Q4 2021 Orbital Energy Group Inc Earnings Call
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Good day, everyone and welcome to orbital Energy group fourth quarter 2021 conference call. At this time participants are in a listen only mode. A question and answer session will follow management's remarks. As a reminder, this conference is being recorded I would now like to turn the conference over to your host John Beisner inverse.
Our relations.
Thank you Josh good afternoon, everyone and welcome to orbital energy group's fourth quarter 2021 conference call.
After the market close today, the company issued a press release.
Quarter at full year 2021 earnings results.
A copy of this release is available at the newsroom under the Investor Relations section of the orbital energy group website.
Speaking on today's call are Jim O'neil, Vice Chairman and Chief Executive Officer.
Alright, Jeff Chief Financial Officer did.
Did they did as Britt will review the highlights of financial results for the fourth quarter as well as recent developments.
Following the formal remarks management blades for questions.
I'd also like to remind everyone that today's call will contain certain forward looking statements made under the Securities Act with Nike 33, it's.
The Securities and Exchange Act is 18 to 34 is the bad debt such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in the forward look.
Company bag spirit.
You too.
As COVID-19 companies rely on third party data factors supplies and service providers.
Agency budgetary and political constraints due increased competition changes in the market to be hit the performance or liability of its products integrated solutions and services.
Factors that others could cause operating results to vary significantly from those in prior periods and to those projected in forward looking statements.
Additional information with respect to these and other factors, which could materially affect the company that's operation.
Included its started Forbes the company has filed with the Securities and Exchange Commission.
These forward looking statements are based on information available to orbital energy group as of today March 30th 2022 and.
The company assumes no obligation to update these statements as circumstances change.
That I would like to turn the call over to Jim O'neil, Vice Chairman and CEO of orbital energy Jim. Please go ahead.
Thank you John Good afternoon, and thank you for attending our fourth quarter 2021 earnings Conference call.
Before I start on my quarterly commentary I want to welcome Nick One staff, who is joining me today is all little energy group's CFO on his first quarterly conference call, Nick and I have a lot of information to share with you today also very positive developments that OAG.
I also want to thank all of our dedicated employees for their hard work and tenacity as we face the challenges of COVID-19, both personally and professionally in 2020 one.
Our workforce interfaces with our customers every day safely providing services that meet and exceed our customers' expectations.
Each of you represent the <unk> brand and I very much appreciate your efforts.
Our fourth quarter 2021 financial results demonstrated a meaningful improvement sequentially and has positioned the company for positive financial results for the full year of 2022.
In the fourth quarter, our consolidated revenues were a record $41 billion or so.
65% increase compared to the third quarter and our adjusted EBITDA from continuing operations, a non-GAAP measure was a loss of $1.2 million, an improvement of $5 $9 million compared to the prior period.
Nick will provide more details on our operating results in his portion of the call.
In the fourth quarter, our operating our reporting segments had been redefined to electric power telecommunications and renewables, which better align with how we communicate to our investors and manage our operations. We recently announced the orbital gas business was reclassified to discontinued operations and we are currently in.
There's discussions to divest our orbital gas UK and Houston operations.
Any information being reported or communicated for prior periods have been conformed to align with these new reporting segments.
During 2021, we completed two transformational acquisitions Gibson technical services and frontline power construction that will service platforms, and our telecommunications and electric power segments, respectively.
These two companies have had many years of success and our established leaders in the industry. They serve and we believe will provide meaningful profitable growth for years to come.
The company's transformation over the past year, coupled with the strong market drivers positions us to execute on our strategy to deliver shareholder value through significant revenue growth and positive adjusted EBITDA from continuing operations for 2022.
As such we are providing a range of revenue and adjusted EBITDA expectations for the full year of 2022 rare.
Revenues are expected to range between 375 and $425 million and adjusted EBITDA is expected to range between 38 and $43 million. This reflects an increase of 382% in revenues and an improvement of $67 $5 million and adjusted EBITDA.
For the full year of 2022 compared to 2021 based on the midpoint of our guidance.
Our backlog at year end has increased over 1000% year over year, and 28% sequentially quarter over quarter.
We anticipate strong year over year old Guy Ganic revenue growth from our electric power segment, largely driven by the growing demand for our services from our investor owned utility customers as well.
We deploy a record levels of capex to modernize the grid and interconnect renewable energy sources.
Telecommunications segment, while equally experienced significant organic growth in 2022, driven by the odd off all won't rural deployment of fiber program awards, the deployment of <unk> spectrum, and the enhancement of <unk> and LTE infrastructure in our renewable segment were experiencing a resurgence of utility scale solar.
Rams and are currently in construction on two large utility scale solar programs, the Blackberry and happy projects for light source P T.
