Q1 2020 Earnings Call

Good morning, ladies and gentlemen, and welcome to show solutions first quarter 2020 earnings Conference call. At this time all participants are in English only mode. After todays presentation. We will conduct a question and answer session instructions will be given up on time, if you would like to us.

Good question I.

I would now like to him a conference over to Steve's Brom, VP legal affairs, and corporate Secretary for shorter solution.

Please go ahead.

Thank you operator, good morning, everyone and thank you for joining US today. We appreciate your participation in the first quarter 2020 earnings call and look forward to sharing our prepared remarks and answering your questions.

We hope that you've had a chance to review the press release, we issued yesterday after market close.

If not you can find the press release as well, it's a supplemental investor presentation. You may follow during our prepared remarks on the Investor section of our website at Www Dot shara dot com or.

Our next Sharia dot com.

Joining me today on the call or Scott Smith President.

President and Chief Executive Officer, and Roger Shannon, Chief Financial Officer, and Treasurer. Following their prepared remarks, we will conduct the customary question answer session.

Before we begin I would like to remind you and our remarks regarding Sars 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 disclose in our earnings releases and conference calls.

These risks include among others matters that we have described in our earnings release as well as in our filings with the Securities and Exchange Commission, including our quarterly reports on form 10-Q, and our annual reports on form 10-K.

We disclaim any obligations 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 it over the call just got tool, our president and CEO.

Thank you, Steve and good morning, everyone.

It's great to have you join us for earnings call today.

I'm happy to be speaking with you again and providing an update on our first quarter performance.

This morning, I'll briefly review, our first quarter financial results provided an update on current business developments and I'll update our pipeline of opportunities in recent regulatory and legislative actions.

I'll then transition the call to Roger for a deeper dive into our financial performance during the quarter.

And an update on our 2020 guidance.

But first I'll provide an update of the impact of Kobin 19 on our business any actions we've taken to protect the safety of our employees.

As a situation surrounding the cobot 19 pandemic continues to evolve our highest priority remains the safety of our employees and customers.

As shown on slide five if you're following along in the supplemental presentation.

So our solutions provides mission critical services to regulated utilities that must continue operating to provide power to the country and I'm very proud of the way we have partnered with our utility customers to maintain service continuity safely.

Our ability to continue to provide essential daily operations outage maintenance byproduct sales and remediation services.

Our mission critical utility customers during this period of high uncertainty and disruption.

Speaks to the resiliency of our team and then mission critical nature of our services.

I want to thank our dedicated Saar employees, who are working every day.

To help our utility customers keep providing electricity.

I also want to again, thank all the first responders medical personnel and all others. You continue working tirelessly to address the consequences of the spend them.

To date, we have not had any significant work stoppages.

We believe we're well prepared to protect our staff and ensure continuity of service to our customers. During this uncertain period, and we will continue to monitor the situation very closely.

So our business was built on an unwavering commitment to safety and we will continue to make sure we're putting the safety and the best interest of our employees and other stakeholders ahead of everything else.

As I described on our recent year end 2019 earnings call. We have taken immediate action to protect our people our customers and our business.

The 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 isn't it more regulated and must continue to operate to provide power to the country.

We have implemented measures demands through possible service interruptions, and we are maintaining real time communication across our entire organization and with our customers.

As I stated in our Q1 2020 earnings announcement yesterday.

In April we implemented a series of preemptive cost cutting and cost savings initiatives across the company.

Including reductions in employee compensation reductions in cash base retainers to our board of directors reduced hiring and significantly reducing discretionary spending.

In addition, we are implementing the applicable benefits of the carriers that.

To protect the health of our employees and customers, we're continuing to restrict nonessential travel.

We're also continuing our work at home policy for corporate office employees until such time as the respective state governments deemed safe to return to the work environment.

However, our mission critical operations personnel remain on site and our customers facilities.

We have not observed a significant slowdown in activity on existing job sites as result of the cobot 19 outbreak at this time.

And our in constant communication with the utility customers.

We have a shared commitment to partner with them and keeping all employees safe by abiding with their health and hygiene policies aligning with their health risk mitigation procedures.

