Q1 2021 Babcock & Wilcox Enterprises Inc Earnings Call
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Good day, and thank you for standing by welcome to the Babcock <unk> Wilcox Q1, 2021 earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone please.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Megan Wilson, Vice President of Investor Relations. Please go ahead.
Thank you Cindy and good morning, everyone.
Welcome to Babcock <unk> Wilcox Enterprises' first quarter 2021 earnings conference call I'm, Megan Wilson, Vice President of Investor Relations at BMW.
Joining me. This morning are Kenny Young <unk>, Chairman and Chief Executive Officer, and Lou Salamone, Chief Financial Officer to discuss our first quarter results.
During this call certain statements, we make will be forward looking these statements are subject to risks and uncertainties, including those set forth in our safe Harbor provision for forward looking statements that can be found at the end of our earnings press release and in our quarter quarterly report on form 10-Q filed this morning, and our form 10-K that is on file with the SEC.
And provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward looking statements.
We also provide non-GAAP information regarding certain of our historical results to supplement the results provided in accordance with GAAP. This information should not be considered superior to or as a substitute for the comparable GAAP measures. A reconciliation of historical non-GAAP measures can be found in our first quarter earnings release published this morning.
And in our company overview presentation filed on form 8-K, and posted on our Investor Relations section of our website at Babcock Dot com with that I will turn the call over to Kenny.
Thank you Megan and good morning, everyone and thanks for joining our call.
<unk> for the first quarter 2021, really reflect the ongoing drive commitment and dedication by our employees. The strength of this management team and our turnaround efforts, including cost reductions and growth strategies.
All segments generated positive adjusted EBITDA and we ended the first quarter well despite continued adverse effects of COVID-19 across each of the segments.
With our strategic growth initiatives over the last year, which included launching new segments, expanding our sales and service presence internationally implementing additional cost savings and overhead reduction initiatives significantly reducing our secured debt and our continued focus on smaller projects. We have positioned this company to success.
It's fully leveraged the global demands, while preserving cost structure flexibility, notably we booked $645 million.
Of new work in 2020 and continued this momentum with $170 million in bookings in the first quarter of 2021. We ended the first quarter are strong with $535 million in backlog.
Importantly, keep in mind, but generally speaking our backlog does not include shorter lead time parts and services.
As we previously stated we are reiterating our target of $70 million to $80 million of adjusted EBITDA in 2021 based on our current business.
Our first quarter performance puts us in a strong position to achieve our EBIT objectives with consolidated adjusted EBITDA of $8 5 million.
This is ahead of our internal plan and still takes into account the seasonal impacts of cold weather and customers reduced maintenance outages that generally impact the first quarter performance.
Our normal cyclical performance typically shows increasing profitability from Q1 to Q4 each year.
Our strategic actions over the last two years and improved performance has provided a solid foundation for our growth strategy, we are seeing attractive targets for investment or acquisition opportunities.
It's an emerging technology and mature products and services, including small add ons or larger transformative opportunities.
We are focused on opportunities that generate strong cash flow leverage the strength of our proven management team to improve margins and generate synergies or net expand or complement our clean energy technology portfolio, all of which drive shareholder value.
As we announced last year, we have aligned our market facing segments in financial reporting under three new segments <unk>.
Renewable BMW, environmental and BMW thermal which directly reflect our core markets technology and strategic pursuits.
For several years BMW has anticipated the changing global energy infrastructure needs and requirements for clean energy, which we believe will include significant steps forward in the application of carbon capture technology we.
<unk> been a leader in de Carbonization research and development for decades and hold more than 90 active patents for carbon capture technologies.
Our proven de Carbonization solutions are either currently in use or ready for demonstration and commercialization to support utilities waste treatment facilities and a range of other industries, including steel cement and oil and gas food manufacturing pulp and paper as they work through <unk>.
Their environmental footprint, we are developing a brand new platform for our suite of cutting edge Decarbonization technologies and services.
Sweet puts us in a leading edge technology position on a global basis and includes our.
