Q4 2021 Infrastructure and Energy Alternatives Inc Earnings Call
Good morning, and welcome to infrastructure and energy alternatives, its fourth quarter and full year 2021 earnings call.
Like to note that all participants on today's call are in a listen only mode and with that I will turn the call over to Aaron Redington, Vice President of Investor Relations Erin. Please go ahead.
Hello, and thank you for joining us today to discuss Iea's fourth quarter and full year 2021 financial results.
With us from management are JP rain, President and Chief Executive Officer, and Pete <unk> Executive Vice President and Chief Financial Officer.
Before turning the call over to management I would like to note that today's discussion contains forward looking statements about <unk> future growth and financial expectations.
Any forward looking statements should be considered in conjunction with the cautionary statements in yesterday's press release and the risk factors included in the company's SEC filings.
Except as required by law IEA undertakes no obligation to update its forward looking statements. After todays call since management will be presenting some non-GAAP financial measurements as references including adjusted EBITDA the appropriate GAAP financial reconciliations can be found in the press release issued on March <unk>.
2022.
And with that I'll turn the call over to J P Rein Chief Executive Officer. Please go ahead JP.
Well, thank you Erin and welcome and thank you for joining our call to discuss the 2021 fourth quarter and full year results.
On the call today I will provide a brief overview of our performance in the fourth quarter and update on our strategic priorities.
And commentary on key end market trends as we see them.
I will then turn the call over to Pete for a more detailed financial review of the quarter.
<unk> for 2022.
We finished 2021 on a very strong note with fourth quarter revenue up nearly 40% compared to the prior year and backlog at record levels, our solid fourth quarter performances across each of our business lines enabled us to achieve both record annual revenue.
And results at the high end of our revised guidance range for the full year 2021.
The challenges and concerns of the wind and solar markets are well documented.
The uncertain policy outlook supply chain and inflationary challenges two questions surrounding the outlook for domestic wind.
We often see headlines highlighting these issues while the challenges are very real and daily considerations for our <unk> business.
I'm proud of the way our team has continued to execute in the current environment to achieve record revenue and adjusted EBITDA in 2021.
Revenue within our renewable segment decreased by nearly 40% year over year on an organic basis.
Driven by broad based demand within both onshore wind and utility scale solar markets.
Our specialty civil segment had a very strong fourth quarter as well with revenues up 38% year over year due in large part to strength in our environmental remediation business. We continue to see a growing multi year opportunity within the coal ash remediation market.
While supply chain and inflationary pressures were headwinds in the quarter, we were still able to grow adjusted EBITDA nearly 60% year over year for the fourth quarter, while improving our adjusted EBITDA margin by 110 basis points to eight 5%.
We are very proud of how we finished the year and we are even more excited about the opportunities that lay ahead, our new award activity levels across both our renewables, especially solar markets.
Celebrated during the latter half of 2021, resulting in a record backlog in next 12 months backlog for the full year 2021, IAA signed nearly $2 billion in wind and solar awards and the pipeline of new opportunities remains robust.
We enter 2022 on strong footing and are positioned for another year of record revenue and earnings.
At year end 2021, total backlog was $2 9 billion up 41% from the end of 2020.
Our renewables backlog ended 2021 up 35% over last year.
And our specialty civil backlog is up nearly 60% versus the end of 2020.
Our next 12 month backlog was $2, one 5 billion at year end, giving us good visibility into another year of record revenues in 2022 .
Long term demand fundamentals remained strong across each of our end markets was on our renewable segment increased commercial and industrial demand for clean energy together with the increasingly competitive liberalized cost of wind and solar when compared to carbon based energy sources remain key catalyst.
For our growth.
We were awarded several important renewables contracts in the quarter that contributed to the strong backlog growth.
Some of the highlights were as follows.
We were awarded a 50 megawatt solar contract to construct the Turkey Creek Solar Ranch, and Guerard County, Kentucky Bye.
By Nashville, based Silicon Ranch Corporation, one of the nation's largest independent solar power producers.
Turkey creep solar ranch is the first utility scale solar project to receive approval from the Kentucky Public Service Commission Siting Board.
Construction began in December 2021, and is expected to be completed by November 2022 .
We secured a $75 million award with Invenergy, where I will provide construction services for the Sapphire Sky Wind project.
That's our plan 250 megawatt utility scale wind farm.
Wayne County, Illinois the.