Additionally, we are in various stages of negotiations on over a $1 billion pipeline of additional utility scale solar opportunities. While we are likely to receive additional solar awards that will move to construction this year.
As we enter 2022, we are experiencing positive momentum across all of our segments with strong market drivers better set the stage for success for many years to come.
With that said I will turn the call over to Nick for his comments.
Thanks, Jim.
Jim and I worked together for 17 years progress re 19 here orbital energy group I'm thrilled to be here and look forward to working with Jim and the orbital team toward increasing shareholder value.
As a reminder, the financial results I am providing today are from our continuing operations and do not include results from our orbital gas North America orbital gas U K, which were reclassified to discontinued operations in December .
And are now included in assets held for sale detailed results from our discontinued operations will be disclosed in our Form 10-K .
As Jim mentioned today, we announced record quarterly revenues of $41 million for the fourth quarter of 2021.
Loss from continuing operations net of income taxes was $15 $7 million with an adjusted EBITDA loss of $1 2 million.
Going forward, we believe adjusted EBITDA is the best financial measure for our investors as an indicator of operational performance.
You will find a reconciliation of EBITDA and adjusted EBITDA from continuing operations, both non-GAAP measures to loss from continuing operations, a GAAP measure as a supplement to our fourth quarter earnings press release for.
For the fourth quarter loss from continuing operations per share was 21.
For the full year of 2021 revenues were $82 9 million loss from continuing operations net of income taxes was $49 8 million with an adjusted EBITDA loss of $27 million.
Loss from continuing operations per share was <unk> 86 cents.
In the fourth quarter of 2021, our consolidated revenues and adjusted EBITDA increased 65% and 83, 6%, respectively as compared sequentially to the third quarter of 2021.
These results demonstrate continued improvement in our operational performance and position the company to deliver much improved financial results for the full year 2022.
For the full year of 2021 revenues were $82 9 million, an increase of 286% compared full year of 2020.
Adjusted EBITDA was a loss of 27 million net loss from continuing operations net of income taxes was $49 8 million and loss from continuing operations per share was <unk> 86 cents.
These operating results are generally attributed to investment in our Greenfield electric distribution and foundation service operations and the absence of utility scale solar projects in 2021.
These investments have positioned the company well toward delivering positive operating results in 2022.
In the fourth quarter of 2021, the electric power segment increased revenues, 91% to $23 3 million compared to the third quarter of 2021, primarily due to the acquisition of frontline power and the continued expansion of ongoing legacy electric power distribution operations.
Over the same period, the telecommunications segment increased revenues, 49% to $13 million, primarily due to construction commencing on federally funded Argos programs over a four state area.
Although the renewable segment had an increase in revenues of 23% from the third quarter of 2021% to $4 8 million.
This fell short of expectations.
Primarily due to the delay of construction on the lighthouse BP Black Bear project.
Our total backlog was $523 7 million at the end of the fourth quarter of 2021 another record level.
Backlog is up 28% sequentially over the third quarter of 2021 and over 1000% on a year over year comparison.
Approximately half of our 12 month backlog of $274 1 million includes revenues that are repeatable and sustainable nature under Master service agreements for electric power in telecommunications customers.
As we move into 2022 to a positive EBITDA a top priority is to optimize the company's capital structure to ensure our ability to fund strategic growth both organically and through acquisition.
While maximizing shareholder value.
I've had the opportunity to work in lead financial roles at two infrastructure services companies. They were part of industry consolidations proud OAG and I.
The position that we're in today with regard to capital structure is not unique for an early stage acquisitive consolidator.
The company's strong backlog, coupled with improving quarter over quarter performance is a very positive signal to potential lenders and we are engaged in conversations with several institutions to address our capital structure over the coming months.
Options that we're exploring include various types of combinations of debt and equity instruments again, all with the intent of optimizing our capital structure for the benefit of our shareholders.
Also we have reached an agreement with frontline empower sellers to refinance the seller notes.
<unk> 5 million of the 87 million will be due may 31, 2022, and the maturity on the remaining 52 million will be extended to May 31 2023.
Turning to guidance as Jim commented, we anticipate strong revenue and adjusted EBITDA growth in 2022.
For the full year of 2022, we believe our consolidated revenue range is 375 million to $425 million and our adjusted EBITDA range is 38% to $43 million.
This reflects year over year revenue growth of 382% and an improvement of $67 5 million in adjusted EBITDA for the full year 2022, compared to 2021 from the midpoint of our guidance.
This revenue growth and improvement in adjusted EBITDA is expected to be led by our renewable segment, because we had two 100 megawatt plus utility scale solar programs under construction as.