Our hydrogen fired package boiler offering which has been in operation for several years as well as coal fired to hydrogen fired boiler conversions.
Our regenerative solvent absorption technology also known as <unk>, which is an advanced fully regenerative we'll solve it to capture carbon dioxide emissions from post combustion flue gas streams for utilization of storage backed by 20 years of research.
Our oxy combustion technology, which isolate a concentrated stream of carbon dioxide for utilization of storage. This technology was successfully demonstrated at a 30 megawatt thermal scale one of the largest successful oxy combustion demonstrations completed worldwide and is it.
Ready for large scale commercialization.
And our chemical looping carbon capture and hydrogen production technology, a breakthrough technology with exceptionally.
<unk> oxide in terms of application cost an abundance, which has been successfully demonstrated to isolate carbon dioxide for utilization of storage.
While simultaneously producing hydrogen.
This technology, which is economically scalable for large and small installations can use a wide variety of feedstocks are fuels was jointly developed by BMW and a major university in the U S and is ready for large scale demonstration.
In addition to the suite of technologies, we continue to see new opportunities being developed within the United States and internationally for organic and inorganic growth of our renewable and environmental technologies, including hydrogen production carbon capture and waste to energy technologies with the potential for BMW to drive a wedge.
Worldwide industrial transformation to green and environmental to a green environmental future.
To further accelerate our growth strategy, we are forming an advisory council made up of experienced global leaders with a wealth of knowledge regarding the industries, we serve emerging technologies regulatory policy and geopolitical drivers affecting them.
The Advisory Board will work with the BMW leadership team to assess market trends identify innovative opportunities and acquisition targets and develop strategies related to new markets and technologies.
In addition.
Through opportunities within emerging technology markets. We are also seeing acquisition opportunities within the thermal services sector with the potential to achieve immediate synergies and higher margins leveraging the strength of our experienced management team.
Our recent deleveraging and capital raising events, including our preferred stock offering that closed on May seven 2021 have positioned us well to leverage these types of opportunities as they arise to support our growth strategies and drive shareholder value I will turn the call over to Luna to discuss some of the key points.
Of our financial performance in the first quarter of 2021.
Thanks, Ken our first quarter consolidated revenues were $168 2 million.
13% improvement compared to the first quarter of 2020. This was primarily due to a higher level of construction activity and the 2021 quarter.
Revenues in all segments were adversely impacted by COVID-19, as customers still delayed projects and travel restrictions.
And which limited the ability of our company's workforce to be at job sites.
Our GAAP operating loss in the first quarter of 2021 and prove to an operating loss of $6 5 million, which is inclusive of restructuring.
<unk> settlement costs and advisory fees of $4 $3 million. This is compared to net operating loss of $10 3 million in the first quarter of 2020.
Adjusted EBITDA was a positive $8 5 million compared to $1 million in the first quarter of 2020.
The improvement was primarily due to higher construction volume improved product execute project execution and further positive impacts of the benefits of our overhead and G&A reductions as well as other cost savings and restructuring initiatives.
Turning to our cash flow balance sheet and liquidity cash flow from operations in the first quarter of 2021 was a use of $54 million, primarily as a result of the full repayment of our revolver using the proceeds of the equity and debt offerings, which I'll discuss more fully.
As previously disclosed on February 12, we successfully closed the public common stock and senior notes offering.
The offering included $29 5 million shares of common stock sold at a price of $5 85 per share.
For gross proceeds of approximately 173 nine.
We also closed the senior notes offering of $125 million at an interest rate of 812, 5%, which is due in 2026.
In addition to the public offerings B Riley's financial exchange $35 million of its existing last out term loan for $35 million of the senior notes and a concurrent private offering.
The interest rate on the remaining last out term loan balance of $73 million was reduced to 665% as comparable to prior rate of 12%.
The two offerings resulted in net proceeds of approximately 283 million after deducting underwriting discounts and commissions.
Before expenses.
As previously mentioned on February six 2021, we used a portion of the proceeds from the offering to repay $167 1 million. So our outstanding revolving credit facility, reducing the outstanding borrowing balance to zero.
