Q4 2021 Charah Solutions Inc Earnings Call
It releases and conference calls.
Those risks include among others.
As we have described in our earnings press release as well as in our filings with the Securities and Exchange Commission, including our quarterly reports on Form 10-Q .
Annual reports on Form 10-K , we disclaim any obligation to update these forward looking statements except as required by law.
During this conference call, we will refer to certain non-GAAP financial measures, we provide reconciliations to the nearest applicable GAAP measures in our earnings press release and supplemental presentation.
Again, thank you for joining us today now I would like to turn the call over to Scott Sewell, Our President and Chief Executive Officer.
Thanks, Steve and good morning, everyone. Thank you for joining us for our earnings call today I'm.
I am pleased to report that 2021 was an outstanding year for <unk> solutions with a record level of new business Awards and an excellent start to three major projects announced at the beginning of 2021.
And strong progress in growing our ERP business.
Because safety comes first at Charlotte and is a cornerstone of our culture I am very pleased to report that we maintained a strong safety and operational record during a challenging environment, resulting from the COVID-19, pandemic and a tight labor market.
Our hard work in 2021 paid off as our financial results for the year were at or above the top end of our revised guidance ranges. We provided last November for revenues adjusted EBITDA and adjusted free cash flow.
This morning, I will provide a business update covering our new business awards, our bid pipeline. The recent EPA ruling and other business developments.
I'll also update you on our ESG initiatives Roger.
Roger will then review our financial performance during the fourth quarter and full year and address our 2022 guidance beginning with New Awards 2021 was a record year for us with $840 million of New business awards, which exceeds our record level of $715 million that we set in 2020.
In fact, this was our third consecutive record year of new works.
The 2021 Ford span all of our lines of business and included two ERP projects.
Two large in several mid size and smaller remediation and compliance projects.
Several ash marketing agreements and multiple renewals of existing contracts.
The total for the year included approximately $35 million that was awarded after our third quarter of 2021 in the earnings release last November .
The most significant of these recent awards with a Midwestern utility for Ash pond closures at one of its coal fired power plants.
Our ability to continue to win new business with both existing and new power generation customers speaks to the essential nature of our services the reputation experience and resiliency of our industry leading team.
We currently have more than $3 $1 billion of pending proposals, which has increased approximately $500 million since our conference call in November .
We also have identified nearly seven 5 billion of opportunities across our businesses.
We are optimistic about the prospects for converting some of these opportunities into additional new business.
That will further add to the predictability of our revenue stream and layer on growth well into the future.
At the federal level, we believe that the environmental protection agency under the buy and the administration will continue to accelerate its efforts on regulatory requirements beneficiary issue guidelines and ash impoundment closure deadlines.
Which should result in additional market opportunities for Sarah.
On our previous call I indicated our expectation that 2022 would be robust year for bid activity, both with respect to the number of solicitations as well as the size of projects.
On that note I'd like to address a ruling issued by.
The environmental Protection agency in January of this year.
Which advances the epa's commitment to preventing groundwater contamination from coal ash.
The January ruling expands and strengthens regulations affecting coal ash and groundwater management of mandated surface impoundments and landfills.
In particular, the 2015 CCR regulations.
We review this development.
First under the New administration is very positive for our addressable market over the next few years.
As a significantly expands the amount of remediation work utilities will be required to perform.
However, based on the scope of the Epa's announcement.
Which was stronger than expected.
We expect the power generation owners will require time to assess the ruling in order to develop or revise their compliance plans.
Since the January EPA announcement, we have seen an impact on timing of pending an anticipated bids for this reason which may continue.
The regulatory environment continues to be favorable for our business at the state level as well.
As we have discussed on previous calls there continues to be significant activity at a number of states as they move toward a more prescriptive approach to the means and methods of Ash pond remediation.
As I noted, we remain very optimistic about the size of the addressable market and our competitive position.
As the partner of choice for solving our customers' most complex environmental challenges.
And as an industry leader in quality safety and compliance we are ideally situated to help utilities and power generation companies deliver on their EPA and state regulatory requirements and needs.
The January EPA announcement, only adds to that optimism and expectations for future growth.
Particularly across our remediation and compliance and ERP services.
We also believe that the infrastructure Bill signed into law in November 2021 will have a positive impact on our byproduct sales services and raw materials sales businesses.
Now the exact timing of the ramp and construction driven by the infrastructure Bill is uncertain.
We believe that recycled fly ash demand will grow.
Much like the favorable impact we see from the recent EPA announcement, we believe that the demand by the state and federal entities and end use customers and consumers for more environmentally friendly alternatives to Portland cement will result in accelerated growth in utilization, so fly ash and green concrete.
