Q2 2021 ENGlobal Corp Earnings Call

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Good morning, ladies and gentlemen, thank you for holding your conference call will begin and just a couple of minutes. Please stay on the line Your conference call will begin and just a couple of minutes.

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Okay.

Good morning, and welcome to the and global second quarter, 'twenty, and 'twenty, 1 and financial results Conference call.

Your host for this morning is Chief Executive Officer, Mark has.

At the request of and global today's call is being recorded and will be available for replay on the Investor Relations section of the company's corporate website and global Dot com.

You may access the replay by dialing toll free on 87 and 74814010 domestically are 919, 80, 22331 internationally and referencing conference I'd 40.162.

This replay will be available available shortly after the completion of this event through 9 am Eastern time on August 12.2021.

I would like to now inform all parties that your lines have been placed on a listen only mode until the question and answer segment of this call begins to ask a question and that segment you will receive instructions from the operator.

At this time I would like to turn the call over to Rick Eisenberg Media Relations director with Eisenberg Communications.

Thank you operator, and thanks, everyone for joining us on this call.

Before we begin I'd like to review our forward looking statements provision.

During today's conference call Company Representatives may make forward looking statements any statements made in this presentation about future operating results or other future events are forward looking statements under the safe Harbor provisions of the private Securities Litigation Reform.

Act of 1995 please.

Please note that actual results achieved by the company may differ materially from such forward looking statements.

<unk> and the factors that could cause such differences appears and the risk factors section of the company's 10-K.

And now I'll turn it over to and global CEO, Marc Hess Mark.

Thank you Rick Thank you everyone for joining us today.

To begin this morning, Youre going to hear from there and sprague's, our CFO Roger westerly on our president and myself.

Darren is going to speak about our performance per day, and Roger is going to speak to you about who and global is today, how we deliver value to our clients the markets, we serve and the outlook for those markets.

Right.

Banks are our revenues and the second quarter of 2020, $111.1 million.

This is down $6.8 million from the comparable period in 2020.

Year to date and revenues declined $37.1 million.

Our declines excuse me declined from $37.1 million and $23.5 million.

While we are seeing improvement and the broader energy market our performance typically lag lagged the broader market about 6 to 9 months.

The decrease in revenues was due to completing several large projects primarily in our automation segment.

These projects were included on our backlog and beginning of 2020 and replacement projects and not yet been awarded.

This is a result, and in fact backlog of $11.7 million at the end of the quarter.

Our gross profit and the second quarter was 7% compared to 13, 7% for the same time period.

Period last year.

On a year to date basis gross profit declined from 15, 4% last year to 4.6% this year.

The decline was primarily the result of investing and our.

And central workforce necessary to execute projects awarded.

Cost overruns due to on.

And anticipated price increases from Robyn carriers and fair on 1 of our large profit also contributed to it.

The labor cost and maintain our access and work force made up approximately 1 third of the gross margin decline during the quarter and I'm, 1 half and the decline year to day.

SG&A costs rose by 2 million this quarter compared to last year and.

And $2.4 million year to date and compared to last year.

This increase was primarily due to on $1.4 million.

Reserve related to 1 of our customers, we suspended activities during the quarter and.

Investment and key staff and support our enhanced business development activity and first of the remainder.

The company reported a net loss of $4.3 million and Q2.

Compared to $68000.

Net income last year and.

And a loss of $4.2 million and year to day compared to net income of $1.2 million last year.

The decrease in net income is primarily a result, and the decrease in sales volume.

Reserve for bad debt, but during the quarter and investment and our people and as previously mentioned.

I will now turn it over to Roger.

Thank you Darren I without also like takes time and I'll comment and I appreciate it's from for those on the call today.

Mark Manson and delivering value and interaction.

The net is our complete focus as a company delivering value.

Our strategy centers around 2 major components those components on <unk>.

Safety and all of that vertically integrated project delivery model.

And in times, NIM management needs and the overall priority because a leading driver of our value proposition is tasty and all.

Order to achieve our goals and loss be safe and the company and we are on a steady for company.

We have.

We have on excellent safety performance record and we have low middle of 'twenty 2 million man hours without lost time injury.