Additionally on March 4th 2021, we amended our credit agreement to among other things reduced the revolving borrowing about availability since zero and the letter of credit availability to $130 million.
On March four 2021, we also paid 21 8 million of accrued and the FERC bank fees and $75 million towards our existing tranche a last out term loan.
We ended the first quarter of 2021 with total gross debt of $233 3 million in unrestricted cash and cash equivalents of $53 8 million.
On March 31, 2021, we entered in to an at the market sales agreement with B Riley Securities Inc.
Which we may sell up to an aggregate principal amount of $150 million of 812, 5% senior notes due 2026, two or through B Riley's securities as of May 10, 2021, we've received $10 7 million of net cash proceeds after commissions and fees.
Through this ATM arrangement.
Also as previously disclosed on May seven 2021.
Closed an underwritten public registered public offering of 4 million shares of 775% series day.
Cumulative perpetual preferred stock at an offering price of $25 per share.
The offering resulted in net proceeds of approximately $95 7 million after deducting underwriting discounts and commissions, but before expenses.
The underwriters also have a 30 day option to purchase up to an additional 600000 shares of the preferred stock in connection with the off line.
Taking into account the effect of the ATM net proceeds as of May 10, and the net proceeds from the preferred stock offering closed on may 7th pro forma total gross debt and unrestricted cash at March 31, 2021 would be $243 9 million and 100.
$62 million, respectively, which reduces our net leverage to one six times LTM adjusted EBITDA on a pro forma basis. This is a marked improvement compared to a six four times net leverage as of December 31 2020.
Combined with our strong cost cutting initiatives. This creates a solid foundation for both organic and inorganic growth.
Net interest expense in the quarter was $14 1 million compared to $22 $1 million in the prior year quarter.
With the decrease primarily driven by the reduction of our total debt the reduction of the rate on the last out term loans and the rate secured on our senior notes issued during the public common stock and senior notes offering in February of this year.
Looking forward, we expect our interest expense to be further reduced due to the benefit of the full quarter of reduced debt levels and rates.
As a result of the February offering.
In addition, as previously disclosed based on the performance of our domestic qualified pension plan.
And as a result of the passage of the U S. American rescue plan at the minimum required funding contributions for the plan through 2026 have been reduced by $133 million compared to our previous expectations of $142 million of minimum required contributions for the peer.
From 2021 to 2026.
Current total minimum required funding contribution for this period is approximately $9 million of which $5 5 million was paid in the first quarter of 2021 with the remainder expected to be paid in 2022.
Important to note that these numbers are subject to change the performance of the pension investments, but the effects of this improved pension performance Mark a significant reduction in cash expenditures related to the pension which has been a key focus of our strategic objectives.
Turning to our cost savings initiatives. In addition to the $120 million of cost savings initiatives previously disclosed.
<unk> also implemented $6 million of additional cost savings in the first quarter of 2021 for a total of $133 million.
With further identified an incremental $8 4 million of cost savings actions that we expect to implement during the remainder of 2021.
These initiatives reflect the strength of our management team and our commitment to improving our EBITDA margins, which we are targeting to reach 10% to 12% over the next few years.
We continue to target adjusted EBITDA of $70 million to $80 million range for 2021.
This is based on our current assumptions about the impacts of COVID-19, and is bolstered by significantly improved bookings in the second half of 2020 combined with our cost reductions.
Each of our segments generated positive adjusted EBITDA in the first quarter of 2021 with the consolidated adjusted EBITDA of $8 5 million in the quarter.
We achieved these results despite the adverse effects of COVID-19 on all of our business segments.
Beginning to see some of the previously deferred projects resuming as is evidenced by the higher level of construction activity in the first quarter of 2021 as.
As Kevin noted our normal cyclical performance typically displays increased profitability from Q1 through Q4 of each year. This is due to the seasonal impacts from cold weather and customers reduce maintenance outages in the first quarter.
