Q4 2021 Matrix Service Co Earnings Call
[music].
Thank you for standing by and welcome to the Matrix Service Company Conference call to discuss results for the fourth quarter and fiscal year 2021.
At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
A reminder, today's program may be recorded I would now like to introduce your host for today's program Kellie Smythe.
Senior director of Investor Relations. Please go ahead.
Good morning, and welcome to matrix service company's fourth quarter and fiscal 'twenty. One earnings call participants on today's call will include John Hewitt, President and Chief Executive Officer.
President and Chief Financial Officer, the presentation materials, we will be <unk>.
<unk> during the webcast today can be found under events and presentations on the Investor Relations section of Matrix Service company Dot com.
Before we begin please let me remind you that on stage call. The company may make various remarks about future expectations plans and prospects for matrix service company. They constitute forward looking statements for the purposes of the private Securities Litigation Reform Act of 1995 actually actual results may differ materially.
Really from those indicated by these forward looking statements as a result of various factors, including those discussed in our annual report on Form 10-K for our fiscal year ended June 30, 2021 and in subsequent filings made by the company with the SEC to the extent the company utilizes non-GAAP measures.
Reconciliations will be provided in theory press releases periodic SEC filings and on the company's website I will now turn the call over to John Hewitt, President and CEO of Matrix Service company.
You Kelly and good morning, everyone and thank you for joining us.
I want to begin our call by congratulating and thanking our employees for achieving a total recordable incident rate of 0.28 in fiscal 2021, which represents the best safety performance in the company's history. This achievement was made in a year when additional rigorous COVID-19 safety protocols were in place adding to.
The task planning complexities and employee distractions.
Safety performance.
Excuse me this safety performance is world class and only serves to strengthen our resolve to achieve and maintain a zero incident safety performance throughout our operations before we leave the topic of safety I'd also like to thank our storm response teams tremendous work they are doing along with others too.
We still have power and Louisiana following hurricane either these teams often spend weeks away from all work under extremely difficult circumstances to restore power and quality of life for those impacted.
I'd also like to announce that next week matrix will publish its first sustainability report in which among other things we describe our enterprise wide ESG governance framework with oversight by our board of directors to drive culture accountability and continuous improvement.
We reaffirm our commitment to uphold the highest standards of ethics integrity and respect our success depends on our people and our work.
Report on baseline metrics for greenhouse gas emissions document our employee diversity baseline from which we will shape recruiting efforts succession planning and professional development.
Report on other key areas, including safety health, and wellbeing training and development and community and clearly state as a corporate citizen our role in society and our commitment to supporting our communities being a good steward of the environment and being a trusted partner to all stakeholders. This has been an enterprise.
<unk> effort undertaken by our employees and leadership to showcase our accomplishments identify areas of continuous improvement and set the stage for transparent annual reporting on all areas of ESG.
I'd now like to turn the call to Kevin Cavanah will briefly review fiscal 2021 results after which I will share our outlook on a much brighter fiscal 2022, including a discussion on the current business environment.
Our strategy and finally, our opportunity pipeline and the acceleration in awards, we are seeing in the first quarter of fiscal 2022.
Thanks, Sean.
I will start by reviewing the results of each segment and then discuss consolidated results.
Despite a strong start to the fiscal year, the utility and power infrastructure segment had a relatively difficult fourth quarter.
Revenue was $53 million in the fourth quarter up almost 18% over the third quarter due to an increased volume of capital projects.
The gross profit the quarter was a negative $9.0 million as good project execution on electrical service work was offset by a charge to revenue of $12.0 million on a large capital project that is currently in startup and commissioning the.
The project has largely been impacted by enhanced health and safety protocols supply chain disruptions travel restrictions and employee concerns brought about by the Covid pandemic.
Several major weather events also contributed to schedule progression and cost increases as the company worked to achieve project completion, we expect the project to have a positive outcome, although at a reduced margin.
Although the revenue was up over the third quarter low revenue volume continued to result in the under recovery of overheads that negatively impacted gross margins by over 400 basis points.
As a result of the project charge and under recovery the segment produced quarterly operating loss of $9 million.
We expect to see this segment returned to our expected gross margin range of 10% to 12% as we move through fiscal 2022.