Our field in office teams continued to perform exceptionally well during a challenging period and we believe we're well prepared for these and future challenges.

As we stated in our press release, we're seeing a significant increase in new award opportunities, resulting from our customers announced an expected remediation initiatives in response to the regulatory requirements and customer motivation.

The amount of business development activity is accelerating and has never been higher as we see utility companies increasingly developing and implementing their plans to address the more than 1000 regulatory mandated surface impoundment closures in the United States.

We are in the process of submitting proposals for projects at three major southeast utilities that recently announced intentions to proceed with large ash pond remediation projects.

During the quarter, we announced that we had been awarded a closure by renewal project by a large southeastern utility.

And this projects Saar will remove over 2 million tons of Ashford I retired coal fired plant that will be recycled and beneficially used in the concrete industry.

Over the next several years as a closer look upon is underway.

We will also install environmental controls.

And at the conclusion the project.

The former ponds will be restored as usable property.

We also recently announced an award to take ownership and close Ash ponds previously owned by consumers energy in Michigan.

And re purpose them as natural wetlands.

As part of a multiyear project.

We will excavate coal combustion residuals that will be beneficially reuse as necessary fill materials.

At the conclusion. This project, we will return the natural wetlands property to the customer.

We see environmental liability transfer services like this one with consumers energy has an innovative solution to meet the evolving in complex needs of our utility partners as they work to retire and decommissioned older underutilized or less economically viable generating assets, while also improving the environment.

Our one stop services can effectively manage the environmental aspects and safely close and enhance the site for the benefit the community all while substantially lowering the costs of utilities.

We expect this trend to continue as states are becoming more prescriptive as a means of methods of asked on remediation and as the environmental Protection Agency continues working with several states to establish their own recycling programs.

Further.

Da continues to work on as regulatory requirements, Beneficiation guidelines and ash impairment closure deadlines we.

We continue to see these movements as positive force our solutions.

As the only full service provider of mission critical Ash management operations, environmental remediation and compliance services and it's an outside services and byproduct sales for the utility industry.

The company is ideally situated to partner with these utilities to deliver their impairment blizzard requirements and needs.

We had growth in our maintenance and technical services operations as we saw an increase scope and higher revenue from both our nuclear and fossil maintenance services during the first quarter.

Through our ally power subsidiary, we are in the process of completing eight of the 12 Mueller maintenance outages scheduled for 2020 with the remainder to be performed in the fall.

Additionally, our allied power team was able to increase the scope of services provided and performed during the quarter or its primary customer.

We are proud of the work that our outlet power team performs and we congratulate them on their success.

Your our power operation, we are a leading provider of mission critical Nondiscretionary nuclear outage maintenance services.

This steady predictable business remains a solid source of revenue and EBITDA for us.

Our ability to expand our scope of outage maintenance work with our nuclear and fossil customers.

As well as our ability to continue to provide a central daily operations and remediation services or our mission critical utility customers.

During this period of high uncertainty and disruption speaks to the resiliency of our team and the mission critical nature of our services.

As we stated during our earnings call the value of $583 million of a new awards won in 2019 exceeded 2018 by 450%.

During the first quarter of 2020.

We have won over $175 million a new awards.

And we are optimistic that we will see an acceleration of new awards based on the project activities currently underway by utility customers all across the United States.

Including three large utilities previously mentioned as they address their federally in state mandated closure requirements in needs.

So we're seeing some near term delays and the timing of New project awards related to the co bid 19 pandemic.

We expect to see our opportunities for mediation and compliance services and byproduct sales accelerate as utilities move forward with their closure plans.

We also remain optimistic about our byproduct sales opportunities.

Driven by expectations for greater infrastructure spend as we continue to expand the reach of our multi source materials network and add new customers.

We have continued to see an increase in bid activity with approximately $3 billion and pending proposals and an additional $12 billion in new near term pipeline opportunities.

A recent uncertainties related to the krona virus and the resulting impact on the U.S. economy may affect the timing in revenues from these new awards in the near term our customer base is growing and our geographic reach is expanding as customer motivation for these environmentally friendly.

Customized solutions to recycling and remediation of ash byproducts increases across the United States.