As we have discussed on past calls the substitution of the Portland cement with fly Ash has almost a pound for pound effect and the reduction of <unk> greenhouse gas.
It improves the quality of the concrete and.
And provides cost savings.
As a leader in the recycling of fly Ash, we are excited about the future growth of this part of our business.
Now turning to an update on our businesses.
'twenty one was an excellent year for the growth of our ERP services business.
Our unique ability to provide a single source solution for customers looking to address the environmental and economic challenges associated with retiring older or less economically viable fossil generation assets positions us as a strong partner for existing and potential new customers.
In December 2021, we closed on the sale of nearly 80% of our REO property acreage in our Gibbons Creek project in Texas for net cash proceeds.
Of $23 6 million.
This consisted of parcels that did not require remediation and that were available for immediate sale.
Last month, we announced a contract for.
The sale of the remaining real property acreage.
With closing expected in the third quarter of this year.
This remaining acreage includes remediated parcels and the valuable switch yard and administrative facilities.
On the remediation side of Gibbons Creek, we completed the planned inflation and demolition of the plant last October .
The demolition completed.
<unk> sales accelerated in the fourth quarter, and we expect that to continue into the first half of 2022.
Additionally.
We were able to recognize gains on our arrows.
Given street due to the differences between the estimated cost used in the measurement of the fair value of the arrows in the actual expenditures incurred for specific remediation tests.
Our remediation work continues ahead of plan and we expected to be substantially completed in 2023.
In April .
We expect to close on the acquisitions of the Avon Lake in terms of what coal fired generating stations from Gen. On after the plants ceased operations.
But just with the acquisition with a new ERP project that we announced in December 2021.
We assume responsibility for demolition of the plan and environmental remediation and sustainable redevelopment of the site.
We have commenced environmental remediation and site redevelopment planning efforts for both projects.
And after closing we will immediately start.
Plant and coal yard remediation.
We plan to engage a local vendors contractors and workforce to support the remediation of these properties.
We are very pleased with our performance and our ongoing ERP projects, particularly at Gibbons Creek or.
The timing and results have exceeded our expectations.
We continue to believe that sharp possesses unique competitive advantages and benefits for our utility customers compared with other alternatives.
<unk> represents an area for significant growth and profitability.
And we continue to devote resources to expand those opportunities.
Now I will turn to our remediation and compliance business.
Prior to year end, we successfully completed the first phase of the coal Ash reclamation project for Dominion energy and we are moving into phase two of that project.
Additionally, the two long term ash pond closure project at a major south eastern utility that we announced in early 2021 are continuing to ramp and progressing very well.
We also commenced work on multiple midsized projects, including the recently awarded Assuan closure project in the Midwest.
As we noted in our press release, we experienced construction delays much of which were a result of adverse weather conditions over the winter and supply chain issues at certain remediation and compliance projects.
These issues affected our fourth quarter 2021 gross margins the construction delays occurred at projects.
Most of which are expected to be completed by mid year.
As utilities and power generation companies deliver.
On their EPA and state regulatory remediation and closure obligations.
They evaluate the options are beneficially reusing, the coal ash or placing it into onsite or outside conforming landfills.
Sure is ideally situated to support our utility partners in either of these pads.
The Dominion project is an excellent example of a beneficial reuse project and the projects at the major southeastern utility demonstrate our ability to close ash ponds.
And our byproducts services business, we remain in contract discussions with potential utility customers and are optimistic that we will achieve our first commercial agreement for the use of our <unk> technology in the first half of this year.
This technology can be used for the beneficiary issue of both wet and dry fly ash.
As a reminder, and virus source has a significantly lower cost profile than the competing technologies.
As a vessel to design, a scalability and can be deployed in months.
It reduces utility customers needs for landfill ash ponds and other disposal methods.
I'll close this business update with a comment about the impact of certain macroeconomic developments on.
On our business.
The labor market has become tighter and increasingly competitive.
In addition to supply chain and logistics issues have affected many sectors of the economy.
We have experienced some delays in obtaining certain construction materials, but for us. The primary concern is transportation logistics, particularly rail and third party trucking.
Where labor constraints in the pandemic have reduced the availability of truck drivers and increased rail congestion.
This has affected our raw material sales business, which is comprised of our international raw materials brokering business.
It includes importing raw materials in providing the sourcing logistics and management needed to facilitate these raw materials transactions around the globe.
Sales decreased in 2021 due to the logistical issues that affected the movement of coal ash by ship barge rail and truck.
In part due to the tight labor market and the impacts of the COVID-19 pandemic.
As a result, we did not imported coal ash from Europe .