However, in the near term will be impacted by under recovery of overheads as well as lower margin revenue on the project discussed above.
The process and industrial facilities segment had a good fourth quarter and completed a decent fiscal 2021 considering the COVID-19 environment as a result of increased refinery maintenance and.
Turnaround activity revenue was 60 million up almost 40% over the third quarter and was the highest quarterly revenue number for the year in the quarter project execution was strong throughout the segment, including refinery turnaround and maintenance activity. In fact direct gross margin has been above our normal expected range of <unk>.
911% and three of the last four quarters.
As a as a result of good project execution and improved overhead recovery gross profit in the quarter was $9.0 million and operating income was $9.0 million.
As we look forward to fiscal 2022 weeks.
We expect the first quarter revenue to be seasonally lower but expect to increasing revenue and earnings as we move through the rest of fiscal 2022.
Based on our recent results and financial projections, we are increasing our long term margin expectations for this segment from 9% to 11%.
210% to 12%.
The storage and terminal solutions segment had a mixed quarter, which finished a tough year for this traditionally strong segment revenue in the quarter of $62 million up modestly from the third quarter was still impacted by the current environment the SEC.
Results were negatively impacted by the settlement of a dispute dispute related to a project that was completed in 2018. The company successfully settled the dispute but received less than the net receivable recorded on the books, resulting in a $11.0 million charge that was recorded as a reduction in revenue.
In connection with the settlement that the company received $17.0 million in the first quarter of fiscal 2022.
This settlement allowed us to avoid future legal costs eliminate any litigation risk and increase our cash balance.
Excluding the settlement impact the direct margins earned in the segment were just below well below the normal range of 10% to 12%.
As a result of low revenue volume under recovery impacted the segment gross margin by 200 basis points in the quarter.
Due to the charge related to the settlement and under recovery of overheads. The segment produced $7.0 million of gross profit.
And an operating loss of just over $3 million as we look forward. We expect to see this segment returned to our expected gross margin range of 10% to 12%. However, the near term and still be impacted by under recovery of overheads.
Yeah.
Moving to consolidated results, while the fourth quarter revenue was up 18% over the third quarter overall revenue levels were about $30 million short of our.
Of our expectations as a result of the continuing effects of the pandemic.
Although SG&A and construction overhead costs have been positively impacted by cost reductions implemented over the past two years and were in line with our expectations low revenue volume still led to under recovery of overheads that negatively impacted gross margin.
Gross profit was $6.0 million or 0.9% in the quarter. The gross profit and EPS did not meet our expectations expectations due.
Due to the project charge in the utility and power infrastructure segment, which resulted in a negative EPS impact of <unk> 16 in the quarter as compared to an expected benefit of <unk>.
The charge related to the settlement of the contract dispute in the storage and terminal solutions segment.
Which impacted earnings by eight.
And the lower than expected revenue.
The end result was an EPS loss of <unk> 40 in the quarter as compared to expectations of achieving near breakeven performance.
It is obvious that revenue volume significantly impacts our operating performance.
So I wanted to take a couple of minutes to discuss the management of our cost structure and the related impact on future earnings.
As we have discussed before since the start of fiscal 2020, the company has implemented almost $70 million.
Cost reductions on an annualized basis. This translates to an approximate 27% decrease to the company's overhead cost structure rich.
Reductions have occurred throughout the business and included head count reductions facility closures and consolidations capex reductions and a zero based approach for non labor overhead a.
A significant portion of the cost reductions are permanent.
The company will add the necessary construction overhead resources.
To effectively win and execute projects as revenue volume returns.
As you would expect the cost reductions.
Reduction changes positively impact the future earnings potential of the company for example at the cost current cost structure of the quarterly revenue required to achieve breakeven results has decreased from approximately approximately $275 million to about $200 million.
However at that level the company would still have some under recovery of construction overhead.
To fully recover construction overheads, we need to see quarterly revenue volumes of about $220 million as compared to $300 million required before we implemented the cost reductions.
The big takeaway is that the cost reductions we have implemented position the company for significant earnings improvement as revenue volumes improve.
Revenue improvement starts with project awards, So let's review backlog.