Given this we believe our first quarter results put us in a strong position to achieve our full year adjusted EBITDA projects. The bottom line is the entire Babcock Wilcox team is focused on winning profitable projects projects execution and controlling costs to drive our financial performance and significant.
It will improve cash flows which will deliver shareholder returns I'll now turn the call back over to Kenny.
Louise Thanks, Wally and closing our ongoing turnaround efforts and strategic actions, including launching new segments, expanding internationally implementing additional cost saving initiatives and significantly reducing our secured debt have provided a strong foundation for the continued.
<unk> of our growth strategy. We ended the first quarter of 2021, well and ahead of our internal plan, giving us further confidence in our ability to achieve our adjusted EBIT targets.
Our strengthened balance sheet puts us in a favorable position to compete globally on mature and emerging technologies through both organic and inorganic opportunities.
We have leading edge day, carbonization technologies and are seeing stronger opportunities emerging across our renewable and environmental segments and looking forward. Our focus is creating stronger shareholder returns as we continue executing our long term plans to profitably grow our renewable environmental and thermal segments.
Yeah.
With that I'll turn the call back over to Cindy who can assist.
A few questions.
As a reminder to ask a question you will need to press star one on your telephone.
To withdraw your question press the pound key.
Your first question comes from Rob Brown with Lake Street capital.
Good morning.
Bob Good morning.
My first question is really on the pipeline.
Activity and I guess, particularly renewables environmental how is that pipeline developing for the year.
Seen that start to open up as the COVID-19 restrictions lift.
Thank you Howard.
The project sort of flow for the next day.
At 12 months.
Yes, we are seeing so.
Often talk about.
Two things one.
Our activities on proposals in.
Other pretty select activities have increased.
Significantly over the past several months and continues to move in a very positive direction.
Which which means those are follow on its proposals as a follow on into bookings at a later day, but we are seeing now.
COVID-19 is becoming.
Either a little bit more neutralized or as we're seeing a shift back towards normalization, we're clearly not there yet but we.
We do see a number of projects that we had been working on last year emerging again and starting to come back up to the levels of proposal and legal activities and negotiations and the like so we are seeing some positive movements globally on.
A lot of projects that we're working on previously that were delayed due to COVID-19.
Now emerging in those will be projects, we look forward to bookings later this year or into next year.
As well as we are.
Putting that aside we are seeing I would say the new efforts on in the U S.
Now as well as internationally on interest in developing new waste to energy or renewable energy technologies and those range from biodiesel type facilities to waste to energy type facilities for or to steam generation facilities, but.
We're seeing a level of increase in interest in developing.
Further projects around the world.
And on top of that maybe just to add we are also seeing.
Interest in the de carbonization aspect even of existing facilities and plants, both in the renewable and thermal but.
They are adding some sort of de carbonization technology that would capture the carbon from those facilities.
We're starting to see interest there as well and we're in engineering discussions with with several of our customers around the processes and procedures and technologies required to be able to do that so we have seen an increased interest in globally and these areas some of that because of.
COVID-19 now lifting or some of the restrictions on COVID-19 starting to lift. We're also I think seeing some of that demand come from just a renewed interest in renewable energy then obviously carbon capture technologies from an environmental standpoint.
Okay. Thank you for the overview there.
And then you talked on the on the inorganic growth opportunities in some verticals.
Could you give us a sense of sort of the verticals that you see from those potential there.
And how that could impact your business.
Yes, let's wait for me to describe that as we mentioned in the in the presentation. This morning.
We're looking at.
Opportunities that both have.
Maybe on a smaller sized companies that have some very unique technologies that complement.
Some of our core capabilities whether that be in.
Renewable segment.
Around.
The accretion of different biofuels or syngas sales, which we think is interesting out there and seeing more and more of.
Or technologies that.
From a carbon capture perspective that could complement the technologies that we've created in that particular area that may be of interest that we provide.
So the union capabilities too to help drive.
Pure stream of fee or two from a sequestration standpoint, and so on and so forth. So we were looking at a number of technology. Some of those are smaller scale that we believe we can scale up in the marketplace.