The project commenced during the fourth quarter 2021 with targeted completion by the fourth quarter 2022 .
We were awarded a $44 million contract to lead the construction of a 16 megawatt utility scale wind farm in Riverside County, California. The project is expected to commence in the first quarter 2022 with targeted completion by the first quarter of 2023.
I E will self perform all engineering and construction of 15 wind turbines, two substations that mineralogical evaluation towers, and an underground electrical collection system.
I will also be passed was construction of new private and land access rights together with improvements to existing public road surrounding the property.
This is a good example of the synergies that are often leverage between our renewables, especially civil segment as most renewable projects have some form of civil work that is included in the project scopes.
The ability to self perform these services enables us to provide better control of the project timing and retain more of the profit.
Within our civil segment, we expect to be a beneficiary of the transformative 1.2 trillion federal infrastructure Bill passed last year as.
As with all federal stimulus plans it will take some time for funds to start to flow, particularly as states and municipalities seek to adjust bidding levels to reflect sustained raw materials cost inflation.
Even still we expect the infrastructure bill to provide ratable incremental cash flows over a multiyear period as stimulus funds find their way into new projects of scale.
As I indicated earlier, we remain very excited about the opportunities evident within our environmental remediation business.
We believe we are in the early innings of a significant capital spend cycle for coal ash remediation, a market, where I E brings significant scale and expertise.
Recent EPA actions provide further momentum towards remediation of the approximately 500 underlying coal ash surface impoundments.
Nationwide.
The timing is a bit difficult to predict as utilities are working to get the cost of remediation included in rate base adjustments.
While the timing has worked out on a project by project basis. It is clear there is a huge opportunity for coal ash remediation and IEA is uniquely positioned to be a key player in this market.
Before I turn it over to Pete I want to spend some time walking through our key strategic priorities for the business entering 2022.
These priorities provide a clear roadmap for long term value creation and are away from the investment community to measure our progress as we enter this next chapter of growth.
First we continue to focus on developing a leading market position of scale within markets, where I E is competitively advantaged.
<unk> intends to leverage its technical expertise geographic reach and scale across it's solar wind heavy civil rail in environmental services, we remain focused on developing a strong backlog of diversified infrastructure projects to support sustained profitable growth through the.
<unk> cycle.
For the full year 2021, we generated total organic revenue growth of 19%, while the renewable segment revenue increased 28% on an organic basis versus the prior year period, reflecting strong progress in this area.
Secondly.
We intend to capitalize on the favorable long term fundamentals within renewables.
In 2021, approximately 70% of Iea's revenue was derived from solar and wind related EPC services.
Over the next five years I expect more than 100, gigawatts of new utility scale solar capacity to be installed within the United States.
An increase of more than 80% versus the prior five year period.
Onshore wind installations are also anticipated to accelerate over the next decade with the 110 gigawatt of new installed capacity expected to be online by 2030.
Third we will maintain bidding discipline and drive economies of scale to support margin expansion.
<unk> intends to pursue higher value margin enhancing opportunities, while leveraging our size and scale to deliver exceptional value for the customer.
Solar is the fastest growing segment of the renewable energy market, given the multi decade trend towards decarbonization.
Having entered the solar market in 2019, we have just begun to realize economies of scale positioning us to achieve margin expansion within this business. Despite the inflationary pressures.
Over time, we expect the margins in our solar business to be at least equal to the margins in our wind business.
Fourth we will look to further simplify our capital structure, while maintaining sufficient liquidity to support our growth in November 2021, our board of directors authorized a program to repurchase up to $25 million of outstanding warrants to further streamline the company's capital structure.
Since announcing this program I E has repurchased nearly 64% of the outstanding warrants through last Friday March the fourth 2022.
Finally, we will pursue a disciplined capital allocation strategy I E will continue to invest in organic growth initiatives by expanding product and service offerings to better serve our customers.
Further developing an industry leading technical expertise.
Growing our skilled labor workforce.
I also intends to consider complementary bolt on acquisitions that increase our service capabilities in adjacent markets and expand its geographic presence and enhance its blended margin profile.
We are committed to our strategic plan and are confident that as we execute against our goals. It will enable us to continue to grow the business generate attractive returns and create value.
For all of our stakeholders.
That I will turn the call over to Pete Pete.
Thanks, J P and good morning to everyone. Our earnings release updated investor deck and Form 10-K were filed last night.
