
We'll have a couple of questions to fall on about that if if that's true so.
It's up there.
Let me take this one the answer is yes definitely and there are.
Certain market share that we can grow through acquisitions and partnering it's part of our strategy.
As we increase our liquidity, we wouldn't be looking at strategic potential acquisitions ones that we can basically.
Go after without putting the company in any jeopardy.
And those would be mainly in the U.S.
And mainly either in the federal market.
U.S. federal market and disaster recovery.
Okay. Thank you and.
If you do.
Two more of the.
<unk>.
With larger company, what do you see as the <unk> capabilities that you bring to doing that the in other words.
Rows and columns for you and the other people and.
Some disadvantages to doing that.
I think pros and cons, obviously, when we're partnering up with some of the major players within our effect certain industries.
One is obviously you are taking away one of the main main competitor your because we are player in it. So it's two trunk competitors combining the resources together well, we bring to some of the major players I believe is a we are probably one of the few global pure.
Project management pay there is so we may be.
Smaller in size, but.
We are very focused and specialized on what we do which is project management construction management.
Right. Okay. Thank you very much.
Thank you. Thank you.
Again, if you'd like to ask the question. Please parts are then one on your touch tone telephone.
Well I'm on my plate.
We have another question from P. underlined of math Articulateness Okay.
Since I have a chance are there.
Prospects to get more money from Libya.
Basis.
<unk>, we are working on that.
The answer is always.
The same the problem is we cannot assess the timing and when it's going to happen.
We have no reason to doubt that it will happen question is when and the when is more political.
Rather than financial.
Libya and our client in Libya has recognizing continues to recognize the debt.
So it's a matter and they want.
If sorry restate they've recognized said that they wanted to go back to work one of our conditions is we get significant more payments before we go back to work.
Question becomes is when is it safe enough for us to go back to work.
When is it safe for them to me as well administratively to be able to process the outstanding payments.
Got it thanks again.
Thank you.
Thank you again, because I got the question. Please press start in one one mother please.
I'm starting to part of the question at this time, you're trying to call back over to Rouse Golly funny closing remark.
Thank you.
In closing, let me reiterate.
Adjusted the easy to is 37% higher year over year.
95% of our beloved of work awful workforce is unaffected from the crisis and we were seeing positive movements to remobilize to suspend the projects.
The company's liquidity is sufficient to support out crash requirements for the foreseeable future.
We have taken $10 million out of our as G.N.A. as a precautionary measures.
In the event the crisis is for long.
The outstanding proposals for final decisions and request for new work during the last two months indicates a strong demand for our services.
Thank you everyone for participating on the call and we look forward to our next call.
<unk>.
Later got me thinking participate email just for that have a great that.
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