At the same time, we are looking to further some of the services.
And obviously.
That may be a little bit more mature and sizable but that can broaden either internationally or globally as well as in the U S parts and services.
There are higher margin cash flow driven type capabilities and that can leverage our distribution and the management team that we put in place. So we're excited.
About some of those that can bolster revenues and top line and create cash flow is going to have immediate synergies and accretive to the bottom line.
As well as some of the smaller ones that are unique technologies.
We're on the leading edge, but.
We see long term capability to scale, those and bring those to the international markets as well as the U S.
Okay. Thank you I'll turn it over.
Your next question comes from Zane Karimi with D D D. A davidson.
Hey, good morning, gentlemen, and thanks for taking my question.
Hey, good morning, Glenn.
So first off here you kind of commented on it earlier, but regarding the growth youre seeing in backlog segments of markets. In particular are you seeing the most upside opportunities from herein and I know you don't usually include services and parts and how you should typically captured in your backlog.
Can you provide an update around those markets in particular as well.
Yes sure.
Let me start with the latter if I can and then we can we can go to the former but.
Parts and services business.
Which we often talk about publicly.
High margin business for us.
The 30% to 35% gross margin platform for us.
During obviously during COVID-19.
Because a lot of the plants.
Whether they were industrial utility a lot of those limits.
The amount of enhancements maintenance outages and so on and so forth during that particular period.
But we have seen a return.
Starting a little bit late in the fall of last year, but as we got into Q1, we've seen a return to the parts business start to.
Come back to.
Towards normal.
The levels if you will.
And which is a very much a positive.
A little bit delay on some parts and the early part of Q1 with some of the heavy weather outages that occurred where a lot of the plants had to obviously provide electricity and backfill for some of the Texas outages. So a lot of utility customers elected to hold off just a little bit longer because of the need to have those plants running.
On that but we've seen the pickup sense returning closer to our normal levels. The good news for us and we put this out.
And press releases as well too as we talked about expanding our presence internationally.
Asia Pacific region, or the mid east.
Are there any in Europe, and other aspects as we're starting to see stronger stronger parts revenue is coming in from those international operations as well.
That augment overall, our revenues in the parts and services business. So.
We have a <unk>.
Very strong management team that runs that organization and as we mentioned from a.
The potential M&A standpoint, we're always on the lookout for companies or products or solutions that we think can complement our distribution infrastructure.
That we can leverage.
<unk> further those revenues.
But typically very strong margins and strong cash flows.
30 day process typically are less on.
First sort of the cash on those so its a strong cash.
Free for us to make sure that we keep focus on.
On the as far as the backlog goes again as I mentioned were there.
And what you see really around the world is this trend towards wanting to move into more renewable type fuels in our renewable segment. The news as we talked about a lot of issues.
Whole premise of this is looking at how the world responds to the greenhouse gas aspects in a lot of that is drive derived from the fact that methane from waste or methane from landfills is a huge issue.
Not only in the U S, but also internationally.
Europe.
It took a fairly strong position a few years back to set regulatory policy to basically eliminate.
Most if not all landfill usage and so there has been a derived.
As a result of trying to curb the message coming from landfills just to reiterate we've talked about this but I think it's a very important point that methane from landfills is 80 times worse on the greenhouse gas effect.
So if we're going to as the world address greenhouse gases and not address methane from landfills, we have completely missed the mark we're not even playing in the game. So.
Theres been a big drive on that we're starting to see.
In the U S more and more entrants interest in.
We're looking at different ways to create different types of fuels what are different types of outputs from waste, whether that'd be waste to energy or it could it be waste biofuels or waste to various gases as well.
Some of that could be in biomass some of that could be elsewhere, but we are starting to see those opportunities and developers are now looking more into the U S to be able to invest in this market as it relates to trading in these different types of energy production.
So we're seeing that lift here in the U S. Now on opportunities and those are those developed early development phases. So those are years out from actually being implemented but.