Our momentum in winning new awards, coupled with the increase 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 reduction strengthens our ability to compete and capitalize on our expanding market of opportunities.

Now turning to our first quarter 2020 financial results revenue for the three months ended March 31 2020.

It was $164.6 million.

An increase of $1.4 million or 0.8% from the $163.3 million reported in the three months ended March 31 2019.

The increase in revenue compared to the same quarter last year is due to an increase in a number of plan nuclear outages in the period.

Partially offset by project completions within our remediation and compliance services component.

Gross profit for the three months ended March 31, 2020 decreased $4.6 million or 29.8% to $10.8 million from $15.4 million in a three months ended March 31 2019.

And gross margin declined to 6.6% from 9.4% a year ago.

Both due primarily to lower revenues in our environmental solutions segment.

Looking at our balance sheet liquidity.

As we discussed during our year end 2019 earnings call in March we reached an agreement with our lender group to amend the company's senior secured agreement that among other things waived a mandatory term loan repayment reset financial covenants through the maturity of our of the facility and increased our borrowing capacity under our delayed draw term loan.

We also closed on the transaction to sell 26000 shares of series a preferred stock for approximately $25.2 million any private placement.

On March 16, 2020, we closed the preferred stock offering and the credit agreement Amendment became effective.

These agreements significantly increase the company's liquidity profile and financial flexibility and deepened our customers' confidence us to deliver our customize environmental solutions.

Next I'd like to provide an update on important regulatory developments at the state and federal levels.

On our last call we spoke to several developments at the state level and highlighted activity in both North Carolina in Georgia.

In North Carolina, Duke Energy has now received approval for three of their Aspen closure plans in accordance with their agreement with the North Carolina Department of environmental quality and there continue to work on plants the remaining six on impoundments.

Performance of this work is expected to start by the first half of 2021 and the completion of most of these closures expected occur over the next 15 years.

EPA has approved Georges coal combustion residual or CCR regulatory program, making Georgia. The second states received such approval. We're also monitoring state regulatory developments in Virginia, Indiana, Tennessee in Illinois.

The Environmental Protection Agency recently announced its final proposal for stabilizing coal last regulations for the electric generation companies.

Among the proposed amendment to the CCR rule is an amendment that changes the method of closure for hundreds of ash impoundments that were lined with clay soils.

This change can increase closure costs when comparing closer in place methods to closure by removal methods.

As for announcement also moved up the ceasing of operation, where these CCR impoundments from October 2022 August of 2020.

We believe the timing the closure requirements stipulated by the EPA is accelerating as upon closure plans across the utility space and is driving new business opportunities in our view.

Collective impact of these proposals potentially increases remediation opportunities for source solutions and 2021 and beyond.

In closing we.

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 and 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 char solutions with significant growth potential for many years to comp.

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.

Thanks Scott.

I'll continue with a review of our financial results and provide an update on our balance sheet liquidity in twentytwenty outlook.

Revenue for the first quarter increased $1.4 million or 0.8% from the year ago period $264.6 million, primarily driven by an increase in the number of plan nuclear outages in the period, partially offset by project completions in 2019 within our remediation and comply.

And services component.

Including the completion in the breakeven project during the second quarter 2019.

Gross profit decreased by $4.6 million or 29.8% to $10.8 million during the quarter.

While gross margin declined to 6.6% from 9.4% in the same period last year.

These declines were driven primarily by project completions in 29 team in our environmental solutions segment.

We reported a net loss attributable Musharraf solutions for the first quarter of $14.3 million as compared to $2.8 million in the year ago periods.

The loss was primarily attributable to higher loss on extinguishment of debt, resulting from the third amendment of our credit facility.

And the previously mentioned lower gross profit.

Partially offset by lower general and administrative expenses and interest expense net.

Q1, adjusted EBITDA of $5.2 billion was down $3.7 million from the year ago period, due primarily to lower gross profit.

Now I'll discuss results in our reporting segment level.

In our environmental solutions segment revenue decreased $21.7 million or 37.2%.

To $36.7 million as compared to $58.4 million through three months ended March 31, 2019, primarily driven by project completions in 2019 within our remediation and compliance services component.