We ended the fiscal year with backlog of $463 million as project awards were negatively impacted by the pandemic.
And the related decrease in spending by our customers throughout fiscal 2021.
We are seeing improved award activity in early fiscal 2022, and believe our backlog level will increase from this point.
John will cover this improvement later in the call.
As we discussed previously revenue volume.
Is key to improving our operating results in the first quarter award activity and our near term prospects support improved earnings as we move through fiscal 2022.
Okay, moving onto the balance sheet and cash flow while.
While the operating environment environment was difficult in fiscal 2021, we were able to maintain a strong financial position throughout the year we.
We ended fiscal 2021 with cash of $84 million and zero debt as compared to beginning of the year balances of cash of $100 million and debt of $10 million during the year, we paid off $10 million of debt.
Funded capex of $4 million.
<unk> 4 million in one time restructuring costs.
Subsequent subsequent to year end, we entered into a new $100 million.
Asset backed credit facility that replaces the previous $200 million credit facility.
Availability under the new credit facility is determined by the borrowing base and is initially 70 million. The borrowing base is calculated on a monthly basis and is expected to increase with the volume of business.
We have utilized $43 million of borrowing capacity to support issued letters of credit.
But we expect these letters of credit to decrease almost 50% in the first half of fiscal 2022.
Overall, we believe we are positioned to support the anticipated increased levels of project work I will now turn the call back to John.
Thank you Kevin with fiscal 2021 behind Us I'd like to turn your attention to the future and as mentioned earlier I'll cover three areas with your current business environment, our strategy and finally, our end market opportunities and award cycle.
Fiscal 2021 was a challenging and demanding year for the business our employees, our clients and our end markets.
Certainty around the timing and strength of an economic recovery. The course of the pandemic and long term energy demand sustainability has delayed awards and significantly reduced spending by our clients. Today. However, the bidding environment across all segments is very strong our business development estimating proposal teams are fully engaged with the robust.
Bidding activity and in some cases, we have hired additional resources to assist with the volume. We are also beginning to see a sharp uptick in awards in spending by our clients as we move through our first quarter of fiscal 2022. This is a good sign that the pent up demand. We expected is starting to be released in our existing and new clients are moving to.
Invest in their facilities I will discuss this in more detail in a few minutes.
Let's talk about business strategy now during the third and fourth quarters, we worked with an independent third party business consultants to ensure that we have appropriately assess the market opportunities for our future and that our organization is properly designed to support these opportunities.
Directionally our strategy continues to be focused on four key areas safety people and communication clients and growth and execution excellence, our focus on safety as well as the ability to attract retain and develop our people is critical to our success as we achieve world class safety performance, we know of zero incidents.
<unk> performance is possible and continue to strive for that goal. We also know our people are our number one resource and our focus remains on ensuring we provide the environment culture training and leadership needed to ensure we have best in class employees.
Where they really wanted to focus your attention today is on clients and growth and execution excellence, while time limitations in competitive intelligence prevent a deep review of our entire strategy I will touch on key elements that will help investors appreciate our direction.
First we will continue to strengthen the core this is fundamentally crude related markets, where we hold a strong brand and market position. These markets will continue to be a critical part of the business as the energy transition occurs over the next decade and beyond.
As refining markets normalize we will continue to work on our competitiveness and deliver high quality services and look for more nested maintenance operations to build a steady base of revenue. We continue to feel good about our position in crude tanks and terminals and believe most of the opportunities will be Gulf coast related with smaller targets and other key logistical places.
And broke crude storage and refining the skill sets and capabilities are transferable and in some cases already support other growth markets. We are focused on.
In addition, we will expand within existing end markets. These markets are where we have a strong value proposition and there was a growth opportunity for the business driven by either our existing position our market maturity markets and midstream gas LNG and NGL storage terminals thermal vacuum chambers for aerospace electrical.
Infrastructure mining and minerals and in our international markets for our stores to absorb terminal solutions are all key focus areas.
We see natural gas as a transition energy source that will continue to expand for many decades into the future our capabilities in midstream and storage and terminal solutions projects, great long term growth opportunities for the company, both domestically and in select international markets.
