Q2 2021 Orbital Energy Group Inc Earnings Call
[music].
Good day, everyone and welcome to orbital Energy Group second quarter 2021 conference call at this time, because it's been thought I listen only mode.
A question and answer session will follow management's remarks.
As a reminder has gone to call is being recorded.
A replay of today's call will be available on orbital energy group's website later today and will remain posted there for the next 90 days.
I will now hand, the call over to Mr. Eckstein of Casey S. A for introductions and the reading of the Safe Harbor statement. Please go ahead Sir.
Thank you operator.
Hello, everyone and welcome to orbital energy group's second quarter 2021 conference call.
A copy of the company's earnings press release, and accompanying Powerpoint presentation are available for download on the events and presentations page of the Investor Relations section of the orbital energy group website.
With us on today's call are Jim O'neil.
Nice Chairman and Chief Executive Officer, and Dan Ford Chief Financial Officer.
Today, we'll review the highlights and financial results for the second quarter as well as recent developments.
Following these formal remarks, we'll be prepared to answer your questions.
I would also like to remind everyone that today's call will contain certain forward looking statements made within the meaning of section 27 eight of the Securities Act of 1933 as amended and section 21 E of the Securities and Exchange Act of 1934 as amended such.
Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in forward looking statements.
The company May experience significant fluctuations in future operating results due to a number of economic competitive and other factors such as the COVID-19 pandemic, including among other things the company's reliance on third party manufacturers suppliers and service providers Gulf.
Government agency budgetary and political constraints, you or increased competition changes in the market demand and the performance or liability of its products integrated solutions and services.
These factors and others could cause operating results to vary significantly from those in prior periods and to those projected in forward looking statements.
Additional information respect to these and other factors, which could materially affect the company and its operations are included in certain forms. The company has filed with the Securities and Exchange Commission.
These forward looking statements are based on information available to orbital energy group today and the company assumes no obligation to update statements as circumstances change.
Now at this time it is my pleasure to introduce Jim O'neil, Vice Chairman and CEO of orbital energy.
Jim. Please go ahead.
Thank you Scott and thank you everyone for joining us on our second quarter 2021 earnings Conference call.
The second quarter was a dynamic period for orbital energy group as we continued our transformation into a full service infrastructure service provider during.
During the quarter, we completed our platform acquisition of Gibson technical services or gcs, creating a strong foothold for us in the telecommunications industry.
Complementing this milestone transaction overall power services experienced significant expansion in the second quarter, both at orbital power incorporated or OPI and expanding their distribution services into two new industrial and utilities.
At clubs foundations, which ramps from one crew to three crews in the quarter, providing drilled pier foundations to electric transmission customers.
Also experienced expansion at orbital solar which was awarded its first large utility scale solar project of 137 megawatt program for a major developer in the southeast U S.
Finally, with oil prices holding around $70 a barrel orbital gas has experienced a resurgence of activity from energy companies, both in Houston and the UK.
All of these accomplishments resulted in significant backlog growth in the quarter.
At June 30 of 2021, Oh Geez total consolidated backlog was approximately $295 million, an increase of 630% from backlog of $44 million at December 31, 2022.
Today, our backlog is approaching $400 million and we expect backlog to increase meaningfully going forward.
Backlog is a good leading indicator of our progress implementing our infrastructure strategy and to improving the company's consolidated financial performance.
As we enter 2022 with our progress to date in advancing our strategy. We continue to believe the company will achieve an EBITDA and cash flow positive run rate.
Now I'll review, our second quarter 2021 results.
Total revenue for the quarter were $63 million or 110% year over year increase compared to $7.8 million for the second quarter of 2020, primarily due to the addition of G. T S.
Ramp up of orbital power services.
<unk> with Eclipse Foundation group in the electric power and solar infrastructure services segment. We also experienced higher revenue from our U K operations during the quarter.
These increases were partially offset by lower integration revenues in our U S orbital gas systems operations during the quarter.
The net loss for the quarter was $8.2 million benefiting from a $9 million income tax benefit.
During the quarter the company expense $4.6 million of equity based compensation for our board performance incentives that vested and point $8 million for referral fees or consulting on the GTS acquisition.
This compares to Q2.2020 net loss of $9.3 million, which had an income tax benefit of $1.5 million.
Additionally, we incurred increased costs to build out personnel equipment and supplies with our orbital power services operations for.
For the first three months and six months of 2021 unallocated indirect costs that negatively impacted gross margins and net results were $2.5 million and $4.8 million respectively.