Including the completion of the cave in project, resulting from the deem termination.

Gross profit decreased $4.4 million or 53.4% for the three months ended March 31st 20, $20 million to $3.9 million as compared to 8.3 million for the three months ended March 30, Onest 2090.

Due to project completions in 2019 within our remediation compliance services component.

Gross margin declined to 10.5% from 14.2% in the first quarter 290.

And our maintenance is technical services segment revenue increased $23.1 billion or 22%.

$228 million as compared to 104.9 million for three months ended March 31, 29 team.

The increase was primarily attributable to increases the number of plan nuclear outages in the period.

Maintenance in technical services gross profit decreased approximately $200000 or 2.3% to $6.9 million as compared to $7.1 million for the three months ended March 31, 2019, primarily as result of margin improvements within our nuclear services.

Offerings during the three months ended March 30, Onest of 2090 did not reoccur this quarter.

Partially offset by an increase in gross profit from our fossil services offerings.

Maintenance in technical services gross margins decreased to 5.4% from 6.8% driven by the mix of services.

Now turning to our balance sheet and liquidity.

For the first quarter Twentytwenty, our operating cash flow was negative $18.3 million. The use of cash in operations was driven primarily by the spring Twentytwenty nuclear outage working capital requirements, where they are collections continuing past quarter end.

And an increase in contract assets, which we expect to collect in Q2 2020.

Capex for the quarter was $1.2 million, resulting in free cash flow negative $19.5 million.

At March 30, Onest Twentytwenty, we had gross consolidated debt of $224.6 million.

The increase in total debt during the first quarter is primarily due to the previously mentioned increases in working capital requirements associated with the spring nuclear outages, which will be collected during the second quarter.

Our liquidity was approximately $37.3 million as of March 30, Onest Twentytwenty.

Up from $23.9 million at the end of the fourth quarter 2019.

Next I'll address our 2020 guidance.

We are affirming our twentytwenty guidance that was previously provided during our year end 2019 earnings call.

Net revenue expectations of $560 million.

Net loss of $50 million.

Adjusted EBITDA of $37 million and an expectation to be free cash flow positive.

The guidance is based on existing contracts in our current expectations of no material worsening of the cobot 19 pandemic.

And specifically, including but not limited to no material customer work stoppages.

No significant employee absences.

No government mandated quarantines.

Any worsening of the cobot 19 pandemic could materially affect our 2020 outlook.

With that I'll turn the call back over to Scott.

Thanks, Roger or.

Our activities during the first quarter demonstrate the positive momentum, we're gaining from our success in winning new business 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 at a 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 environmental and maintenance services partner of choice for the power generation industry with an exceptional quality safety and compliance record.

And we have not observe any significant disruptions to our business due to the mission critical nature of our customers operations.

We are aware of the potential of macro economic 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 in 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.

One.

There is a very large installed base of legacy coal ash disposal costs or acquire remediation.

Two.

Routine nuclear reactor maintenance is nondiscretionary specialized unpredictable.

Three.

And existing customer base, consisting of 80% investment grade regulated utilities that rely on our mission critical services.

For utilities increasingly focused on environmental stewardship and regulatory compliance.

Recycling waste by products is a critical component of the current and future infrastructure needs.

And six enhance liquidity and financial position.

And as we pursue our expanding pipeline of opportunities we are committed to making further adjustments to improve our operating efficiency.

Reduce our debt levels and increase our margin potential.

As stated previously our ability to manage through the great shutdown with minimal disruption and the momentum we are gaining from increased new awards, coupled with expanding addressable market.

Gives me confidence in the future Saar solutions.

Thank you again for your interest and participation and with that operator, let's begin the QNX session.

Hi, This is Tom if you're going to ask your question. Please press Star then the number one on your telephone keypad.

Once again that is star then one number one on your telephone keypad. If you would like to ask your question, we will pause for just a moment to compile the Q and in roster.

Your first question comes from the line of Michael Hoffman from Stifel. Your line is open.

Thanks Roger.

Morning.

And as well with you all in your family and colleagues.

We'll do it were deal here over the same with you.

Yep.

Need a hair cut but no sign as most of the country I think.

Jamie.

[laughter].