One emerging market for us is the upgrade and repair to existing LNG peak shaving facilities spread across the United States, especially given our significant skill set and long standing expertise in cryogenics. The niche position we have in thermo vacuum chambers is a differentiator for us is the need for upgraded and expanded satellites and other.
Related space activities will drive the need for more testing.
The internet interconnected world of electrical renewable generation and an aging infrastructure system creates outsized organic growth potential for our east coast centered business, we maintain our commitment to create a coast to coast service delivery and support of these infrastructure investments.
The demand for nonferrous and rare Earth minerals as a result of growth in renewable energy and electrical infrastructure is already providing a steady stream of project opportunities and we expect to re grow our presence here through the fiscal year and well over the next decade.
Finally, we have grown into new end markets. These are opportunities, where we can apply our project and technical skills to the new developing our adjacent markets. Examples include renewable energy infrastructure, such as hydrogen and Biofuels chemical and petrochemical facilities carbon capture and renewable power and utility scale solar.
As hydrogen a key future energy source for transportation heating and power generation receives more private and public investment our skill sets will be put to work building, a new national infrastructure, our experienced and cryogenic storage and terminal design and construction combined with our strategic partnership with chart industries as <unk>.
Already having significant and positive impact on our opportunity pipeline.
The partnership has several near term project opportunities that our teams are progressing. In addition, we are developing standardized solutions that will provide our customers with cost effective turnkey designs and faster implementation.
Recognizing hydrogen as a key strategic growth area for the company. We have recently applied for membership the hydrogen Council a global CEO led initiative, a leading companies focused on advancing hydrogen to foster the clean energy transition for a better more resilient future. In addition, we continue to look for other partners to support the <unk>.
<unk> of infrastructure solutions for the hydrogen and carbon capture markets.
In chemicals and petrochemicals, we have started our market penetration by executing various master service agreements, which have opened the door to provide engineering and construction services in the industry.
Mall Engineering awards have started to occur and several project opportunities are in the bid funnel.
In all cases growth will come organically as our markets improve and our business development approach to marketing the entire enterprise creates an expansion in our bidding environment over time acquisitions will also be required an engineering process design and key brands and project skills and select targeted end markets.
I'll touch on what we're doing to prepare the organization for market opportunities. We see returning to the business. We have stated previously we have reduced our cost structure by nearly $70 million in response to the pandemic.
Now I'll turn our attention to the efficiency and design of our organization again with the help of a third party business consultant, we have embarked on a 12 week organization review process to explore expanding shared service centers and operation centers of excellence as well as streamlining our management structure, employing lean procurement strategies and a review of our <unk>.
Operating model model and organizational structure, our objective is to be more efficient administratively and more effective with the enterprises resources across all our reporting segments.
One of the organization changes already completed is the consolidation of all of the company's business development resources in one center of excellence at the Matrix service company level in this way we can apply the expertise of our business development engineering and construction personnel across the enterprise create more opportunities with a better risk profile.
Prove our overall win rate and grow the business.
Ability to capture a broader and deeper quantity of spending across our client base will be greatly enhanced by this consolidation.
We are already seeing the benefit of this change in our pursuit of hydrogen renewable fuels and LNG NGL related opportunities as we complete our organization redesign and business planning activities. We expect to see positive benefits that will result in a more competitive business with improved bottom line performance and a strong foundation for growth.
Now I'd like to talk about opportunities and awards our opportunity pipeline across all segments is strong and supports our revenue expectations in the near term and growth aspirations for the future key opportunities in the bidding stage include domestic and international opportunities for new and expanded LNG tanks and terminals for peak shaving X.
Port import and transportation fuels as well as inspection maintenance and upgrades of existing LNG facilities.
NGL infrastructure is also creating positive opportunities.
<unk> gas compression and processing opportunities is gaining strength, which in many cases or to improve the efficiency and carbon footprint of their legacy systems renewable energy and hydrogen infrastructure, such as storage process facilities transportation hubs and distribution centers. In addition, biofuel storage terminals and processing are also.
Building in our bid funnel crude oil storage tanks and terminals continue to fill our pipeline on both the domestic and international basis. While these have been slow to award and very competitive we see the market on this infrastructure improving in the near future electric.