This is a very impressive.

It's very impressive and provides a solid foundation for growth, even though we have a strong safety record our goals is to even be better we increasing our and affect the effectiveness through all our combined safety programs and incentives.

We are building on our Sealy impact program and we have created the safety awareness campaign called first things first.

This campaign keep safety private lives by highlighting our culture, and our responsibility planning Integra and TM.

And finally taken care of first things first.

Both on the job and our personal lives lives. This campaign was launched internally and June with a plan and emphasis through quarter 3 and quarter..4 this year. So we'd be morphing from more this is fully into the amount of debt.

The other component of our delivery strategies are working day integrated project delivery model.

So what does this mean.

This mean that we can create the most significant and sustainable opportunities within the mall could be focusing on.

The focus markers are automation and integration.

Oil and gas and petrochemicals government services a renewables.

We haven't specifically chosen.

Mark will focus to closely align with our 35 years of legacy experience on client base with the projected growth in all of these full force focused markets.

We have well over Q on to them Msas in place, resulting from sort of going on.

And customers with safe comprehensive on time and the projects.

Our automation and integration and has served as a core offering for them and global from many years and we are well positioned with an experienced and tenured staff along with several key alliance partners like Schneider Electric rock will allow us to make something on 1 of the way.

And you will not on the production on refining belt and pipeline transmission and says well are focused approach combined with a broad offering across the small cause. There's this hold on for foundation to capitalize on opportunities are strength and leadership this position and focus to do just that.

Government service market continued to provide a stable base of opportunities. In addition to this project base load on government service leadership team is utilizing diverse vertical deliberately model is amplified opportunities within the government. Following the same strategy provide.

And more sustainability and the surface of opportunities and cross from that culminated thing on strength to those opportunities.

Opportunities with and on renewables markers continue to surface. The recent complected, 20th and module houses and plant is being a capitalist of experience. This project strength and other nations will get a lot with our alliance partners and serve as a springboard for additional opportunities over to say.

The current pipeline of targeted opportunities over $500 million, which indicates.

Which is indicative of the global attached on alternative fuels.

When each of those market with sales perform approximately 80% of our scope this crucial because delivering the value mentioned earlier to deliver the value manager and earlier. Additionally, because of the performance Naphthyl, we stay on the ship, meaning we control our own destiny delivering high level.

And no safety and predictable schedule, both would represent significant and saving and value of a compact all over our competitors.

And genius position with a strong and positive outlook on his bulk of because of vertically integrated fat free as well as the fact that we have a meaningful exposure to significant and energy client and ever a predictable focused on larger sponsor across multiple and market on.

The most christmases are new strength and management team on based on about business development teams. This group is and integrated on the line with each mark and strategy, which day of creating and extremely focused activity and clients engaged but.

Our new logo website and read back rebranding all tell a clear story all the energy and in addition to a fresh new look it reminds us on that platform for profitable growth on a solid cash flow.

In addition to growing out this business. We are also equally and focus on improving margins expanding service offering and remain discipline and to our core values.

Hi value low cost Engineering Alliance.

It's another component that we have successfully engaged and implemented this partnership is crucial and a competitive market on a lousy Angie to leverage resources and focus more on.

Focus on more opportunities.

At least but not certainly the least is our people and G. As a fortunate to have some of the brightest talent and our industry Ivy.

I believe that 1 of our different differentiate the free Ashley gating factors is our understanding and use of technology and and both processes are now from Asia.

Our team is knowledgeable and experienced at applying state on the our technology to real world problems stuff assault and safe practical perspective cost efficient and they notice solution for our clients on the predictable timeline.

We are committed to investing and to develop on our team both personally and professionally.

And closing and G as well positioned and key energy markets and and the government sector, we have planned and implemented and our excuse and approve and winning strategy build around realistic goals solid core values on mean full objectives.

Thank you Roger.

As you know, we have been transitioning and global from and engineering consulting firm because this vertically integrated complete project delivery company and response to our customers needs.

And since the recent.

Changes and senior management we.

We have accelerated debt transition by strengthening our management team and beady team heightening accountability increasing.