And my wife, threatening to pull out the horse Clippers.

Roger cost cuts that you alluded to.

Two questions around that are they done so you take them on allergens rolls through during the year in two could you quantify the scope.

Hi, Yes, Michael we have.

We have.

Implemented the bulk of the cost cuts we talked about in previous calls.

With that has been done towards the end of last year.

Impact is starting to flow through we had some additional.

Tweaks to that beginning of year.

As we mentioned in the release, we have taken some reactive steps related to cope with my team situation, including.

Some salary reductions.

Spending the form 10-K match as well as other tossing cuts. So I'd say that you knew the the bulk of it has been related to head count all but we've looked across the entire organization in there has been other.

Cost savings that we've identified that we made toward the end of last year and we do we continue to make with that will flow through for this year.

And our we're putting a number on that as far as the dollar amount.

No we havent publicly disclose that.

I think you can see.

In the first quarter this year compared to fourth quarter last year first quarter last year.

The that flowing through.

Okay not.

We'll now.

And then could you remind us when do we.

Anniversary the quarterly headwinds from.

Lack of.

We have a certain work if you will as sort of until the award stuff started to pick back up again, and then lead to.

Our renewal of actual work plus breakeven.

Hey, Michael This is Scott can you ask that question again I'll make sure we.

Yes, probably didn't come out very clear [laughter].

So you shared with us in one Q you had it basically a headwind and on gross margins because you're anniversarying remediation work that so the way I think of it is.

The pipeline Didnt get renewed and replaced with new revenues were working down the pipeline brick Havent happens now it comes out.

Yes, Thats high margin stuff.

And it's not really until 2020, we start to see the.

The awards.

Turn back into revenue. So you had this pressure revenue that was high margin when do I anniversary that yet okay. That's what I thought you are asking wasnt wasn't sure. So I think yeah. The best way to think about that is the end of Q2, so that that anniversary with would be at the end of Q2.

You would see cow the.

Everything the related with brick haven to flow out of the system and then all the new awards that were starting.

In 2020 in the ramp associated with them getting us back to normalized level here at the end of Q2.

Perfect and then last from me could you walk us through the cadence by quarter not so much the dollars because you're not giving a dollar but you say you will be free cash flow positive, but how do I follow the cadence like you were negative in one Q.

On a relative basis, how does that look through the remainder of the year to Q3 Q4 Q suggest to year end positive.

Sure Michael now that I'll, let Roger answer that one, but I think really when you look at it Q1, and I noticed a little bit of a difference between.

Where we where are we.

Ended the quarter versus kind of where you're.

Where you were guiding jewelry or.

We were you were modeling I think the biggest thing on our and it's just the.

Working capital build here associated with.

All of the nuclear outage work I mean again, we had our strongest.

Largest spring outage season to date.

And that puts a.

A strain on working capital only for a very very short period of time and it works itself right back out. So just kind of got caught at quarter end here and that's all going to work itself out right now and Roger if you want to add anything else to that.

You can see on Michael on the balance sheet the increase.

And accounts receivable that is.

Yes.

Materially pretty much exclusively driven by the increase that allied.

For the first quarter outage.

George outage, coupled with additional scope.

On that.

That is a process of unwinding, so we expect cash flow to be.

Significantly in Q2.

As well as in Q3, and then just from normal seasonality with going back into the fall outage at Allied we'd expect to be some modulation in that.

Into Q4, but you the bulk if that helps.

Yes that helps a lot one last cause I said, one last question so.

Some of the trade journals are talking about how utilities are struggling lumber just to stay at home has reduced demand dramatically.

How is that sort of flowing through into your customers.

As you see that impression is particularly your on site your fossil services and corresponding would have a correlation to a byproduct.

Are you seeing any impact of that.

Oh, we're seeing a little bit Michael but very very minor I mean again our.

As we as we stated in the in the.

Remarks.

As well as in the press release, we haven't seen any significant.

Downturn to our daily operations were still onsite everyday providing.

Services at both of us fossil and nuclear facilities that.

When you think about generation, we ought we are seeing it were.

We are seeing a.

Downward trend as it relates to.

Power generation I think our contracts are structured for the onsite services to to make sure that we make there any downward.