In 2021 we had a steady increase in crude appointments to projects, serving our electric power customers. These upfront costs or an investment in our business and will generate profitable revenue growth going forward.
Additionally, the operations the overall solar services at minimal project revenues during the three and six months related to project delays.
While the company maintained its staffing levels in preparation for these projects that are now coming online.
We believe these are startup type costs that will be offset in future periods with the generation of revenues and profits off the significant backlog that has been built during 2021.
We expect to result in significant improvement in quarter over quarter income from operations, Dan will provide further details on this shortly.
Now, let's talk about the telecommunications market and the acquisition of our telecommunications platform G. T S.
One of <unk> top priorities was to acquire a proven telecommunications infrastructure services company, providing a full service solution, which includes the engineering design project management, construction and maintenance to broadband and wireless customers.
That's because we believe the telecommunications industry is in the very early stages of one of the most exciting infrastructure build outs in the history of this industry.
The deployment of <unk> wireless technologies and the associated broadband network.
Parallel compared to deployment of prior communication evolutions and part of <unk> strategy was to establish a meaningful position in this industry.
One of the bigger initiatives and the <unk> deployment is federal and state funding programs and who has to bring broadband connectivity to rural America.
The rural digital opportunity fund will provide $24 billion in funding over a 10 year period to support broad thing that works and rural communities across the country.
Additionally in October of 2020, the FCC establish the fog G run fun for Rural America, which will provide up to an additional $9 billion in funding over the next decade, the brake Bob G wireless broadband connectivity to Rural America.
Given these regulatory backdrops, our visibility continues to improve as we see massive fiber builds across the country by new and legacy customers and.
In addition, just last week the Senate passed a one trillion dollar bipartisan infrastructure Bill which includes additional investment in enhancing the telecommunications network and the deployment of the <unk> spectrum.
The acquisition of Gibson Technical services was the perfect opportunity to begin building our telecommunications platform.
Founded in 1990 and had outside of a client a G. T. S has well established engineering design and construction service provider to the broadband and wireless industry survey telecommunications medical and entertainment customers.
Gcs has a highly technical and experienced employee base with very little employee turnover.
The company is led by one of its founders, Mike Mccracken, who has a clear strategy on how to profitably grow this platform both organically and through acquisition in a market where the demand for our services should increase for many years to come.
In the short time since acquiring GTS, we've been awarded some significant project work.
A project for a major U S cellular carrier to install a distributed antenna system and a large Atlantic Coast conference or ACC University stadia.
Gcs won this project in June and work has just recently commenced and is scheduled to be completed during the 2021 SEC football season.
Building on this momentum Gcs was also recently awarded a major project by Charter Communications, a leading broadband connectivity company in cable operator, serving more than 31 million customers in 41 states through at spectrum brands G.
Tcs has been engaged by charter for approximately 8600 miles of both service broadband construction across three states, including Louisiana, Alabama, and North Carolina.
This project is scheduled to begin this year and extend over the next five years.
In addition, gcs was awarded 700 miles of rural broadband build out in Mississippi for telephone Electronics Corporation or T E C of Jackson, Mississippi.
Construction is underway and is scheduled to continue throughout the next four years.
Project is made up of a combination of federal state and private funding and was the first of its type to be awarded.
It speaks to the reputation and capabilities of GTS to be awarded.
This first such initiatives.
GTS is broad footprint combined with its diverse complement of service offerings, we anticipate numerous broadband opportunities in the future.
We are extremely grateful for the confidence that our customers have shown in our abilities by awarding us these contracts and we look forward to continuing our relationships with them going forward.
A key aspect of our growth strategy is to opportunistically acquire complementary tuck in companies enter gcs to expand their platform service capabilities broaden their customer base and extend our geographic footprint.
Our July acquisition of info will bring immediate synergies to gcs expanding their engineering and design capabilities broadening their customer base, primarily into state funded art off programs and thereby extending the combined entities geographic footprint into new states largely on the eastern seaboard.
Additional synergies include emco, providing orbital solar services engineering and design.
Her abilities for utility scale solar projects, which was previously outsourced to third parties.
Finally, gcs and the Aimco expected combined the operating facilities and some shared services functions, realizing meaningful cost savings going forward.
As stated we believe the telecommunications market will be very active for years to come and we anticipate strong growth opportunities and increased demand for our nationwide services both in the near term and over the next several years.