A sense of urgency among other things.

I'm also encouraged about the increased quality of the opportunities and our pipeline, particularly and the traditional oil and gas and petrochemical and renewables markets.

In addition to the tremendous work Roger has been doing operationally, we have been busy positioning the company to maximize these opportunities as they are awarded.

Working with our financial advisors. This year, we filed us a shelf registration statement with the SEC, which assist the company's capital raising activities under that shelf registration statement, we received approximately $19 million on a registered direct offerings.

And we also put a facility and place where we may sell shares up to $25 million and through the market's from time to time at those and market price. This is called and ATM facility under this facility we've received approximately $1.5 million this year.

In addition, and July we were notified by our bank that the SBA has forgiven or PPP loan of approximately $5 million. This will be recognized and the third quarter.

As a result of these activities strengthens our balance sheet.

We ended the quarter with about $20 million stronger and on net assets and working capital adjusting for the PPP loan forgiveness.

So at the end of the day and global is a company with a very strong balance sheet with almost no debt access to our working capital facility and the capital markets if needed.

This is very important to our customers as it provides them with greater comfort that we have the financial strength to complete there are sometimes very complex projects.

Most of the technology, we deploy today is through our technology partners. We continue to seek complementary technologies by adding technology partners or acquiring are on technology.

To accompany the changes that and global has been going through over the recent past pivoting from and engineering consulting firm to and innovative complete solutions provider working on both the traditional hydrocarbon energy sector and now more and the.

Emerging renewable energy space, we're refreshing our image as Roger mentioned, we now refer to ourselves as EMG instead of and global we have a new more progressive logo on new more progressive website that better portrays what EMG is today and our capabilities and <unk>.

You haven't seen on new website and I encourage you to take a look at it and and global Dot net www dot and global Dot com.

This concludes our prepared remarks, and I will now turn it over to the operator per questions operator.

Thank you ladies and check on the floor is now open for questions. If you have any questions or comments. Please press star 1 on your phone at this time.

We asked and while posing your question you. Please pick up your handset and she lets me on speakerphone and provide optimum sound quality. Once again. Please press star 1 on your phone if you have any questions at this time.

Please hold while the poll for questions.

And we did have a question coming from <unk> Oppenheimer.

So your line of sight, Steve menstrual flow nation and pose your question.

2 questions number 1 could you be more specific about the bad debt reserve and if there's any recovery and who it might be and and what the nature of it is.

And and over bidding or just bankruptcy and.

And the other is Mister class it used to be involved and the company is he no longer involved as well.

Is he.

Engaged in any way.

Ah Phillips's Marquez.

Yes, Bill is still the chairman on the board.

He's still involved and the company in that regard he is not involved and the company and the day to day operations. However.

That falls to me, Roger and there and as you heard.

And with regards to the.

Bad debt reserve.

That is 4 a.

Company.

Calls lined treebank, that's a facility that's down and Saint Croix.

Was acquired back and 20.

19, and I believe.

From Neil Hogans.

The sales of Venza facility.

And they wanted to restart their facility and we were we were working with them to get that facility restarted.

Once the facility.

Tried to restart they had and EPA issue and were shut down and then subsequently suspended operations. This was in June.

When they suspended operations, we put the.

Reserve on the books they subsequently.

Bill for bankruptcy in July and.

And.

And so that's where they are today.

It's very early in the process, it's very difficult to know at this point if there is any recovery of that reserve.

We are hopeful that there will be.

We are we are and unsecured creditor and a long list of of unsecured creditors.

I think it's.

If you read the bankruptcy filing and I think there's about $105 million of unsecured creditors and we're 1 of the smaller ones.

I don't know what else I can tell you about that at this point.

Thank you.

And Q once again, ladies and gentlemen is there any questions. Please Gus star 1 on your phone at this time.

And there are no other questions from the lines at this time I'd like to from the call back to the management team for any closing remarks.

Well, thank you all for joining us today.

Appreciate it and look forward to speaking to you on the future.

Thank you ladies and gentlemen, this does conclude today's conference call you.

And you may disconnect your phone and that's at this time and have a wonderful day. Thank you for your participation.

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