And we imported unless asked from Asia than expected.
We are continuing to monitor the international supply chain situation.
And we're staying in contact with our global raw material suppliers and partners in the event that shipping conditions improve.
In terms of our workforce, we have been successful in retaining our leadership and middle management.
Wages have been increasing.
Date, they have not been availability constraints that have hindered our ability to perform the work.
The majority of our contracts.
<unk> pass.
Pass through clauses for cost increases in fuel resin liner and certain other commodities.
Next I'd like to review our performance with respect to our ESG initiatives.
As we had indicated previously sustainability is at the heart of our business I am pleased to report that.
We achieved substantially all of our one year ESG objectives, and the key areas of environmental performance.
Notably sustainable and land redevelopment water <unk>.
Electricity and fuel consumption.
And waste disposal, as well as diversity and inclusion and safety.
And a key area of safety, we had no lost time incidents and we had a total recordable incident rate of <unk> 32, which was below our goal of four 6% or lower.
Our safety performance was recognized with several awards for construction safety and employee safety in 2021.
In terms of environmental performance, we're on track to remediate or redevelop substantially 90% of our land owned.
Such as at the breakeven.
BC Cobb Gibbons Creek sites.
We have increased both the number and quality of site audits and inspections.
With <unk> environmental compliance inspections, nearly doubling since 2020.
We did not receive any notices of violation or notices of deficiency in 2021.
We also made progress in evaluating our water consumption to reduce use will replace with recycled water.
We have developed methods to track, our electricity and fuel consumption and our waste production at individual sites.
I would also note that we expect to issue our second annual ESG report early in the second quarter of 2022.
Showcasing our significant leadership in fulfilling our ESG commitments and sustainably preserving our natural resources for the betterment of our planet our communities and our customers.
Before turning the call over to Roger I would like to thank our dedicated server solutions employees.
We are working every day to help our customers ensure service reliability and to address their environmental and recycling needs.
We remain committed to keeping our people safe supporting our customers and growing our business.
With that I'll turn it over to Roger Shannon.
Thanks Scott.
Continue with a review of our financial results and provide an update on our cash flow balance sheet liquidity and 2042 guidance.
For the year ended we updated the descriptions of the types of revenue. We would include in our suite of services to better reflect how management operates the company.
Which is by customer arrangement.
We moved the utility sourced Scm's management, and marketing services to align with our CCR landfill operations and utility support.
Whereas it had previously been included with our raw material sales.
Raw materials sales is now sales such as fly ash brokerage for non utility sources internationally sourced industrial slag products iron ore bauxite and other raw materials that customers used to produce cement, while also providing the sourcing logistics and management needed to facilitate.
These raw materials transactions around the globe.
Please refer to the breadth of services chart that we added to our supplemental investor presentation.
I will now start with our fourth quarter 2021 results.
Revenue increased $27 8 million or 42% to $93 4 million as compared to $65 7 million for the fourth quarter of 2020.
This increase was primarily driven by an increase in our remediation and compliance services revenue from the commencement of new project work.
This increase was partially offset by decreases in raw material sales and byproduct services.
Scott noted the decrease in raw materials sales was driven by reduced supply from international sources due to supply chain constraints in particular high ocean cargo rates that have reduced profitable sales opportunities.
The decrease in byproduct services was mostly attributable to the dissolution of our joint venture Ash ventures, LLC and the second quarter of 2021, and the completion of certain projects in early 2021.
Gross profit decreased $400000 to $3 9 million as compared to $4 4 million for the fourth quarter of 2020.
The decrease in gross profit was primarily driven by issues at certain projects most of which are nearing completion.
<unk> from construction delays supply chain issues and adverse weather impacts.
As a percentage of revenue gross profit was four 2% a decrease from the six 7% in the fourth quarter of 2020.
Net income attributable to <unk> solutions was $1 3 billion, an increase of $35 2 million from net loss of $33 9 million in the fourth quarter of 2020.
The improvement was primarily due to a decrease in impairment expense gains.
Gains on sales of real estate property and equipment net from an ERP project and a gain on settlements also at our ERP project.
These positive drivers were partially offset by the non recurrence of a gain on change in contingent payment liability.
Other operating expenses for <unk> services increased interest expense and increased general and administrative expense as on past calls I'd like to remind you that the accounting treatment for our ERP services is different from our three other lines of business.
Profit and loss results for ERP services are captured in two lines in the income statement.
Gains on sales of real estate property and equipment net.
And other operating expenses for <unk> services.
Thus the ERP business is not included in our revenues or our gross profit, but it is included in operating income and adjusted EBITDA.