Visibility will continue to improve during the second half of 2021 and we expect there to be a significant increase and broadband and wireless activity in 2022.
Oh, Gee will capitalize on our strong telecommunications market to opportunistically expand its market presence, both organically and through tuck in acquisitions.
Tcs has established significant momentum over the last two months and we expect this momentum to continue as it is the top priority of the company to identify additional tuck in acquisitions that will position OAG and gcs to grow market share in this industry for years to come.
Now I will turn our discussion to overall solar services.
The long term outlook for the utility scale solar sector remains incredibly encouraging.
In the first half this year the industry as a whole experienced a slowdown in project awards, primarily due to shortages of solar panels and steel caused by manufacturing delays due to the pandemic, which have led to an estimated six to nine month delay in product delivery.
According to a recent industry report from Cowen and company.
In addition to the shortage of materials project developers delay construction in the first half of 2021 given inflation and potential regulatory changes in the U S around tax credit support for renewables.
In late June the U S. Internal revenue service extended the safe Harbor period for solar projects under the investment tax credit providing support for projects that have been disrupted by the pandemic.
This extension was expected by developers and has served as the catalyst for the increasing level of utility scale solar activity, we are experiencing today.
In June we were awarded our first significant solar project of this year 137 megawatt utility scale solar projects to be constructed in Arkansas.
Most recently, we announced another 132 megawatt project to construct a solar farm and the South East United States.
This project will consist of 350000 solar panels installed across 800 acres of land and will provide a power for 20000 homes per year.
Early this year, we provided an outlook that the company would generate 200 to 300 million in utility scale solar revenues for the full year of 2021.
These project awards were anticipated in the $200 million to $300 million range, but were delayed due to the lingering effects of the pandemic and related factors I discussed earlier.
The tepid environment for utility scale solar industry endured in the first six months of this year is largely post the timing of most projects forward six to nine months, resulting in projects moving to construction later than we originally anticipated.
Now the bulk of this revenue from project award is anticipated in 2022.
While the utility scale solar industry has not yet returned to optimal activity levels. These recent project awards are very encouraging and while we continue to maintain a cautious outlook for this business for the remainder of 2021. It is quite possible that additional project awards will materialize during the remainder of this year.
Turning to the electric power transmission and distribution market major trends in the energy market point to continued investment in clean energy, improving grid resiliency and favorable for energy policies. The long term business strategies of our customers reflect these trends, which present growth opportunities for <unk>.
The power.
Reconfiguring the electric grid from sources of fossil fuel generation to renewable energy as a significant growth driver of infrastructure improvements and we are strategically expanding our presence with utilities to capitalize on infrastructure projects and solar developers to capitalize on clean energy project opportunities.
According to a February whitepaper from the energy systems Engineering groups power system analysts and energy Department research the cost of new transmission needed is estimated to be at least $100 million.
And possibly three times higher.
We believe the migration to electric vehicles is the predominant means of transportation in the coming decade will be a major catalyst in modernization of the electric distribution grid.
Increasing electrical vehicle usage will have an enormous impact on the last mile of delivering electricity to charging vehicles.
Proposed American jobs plan includes a $7.5 billion dollar investments to fund the acceleration of electric vehicles and build a national network of charging stations and related infrastructure across the country to support the growing fleet of electric vehicles that will be on the road.
To support our role in this industry as anticipated growth overall power is presently on track for a fivefold increase in its crew count and revenue run rate by the end of the year compared to the same period last year.
During the second quarter overall power expanded its customer base executing multi year electric power distribution maintenance contracts for three additional investor owned utility customers.
We anticipated these awards several months ago and due to the shortage of skilled labor and specialized equipment.
Fair for these contracts overall power onboard cruise and purchased equipment supplies well in advance of generating revenue.
Additionally, we recorded certain one time costs during the quarter related to mobilize and jobs specific resources for a new customer where we are supporting us.
Upgrading their electric distribution systems in metropolitan areas.
These are often inherent cost when establishing our workforce with a customer and a new complex environment.
While it was not ideal onboarding technical personnel equipment and supplies in advance of generating revenues. We believe this was necessary due to the scarcity of skilled labor and the shortage of equipment availability I mentioned earlier.
This resulted in significantly increased cost for the quarter and financial results that were below our internal expectations.
We expect that these cost overruns or are temporary and can largely be attributed to the growth orbital power has experienced in this year.
Transitioning to orbital gas services were experienced an increase in customer activity due to oil price, which has stabilized around $70 per barrel, coupled with business activities returning to pre COVID-19 levels.