Electrical infrastructure work and maintenance storm repair upgrades and new builds for Substations transmission distribution data cabling land based transmission and distribution facilities for offshore wind solar generation battery manufacturing plants and battery backup battery storage facilities.
Chemical and petrochemical engineering services capital projects maintenance and repair are starting to enter our pipeline as our strategic focus is creating opportunities.
Mining and mineral projects associated with copper lithium full rate silver and gold are growing in the mid funnel as the demand for these minerals is driven by.
Renewable generation batteries and electrical infrastructure.
Thermal vacuum chamber design and construction to support satellite expansion and technology changes have been steady and is creating near term awards. We are happy to report that following the close of our fourth quarter Award activity has accelerated and just the first 60 days of fiscal 2022. We have formally booked are received notice of award of approximately 180.
Million in new contracts. This volume of awards will be the highest award level since the fourth quarter of fiscal 2020.
These contracts spanned many of our key markets, including thermal vacuum chambers, LNG storage tanks and terminals biofuel API 650 tanks, electrical infrastructure midstream gas and various other industrial projects and Master service agreements, including New chemical clients. We believe this award cycle.
<unk> acceleration represents a long awaited an important sign of client confidence returning to our markets and the beginning of an award progression that will deliver a book to bill in our fiscal 2020 to first quarter and for the full year of greater than one out the impact of revenue from this first wave of awards will follow in subsequent.
Quarters, and we expect this improve the award cycle to continue as we move through the balance of the fiscal year.
So in closing we continue to actively manage the health and safety of our employees as a first order of business. The Delta variant does not appear to be having a significant impact to our clients' spending plans with their focus more on economic activity energy demand sustainability clean energy and federal policy.
The award cycle is accelerating with a strong start to fiscal 2022 with the first two months already representing the highest project award activity in the last four quarters, our strategy to protect our core markets expand in existing end markets and grow into new markets is clear and demonstrates our commitment to not only support our clients' existing business.
<unk>, but also critical infrastructure investments to be made as the world transitions to a lower carbon future.
Our opportunity pipeline driven by our newly centralized business development group is strong and supports both near term revenue and long term growth objectives, and finally as we focus on continuous improvement our organization redesign will create more consistent performance on the top and bottom line and support our long term vision for the company.
Extremely proud of our people and their continued commitment to safety quality and performance during this highly challenging period.
I will now open the call for questions.
Certainly ladies and gentlemen, GAAP a question at this time. Please press Star then one if your question has been answered and you'd like to remove yourself from the queue. Please press the pound key our first question comes from the line of Brent Thielman from D. A Davidson your question. Please.
Hey, great. Thanks, Good morning, John Kevin.
Good morning.
John on the utility and power group, just given all that's happening with our delivery upgrades in the peak shaving opportunities.
You talked about I guess surprised to see some pressure on the revenue. This quarter can you just talk about the moving pieces within that that just a function of some of the transition. These projects you're executing and then how quickly can we see that.
Yet to reverse, especially with this new award activity.
Yes.
And that in that segment has two principal pieces of <unk>.
Our revenue.
<unk> there one is just on pure electrical infrastructure transmission.
Transmission distribution substation work and so that that is continuing to grow for us.
We.
A couple of years ago went through kind of a reorganization there to improve performance and hit rate, we're seeing we're seeing the.
Success of that of that focused in our reorganization in that business is performing pretty well and so we're continuing to look for opportunities to expand that business.
<unk>.
Outside of our kind of core geography.
On the East coast. The other piece of that segment is the is work we do for our LNG related peak shaving terminals for utilities.
And we're continuing to see.
A significant amount of opportunities in our opportunity pipeline for that work and we're seeing opportunities, while I'll be them smaller but opportunities related to existing LNG peak shaving infrastructure Thats had been in the country for years.
Looking for upgrades.
And maintenance work.
One of the awards that we will.
We've collected here in the last 60 days is related to storage around LNG.
Okay. Okay. That's helpful and then I carton some of the commentary there it sounds like the crude storage market things are perking up, but it's still pretty competitive.
How would you how would you sort of attack the rest of the environment and with all this New award activity had picked up I mean is it.
Because it still ultra competitive as we're coming off the bottom and some of these markets.
Do you feel about sort of the bid margin.
New work Youre picking up.