Adjusted EBITDA increased $11 6 million to $13 7 million as compared to $2 1 million for the fourth quarter of 2020.
The Gibbons Creek ERP project was a significant contributor during the quarter.
With gains recorded on sale of 80% of the real property acreage and a reduction in the ROE.
Now turning to the full year ended December 31 2021.
Revenue increased $68 million or 26% to $293 2 million as compared to $232 4 million for the year ended December 31 2020.
The increase was primarily driven by an increase in remediation and compliance services revenue of $79 8 million from the commencement of new project work.
This increase was partially offset by lower raw materials sales of $13 6 billion.
And lower byproduct services revenue of $5 3 million.
Drivers of these decreases for the year were similar to those previously mentioned for the fourth quarter.
Gross profit increased $3 1 million or 13, 6% to $25 9 million as compared to $22 8 million for the year ended December 31 2020.
The increase in gross profit was primarily driven by an increase in revenue.
Partially offset by a lower gross profit margin percentage of eight eight and 2021 as compared to $9 eight in 2020.
The decline in gross profit margin was primarily driven by issues at certain remediation and compliance projects most of which are nearing completion, resulting from construction delays and supply chain issues again, mostly affecting the fourth quarter of 2021.
Net loss attributable to show, our solutions decreased $50 million or 89% to $5 8 million as compared to a net loss of $55 $9 million for the year ended December 31 2020.
The decreased loss was primarily due to a decrease in impairment expense gains on sales of real estate property and equipment net.
Gain on the sales type lease from an ERP project gain on a row and the increase in gross profit.
These positive drivers were partially offset by the non recurrence of a gain on change in contingent payment liability and increases in general and administrative expenses and other operating expenses from <unk> services associated with the startup of the Gibbons Creek project.
The nonrecurring gain from the change in contingent payment liability was $9 $7 million.
General and administrative expenses increased $8 1 million in 2021, primarily attributable to the absence of a $7 1 million dollar reduction in expense from the exploration of our purchase option liability on our structural fill sites as previously mentioned.
Other operating expenses from ERP services increased $5 1 million due to expenses associated with the commencement of operations on the Gibbons Creek ERP project in 2021.
Adjusted EBITDA increased $25 8 million to $40 1 million as compared to $14 2 million.
For the year ended December 31 2020.
As I noted with respect to the fourth quarter results Gibbons Creek was also a significant contributor to adjusted EBITDA for the full year.
Now turning to our cash flow.
Operating cash flow was negative $12 5 million for the fourth quarter of 2021.
Decrease of $10 $9 million from a positive $1 6 million in the fourth quarter of 2020.
The decrease was partially attributable to noncash adjustments to net loss and changes in working capital.
Adjusted free cash flow was $12 6 million, an increase of $3 9 million from $8 7 million in the fourth quarter of 2020.
The increase was primarily attributable to proceeds received from the sale of 80% of the real property acreage and scrap sales that Gibbons Creek, partially offset by the decrease in operating cash flow and an increase in capital expenditures.
As we've discussed on previous calls adjusted free cash flow includes the gains on sale of real estate property and equipment net from ERP projects.
Which are reflected in cash flows from investing in the cash flow statement.
While the <unk> remediation spend is reflected in cash flows from operations for the full year operating cash flow was negative $10 $2 million.
A decrease of $22 $7 million from the positive $12 5 million in 2020.
The decrease was primarily attributable to the net loss before noncash adjustments.
Adjusted free cash flow was $52 6 million, an increase of $35 9 million from $16 $7 million in 2020.
The increase was primarily attributable to $34 $9 million of cash and restricted cash from the Gibbons Creek ERP transaction and an increase of $32 million in proceeds from the sale of real estate property and equipment, including proceeds from the sale of the 80% of the real property.
Acreage and scrap sales to Gibbons Creek.
These changes were partially offset by a decrease in operating cash flow as previously discussed and.
And an increase of $4 2 million and capital expenditures include.
Including $4 1 million demolition cost at our Gibbons Creek project.
Turning now to our balance sheet.
As we've discussed in the third quarter conference call in November we closed on a new credit agreement with Jpmorgan Chase Bank.
The credit agreement provides for a four year senior secured revolving credit facility of up to $30 million.
Plus an additional $5 million of capacity that is available for letters of credit which are supported by cash collateral provided by the company at our option.
We currently do not expect to draw under the new facility.
<unk> in November and December we used the new facility is planned to reissue and replace existing letters of credit that had been cash collateralized by a $17 9 million promissory note issued to B Riley.
Once those letters of credit were replaced the cash collateral was released.
We repaid the promissory note and before in late December .
Our gross consolidated debt at December 31, 2021 was $167 7 million, which was an increase of $1 $7 million.