As discussed previously several large petrochemical refinery projects were awarded to our Houston operations earlier this year.
These projects were largely in the engineering and design stage.
First half of this year and have now moved to construction in our Houston facility.
The projects are.
Our associated with providing customers with gas analyzer buildings, where we have installed gas chromatograph and other instrumentation for gas process control and measurement systems, which are required as both customers are expanding certain areas within their refinery operations.
We're also experiencing increased activity from our renewable natural gas customers require overall gas through engineered design and build greater entry systems that measure the energy level of the renewable gas as it is transported into the main natural gas grid system.
In summary, the current macro environment and these prevailing trends should not change with the price of oil of Covid and we expect continued momentum throughout 2021 and 2022.
Yeah.
Our U K operations are also experiencing a resurgence in customer activity.
The renewable market is very active as older for Biomethane gas entry units are increasing driven by the U K government's incentive scheme to developers.
Set to end in March of 2022.
As a result of this increase in renewable gas systems. Overall service revenues are expected to grow in 2021 compared to prior periods.
The U K operation is also qualify tomorrow shortlist of prospective suppliers for the next five year funding cycle for Nash at National grid, the U K gas transmission operator.
We expect to learn more from national grid about the contract awards and their commitment to minimal more volumes over the next five years in the not so distant future.
Once awarded this program would be a significant contributor to orbital UK is financial performance and should provide a meaningful stream of recurring revenue to their business in 2022 and beyond.
Before I continue I'd like to provide an update on COVID-19.
But typically its impact on our business.
Across all of our operating segments, our customers are making progress toward returning their respective business and capital spend to pre COVID-19 levels.
Some industries are further along than others, but all have positive post COVID-19 momentum.
We have not experienced any impact to our business, thus far from the Delta variant outright.
With that said the impact COVID-19 had on the shutdown of the manufacturing sector. During the second and third quarter of last year has impacted all aspects of our business and as most of you know this is an industry wide issue and not limited to just the overall energy.
Challenges continued related to acquiring vehicles specialty equipment consumables and customer provided products to build their programs.
We expect this dynamic will inevitably increase costs and delay some projects for a short period of time until the supply chain returns to normal levels.
As with the Covid pandemic of last year and any other challenges arising that are simply beyond our control we will manage through these hurdles.
On a positive note none of our recent project awards backlog has been canceled due to the manufacturing challenges.
Our customers have been quite understanding about the supply chain issues as they are also dealing with the same challenges.
Aside from our operating segments. We also made strides in other areas during the quarter in more recent weeks and the law.
Last two months, our board of directors elected three new independent directors, including Paul Addison, Dr. Jerry Xu Horton and Laforest Williams.
These professionals bring diverse experiences broad perspectives and extensive expertise in many areas vital to <unk> strategy going forward.
They are all welcome additions to our increasingly diverse and highly qualified board of directors.
We would also like to thank Sean Rooney for his service on our board.
Sean will be departing to pursue other business opportunities following our annual shareholder meeting in October and we wish him the best in his future endeavors.
Our newly constituted board of directors will have nine board members, including six independent directors, which are 67, and 83% ethnic and gender diverse establishing an ESG tone for the company starting at the very top.
We are also implementing programs at our operating platforms to recruit hire develop and provide career opportunities for disadvantaged people and the communities that we serve.
This concludes my opening remarks, and now I'd like to pass the call on to Dan Ford, who will review our financial.
Results Dan.
Thank you Jim and good morning, everyone. Today I'll review, our second quarter of 2021 GAAP financial results.
Please note the electric power and solar infrastructure segment. Now also includes the Greenfield Eclipse Foundation group started in Q1 of this year and the acquisition of Gibson Technical services in April of this year.
We reported total revenues of $16.3 million for the second quarter of 2021 compared to $7.8 million for the second quarter of 2020, an increase of 110%.
Year to date revenues were $25.8 million compared to $13.5 million in the prior year period, an increase of 19%.
As Jim mentioned previously the year over year increase reflects the addition of Etfs are new telecommunications subsidiary. The continued ramp up of the Liberal power services and it started with the consolidation in the electric power and solar infrastructure services segment.
As well as increased revenue from our UK operations.
These increases were partially offset by lower revenues during the quarter from our orbital gas systems U S operations and the previously discussed delays in solar projects for 2021.
U S markets continue to face headwinds surrounding COVID-19, and associated project delays as Jim has discussed.