I'll limit my remarks to providing some financial highlights, giving an update on our liquidity and our continuing capital structure simplification and wrap it up with a full year 2022 guidance.
Before focusing on the fourth quarter I do want to note that our 2021 full year revenue of $2 $1 billion exceeded the guidance at the start of the year and then even with the negative impact of the pandemic and supply chain constraints, our adjusted EBITDA of $135 one.
Yeah.
Was right in the middle of the guidance provided at the start of the year.
For the fourth quarter of 2021 compared to the fourth quarter of 2020 total revenue increased 39% to $544 $1 million, reflecting strength across both our renewables and specialty civil segments. The.
The increased revenue helped us achieve gross profit of $63 $9 million in the quarter up 50% versus last year and our gross profit margin for the fourth quarter 2021 was 11, 7% up 90 basis points from the same period last year.
For the quarter SG&A expenses increased by $5 $6 million compared to last year's fourth quarter, primarily from higher employee compensation and benefit expenses. However, as a percentage of revenue SG&A expenses declined to five 8% compared to $6 six.
<unk> in the prior year period.
Interest expense for the quarter totaled $6 $4 million down from $14 5 million in the fourth quarter of 2020, demonstrating the benefit of the recapitalization transactions. We expect that these transactions will provide an annual reduction of $22 million in interest expense.
Cash interest payments going forward.
Net income for the quarter was $31 $7 million compared to a net loss of $1 $4 million in the prior year fourth quarter.
Fourth quarter results included $12 $9 million pre tax benefit relating to the fair value adjustment of our publicly traded warrant liabilities.
Adjusted EBITDA increased 59% on a year over year basis to $46 2 million in the fourth quarter 2021 versus $29 1 million in the prior year period.
Adjusted EBITDA, especially benefited from the combination of strong revenue growth.
And overall gross margin expansion.
Now turning to the segments.
Renewable segment revenue totaled $338 $7 million during the fourth quarter 2021, an increase of 39, 5% compared to the prior year.
Wind revenue was up 30% during the quarter, while solar revenues nearly doubled.
Renewable segment gross profit was $34 $8 million or 10, 3% of revenue for the fourth quarter of 2021 compared to $26 $7 million or 11% of revenue for the same period in 2020.
The decrease in gross profit margin percentage for this segment was primarily due to supply chain disruptions, especially in the company's solar business.
Although we finished the quarter within our long term margin percentage goals of 10% to 12% we were somewhat disappointed in the 70 basis point reduction from last year's quarter.
We recognize we are working in a challenging operating environment and we expect that these challenges will continue into 2022 and perhaps beyond.
These factors coupled with recent earnings guidance from our peers up and down the solar and wind supply chain are worth noting.
Of course, I E is not immune to market pressures, but let me briefly discuss why we fully expect we can achieve a renewable margin targets.
While we are rapidly growing our solar business, we are still gaining scale.
Did not reenter the solar market until the end of 2019 and in the past two years solar revenue has grown to over $300 million and in 2021.
It was more than 20% of our total renewable segment revenue.
As expected.
There has been a learning curve, but as we gain scale and experience of solar we fully expect our solar project margins to be like our wind project margins.
As the solar utility market is maturing.
We see many similarities to the wind market, especially in the forms of contracting.
Let me highlight the factors that help us protect our margins.
Some of the inflationary and supply chain challenges impacting the market today.
First our contracts are relatively short in duration.
With most projects, finishing within 12 to 18 months, thus, we have less risk than we would in a multi year project.
Second our customer supply most of the larger and expensive components, such as panels blades and turbines. So we do not have inflation risk on these key components.
Third we often adjust contract at the notice to proceed date and place most of our material orders, while the pricing is still fresh so there was reduced price pressure on materials.
Fourth we are fortunate to have a highly skilled and dedicated workforce many of whom have been with IEA for many years to date, we have not had significant retention issues, although we remain concerned about labor inflation.
We also have some ability to shift workers, among wind solar and civil projects, which helps from a planning perspective.
Finally, our contracts contain force majeure provisions that provide a level of protection from unexpected events, such as unusually inclement weather.
We all remember 2018, when weather was a meaningful headwind for our industry, but with the improved contract structure, we are largely protected from such issues.
As I said earlier, we will be affected by market issues as we have seen when supply chain challenges negatively impacted the efficiency in sequences on some solar projects. However, we have been able to structure. The business. So that we are insulated from many of the issues being discussed every.