$166 million at December 31, 2020.
Our liquidity at December 31 consisted of our unrestricted cash of $24 3 million and $9 5 million of availability under our credit facility.
After accounting for outstanding letters of credit and borrowing base limits.
I will conclude by addressing our 2022 guidance.
Which we issue with these results.
Those are revenue of 325 million to $365 million.
Our net loss attributable to show our solutions, the 8 million to $12 million.
Adjusted EBITDA of $35 million to $40 million and adjusted free cash flow of 5 million to $15 million.
Looking at the guidance in a bit more detail.
Our 2022 revenue guidance reflects a strong increase from the 2021 level of $293 million driven by the New business Awards received in 2021, and the continued ramp of existing projects.
Our 2022, adjusted EBITDA guidance is $35 million $40 million.
As you May recall, our 2021 results of $40 $1 million included a $5 6 million gain on the sales type lease from an ERP project that actually closed in 2020.
But for technical accounting reasons related to the agreement was required to be recognized in 2021.
Adjusting for this carryover from 2020.
Our 2021, adjusted EBITDA would have been approximately $34 5 million.
As you May recall we.
We adjusted our 2021, adjusted EBITDA expectations upward by that $5 6 million at the beginning of 2021.
The 2021 results also include significant contributions by the Gibbons Creek ERP project arising from the sale of 80% of the real property acreage in December which was a $14 $7 million gain on.
Ongoing scrap sales in.
And a reduction in a row $3 6 million.
Contributions by <unk> projects are expected to be lower in 2022 due to not receiving the large upfront cash payments that occurred Gibbons Creek in 2021, and the startup nature of the two new projects, which do require remediation.
Although we will continue to receive proceeds from the sale of the real property.
On into the project.
On the favorable side, we expect adjusted EBITDA to benefit from contributions by new projects as well as the completion of ongoing projects that have experienced issues.
Our 2022 adjusted free cash flow guidance is 5 million to $15 million.
Our 2021 result of $52 6 million.
Which included $34 9 million in cash and restricted cash receipt when we closed the acquisition of the Gibbons Creek project.
And another $23 6 million on the sale of 80% of real property acreage considerably exceeded our expectations.
Cash flows with the two new ERP projects are expected to be more modest, particularly in the early stages and there will be cash outflows associated with the ramping of remediation activities in demolition over the balance of the year and continuing into 2023.
Lastly, as we discussed in our previous calls our guidance is predicated on certain assumptions, which are discussed in more detail in our earnings release with that I will turn the call back to Scott.
Thanks Roger.
In closing, we believe that our success in new business Awards.
Progress in growing our businesses and expanding our service offerings and our keen focus on environmental sustainability continue to position the company for long term success.
We remain committed to positioning ourselves to take advantage of the expanding market opportunities and enhancing long term value for shareholders.
Importantly, we are closely aligned with our power generation partners, environmental remediation and sustainability initiatives, which should provide <unk> solutions with significant growth potential for many years to come.
Thank you again for your interest and participation.
With that operator, let's begin the Q&A session.
Thank you if you'd like to register a question. Please do so now by pressing star followed by one on your telephone keypad.
To ask a question. Please ensure that your device and your microphone on mute lately. If you change your mind I would like to withdraw your question from Nicky. Please press star followed by <unk>.
Our first question comes from the line of Brian <unk>.
Brian . Please go ahead your line is open.
Thank you good morning.
You guys hear me, Okay, Brian morning, Brian how are you doing.
Yes, Sir okay.
Alright.
I wanted to start with kind of the award pace. So three record years in a row.
But we now have the EPA ruling for the.
Remediation of the water.
Does that slow the pace I mean, do we end up with a slightly slower.
<unk>.
Size of contract awards in 2022, and how do you think about how long does that.
The EPA ruling really delay.
Yes.
The generators.
Yes.
In regards to award contracts.
Yeah, Thanks, Brian Youre right I mean, we're very proud about the three years.
Concurrently of record New awards.
When we look at the.
The new ruling from the EPA or what happened in January we're really excited about how that increases and expands the addressable market.
But we're not.
100% sure how thats going to impact FY 2022.
Tracking $3 1 billion of pending proposals.
Our near term pipeline spill over 7 billion. So we're very excited about that and the visibility that we havent into that but.
But we do think that what we've seen here kind of in Q1 is a little a little bit of a delay.
So we don't believe it's going to last too long.
But we're still focused on trying to hit our fourth year of record awards, and we think that potentials out there to do that and thats going to be our objective for the year.
Okay.