Gross loss was $1.2 million for the second quarter of 2021 compared to gross profit of $1 million for the second quarter of 2020.
Year to date, the gross loss is $2.5 million compared to $1.6 million of gross profit for the six months in 2020.
The decrease is attributable to ramp up costs at the company's orbital power services group.
Start up costs and he comes foundation group and lower margin projects during the period for orbital solar services.
Jim noted previously for the second quarter and year to date 2021, unallocated indirect costs for equipment supplies and labor negatively impacted gross margins and net results from the orbital power grid as crews continue to deploy the projects serving our growing backlog with customers. We expect these startup costs will become profit generators going forward.
We expect margins to improve substantially during 2021 and the oral telecom services contributes more revenues or Repower services continues to gain greater operating efficiencies.
Planned increases revenues.
And as the orbital solar services began to work on significant solar projects during the balance of 2021 with improved margin increase revenues.
And Tony throughout our industry has continued to learn to cope with the post COVID-19 environment.
Increased sales of higher margin products, a better mix of integration projects increased service revenues throughout our energy focused operations and solar projects for orbital solar are all expected to drive continued improvement to the company's profitability.
Along with the revenues coming from GTS going forward and the benefits of its recently announced acquisition of income.
For the second quarter of 2021, SG&A was $15.7 million compared to $6.8 million in the prior year period for the six months ended June 30th.
SG&A increased to $30.2 million from $14 million in the prior year the.
The increase in SG&A for the quarter and year to date was due to increased SG&A costs related to the ramp up at orbital power services group, which included increased payroll and insurance costs and start up costs and Eclipse Foundation group as.
As well as the previously mentioned equity related expenses for the year to date period equity related expenses were $8.1 million, including the Q2 expense of $4.6 million for vesting of employee performance incentive awards, and <unk> $8 million for a referral fee to a consultant on the GTS acquisition.
Further contributing to increase were increased corporate costs in the other segment due to an increase in the mark to market adjustment to the executive cash based stock appreciation rights and employee performance bonuses.
Additional GTS in April 2021, and orbital solar services in April 2020.
Compared to the first six months of 2020 further increased SG&A.
As those periods, where prior to the acquisitions.
And contributed these increases were partially offset by decreased SG&A costs and the integrated energy infrastructure solutions and services segment due to cost saving measures there.
The company's operating loss was $18.3 million for the second quarter of 2021 compared to $7.2 million in the prior year comparative period.
For the six months ended the operating loss of $35.5 million compared to $14.3 million in the prior year.
The operating loss is due to the previously mentioned items.
As Jim noted net loss for the quarter was $8.2 million benefiting from a $9 million income tax benefit.
Compared to a net loss of $9.3 million for the second quarter of 2020, which included a $1.5 million income tax benefit.
For the six months ended June 30, the net loss was <unk> $6.2 million, where the $8.9 million tax benefit in 2020 one.
Compared to a net loss of $16.7 million and a tax benefit of $3.2 million in the prior year period.
For further details please refer to our 10-Q filing.
We expect revenues to continue to ramp up for the second half of 2021 with the addition of GTS, including the recently announced acquisition of <unk>.
We also expect an increase in overall power services and orbital solar activities during the remainder of 2021.
The orbital power services, we expect this segment should continue to grow the business throughout the balance of the year and we currently expect the segment to achieve profitability in the second half.
In addition, the company expects the meaningful growth of utility scale solar market to drive significant backlog and revenue growth for orbital solar during the second half of 2021.
At June 30 of 2021, our backlog has increased to $294.9 million compared to $62.1 million at March 31.
And $44 million at December 31, 2020.
The increase is due to the inclusion of GTS and an improved oral solar backlog and growth from orbital power.
This also reflects updated timing of orders and delivery schedules for integration customers.
Of this total approximately $124.9 million is expected to be recognized in the 12 months following Q2.
Lastly, we ended the quarter with cash and cash equivalents of $9.6 million and restricted cash of $1.2 million.
In Q2 cash used in operating activities was $9.3 million compared to $1.3 million in Q2.2020.
Increased uses of cash during the second quarter were primarily for M&A activity related to our GTS acquisition the.
The ramp up costs that oral power services and startup costs of Eclipse Foundation group and cash used by overall solar services operations.
The company has an initial cost increase from orbital power services Nikos Foundation group. We expect these years can become cash flow positive as a business environment normalizes and the company continues to increase revenue generating service crew deployment.