Trends in a good spot.

But what we are watching and monitoring closely as the.

The supply relative to byproduct sales.

With a little bit less generation of.

Thats.

Going to impact that a little bit. However, we still have pricing mechanisms to recoup that in demand is extremely strong there we see demand continuing to.

Increase in byproduct sales, especially with a lot of talk around infrastructure spend everything else. So just something that we're monitoring we are seeing a bit of a downtick however impact to US right now is very minimal.

Okay. Thank you very much.

Your next question comes from a line of Toni Kaplan from Morgan Stanley. Your line is open.

Thank you.

Got it sounds like the opportunities.

Continue to grow.

Thank you could discuss whether your current capital structure.

The amount of contracts that you can.

Just given startup costs in each job.

Good morning, Tony Thanks.

I mean the.

The opportunities in front of us from remediation standpoint, as well as a byproduct sales standpoint or just.

Really like nothing we've ever seen before so there is not there has not been a slowdown our business development team is.

Busier than they've than they've ever been and so we've we've been.

Very.

Cognizant of how we should plan for future growth.

And as we think about capital structure in the way, we can track with our utilities.

Yes, I think it it sets us up well for the for the future.

It really does I think you'll get what we've done on their balance sheet here recently that that's been very supportive of being in a in a from position to take advantage those work and that's something that Roger and I have focused on.

We talk about reducing debt and.

Increasing the strength of our balance sheet liquidity.

All that has been done in effort to take advantage of the big opportunity in front of us right now.

Yes got I'd, just add that you can look in the balance sheet and see that the new enhance liquidity by the 25, roughly $25 million preferred equity transaction. We're holding that is cash on the balance sheet. Our lender group has been very supportive and certainly.

Recognizes the opportunity in front of us.

Increased liquidity by $10 million as part of the third amendment that we did during the first quarter.

So that that really was in line in expectation of the opportunities that you described so we certainly recognize that the other things that you know that we look at is.

Yes.

Working to be cash flow positive at the beginning of projects, we're certainly very conscious of.

You expenses and.

Outflows around mobilization.

We look to kind of optimize and reduce the cash initial cash strain on in sort of equipment at the start up.

So we were looking at it very holistically and kind of front both for the balance sheet perspective, then.

In terms of liquidity in capacity and certainly very much focused on cash flow, but to answer your question I'd say no I don't is we're looking at these opportunities, particularly the large ones that we just mentioned.

There's really nothing at the moment this kind of keeping us up at night, and how we think about being able to.

Execute mobilize and partner with our customers on those.

That's great and then just for my follow up.

Yes.

Portion.

It's structured as time and materials, our cost Reimbursable, how should we think about the fixed versus variable.

Hi.

Yes.

So Tony I think.

Thats something that we look at differently kind of segment by segment.

We.

As we described fixed and variable type costs I think.

One way to really view that is it all kind of to us it depends on the contract structure and which.

<unk> costs are considered fixed by our customers versus and reimbursable as well versus what's.

How we can track those those contracts so.

I don't know Roger if you've got a better way to describe I think what's you're alluding to is right. If you look at the maintenance and federal services segment.

Particularly the nuclear outage side that that is.

You know tnsm so theres.

Certainly higher percentage of variable cost around that you can see that we ramp up pretty substantially in.

Field personnel during those outages in ramp back down.

During nine outage season.

The.

See the fixed component of that segment.

Although we don't really don't report on it down to that level of just kind of speak about it logically. It as you is certainly less.

From the.

Environmental solutions side.

I'd think about.

Bring down it is not something I don't think we've disclosed publicly but.

We will look at the projects.

We look at it on a project by project basis, as Scott was saying with.

With the resources the material the the head count built into those projects the the cost of the equipment.

Is kind of baked into the the gross profit on those.

So it's Scott was alluding to we really look at it more on a project by project basis as opposed to.

On it on a companywide.

Does that help.

That's perfect. Thank you.

Again, if you would like to ask your question. Please press Star then the number one on your telephone keypad. Your next question comes from Milan of Michael Feniger from Bank of America. Your line is open.

Hey, guys. Thanks for taking my questions.