As well as strong double digit organic growth in our electric power and telecommunications segments, largely due to projects under contract and the unprecedented demand for our services in these segments going forward.
As it relates to the electric power segment, we believe 2022 revenues will range between $115 million to $130 million.
A significant amount of the revenues in this segment are under Master service agreements and provide a recurring base business that we expect will continue to organically increase.
Over the next several years, driven primarily by North American utilities outsourcing activities required to replace rebuild and upgrade existing infrastructure.
We expect the electric power segment, adjusted EBITDA margins to be in excess of 20%.
Any emergency restoration related revenues were not realized in 2022 is not included in this guidance.
And our telecommunications segment, we expect revenues in the range of $60 million to $70 million driven by the federally funded art off construction programs.
As well as increasing demand by our wireless and wireline customers for our engineering design construction maintenance testing and commissioning services largely around system upgrades driven by the rollout of the five <unk> spectrum in <unk> LTE enhancements.
Our 2022 adjusted EBITDA margin expectations for this segment is in the mid teens.
Finally in our renewable segment for the full year of 2022.
We anticipate revenues in the range of $200 million to $225 million.
This range anticipates that orbital solar will be awarded one to two additional utility scale solar projects that will move to construction in 2022.
Adjusted EBITDA margins for this segment are expected to be in the mid single digits.
As a reminder, orbital solar provides engineering procurement and construction solutions to the utility scale solar market.
Joining venture with gene Golar power, where overall solar will consolidate 100% of revenues generated bold absorbed cost and the project paging Julie for their participation, which contributes to a lower margin profile for the segment.
Certain holding company and unallocated cost exist outside of the defined operating segments. We estimate these cost to be $15 million for 2022.
You will find a reconciliation of EBITDA and adjusted EBITDA from continuing operations, both non-GAAP measures to loss from continuing operations, a GAAP measure as a supplement to our fourth quarter earnings press release as it relates to our expectations in 2022.
On a consolidated basis from a revenue seasonality perspective in 2022, we expect the first quarter revenues to be slightly higher than the fourth quarter of 2021, then growing sequentially into the third quarter with a slight decline in the fourth quarter.
We also anticipate margins for the first quarter to be the lowest for the year margins did increase in subsequent quarters as volumes increase and we successfully execute through individual project contingencies throughout the year.
We as well as most of our customers are experiencing supply chain issues across all of our operating segments. However, we've been working closely with our customers to strategically plan to maximize productivity of our workforce.
We have taken into account the current cadence of supply chain issues into the guidance. We have provided you today.
While uncertainties exist today in our business and in the economy driven by the COVID-19 pandemic, we expect fewer issues in 2022 compared to the last couple of years.
In 2021, the company completed four acquisitions, Gibson telecom or GTS and the tuck in acquisitions, Emco and full moon telecom as well as the acquisition of frontline power.
These acquisitions will significantly change the magnitude of amortization acquisition and integration costs and certain other corporate and unallocated costs as well as the quarter to quarter timing of these items.
Please refer to our 10-K for details associated with these cost components now ill turn the call back over to Jim.
Thank you Nick.
I would characterize 2021 is a transformational year for OAG.
The strategic acquisition of two platform companies GTS Telecom Communications segment in front log power in our electric power segment realized significant recurring profitable revenue streams with strong organic growth opportunities for years to come as we capitalize on the positive market trends in these industries.
In frontline power on the platform companies I'm visions and quiet acquiring when I joined the organization as CEO in October of 2019, and the company is now positioned for profitable growth in 2022 and beyond.
So accomplish our objectives required a considerable amount of capital in the form of both debt and equity. It is not and never has been our intent to operate long term with our existing capital structure. However, it was imperative that we established our market presence without delay to position ourselves to take advantage of these very positive.
Industry dynamics, our capital structure is in transition and as Nick commented one of our top priorities is to optimize our capital structure, reducing leverage and repositioning our balance sheet accordingly, with operating performance improvement in 2022.
We have strong a strong foundation to build from in each of our operating segments with very strong market drivers for our services I am confident by 2022 will be a rewarding year for our employees and shareholders.
Operator that concludes our prepared remarks, and we'll now open up the call for questions and answers.
Thank you.
A reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Our first question comes from Jeffrey Campbell with Alliance Global You May proceed with your question.
Good afternoon.
Jim just quickly regarding the sale of the natural gas business.
Inspector.
Now the business is currently organized or is it more likely that the U S.
Okay.
That will be sold separately.
It's more than likely that there'll be sold separately Jeff.
Two strategic spend work geographically in the same regions that they work.
Thanks.
It sounds like the short term bill for frontline has dropped to $35 million. So just wondering.
What sort of options are you entertaining.