To mitigate these short term costs, we continue taking steps to shore up our liquidity, including disciplined management of both working capital and expenses.
As we've mentioned previously during the height of the pandemic or real emphasis aviaries entered into unsecured loans in the aggregate principal amount of approximately $1.9 million.
Pursuant to the Paycheck protection program.
Loans and interest accrued thereon is forgivable, partially in full if certain conditions were met.
The company did receive forgiveness of these loans during the second quarter.
During the first quarter of 2021, we supplemented this with liberty facing 45 million shares of stock additions.
Additionally, subsequent to quarter end in July we closed a registered direct offering the company sold $10 million 410909 shares of its common stock at a price of $3.65 per share for gross proceeds to the company of $38 million before deducting commissions and estimated offering expenses.
Per our shelf registration filed in the first quarter. We continue to have the capability to issue an aggregate of $150 million of common or preferred stock or public debt under the yesterday registration.
100, <unk> with $112 million of remaining capacity.
As we explore potential avenues for growth and acquisitions.
These enhanced sources of liquidity, we remain confident in our ability to continue executing our strategic growth plans.
With that I'll now turn the call back over to Jim for closing remarks.
Thank you Dan.
In closing during the second quarter, we achieved several milestones while executing on our strategy to transform overlay energy into an infrastructure service provider, serving the electric power transmission and distribution.
Communications and renewable markets, we completed our accretive platform acquisition of Gibson Tactical services, establishing a solid leadership position in the telecommunications services sector physical.
Since completing this acquisition, we have capitalized on our momentum in the telecommunications market being awarded substantial customer projects.
And adding our complementary tuck in acquisition of <unk> and.
In addition to our progress in telecom during the second quarter, our orbital power services and Eclipse Foundation group businesses continue to gain traction adding to our revenue growth.
Further we expect to continue to build upon the recent solar contract awards, which are expected to provide significant revenue growth and earnings going forward.
At the same time as a company we continue to enhance our ESG efforts on diversifying our board of directors, while also initiating programs to drive our pursuit of ESG excellence.
Looking ahead overly energy group continues to be a forward looking story with substantial prospects for continued rapid organic growth as well as accelerated growth through strategic complementary acquisitions to increase our services capabilities and expand our geographic footprint.
Our priorities are to continue with opportunistic tuck in acquisitions, bringing companies Entergy Etfs that will expand our position as a full service infrastructure service provider to our telecommunications customers. We're also pursuing the acquisition of electric power transmission and distribution platform company to position OAG.
And with marketplace and deploy the same tuck in strategy, we have implemented a G T S.
The environment has improved we have a renewed sense of urgency to expand our presence in the industry <unk> was reflected in a dynamic increase in our backlog numbers.
And finally, we believe we will achieve an EBITDA and cash flow positive run rate.
And our next year.
That concludes our prepared remarks, now I would like to open the call for questions. Operator. Please go ahead.
Thank him as a reminder to ask a question you need to press star one on your telephone.
Our first question comes from Jeffrey Campbell with Alliance Global Your line is open.
Good morning, and congratulations on the backlog.
Thank you Jeff good morning.
First I wanted to ask about emco, just wondering broadly that it does.
Does it have any business with GTS competitors that we can now send them.
<unk>.
As part of GTS, Jeff That's a great question, we do have some work with competitors.
In our industry that typically doesn't go away.
I mean today for instance, our foundation group works for competitors that we have on the Oh.
Electric distribution.
<unk>, we walk on and.
And also in solar some of the interconnections, we do in some areas or done by competitors. So it's kind of an interesting industry that you typically don't lose the.
Historic work that you've done for competitors when you when you all for a specialized service like we do at Aimco.
Okay, great well, thanks for that color and my follow up is you've announced fairly short time lines to complete the two large solar projects. I was just wondering how are you going to manage to meet these deadlines bearing in mind the.
Shortage and the cost inflation you scale on solar panels that you mentioned earlier in your remarks, so that the cost of the steel and solar panels will certainly be passed onto the customers in some cases, we've secured pricing already that's locked in from from the vendors.
We've got the the project management teams and the sub contractors.
Engage too to be able to complete these works to our satisfaction and certainly have the bandwidth to do to do more work in the future as well. So we've done a nice job of coordinating a coordinating the resources, we need to complete these projects on time.
Okay, great. Thanks, I appreciate it.
Thank you Jeff.
Thank you. Our next question comes from Eric Stine with Craig Hallum. Your line is open hi.
Dan Good morning, Eric Good morning.