Good morning, Michael.

Good morning.

You guys are you know we're now in May you you reported.

Last quarter at the end of March you reaffirmed your outlook is there anything we should be aware of that could be slightly different from when when you last gave your original guide.

Is the free cash flow, which is supposed to be positive and still expect to be positive less positive than your original guide does this EBITDA I feel like based on where you sit now and what you've seen through April and may be the field easier to your chain attain is there still sub.

And the feel a little bit more out of reach I'm, just curious with what you've gone through and the fact that overall you know it's supposed to be hitting most of that accompanies the most in April and you guys reaffirmed just any comments you have from when you guys reported at the end of March tilt till now on those areas of your guide.

Yeah.

Thanks, Michael and I think I'll touch on a couple of things related to your question I think some of them tied back to what Michael Hoffman was asking as well but.

Specific to go visit and since we last spoke in just thinking about the last 60 days it.

It really highlights who we are not just the strength and resilience of our workforce, but also the.

Strength and resilience of our business model.

We highlighted.

Some of the strong things are MTS group.

Did in a in a Q1 like you said in April they continue to perform their outage work or byproduct sales as well as our ash remediation continued to perform in our teams.

Performing daily Ash management at the fossil plants all continued to go to work every day.

I think Thats is really highlights you know why we were able to reaffirm guidance.

Guidance, we really have not seen.

A significant slowdown since we since we last spoke.

I think when you think about the the numbers or anything else.

Yes.

Yes, obviously.

Cash flow looks a little bit different than than that I've seen some models out there that all.

That all kind of.

It is kind of more of a modeling exercise probably from an analyst perspective, we expected a negative cash flow covenant.

Q1, just because of where we stood with the with the outages so as Roger.

Pointed to earlier in the conversation.

That all.

Will work itself out here in Q2 and Inc. It over the balance of the year. So.

Really we were we're pleased to be able to come out and reaffirm what we know of other companies out there.

Pulling guidance or changing guidance and I think the approach that we took when we spoke.

To you guys last quarter of just.

Speaking very directly around what we have in hand, and how we can perform it and then.

Again, taking a look at.

As we reaffirmed that we we set down as a team and saw what are our teams were able to make it through April and.

You said that was supposed to be a tough month for everyone and we continue to move through it at a good pace. So we're optimistic about the balance of the year and we're definitely happy to be able to reaffirm our guidance.

Thanks for that and Scott you mentioned through through the call.

Obviously, there's there's a lot opportunity and the acceleration.

And with some awards, but then you also mentioned how Cove. It is delaying some New award awards on Im just curious is the delay you're seeing the ability for.

Well the the bidding on these awards these projects to be awarded and into your backlog or their concern could we see delay of.

Project is supposed to be starting in the back half of this year. It's already been awarded in your backlog yet because of coded utility has decided they wanted to push it out a few months or so.

So so two things if you think about the timing of the New awards.

That is continuing as a.

As expected. So you know the the record year of New awards that we had in 2019 in that pace that we saw coming into Q1 of two.

2020.

Those those startups are are generally in line with where we expected them to be when asked what beyond the remarks, and we speak to timing of I would say newer awards or New awards from Q2, Q3, Q4, what we're expecting right now.

We're seeing that.

That little bit of delay right now.

More administratively a you know we think about all of our customers everybody's working remotely and maybe a little bit less productive.

So it's a it's more of an administrative perspective of why there is some delays there and not any kind of a.

Timing perspective related to hey.

We are going to do this project over not can do this project goods is kind of more of a hiccup in the system, we're kind of a little.

Speed bump here, but.

We fully expect to see the rest of those awards come out balance of the year and like a.

Stated a couple of times here I mean, that's just amazed and.

How productive our business development teams being right now in the amount of opportunities in front of us in the in the size.

On scope associated with and that's just as a is very exciting time for us right now.

Yes, I think thats, how Roger speaks to our guided Cedar Hill we.

When we talk about that 560 revenue and 37 EBITDA number that.

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Wanted to.

Be confident that.

We have feel for discard though that there is.

Less chance of disruption for that and I would just reiterate through today through.

Having gotten through April almost halfway through May things are continuing to progress as we expected or hoped.