Day in the market and we remain confident that we can achieve our renewables long term margin goal of 10% to 12%.
Now turning to our specialty civil segment revenue for the quarter totaled $205 $4 million, an increase of 37, 7% or $56 $2 million year over year, primarily due to growth in the environmental and heavy civil.
The environmental remediation business is benefiting from the ramp up of a large customer as well as contract expansion of an existing customer.
Heavy civil revenues were up approximately 20% of some work that had been delayed was pushed into the fourth quarter.
Rail revenues were down modestly due to reduced customer capex, resulting from the last two years of COVID-19 pressures spec.
Specialty Civil segment gross profit was $29 $1 million or 14, 2% of total revenue for the fourth quarter of 'twenty, one as compared to $15 8 million or 10, 6% of revenue for the same period in 2020 the.
The increase in the segment's gross profit percentage was primarily due to growth in the environmental remediation market and favorable year end project completions.
At December 31, our balance sheet shows cash of $124 million and total debt was $358 million, which included a 300 million dollar unsecured notes.
$3 $6 million in commercial equipment loans, and $54 $4 million of construction equipment financing lease obligations.
Our net debt to adjusted EBITDA ratio was a sparkling one seven a meaningful improvement from where we have been.
At year end, we had nearly $119 million of availability under our credit facility net of letters of credit, which when combined with cash gave the company total liquidity of $243 million.
Because some of our projects are pushed towards the end of 2021 or even into 2022, we incurred a negative cash flow from operations for the year of $11 million. This is the result of our construction industry characteristics, namely owners do not want to negotiate or especially pay for.
Change orders until the end of a project on.
On average our larger projects accrue, 5% to 8% of revenue as change orders and the delay in completing projects has a direct impact on billing and cash collection.
We obviously monitor the situation closely and while the number is frustrating we are not anticipating a significant issue as we go forward.
Instruction industry characteristic is another reason to maintain a strong balance sheet.
Last November our board of directors authorized us to spend up to $25 million to buyback the public warrants these warrants, which trades under the symbol I E. W. W are the last vestiges of the spec process in our capital structure the warrants expire on March <unk>.
26 2023.
At the end of 2021, we have repurchased $9 $2 7 million warrants are about 54, 8% of the total at an average price of $1 27 per warrant.
While the pace of repurchases has slowed as of March 4th we had repurchased almost $10 9 million warrants were almost 63, 9% of the total warrants for a total cost of $14 $6 million.
We benefit in three ways from the repurchases first we have reduced the number of potential shares that would need to be issued in the first quarter of 2023.
There remain anti dilution covenants from the series B preferred agreements and for every share issued on the conversion of the warrants we would owe 0.3 shares to the former series B owners.
Date, the repurchase or have reduced by over $7 million of potential shares issued on the exercise of the public warrants.
That means we have reduced the spak warrant overhang from 120% to 108% of diluted shares.
Lastly, we are reducing the number of publicly traded warrants that must be marked to market at the end of each quarter, thereby slightly reducing the volatility of our earnings calculations.
Now pivoting from the past into the future.
Total backlog at the end of 2021 was $2 9 billion, an increase of 41% compared to the end of 2020.
Renewable segment backlog at December 31, 2021 was to point out $1 billion, an increase of 35% compared to the prior year driven by strong growth in our solar market combined with steady performance in wind.
He signed nearly two point of $1 billion in wind and solar awards in 2021, and the pipeline of new opportunities remains robust.
Specialty civil backlog at year end, 2021 was $881 $3 million up nearly 60% compared to last year due in large part to favorable market trends and our environmental business.
The company expects to realize approximately 215 billion of its estimated backlog during the next 12 months up $523 million from the end of 2020.
Now onto guidance.
The long term outlook for Ies business and our markets remain strong we see 2022 as another record year for our business both in terms of revenue and adjusted EBITDA.
However, we recognize that challenges from 2021, including the impact of supply chain disruptions in COVID-19.
Will continue into 2022.
<unk> guidance for 2022 reflects our efforts to recognize the uncertainties associated with these challenges.
For 2022, we project total revenue of between $2 1 billion and $2 $2 billion, we expect that the renewable segment will generate approximately two thirds of that revenue.
We expect that wind revenue may decline from 2021 by 15% to 20%, but that solar and wind services revenue will more than make up for that decline.