We're seeing that as well as starting to occur internationally as I said Europe and the U K are very strong.
We continue to see our backlog our pipeline grow in those particular markets.
As well as in Southeast Asia, If you look at Indonesia, Australia.
Even other parts of that region, China included Japan Korea.
Vietnam are all looking more and more at waste to energy type technologies to fill the void on baseload generation from a.
A reduction of COPD aspect as well as reducing the methane coming from landfills, which has a much bigger impact on the environment. So we're seeing a lot of activities in all of those areas and again.
<unk> Leverages. The fact that we had built up a pretty solid expansion in those particular areas and so we're seeing a lot of those those opportunities come.
Mid East has the same index, we're seeing.
A large increase in opportunities there.
This is all public out there you can find it but.
UAE, obviously has is to build one of the largest waste to energy facilities.
And the World obviously, it's out there the largest one right now is in southeast Asia on that front.
But youre starting to see that kind of thought process on waste to energy Biofuels doesn't scale that big but we see.
An increase in winning biofuel from waste, which is a smaller scale application, but still equally as important. So we're looking at obviously all of those areas, but we are starting to see a lot of opportunities grow worldwide as well as the U S.
Thank you that without.
For sure and then.
Little bit talking about settled in now and the implications that it's been hard for you guys. When you think of the COVID-19 delays and disruptions have you or do you quantify what you believe the impact has been so far and are any of these segments more or less likely to see a rebound faster coming out of COVID-19.
We haven't calculated specific numbers on the impact of COVID-19 because it is so it's so wide and so variable and some of it's tangible and some of it is not tangible.
Subscription and what I mean by that is for example.
Some projects.
As we talked about new projects.
We're delayed if you go back historically they were delayed initially because the whole world shutdown right during COVID-19 and it was people were just putting everything on hold.
Line to figure out the economy, you're trying to figure out what was happening.
Borders were closed and the like so you had worldwide you had projects and other aspects that were put on hold.
The summer progress last year and moving into the fall you started to see some of those re engage in some of those new projects from bookings but.
Just to give you. An example, something that might take normally two weeks or three weeks to get a permit through now it takes three months something that where we are our client or the customer needed to send out various engineers into our country to do various drawings for mechanical drawings are mechanical engineering aspect.
Around the plan.
There are several partner construction company, who wherever that may be needed to go out and do the drawing it was impossible to get people in cross borders even on country to country locally those took weeks two to get accomplished.
All of those processes, just at a time and it also extended out.
Obviously, the timing of those bookings and new projects. We also we clearly saw projects that were deferred so price.
That we were currently working on where a customer wanted to.
The delay or defer defer those some of those went into.
Shrink mode.
Basically the customer was saying hey, we're going to continue doing the work, but we're going to do it on smaller groups smaller numbers of people so to try to limit the impact of COVID-19 on our site, but they can keep the project moving along others deferred those out.
Other customers delayed their maintenance outages from a utility perspective, so we had a myriad of tangible and intangible impacts on COVID-19.
And as we've talked about publicly coming out of it now or at least we're starting to feel like we're moving towards that direction globally. We're seeing obviously a lot of the projects return to normal levels. We still have several that are in COVID-19 type separation, where we've got to keep people separated they've got limited number.
The people that could be on elevators, and so on and so forth. So those just add some more time and delays in revenue skewed delayed a little bit as well throughout those projects.
But youre starting to see things return Youre also seeing the customers planned outages by parts that they would normally do to prepare for those outages.
Both.
This year and in the fall and then going into next year as well.
And then youre starting to see a robust pipeline being built where a lot of our clients. Our customers now are developing are made.
<unk> plans to upgrade or enhance that.
Our technology and with the with the construct there is now amounting environmental pressures worldwide.
On the de Carbonization.
We're seeing more and more activities as it relates to our customers that.
Are looking at ways to upgrade their technology looking at possible replacement of technology and leverage.
As much as the cash some of the de carbonization. So.