Okay, and then kind of switching over to the ERP can you give a little bit more color maybe on timing based on all the moving parts in 2022, and then maybe on a longer term basis, how should investors think about what that potential contribution going forward.
Sure I think as we stated in the prepared remarks.
Continued optimism and enthusiasm around that that category of our business as it's continued to grow over the last several years.
The announcements.
Avon Lake and Tesla, which are very exciting to us is they will contribute to this year.
I think youll see kind of a little bit of contribution from from Gibbons Creek is at stake.
Not necessarily wind down but.
We're kind of progressing through that one.
But you will see the ramp from Avon Lake and <unk> and we continue to be excited about those two projects.
Others out there that we're chasing right now so it continues to be a great category for us Roger do you want to speak a little bit to kind of a more specifics on the contribution aspect.
Certainly thanks, Scott, Yeah, Brian just kind of thinking about it.
Gibbons Creek as we stated we have the.
Purchase agreement signed to sell the remaining 20% of the acreage we talked about that being.
Comprised of some admin building since with charged some kind of some higher value.
Type.
Parcels of the total.
We're expecting.
Net proceeds.
The remaining 20% of the.
Parcels too.
Say in the low $20 million area.
Like we said in the prepared remarks, we also have.
Scrap sales that are going through the first half of the year.
And that will probably wind up.
Mid year <unk>.
At the beginning of third quarter so.
Several more million for that so we do have.
You still have good.
Cash flow coming from from.
<unk> like we said you were the big differences between Gibbons Creek.
The <unk> property in Avon Lake and <unk> was the.
The upfront payment, we discussed that we got about $35 million of upfront.
From <unk> for the for the Gibbons Creek property there is upfront cash.
But to a smaller extent.
For the two properties that we announced youll primarily because the.
The amount of the <unk>.
No.
Remediation is smaller.
Like Scott said, we will kind of immediately start work on the decommissioning, we will recognize scrap income.
Over the course of this year.
But unlike.
Gibbons Creek, where we had parcels.
That didn't have to be remediated out of that 6200 acres that were available for immediate sale.
The bulk of the part is really all of the parcels at the two acquired properties.
It will be sold following remediation so there'll be a little more back end loaded from that perspective.
Okay, Great that's helpful.
On the materials, where you talked about the kind of the supply supply chain and why they are kind of impacting the.
The numbers.
If supply chain doesn't improve.
Is the pace that you saw in the fourth quarter kind of the right right level to use kind of going through 2022.
Yes, a couple of different things there.
And I know you will look at this but I'd kind of refer you to the <unk>.
Note four in the 10-K on revenue so the way that we that we look at.
Product now and again like we mentioned in the prepared remarks is kind of aligned with how we look at the business and customer related so.
When you look at the revenue what we consider sales of raw materials sales decrease from about $45 million to just over $30 million.
Primarily almost exclusively as a result of the.
Supply chain Ocean going vessel cargo rates, which have really made that less profitable. So.
We're not seeing them.
We go into 'twenty two if you look at that kind of got raw materials sales number that you reported around $31 million.
I wouldn't expect a whole lot of change in that.
Byproduct services.
Really all things byproduct related as it pertains to working with the utility so performing not only performing the day to day out services.
And ash management, but.
Recycling that too into the cement industry so that.
I think we will expect to see that increase.
Over the course of this year.
Particularly as the as the Dominion phase two.
<unk> ramps, so we transitioned from phase one.
Which was.
More of a construction project that we could basically completed in 2021, that's transitioning as we speak to a.
Two a beneficial reuse project so that will go on for 10 years.
But that number will increase.
Like we talked about also were getting close to we hope we believe signing the <unk> contract, which we don't expect revenue from that this year, but that as those ramp that will be in the.
Byproduct services category so.
And then finally like we talked about on the infrastructure Bill while we really don't know the timing of that and we hope it sooner than later.
We're very bullish on the growth opportunities. So you will expect to see that.
<unk> product services category increase.
So that that ramps that potential ramp or an award isn't in the current guidance that would be upside.
No no it is.
So as well.
When we look at the guidance number the revenue of the 35 to 40, we have.
The current expectations around the Dominion beneficial reuse project.
Of course, it's early like I said, there is nothing in 2022 four for <unk>.
Is that about nine months nine to 12 months to get started.
Sure.
But.
I want to make sure I'm addressing your question no. It is.
It is in the guidance, but that's.
It falls within that byproduct services category.
Right.
New <unk> contract that you're expecting in the first half.
There is no revenue contribution.
<unk>.
In the guidance from that.
Nice correct missing.
Okay.
Sorry months correct.
Yeah.
No not nine months to construct.
We signed the contract in mid year.
We're looking at.