Yes, I think it depends on which segment it's in I'd say in general.
The earlier award activity or smaller awards.
There are projects in the sub $50 million kind of range.
Some of them are in markets, where we've got up.
Strong position and others are more competitively.
Were competitively bid.
When you look around for sure the crude storage market.
And what's available to bid in the crude storage market right now which is mostly.
One two and three tanks that market is really competitive.
But there is various projects in our pipeline, where there are multiple tank expansions and.
Opportunities there.
That creates not only flat bottom tanks for crude but also.
For other.
Sure.
Other things like Biofuels.
And other other liquids and so.
We're seeing that start to expand as well an opportunity pipeline and we still think we probably four to six months away for those things starting to turn and that turned into projects for us.
Okay, and then I know it's early on just in terms of the partnership with chart industries, but maybe can you talk about the <unk> and hydrogen related work I don't think it would really expect to be meaningful for yet.
For another several quarters.
Where youre at and when do you think that starts to hit.
Revenue little more nuclear.
We felt that that was those those.
<unk> opportunities for US were I think six to 12 months out we talked about initially and I think that's still that's still in the timeframe that we're looking at.
We've.
Jointly and individually bid some projects.
And most some storage projects, we're working with a series of clients both from a developer standpoint, and I'll call Blue chip clients and looking at opportunities that where they want to expand existing infrastructure or put in new infrastructure.
And so I think for us it's realistic that sometime after the first of the calendar year, we should see some of those opportunities at least get to a decision point.
Whether they are whether it's us or maybe somebody else, but the competitive set is fairly small there.
So we feel pretty good about where our position is.
Okay, and then last one just with the cash.
The new credit facility flexibility that gives you.
Maybe just talk about you had thought.
Around M&A versus sort of reserving some liquidity with what looks to be about ramp up in project activity I just wanted to get some thoughts on kind of business development opportunities that you might be looking now at liquidity.
Right now, we're primarily focused on organic growth.
In return our strengthen our markets there is.
There's a lot there for us to say grace over.
So were focused there, but we will we will need to consider acquisitions as a business as we continue to look for opportunities for growth.
But in the near term.
That any to any kind of.
Sizable acquisition I think is.
Is not on the table.
Okay. Thank you appreciate it.
Thank you. Our next question comes from the line of John France.
Sidoti and company your question please.
John and Kevin.
Good morning.
Process and industrial Securities.
You've raised your gross margin assumptions.
Based on.
Restructuring actions can you talk a little bit about whats changed in the mix in process that gives you the confidence to raise the gross margins.
Okay.
So I think I know, what you are asking so on and process and industrial facilities.
We did increase the margin expectations, there from previous range of 9% to 11% to the new range of 10% to 12.
If you look at the performance.
Over the past couple of years.
That segment is normally exceeded our expectations from a direct margin performance.
Now when you look at the actual gross margin there has been under recovery because of the lower revenue volumes.
As a result of the <unk>.
Pandemic, but as revenue.
<unk> returns and we saw that this quarter it came back pretty strong.
We'd expect it to continue to increase as we move through fiscal 'twenty two that under recovery is going to where to get the level. We're fully recovering in that segment and at that point just the mix of work.
You should see.
The gross margins in that higher range.
It's a lot of that has to do with the diversity that we have built into that segment.
Past.
I think refinery work would have been the predominant piece.
Piece of revenues in that segment and that is still there and thats good margin work, but it's it's supplemented by.
Other other types of projects.
Thermal vacuum chamber work engineering work for gas processing mining and minerals are a few examples that that will help drive the margin up to be more consistent with our expectations and the other two segments.
Great Thanks, and on the cost reduction efforts two questions here.
Firstly, the 220 versus the 200.
Breakeven points.
Delta between those two numbers and.
And how much of that $70 million in restructuring is variable and at what point does that have to come back.
So $70 million, that's the number of amount of cost we've put out of the organization.
Throughout fiscal 2020 one.
And as I've talked to.
Range of areas.
I think I think it's probably 70% permanent.
Talked about that there will be some costs that we'll need to add.
As revenues come back most of that cost will be related to.
Things like.
Positions that support revenue either.
<unk> project management quality control those types of costs in.