In that regard.
Jeff will take that what about the $35 million I Didnt catch your question.
It sounded like on what Nick said that the frontline Bill.
Pending on the Dropdowns.
And the rest is in the next year. So I'm just wondering what youre thinking about with regard to <unk>.
$35 million of upcoming.
Yes. So yes, we are in the market. We've got several options, we're exploring both debt and equity options in that regard and certainly expect to have a solution by the end of.
Okay.
Okay.
Yeah.
<unk>.
I wanted to ask now that frontline.
Sensibly OAG.
T&D platform.
How does the orbital power fit into the portfolio will you continue to invest in the growth of that division as well.
Well, that's a great question, we've actually almost look like.
Overall powers, a tuck in into frontline, we've already been leveraging.
Best practices and synergies with.
With frontline being the platform and overall power almost being like a tuck in and we're starting to realize those those benefits.
To the bottom line, which is.
Part of the improvement that we're going to see year over year.
Overall power will be.
We will be much improved in 2022.
Okay, I guess, one thing I was thinking about with orbital power.
I understand it correctly frontline's businesses.
Heavily aligned to taxes, whereas some of the orbital power MSA is there.
Other states I just wondered if.
Okay.
With an attractive feature of keeping both of them.
The diversity of markets and states that you can.
Reached with the two different entities I think I think the most important part about the frontline power acquisition and overall power working together.
They provide a synergistic services.
They're both very strong in electric distribution services in particular and with.
With that capability in the company building those resources.
It gives us a greater ability to scale.
The geographical area and with new customers.
So theres more coordination between the two companies.
Okay.
Yeah.
There was I mentioned of additional projects in renewables expected to come when there was a discussion of the backlog for the year. I was just wondering are those most likely to come from this evolving relationship with lightspeed or would it possibly be with.
Other companies as well.
The light source PPE relationship it there's one that we value tremendously.
That's the Blackburn happy projects, we're on and we're certainly looking to expand our relationship with them, but the billion dollar opportunity pipeline.
Consistent with many other customers that we have been developing relationships with which which gives us a diverse customer set.
To potentially work for this year so.
Our guidance does expect to get at least one.
To two more projects that will move to construction in 2022.
Okay.
The last area that I wanted to touch on.
Well actually to first regarding logistics and materials there was some mention of that.
We've heard from third party sources.
Considerable concern about the difficulty in obtaining solar panels.
And Inverters and other.
Pieces of equipment that are particularly at lines of utility scale solar project at.
It sounds like.
You don't share that concern to a high degree. So I'm just wondering what have you done to block those risks.
It's a concern Jeff.
But.
We work more closely with our customer and the supplier strategically.
The way I look at it as you know.
It took before the pandemic about six months lead time and now it's running about nine to 10 months lead time on some of those items. So you just have to plan for more in advance.
And.
If there are any supply chain interruptions.
We work very well with our customers to mitigate that the best we can to work on other parts of the project.
Whatever we can do to be as efficient as possible.
Okay, and thats across all of our segments not just the renewable segment.
Okay and then my final question was with regard to.
Gibson and emco, and maybe more specifically emco emco had a recent announcement about 2 million fiber to the premises designs and office expansion.
I was just wondering how does the emco work translate into field work for Gibson.
Or what are the synergies and so might have.
The overall portfolio.
Well the engineering and design is the tip of the spear to get to work right, So you're bringing in emco, who.
Not only.
Expanding our capabilities to do engineering and design.
For wireless customers and broadband customers, but they're also bringing in new customer base as well. So that is a good lead in for US to go provide a total solution to.
Our customers.
Two where historically maybe M code provided just engineering.
So it gives us an opportunity to bring up.
<unk>, a one stop shop solution, which is what.
Many of our customers are looking for today.
Especially when they have a track.
<unk> track record of success.
Our relationship built off of the quality of work that.
That either gcs or info of them, putting them in the past and put them on the full moon acquisition was huge as well because.
On the other end of the spectrum, where they do the testing and commissioning.
Of the Oh, the infrastructure once everything has been installed so it really broadens our ability to provide a one stop shop, which is really really attractive to our customers.
Okay I appreciate that color. Thank you.
You're welcome Jeff Thank you.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Jim O'neil for any further remarks.
Well, thank you operator and to all of you for listening today I'd like to remind you that we are participating in the alliance Global Virtual conference that's coming up this Wednesday, if you'd like to schedule a meeting please contact your AGP representative or three part advisors. We look forward to speaking with you when we report.
Our first quarter 2022 results in May.
Good evening Goodbye.
Yeah.
Yeah.
Thank you. This concludes today's conference call. Thank you for participating you may now.
Disconnect.
Okay.
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