So maybe just on the telecom side and aren't off I mean, just would love some commentary on on how early you think that is how.
How how much of an opportunity there is going for both.
Well I mean, I guess in in GTS as current kind of.
Geographic footprint, but as you look further out and then I'd love to know how M. Coe.
Potentially expands that or improves your visibility into further work.
That's a great question, Tom We've got I mean, Unfortunately, we were announced on some of the very first project came out boutique. She project in the charter build over that three state area. I think we're just scratching the surface on obviously, what what projects will come out over the next several years to.
We built and we certainly think we're in good position to capture more work in this area, especially in the yard off area. So I I expect that that'll be a great growth opportunity for us going forward ampco.
It's really just it's a great synergy for us they they bring more engineering and design capabilities to us for a broader customer base over a broader geography. So.
The strength of our two companies together.
Customers that ampco has that we could go do some of the the project management and construction on them and vice versa. There's there's customers that we have that we could we could get more upfront on it.
Into the engineering design stage, where aimco has that relationship so.
It's a great synergy and we expect to do more acquisitions in the future that that broaden our capabilities and customer base shouldn't helped strengthen our organization even further.
Got it and then maybe just sticking to your strategy and kind of tuck ins you mentioned that you had a I mean, it sounds like you've got a fairly near term acquisition, they're eating that you've got lined up at least youre working towards on the transmission side, maybe just.
Just some details on.
I mean anything you can give whether its size.
Graphic area.
Anything would be helpful.
Yeah, I mean, I think the only thing I can say right now is that that's a top priority to us to get our.
To get an acquisition done in the electric T&D space.
Next and certainly that goes into the equation on being cash flow positive.
EBITDA positive as we go into next year.
So the timing on that is important to us I really don't want to get into the geography, right now or the size, but it's a very tight market place and you know people will be able to go to a zoom in on it probably you know who we're looking at.
I don't want to avoid that at this time, but we'll get more information out to you as soon as we can once we start moving forward with the deal gotcha. Okay.
Maybe last one for me just in the power services business you mentioned the two new.
Investor owned utility contracts is that is that something you're able to give more details on size or or area or do you know just to give us some color on how that business is starting to expand I would just say that where were moving across the south.
And to the South East.
Where we're expanding.
Synergistically.
Geographically if you will.
We should be as I showed in my commentary.
54 crews by the end of the year.
Which is a fourfold increase during the year. So that's one of the challenges with margins right now as we try to ramp this business very very rapidly.
Going to bring on cruise and equivalent earlier than we normally would because of the.
The headwinds, we were facing which I mentioned COVID-19 in a tight labor market.
It's a good problem to have and then hopefully we'll reach steady state at some point to where.
Where we start having a recurring profitable revenues and we expect to have that frankly, you know by the end of the year and going into next year.
Got it. Thank you, yes, Sir thank you Eric.
Thank you and we have a question from Alex Rigel with B Riley Your line is open.
Thanks, Jim and Dan and a nice quarter there.
Can you give us a little bit more breakdown.
The mix of backlog in hand today.
So we've we've split backlog.
And of the two segments.
We don't break it down further than that.
Two individual entities or sub categories.
But I can share the backlog.
At the at the operating level so.
The electric power infrastructure services segment, which includes the Gibson telecom.
Orbital solar and the orbital power groups and Foundation group, it's $281.6 million of backlog.
And then our.
Oil and gas UK, and orbital gas Houston, which make up the integrated infrastructure integrated energy infrastructure solutions segment has backlog of about $13.3 million.
So the majority of it is in the electric power infrastructure.
Sure.
And then clearly our won a ton of work here.
Had some acquisitions Super exciting time can you help us to think about sort of a cadence of revenue in the third quarter and fourth quarter and how we should think about that and model it.
I mean, Alex a lot of it's going to be dependent upon acquisitions, but if you just look at the business is in hand today that we have.
We expect.
Very strong growth in backlog.
We went from 295 at the end of the quarter too worried about 400 million a day.
I think that pace is going to continue for quite some time.
Frankly that stretch.
You know very important leading indicator for us to move to profitability because in the past.
We haven't had a lot of revenue, we had $30 million a year for the last several years $25 million to $30 million a year of revenue that wasn't as profitable frankly is what we're making now and now we're ramping up significantly and that's that's going to be what.
What brings you send a puff profitability, primarily as the volume of work that we do profitable revenues, which we're building in backlog and I think that cadence will continue very strongly you know for the.