We expect that we will continue.
Our normal seasonal patterns with approximately 40% of their revenue in the first two quarters of the year.
Our projection for 2022, adjusted EBITDA is $140 million to $150 million.
That includes approximately $48 million of depreciation and amortization interest expense of around $26 million.
And the tax rate of around 26%.
We expect to invest around $45 million to $48 million in Capex.
Finally, because we absorb more fixed costs as our revenue increases we expect to recognize between 25 and 30% of the adjusted EBITDA amount in the first two quarters of the year.
With that I will turn the call back to J P.
Well, thank you Pete.
2021 was an important year for I E and I am extremely proud of everything we accomplished despite the sometimes uncertain and volatile market conditions.
Looking at the year and review some of the important highlights were as follows we significantly simplified our capital structure by redeeming our series, a and series B preferred stock refinanced our debt facility and are in the process of repurchasing a portion of our warrants all to the benefit of the call.
I'm a shareholder.
We continue to grow our renewables business and in three short years have become one of the leading utility scale solar EPC firms in the country, we see significant growth in the solar market in the coming years and he is very well positioned to take advantage of these trends.
We executed very well in our renewables business, despite the supply chain inflationary and labor headwinds. We did have some modest margin compression, but we think our performance validates our ability to execute even in the most challenging times and highlights how I E is different than the wind Oems blade menu.
Factors of residential solar firms that saw significant margin compression in <unk> 2021 .
We positioned <unk> to be a leader in the environmental remediation market and have successfully ramped up our business in recent quarters with approximately 500 underlying coal ash surface impoundments nationwide, we say a long path of growth in this market.
I want to leave you with one key thought regarding our growth opportunity in renewables. We are excited about what we see in the coming years for both wind and solar but I think it is important to understand that I E. In the wind and solar market are not policy or tax credit stories.
We certainly hope the renewables industry is supported with extensions to the ITC and the PTC as it will help our business near term.
That said, we are not dependent on policy to drive profitable growth.
Currently nearly 200 Gigawatts of legacy power capacity is scheduled to come offline in the next 30 years low.
Low cost wind and solar are going to be the key beneficiaries of this replacement cycle the.
The reduction in the liberalized cost of win and particularly solar have made it such that renewable energy is not only the right environmental choice.
It's also become the right economic choice as well.
The growth opportunity is large and is one of the few EPC firms with the scale expertise and experience to execute on this opportunity.
We are very well positioned for years to come.
This concludes our prepared remarks for today, operator would you. Please open up the call to questions.
Thank you and at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
And our first question comes from the line of Brent Thielman with D. A Davidson. Please proceed with your question.
Okay. Thanks, Good morning, J P. Pete Congrats on a great brand.
Thank you Brian .
I guess first question it seems like potentially the revenue guidance could be sort of handicapping toman going supply challenges, obviously in solar which we all hear about.
I guess my question is how much of that business today, our backlog today is really scheduled to get done this year versus what youre sort of currently embedding in the revenue outlook to get worked through as you try to anticipate some of these ongoing challenges.
That's a good question Brent.
I think that when we look at the numbers, we recognize that we have a situation where we are showing.
$2 $1 5 billion in near term, but we may not achieve all that this year in the same way that we did not get to our total next 12 months in 2021. So we are recognizing that some of the jobs may get pushed and so the guidance is trying to.
Kind of walk a middle part between what we have been told we could build versus what we're afraid some.
Some of the supply chain limitations means.
So that's why you see kind of a middle of the road type guidance.
Yes.
Okay I appreciate that Pete.
Wind business again, I think nothing too surprising about the outlook through 'twenty two there.
J P any thoughts on.
You ought to think about kind of a revival at year end 2023, and one of the things we need to see through this year that to get more comfortable that that business can get that back on better footing next year.
Well you know.
We I think this is kind of been an ongoing question we've handled in the last two or three calls but.
You know I'll kind of restate some of the things I've said before the fact that.
I think what we see.
As we've discussed in the commentary here on the call, we see when maybe down a little bit this year, we certainly don't see it down.
As much as what we've seen some analysts predict in the market.
So you know that.
What kind of level set 2022, but you know to your question going forward.
This repeatedly.
Our customers are our barometer.
Sure.