In addition, there is some variable costs in this environment that will come back like travel costs have been extremely low, especially in your fiscal 'twenty, one because nobody traveled most of the year those costs will come back and then finally I guess another piece of cost will come back.
As earnings improve and will return to profitability.
There is some variable compensation costs.
It will come in but I would say at least 70% of the cost that we've reduced our are permanent in nature.
I don't know if I answer your entire question no no no.
Other part is the difference between the $102.0
So even levels.
Yes, so I'm glad you're asking about that so.
If you go back a couple of years before we started.
Trying to.
Reduce our cost structure.
At that point.
Required us to have revenue of $275 million in a quarter just to breakeven and to.
But that breakeven level, we'd still have unrecovered overheads, and so it would've taken us 300 million to fully recover the overheads.
As a result of reducing the cost we have lowered those those targets for the company.
$200 million deployed about $200 million is the point, where we're going to reach breakeven earnings that there'll still be some under recovery of overheads that level you get the brown $22.0, now youre getting to full recovery of overheads and at that point, you'll see the.
You should see the margins that we've talked about those margin targets of 10% to 12% should be what you see in the financial statements and obviously from that point forward earnings earnings improved further.
Got it got it Ken and under $100 million.
Awards, so far can you give us a sense of the timeline on those jobs do they is it two or three jobs that longer duration. When you kind of expect them to kind of roll into the P&L.
I would say.
Said.
I'm not sure I got the number but it's right.
Right now.
Yeah.
Ladies and gentlemen, please remain on your line your conference call will resume momentarily. Once again. Please remain on your line your conference call will resume momentarily.
Yeah.
Yeah.
Yeah.
Okay.
Yeah.
Okay.
Okay.
Yeah.
And you may resume.
Can everybody hear us we got kicked out.
Yes, we can hear you.
Okay. Good.
Maisel less.
Yes, yes.
It's taken a poor operator.
The last thing I heard was.
We discuss it about the timing of the of the recent awards and what has that kind of play out.
Right right so.
The awards I wasn't sure if I heard you had to hit the number but it was you know within the first 60 days we're at Orion.
We're at around $180 million and we expect that to continue to increase as we go through the quarter the first quarter Eric.
So it's a mixed bag those projects some of them in general most of them won't start having any kind of impact on revenue until the second quarter.
And some of them are you know are multi year projects and some of them will be all flushed through the system. This fiscal year. So it's a combination of us.
Okay I'm Gonna trauma located guys. One more question on new credit facility are you touched a little bit about I guess on M&A, but can you talk a little bit about how it changes your ability to repurchase stock and it changes your ability to spend on Capex and why not just start a capex number for fiscal 2021 way you're at it. Thank you.
Yeah, I mean so.
Yeah, Yeah, so for Capex I would expect us to.
It started out the year, a little slower on capex than than we will in the year.
Obviously waiting for revenues to return.
But we've been at a pretty low level of Capex.
For the last 18 months, so we will need to increase them I think for the total year. We're currently anticipated capex.
Somewhere around $9 million to $10 million.
Now on the credit facility, we're not limited on that Capex.
And on the credit facility you know right now were.
You know we are restricted a bit on on how much we can do for certain other things.
I'm not saying, we're precluded from doing buybacks, but some more if we would need.
We need to be proactive about if we're planning on doing students. So I think as earnings improve.
Our appetite for stock buybacks will improve.
But you know we've it's been important for us to maintain a strong balance sheet.
This last year and I think we've done a good job of doing that.
And so you know.
That's going to continue to be our approach.
It's just like John said, we're not looking at really major M&A in this environment, we want to see we would see their earnings improve go back to profitable results and then we'll get a little more.
Aggressive on on growth initiatives and other uses of cash income.
Thanks, Mike I appreciate taking my questions.
Yes, Thanks, John Thanks, John.
Thank you as a reminder, once again if you have a question at this time. Please press Star then one.
And this does conclude the question and answer session of today's program I'd like to hand, the program back to John Hewitt for any further remarks.
So I, thank everybody for for their attendance today and wish everybody to be safe and healthy as you move through the balance of the calendar year. Thank you and thank you again.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
[music].
Yes.
[music].
[music].
[music].
[music].