Thank you that's helpful. John then any any big maturities I know you guys did a lot of.

Oh, the credit amendment than the like I'm, just curious you can remind us.

Big maturities.

Or the next big tranche to it should be aware of.

Yes, so weve.

Think about the different tranches of the increased liquidity, we increased liquidity through the bank group of about 10 million.

Were scheduled to pay that down quarterly.

Over the next four quarters, starting the ended the second quarter. So Q2 through Q1 and 2021, so that would be $10 million over the course of the next 12 months starting it.

12 30.

The remainder of the.

Term loan.

With the lender group.

The.

Mounted amortization.

Has not changed through the course of this year so.

Two monthly amortization from quarterly, but the amount of that Didnt change in in the bulk of the Paydowns that you see in our current portion relates to equipment type facilities.

That are just kind of paying down as per the terms of those agreements.

So net net we are projecting two to pay down an additional.

30 plus million dollars over the course of this year.

Okay that was helpful and just like lastly.

Thats a sneak one in you mentioned.

These three major southeast utilities, you submitted some bid.

And then you also talked about I think award you have where you're moving over 200 million tons of ash.

I'm just curious.

Who are you guys kind of bidding against for these these awards is it similar type of players that you're you're you guys have seen in the path is it different type of.

Contractors.

Waste companies or.

Engineering companies that are that are coming in to Q tried to look at this market as an opportunity and with the complex you talked about Scotland, moving over 209 tons to that I mean.

It's a multiyear deal it is there anything different with this contract structure that we should be aware that that we haven't seen chara, having the path.

Is it more complicated seems like you guys are installing some environmental control.

And any color this former PON be able to you used again I'm just curious if the bigger contracts and some that youve more if there if theyre drastically different from promised you guys have done in the past thanks, everyone.

Thanks, Michael and I need to hire you'd be my PR Guy is 200 million tons of ash would be great phenomenal project floors.

I'm, just I'm just getting its actually yet.

2 million ton.

Right.

Well.

The fact that.

Nonetheless, very very exciting for us.

And to your point on on size and scope there it fits right in our wheelhouse of what we've done.

We've done much bigger projects in the past and much smaller ones as well it fits right in our wheelhouse of just.

Excavating in Remediating. Upon to then also bundling that with our ability to use our Multisource network.

The to sell the ash for Beneficiation in recycling, so yeah, nothing nothing out of the ordinary as it relates to that project, but again, one that we're extremely proud of and then.

As it relates to the competition, we're not seeing anything different than we've seen over the years.

It there have been different.

Times, where we've had like you mentioned NC guys are waste folks or asked specific.

Companies are civil contractors.

You know I mean, it from time to time people attempt to.

To compete in this market and then they decided to get out for whatever reason.

Because they just don't have that same sensitive.

Our focus on customer.

Quality and safety.

Like we have it now and that's really we haven't seen any changes there and on the competitive side.

And I'll just add Michael that.

Do you think about these.

Pardon three that we mentioned they know our capabilities well get good relationships there and.

They know we can do in it I think you think about us as that is.

Services that we bring.

We believe that there's there's no other company that can bring the combination of the.

Remediation work.

Backed product sales.

Really ash operations, where we're already on site performing this work. So that's that's kind of unique in the industry to be able to bring that full suite and you're seeing that.

In these two projects that that we talked about two to be able to.

Combined the remediation work and.

Beneficial reuse of the product, we do see fantastic opportunities in byproduct sales.

Is there is there's certainly a recognition in the benefit of fly Ash is a substitute report has meant for keeping a close eye on.

Potential infrastructure projects that could be announced across the us being discussed more as you know as a possible outcome of the impact of covert to get the economy exhibit again.

So we we think the customers see the value in that kind of full suite that we bring that we think is unique in the industry.

There are no further questions at this time I turn the call back to the presenters for closing comments.

Thank you and we appreciate everyone's time today.

In our story and interest in a in the quarter.

Florida speaking to everybody again here at MCU to call on just hope everyone listening and as families are safe.

Stay safe and everything that you do so thank you and will when the call. Thank you.

That concludes today's conference call you may now disconnect.

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