How we play in our business going forward and we see a lot of strong wind demand I think our I think we've heard particularly one when the OEM indicates they've seen an uptick in orders in the last part of 2022 going into 2023.
So we do see kind of a resurgence.
I think that's kind of picked up in the in the analysts' reports, yet but from our feet on the ground, we see kind of a resurgence of win we've also seen some of our clients kind of in this supply chain uncertainty times for solar.
Kind of shifted their their capex spending more towards when next year. So all of the already said.
We're diversified renewable contractor obviously, we've you know we've got a long storied history and win.
But.
You know.
Yeah.
Any kind of federal legislation or not we think wind is kind of here to stay and the part of.
This energy transition for for the future.
Okay. Thanks for that JP and then.
Outstanding margins and specialty simple, maybe just kind of help us understand how much was transitory things this quarter versus whats still benefit the margins in this segment on a go forward basis and kind of what are you assuming for margins in the guidance.
We saw some very strong benefit in our.
Environmental work, so I think that will kind of stay and then yeah. We did get some benefits from as we got to the end of jobs and we're able to negotiate.
The final change orders I would say that our guidance has been that we want our specialty civil segment to be you know 90 plus percent margin points.
And I think that that's kind of where we expect it to stay with you know occasionally being able to get to the <unk>.
Standing margins that we got at the end of 'twenty one.
I also.
I appreciate you pointing it out Brent August one.
We spent a lot of time talking about renewables on these calls but.
I appreciate you in particular pointing out that.
Performance in the quarter were proud of our team and their performance in <unk> and.
And quite frankly, it's a.
<unk> coal for them as Pete mentioned in.
In the future, but thank you for pointing that out.
Yep.
Last one just for me could you talk about the offshore wind partnership you've engaged and maybe what your role will be in.
Certain financial implications or further down the road, but what those could potentially be.
Yes, I'd say.
We would.
What one thing that I would say before as before I can really get into it as we're very early on into this partnership and the industry is very early on into what is.
It could be a pretty substantial industry by 2030 as predicted.
And with any industries it is continuing to mature.
So it's never been built in the United States before the means methods jurisdictions of trades.
Yeah.
Everything everybody is kind of still.
Still working that out so to speak.
So.
We think it has we think it has.
Potential to be a meaningful contributor.
In the years coming or we wouldn't have done.
But our strategy is pretty simple.
Where we are focusing on the onshore.
Ponant of offshore wind.
So what's that mean well what that means is.
Running running the port that services the project.
Taking managing all the inbound shipments that come in from various OEM vendors and receiving those shipments.
Different than we do I don't know.
Onshore project.
Doing pre assembly as required and who in prepping those components.
And loading them on.
A barge that would ultimately take them out into the water for assembly by by others.
I want to reiterate I think as I've mentioned several times in the past.
We currently do not have a we're not pursuing this strategy.
That would be evolving I E out of the water everything that we are currently pursuing for IEA.
Onshore offshore business is port type onshore work.
Okay. Thanks for that JP best of luck.
Thank you.
Our next question comes from the line of Adam <unk> with Thompson Davis. Please proceed with your question.
Hey, good morning, guys. Congrats on the strong Q4. Thanks.
Thanks, Adam Thanks, Adam.
The.
Where are you guys in terms of the wind services revenue and I think you said that would help to offset some of the decline in the wind project revenue this year.
Good.
We have not fully broken that out yet I mean, it is still going to be order of magnitude less than a 100 million, but we're seeing some great growth opportunities. They had a good year. They actually broke even this year and we look for them to continue growing and it's going to take a while obviously to get to scale, but.
But we think we can be one of the real strong.
Operators in that field.
Okay, and I was glad Brent asked a question about the specialty civil margins because if those are kind of in that.
9%, 10% range I think the guidance would imply that you get back to 10% to 12% at renewables.
And I guess the question would be just what gives you confidence that you'll be within that range. This year at renewables.
Well certainly we've historically, we've historically been able to accomplish that.
Yeah.
Thanks for sure we had been building wind for 18 years now so we certainly understand when we've been in and out of the solar business over the over the period of years, but.
And it's solidly now for over a period of three years.
We are.
As.
Pete mentioned in his commentary.
We had some ups and downs in solar last year, but.
Basically why use where you've seen us come out is our conviction that you know we've.
Good.
We certainly have learned we learned and continue to scale that business in and have a firm firm conviction of where we believe we could we could bring that business in and as we as we indicated.