For the foreseeable future.
And one last question.
And I assume that not all of your revenue really up.
Passes through backlog, how should we think about that with some other contractors, maybe 30% of their annual revenue doesn't really pass through backlog.
Correct for you all as well.
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We don't.
Theres not a lot of pass through costs other than.
Potentially some small amount on solar.
But there's not a lot of pass through costs shown on electric P. M D business today and.
And they're certainly not only on telecom either now now that.
You, certainly, but by and emco eliminated a lot of that because we did it outsourcing and engineering and design some of our projects for Aimco and I think that was the biggest area of pass through.
Historically.
So I think going forward, our number would be much less than 30%, probably less than 10%, 5% to 10% of that.
This pass through.
And just to clarify.
It is.
It really trying to get at how much of your revenue is coming from short cycle work that doesn't Oh, sorry, yeah, yeah yeah.
Yeah Yeah.
But most of all their electric power Distributional War for short cycle work, we Bill weekly there on production.
And Oh, obviously, the the solar work is gonna be overall.
Longer period of time.
Recognizing that revenue when we meet key milestones on projects and get paid but that should be no more than a month or so and then the telecommunication work for similar to electric T&D.
So we get the bill regularly on our progress.
Progress towards construction.
So, yes, I think that the turnover is going to be.
Pretty quick on.
On <unk>.
Project production versus building versus getting paid.
Thank you Sir.
Sure. Thank you Alex.
Thank you. Our next question comes from Jeff Bernstein with Cowen Your line is open.
Just a couple of questions.
Can you talk a little bit about your expectations for the the power restoration.
Business.
And all of that the weather events that seem to be happening more more regularly and how much do you like that business and just some some characteristics about that.
So good morning, Jeff.
Look.
None of us want to see these kind of catastrophic events happen, but but certainly you know growing our <unk>.
Base in that business, especially in the south or southeast puts us in a exponentially better position than we were last year to respond to to any of these events and certainly we're tied in with with many of the utilities because of because of us responding last year and two.
Others that.
They'd go and specifically just go after the storms.
You know we're tied in there with contracts to respond immediately we're also working with many investor owned utilities that will releases for mutual assistance.
To go support support other sister utilities that have had a catastrophic event on a storm. So we're well positioned now to.
To take advantage of storm.
Working that would certainly be a big bolster too to our revenue and bottom line.
Terrific. Thank you.
And then I think that you might have said that there was another platform acquisition in your future at some point and I am not sure if I heard that right and can you just clarify.
Does that mean it another area of actual work than what Youre doing now or is it potentially a larger geography.
Covering acquisition right. So even though we've done a great greenfield of our electric T&D work, we want to buy a platform and each of the three.
Infrastructure segments, we're focused on so we bought warning solar where we bought Gibson.
In the telecom sector and now we're looking for a.
Our platform acquisition in electric T&D.
Gotcha and then once we do that we'll focus on tuck ins like the Ampco acquisition ended GTS will focus on expanding the platforms through acquisition.
With synergistic acquisitions that expand their service capabilities geography, our customer base.
Terrific that's great and then just on the R&D side nice to hear that you've won some of those contracts on integrating into the.
Pipeline systems.
How big is that going to be there you know discussion that there's the potential for 8500 projects in the United States or something like that but you know what do you guys see there.
Well I think it's a huge opportunity.
We have.
One of our problems.
First units left our shop in Houston to go go to a major R&D.
Developer of which we're excited about you know after going through through many rounds of Oh, but our RFP with against other <unk>.
Players and.
Certainly they didn't face there.
Their decision solely on cost it was almost the total package the quality of some of the technology. So we feel well positioned to be a leader in that in that area. Both in the U S and the U K. So I think as that business ramps, we'll get our share of it and were very.
Excited about it we're seeing a nice uptick of activity there.
Frankly, our shop in Houston is doing really well now we spent the first half of the year in engineering design.
But now we've moved into the construction realm in a big way on a lot of these projects. So we should see much better results from all.
Our overall gas this group.
In the second half of this year.
Great sounds great. Thank you. Thank you Jeff.
And that's all the questions. We have at this time I would like to turn the call over to Mr. Jim O'neil, Vice Chairman and CEO for closing remarks.
Well I would like to thank everyone again for joining us on the call today and for your continued interest in overall energy group, we look forward to having follow up conversations with many of you and updating you on our progress.
So I want to thank everyone again, and hope everyone has a great day goodbye.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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