We're just seeing that now and it is some of that is in a post COVID-19 world. Some of that is in a new regulatory world that's happening as we speak as well. So it's just all those influences our add on or our business, but as we said we've got really good visibility now on the parts business.
Obviously, what what projects that we're working on.
In delivering this year from a revenue standpoint, and this management team has done a great job of actually cutting cost in building a cost too.
But cutting cost to actually leverage and be closer to known revenue. So that we can we're actually bringing more to the bottom line. So both through the abilities to know what business that we're highly confident that we're going to book and it was out there knowing that we cut the costs and overhead of the company all of those things give us confidence and visibility into our project.
<unk> and where we're going to be.
Okay.
Thank you very much for that.
Again, if you would like to ask a question. Please press star one on your telephone keypad.
And your next question comes from Alex Rygiel with B Riley.
Thank you good morning, gentlemen, and a very good quarter congratulations thank.
Thanks, Alex.
Couple of quick questions here revenue was ahead in the first quarter with any of this pulled forward or is it all sort of mostly underlying demand and just kind of a return back to normal.
That pull forward is just to return back to normal.
We had.
Several projects I think Lou mentioned in his remarks on in construction in the U S. A few that.
We're performing.
Stronger for us.
Through better project management controls.
We which helps improve margins, but the revenue is in other aspects here were none of them were pulled forward or.
From from that standpoint, so do we have better visibility at the parks business begin to.
Pick back up a little bit as we mentioned as well to run after the cold weather impacts of Texas. The parts business started to increase as well. So we just didn't we just had stronger revenue performance based on increased demand.
But from what we thought were going to be.
And as you look at your backlog can you kind of answered this.
But earlier on but as you look at just your backlog today, how much confidence do you have in the timeline of executing on the backlog and the profit forecast that's embedded in that backlog.
Thats Great question, Alex we have a lot of confidence now in looking at that visibility in the timing of it.
As always plus or minuses.
We begin to perform the work.
Related to that backlog.
It happened out there, where I think we're getting better as a company internally looking at our own forecasting elements and being able to look at each of those projects.
How much cost will occur and how much of the revenues will recognize each month.
The team does a really good job at that outline that and trying to anticipate any anything or activities that may delay us to two weeks here are weak there that could be from.
Not our fault COVID-19 customers issue it could be a third party company issue or whatever the case may be but we've tried to factor those in into our revenue and forecast as well and our visibility so that we're looking.
Looking at it from a more disciplined standpoint, and not just a.
While we will recognize all that revenue in the third quarter without any material facts behind it so theres a tremendous amount of.
Scrutiny that goes into those numbers and there is a lot of people read review each of those projects on a weekly and monthly basis to analyze the forecast and the costs associated with those projects to give us better visibility.
As well as even on the parts side, which is not in backlog, but a lot of scrutiny goes into that as well too as we're looking at each each of the forecast on a quarterly basis and how we are performing on a daily basis on our parts and services aspects. So theres a lot of work that goes into that to make sure that we've got.
Good visibility into those numbers.
Theres always going to be pluses and minuses in positive positive and negatives that occurred.
On the projects and obviously the more that we can eliminate or.
Stop the negative aspects and increase the positive as well.
And for everyone, but.
We manage that pretty tightly so that we have.
We've got all of that accounted for as it relates to our internal projections and then obviously that flows from how we're going to manage cash flows our cost side as well so.
Sure and then turning over to M&A.
Youre looking at some really attractive markets here and many others are looking at these as well could you comment on seller expectations for valuation.
What you are.
So the value proposition is to execute on accretive deals here.
Well.
I think theres a lot of there is a lot of opportunities out there.
And again as we've talked about we look at it twofold.
And net.
When you look at our overall underlying technology, we have as a company in line.
Our renewable and environmental segment and that goes across the board so.
Renewable segment. There are obviously attitude is another aspects, we would like to add to our overall technology portfolio that we think will make it more attractive.
But for us to participate we look at going into renewables. When we talk about waste to energy means a lot of things right. It's an easy topic, but there are a lot of technologies below that around it we have some of the best dining great technology in the world in the dining great technologies very.