So believe that it should be approaching if not at margin with our wind business. So.
From what kind of lessons learned over the last couple of couple of years.
We believe that that's where we can land.
Great and then lastly, I guess for Pete.
How do you think the cash flow.
Shakes out this this year or maybe maybe even if you just wanted to kind of address it in terms of quarterly cadence that'd be helpful.
I think that.
One of the humorous things in life is that unfortunately.
There are specific dates so we picked up 40, almost $40 million in cash on January 4th which was the first day of them of the new year and.
We would have loved to obviously a lot better from cash flow of operations, but for that weekend I think what we will continue to see is stretching out some.
Some pushing until we finish the project and get all the change orders done so it's going to go.
Robley.
First your first quarter as we should be okay.
Towards the end of the quarter, maybe April before we settle some of these.
I think then we will get back into a much more normal cadence I think that.
What's happened to us is by pushing back some of the projects you just delayed our ability to collect because we haven't finished all the change orders.
Helpful. Okay. Thanks, guys.
Thanks, Adam.
Our next question comes from Sean for reason with Guggenheim Partners. Please proceed with your question.
Hello, It's actually Comped contained here for Shar, congrats on a great quarter.
Good morning, Thank you and good morning.
I wanted to start off with a question on the 2022 outlook I appreciate the revenue projections outlined today and <unk>.
We continue to sign more projects centrally starting in the 2022 time frame would.
Would you expect the cadence of the revenue recognition impact the guidance for the upside, especially as you keep announcing projects here in <unk>.
Well you know as I said in my remarks, we expect to see about 40% of the revenue in the first half of the year and 60% in the second half of the year to the degree that any of that moves up obviously, we do a better job of absorbing overheads and increasing EBITDA and EBITDA margin.
The Big challenge for Us will be the point at which our customers feel comfortable that they can give us notices to proceed and the point at which they can get especially in the case of solar panels that they can get delivery you know anecdotally. We're hearing that some of them are still not yet they are ready to give us a notice to proceed but they have not yet.
<unk> acquired the solar solar panels, because theres still negotiating with the manufacturers. So those are the sort of things that keep us up at night as we are our issue is that especially with solar you wanted to do that all of the manufacturing all the construction. Once you don't want to have to go back in and change anything.
So.
For us if we were in a position where we could get everything when the clients want us to start with the jobs are.
And we could work our way through then yes, you would see we would do even better both on revenue and margin. What we've tried to do is kind of.
Do a middle of the road case.
It gets us through hopefully most of the issues associated with inflation and associated with the start of the project.
Okay. That's very helpful and just kind of on the same note in terms of the kind of operating leverage that you're embedding in plan is there some inflationary contingency around input costs.
Yeah, and as I said in my remarks, there are a lot of input costs that are not our responsibility.
The actual purchase of the panels the purchase of the turbines.
Secondly in a lot of cases, we have the ability that at the time, we are given the contract. The notice to proceed that we will go ahead and commit to purchase are actually purchased a lot of the materials that we need.
And then we benefit obviously from having a relatively shorter timeframe within which do construction.
But having said that yeah, we are somewhat susceptible obviously labor is always going to be a challenge.
We have tried to address that issue in our forecast.
Our projections.
And some of that unfortunately, we won't know until we actually see what happens, but we certainly learned last year in third quarter that this is a real impact and that we need to take into consideration going forward.
Yeah.
That's very good clarity and maybe just lastly, shifting a little bit more broadly in the financial strengthening that was done in 'twenty, one was well received and how.
How are you thinking about capital allocation for 'twenty, two and beyond just getting a sense of the stack of priorities between kind of picking up that they would have security and expanding the platform organic inorganic et cetera.
I'd, probably start and let J P finish I think from the financial side.
I mean, we are looking and obviously, we've taken out a lot of the publicly traded warrants.
We're probably approaching the point at which we're not going to do a whole lot more.
At this point, we are looking to make sure that we have the availability and cash that we need for organic growth.
Obviously, we are can generate good cash flow out of our projects, but when we look at where we're going I think we certainly are looking at potential opportunities.
Bolt on acquisitions.
J P you might.
Yeah from my standpoint.
You know I think if you look at our track record on organic growth its almost kind of second to none of any of our public peers. The last.
Several years.
I believe that our ability to continue to do that is.
Going into this year is continues.
So primarily we're gonna be thinking of organic growth and.