Probably second quarter of 2023 to start producing revenue for that.
Okay.
Okay.
Helpful.
I guess then.
Just looking at you talked about the impact on the construction delays in the fourth quarter do you have a number for that how big that was.
On the gross profit side.
Yes, I would put it kind of in the.
3 million range two to three I mean, we certainly were.
We're disappointed by that we had a fantastic year.
Over $40 billion of EBITDA right.
That was some offset.
That we saw from these projects that are very close to winding down.
You were affected to a very large extent bastian.
Weather issues that push that out.
But I'd put it in the kind of two to three area through three main areas.
Okay, and then last one for me just on the outlook for do you have a number for capex.
And the guidance for the cash flow.
Yes, yes, yes.
Sorry, Scott.
No one can answer that so we are excluding the in virus source unit.
We're kind of thinking in the <unk>.
Mid teens area.
Got you call it <unk>.
Okay, great. Thank you very much for taking my questions I'll get back in the queue.
Thanks, Brian .
Thank you Brian for your question. Our next question comes from the line of Alex <unk> from B Riley Alex. Please go ahead.
Thanks, Good morning, gentlemen, and great year.
Yes. Good morning, Thank you.
Youre welcome a couple of questions here, obviously due to the EPA ruling some customers are reevaluating some of their remediation plans and delaying some awards.
Is any of that reevaluation sort of going backwards such that your opportunities are less.
Are all of those sort of revaluations all to the incremental positive.
Opportunity set and therefore, we're really just have a modest delay in timing here.
You're spot on it's a modest delay in timing.
Couldnt be more of the opposite.
The going backwards standpoint, and Thats, where our enthusiasm and optimism comes from is it.
As I have to sit back and kind of reevaluate some of these groundwater issues.
It only.
Increases the size and scope of the project.
Sure.
Primarily where theyre going to have to go out and clean clothes or dig out all of the ash from these impoundment. So yes, it's a net.
As a net positive all the way around from a opportunity standpoint.
We're just going to have to.
Bear with him here as they re scope and reengineer. Some of these projects for a kind of a modest delay as you.
Phrase earlier, but but no. We're really excited about it we think it's going to be a great.
Plus for the business.
And Alex it's Roger.
Not to give any.
Information on any specific customers, but there were even some comments public comments from utilities. Following the announcement that we're just Scotts point where are they.
Had plans in place to do a cap in place.
Because of the groundwater.
Discussion contamination issues, they are having to go back and say okay.
Cap in place is not going to be permitted to pivot to a full clean closure and that is.
Exponentially larger.
<unk> terms of our projects. So it certainly is.
We believe expanding the addressable market.
Sure and then when you characterize the modest delays are we talking a modest delays in one to two quarters of modest story, it's a one to two years.
No.
Our belief is we're talking quarters not years on this.
And again I think it goes back to one of the initial questions that Brian asked that earlier.
We're still we're still tracking at $3 billion in pending and $7 billion in near term potential opportunities in.
The business development team here is.
Is focused on trying to exceed.
2021 numbers and we believe we have a path to do that and we're going to try our best to keep moving forward.
And then.
Have imports from Europe , or Asia improved at all in the first quarter or is there any if not is there any visibility that that might change in the second quarter.
Yes, I think we are.
Alluded to this I believe in some of the comments earlier, we don't we do not see any improvement.
On imports from Europe , or Asia, right now coming into Q1, and really don't expect that.
Any improvement in our balance of year, but I would say that is it.
They're very small.
A portion of our business.
But we don't see any improvement right now and we've kind of included that in our calculations and thought process when it comes to the guidance as well.
Yes.
That's helpful and then lastly.
Any update on additional and virus source opportunities beyond the first.
Yes, so we're really excited to hopefully be giving you guys. Some really good news here in the coming weeks or months, hopefully closer to weeks and months, but definitely expecting that.
Q2 should be a good year for a good quarter for us we're announcing.
So we hit the first one behind Us and we've got a couple more in the queue that we're talking to some customers on and have been talking to them for for quite a while now so the reception is great and hopefully we've got some.
Similar to our ERP announcements hopefully we've got a good cadence on announcements relative to admire source in the future.
Yes.
Add to that briefly.
The.
There are some conversations specifically around.
Utility financed.
<unk> source that we have kind of in that.
3 billion number that we're either we're continuing to try to progress.
And then we do have a you would kind of developed a.
Punch list of.
Potential opportunities.
Over the next several years.
And there is we are even seeing interest from.
From like the.
Department of energy Federal government.
Around being supportive of the use it as a concept.
The ash recycling beneficiate than in substitution of Portland cement that has a lot of.