Efficient and burning and moving trashed, along the combustion process in order to maximize the steam or heat output from those facilities.
There are little pockets technology for example that might pop up that are able to control some of the emissions associated with the birth of the combustion of that waste.
A little more effectively.
Then we have for example than we think.
When we look at technologies, we will look at ways in areas that we can augment what we have today and make it more robust lower our costs.
Structure from that standpoint, but that we think could complement long term, where we want to go.
We talked about and I'll just focus on a per second as we talk about waste to energy.
And landfills, there is going to clearly be a need to consume and burn ways to create energy no doubt.
We see net worldwide are we've we're one of the leaders in that worldwide today and have a very large presence internationally U S has been limited.
Been limited for a number of reasons on the use of waste to energy, but we do see that changing now and we're anxious to help move that along but.
One of the other areas that waste will be used for obviously is it's going to be creating.
Different kind of Biofuels.
Bio diesel or ethanol or.
In some cases actually even even the creation of hydrogen are utilizing net fuel too.
There are ways to create different types of pellet output to create different types of fuels that can be used in the production of hydrogen.
All of those areas are interest to us.
Some of that technology.
Sit around and some of the technology, we're looking at developing internally from an R&D perspective, but there's other companies out there that have some of those unique capabilities.
But we think we can scale up fairly rapidly in the space and so and there's several of them out there that are looking to.
Either for investments, where we might take a minority position in those or where it might be.
Through that we will want to have some sort of license or market capabilities to bring that product into a revenue stream for us others, maybe something that we take a stronger ownership play in where we can help further develop those technologies and actually own physically own the IP associated with them.
So.
We're looking at it from renewables standpoint, we're seeing also in the production of hydrogen we think hydrogen production long term is going to be a very strong market as it relates to green and blue hydrogen energy.
And we see those opportunities as well or as we mentioned in our presentation our own chemical looping technology that we jointly created with Ohio State and Department of energy is capable of actually producing hydrogen.
Through the burning of say natural gas, where you can on a small scale it could be very small facility or it could be a very large facility, but be able to burn.
That fuel source create heat output at the same level as you were previously at the same time producing hydrogen as a fuel source.
So.
That double aspect around that capability. We think is very unique and we're starting to see a lot of interest in that technology.
There are other smaller technologies that could complement some of that we might look at partnering up with companies that have some unique sequestration capabilities that would be use sources uses of the <unk> that we capture so.
We think all of those are very strong opportunities. The other industry that we see interest around is the fact, if you look at pet Coke on from an oil and petroleum standpoint, petco. It can be used in the burning in the chemical looping process again.
With the concept of creating net split stream.
Out there and thats going to be smaller scale type of facilities not on a supercritical basis, but.
We think there's some interesting opportunities there as well worldwide as the oil and gas industry is looking to move into a green or blue energy direction, our technology fits very well within that industry and so.
But theres always tuck in aspects that wed like to add to that technology.
Around that improve our agent capabilities, we've talked about on our set technology. So just giving you some wide variety of things that we will be looking at there at the same time, though there are.
Larger companies that have <unk>.
Services that we think are attractive to us where we can bring those companies into ours and again just reiterating the fact that this management team.
<unk> builds on the fact that we control the overhead and the cost structures of these companies, but by acquiring some of these other companies that.
You may have to hire and overhead but have high margin on services, where we can cut the overhead out of those companies and bring those cash flows from those services right to the bottom line those are attractive as well and some of those will be in our thermal sector that were looking at some of those are in our.
Renewable sector as well that actually can maintain and provide services long term to some of these plants and typically when you talk about the services and parts. Those are typically more recurring revenue type of opportunities and so those are exciting as well as we look at how we can manage those businesses I think more effectively and bring that to the bottom.
Line so.
And Alex if that helps but that's some of the areas that we're looking at.
This ends our Q&A session I would now like to turn the conference back to Megan Wilson.
Thank you for joining us that concludes our conference call a replay will be available for a limited time on our website later today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.