And margin enhancement.
Those are those are no doubt are our two key themes of this year now that being said.
These warrants in end markets that are very tough to organically grow and.
We've been very successful at it but still in order to continue to scale and kind of the appetite to facilitate the appetite in the market.
You know it might be best to organic to inorganically grow or execute a bolt on acquisition. So we're always looking.
For particularly in our key end markets.
For those type of opportunities, but as.
So I would think about us in the near term I would think about us concentrating on.
Organic growth and margin margin enhancement opportunities.
Yes.
That's perfect abundantly clear thanks for taking my questions.
Thank you.
And our next question comes from the line of Noelle Dilts with Stifel. Please proceed with your question.
Hi, guys I, just was hoping you could comment a little bit more on the coal ash remediation opportunities Youre seeing you know when you.
Look out kind of what's in the market or these kind of smaller opportunities or do you see you know some additional large contract opportunities over the next couple of years. Thanks.
Well, it's a great question I'm glad you asked it Noelle earlier earlier in the quarter.
The.
Earlier in the first quarter of this year, the biding administration kind of announced or the Baidu administrations EPA.
Announced that they were going to go even further crackdown on.
On the guidelines and the requirements for remediation.
So.
Certainly I think what was already kind of a.
Incredible opportunity.
Has.
As even gotten better.
In the near term.
It is it is a.
We would kind of reiterate as we've talked in the past.
Since it's not a revenue producer.
Our margin producing.
For the utility.
They move very slowly.
And quite frankly, they they analyze any and all opportunities depending on which state you're in to get rate base recovery.
And then.
They kind of get curve balls every time.
The federal government kind of changes the guideposts on them. So that's all to be said is we can see we continue to see opportunities move forward.
We continue to respond to Rfps.
And it's growing for us.
But we think this is a.
This is not a one or two year opportunity. This is multi this is what's more than a decade opportunity and we just.
We expect to be continuing to incrementally grow this business for quite some time.
And quite frankly, that's that's good from the standpoint it is a very.
Resource intensive business, both especially from the the manpower that it takes but also in the specialty equipment.
And.
There is there is.
With the market that's out in front of us certainly not.
Not the opportunity to ramp this business up overnight so.
We are glad to be the player at scale and expertise that we are in here in just reiterate.
We're going to be a big player in coal ash as it continues to grow over the next decade plus.
Okay, Great. That's really helpful. And then recognizing your comments that the business is not necessarily dependent on.
Yeah.
Within win until around on policy and tax credits, but could you just speak to kind of what your expectations are around the potential for you know given that build back better sort of in limbo, how youre thinking about what you know.
May or may not occur in terms of the wind tax credits and how you've sort of incorporated that into your guidance in other words, you know if we do see them.
Direct pay option come through and in the multi year extension of the tax credit.
Does that just represent upside to your guidance or do you think it would really be.
Something that might benefit 2023.
Well I'll take the I'll take the last part of it first because it's the easiest to answer.
I don't see I don't see any any change our guidance for what happens legislatively in Washington at all by 'twenty three or after.
As far as.
What a roller coaster. This last 90 120 days has been for anybody in this industry.
Obviously build back better look very favorably.
Back before the holidays.
And then obviously suffered some headwinds.
And then obviously.
With things that have happened.
More of a world scale, Russia.
Supreme Court Justice and things of that nature, it's kind of almost fallen off or had fallen off the.
The day to day rhetoric.
However that being said.
Thank you.
Our kind of connections to Washington.
I think this may be coalescing around.
It may not be build back better maybe more of just a climate climate bill or more of an energy security type of bill, but I think the situation you have in Russia is bringing really the two two sides together.
And I think that.
What you see going on with oil and everything else right now.
Hi.
I'm feeling very strongly from what we hear is you will see some legislation soon.
Hopefully within the second within the second quarter.
That.
Kind of really a re engage with some of the principles on the climate side from build back better.
Okay got it.
Thanks very much.
Thanks Noel.
And we have reached the end of the question and answer session and I'll now turn the call back over to J P removed for closing remarks.
Well, we appreciate each and every one of you for joining US today as we reported on our year end 2021 in the fourth quarter of 2021.
It'll be just a short few weeks here before we're back together in early May as we look forward to reporting to you on our Q1 2022 results everybody be safe and we will talk to you soon thank you.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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Yes.
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Hi.