Receptivity in alignment with with some goals within the Doe to reduce greenhouse gases. So theres some conversations going on around there. So we're more enthusiastic about the day by day about the opportunity to start to roll. These out and we think the first one it is just the start.
Good luck.
Alright, Thanks, Alex.
Sure.
Thank you Alex for your question. Our next question comes from Tony ballots from interact Tony. Please go ahead with your question.
It's gotten Roger great momentum.
Wonderful pull through.
It's a lumpy business and it's difficult to model.
To be more of an optimist.
Your.
Continued ability to execute on this pipeline.
Gathers momentum where are the bottlenecks and we're dealing with unprecedented in place and at the moment.
Whats happening from the standpoint of the price of yellow iron and.
Are you really able to find the contractor should you win.
New opportunities.
And what are the challenges to really scaling up on it.
Good morning, Tony and Great question.
Also thanks for the comments on the.
On the momentum and the progress we made in 2021 and we share your.
We share your view, where we're pleased with the results, but yes, we think we can continue the momentum.
And we will.
As we've we've always done we've grown through challenging times, it's kind of always been kind of one of sorrows.
Owner stones.
This continued growth.
We look at kind of the different phases of our business over the years.
Youre right.
There are if we continue this momentum and we do continue to pick up New awards.
There are going to be some some bottlenecks or some constraints, but I think.
All of them are solvable and we have not.
We haven't come across anything yet that's that's kept us from executing on any of the New awards in the record New awards that we had last year.
I think obviously there are some supply chain issues out there when it comes to availability of yellow iron ore also just some tighter.
Tighter labor markets and certain regions, but I think the the benefit of where we stand today is that as we do get.
These new awards I think our customers understand those same challenges and we'll continue to.
Sure.
Bacon certain provisions into our contracts that make it.
The de risk some of those those constraints and we'll continue to push forward and move forward is forecast to get done and we will get done and we are the.
One of the suppliers of choice here for for completing it. So I think we're in a good position even with the momentum that we have right now.
And kind of the current market conditions around ablation or or supply chain issues, we will be able to solve those and move forward. So we're comfortable with where we stand and where kind of our growth path is.
And Tony just Roger Good morning, just a quick follow up on the low iron question.
In response to.
Brian's question, we've talked about and approximately $15 million number.
Sure.
Capex excluding.
Excluding virus sourced and of course, there is some capex.
That goes into the <unk> side as well, but.
So what I would remind you is last year was.
Bigger number in terms of sourcing equipment of course, we had the startup of some very large jobs that we source equipment for so we were we feel really good about what we were able to get in last year. We.
We had equipment even arriving.
Towards the towards the end of the year that has been put in service. So.
I think our procurement and fleet grouped.
Group does a fantastic job of kind of looking ahead, we're not really seeing any.
Bottlenecks at the moment in terms of not being able to get the equipment need impact.
I think they really planned ahead very well.
And we just didn't expect too.
Bring as much in.
Of course as you as these awards convert.
We would look to.
You, either sourcing new equipment or redeploy existing equipment coming off jobs that are finishing of course, who do the latter first and then but we feel confident about being able to do that.
That's helpful and on the ERP I mean given.
You guys turned out around really efficiently and maybe it was just a unique opportunity do you see other decommissioning projects that have the characteristics of a Gibbons Creek.
They are all slightly different I imagine.
Youre right Tony they are all slightly different if you look at the ones that we performed.
Each one has been pretty bespoke and its characteristics both from our performance standpoint, as well as the financial and commercial characteristics of each one so youre right given the Griffins Gibbons Creek has been a great example of how we perform these projects and what we can do.
I mean, if you look at the kind of portfolio of them right now given us Creek on the larger end.
I think the other ones just from <unk>.
Size perspective, or a little bit smaller, but they still have some of the similar characteristics and I think to.
To your point on other potential Gibbons types projects there are out there they.
They are out there and there are teams focused on bringing those in as well. So it'll continue to be a good mix of from a size standpoint, when it comes to the <unk> business and it is a bit lumpy, but as we continue to layer more and more of these on top of each other will hopefully smooth out some of that Lumpiness and continue to drive good predictable.
Revenue and EBIT streams for the business.
Thank you.
Youre welcome Thanks, Tony.
That is all the questions we have for today, So I'll now hand back to the management team for any concluding comments.
Great. Thank you operator, and we appreciate everyone's time today, we are again very pleased with our.
FY 2021 results.
Look forward to future calls.
And reporting out Q1, and the balance of 2022. So thank you for your time and your interest.
Thank you everyone for joining us today. This concludes our call. Please now disconnect your lines have a lovely.
Hey, everyone.
Okay.