Q1 2022 Hill International Inc Earnings Call
Yeah.
Greetings and welcome to the Hill International first quarter 2022 financial results conference call.
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Question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Devin Sullivan Senior Vice President of the equity group. Please go ahead.
Thank you Joe Good morning, everyone and thank you for joining us today for Hill Internationals first quarter financial results conference call our.
Our speakers for today are Roes Golly, Chief Executive Officer, and Todd Weintraub, Chief Financial Officer.
Before we begin I'd like to remind everyone that certain statements made during this call maybe considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, and it is our intent that any such statements be protected by the safe Harbor created thereby.
Except for historical information the matters set forth herein, including but not limited to any statements of belief or intent any statements concerning financial projections, our plans strategies and objectives for future operations are forward looking statements.
These forward looking statements are based on our current expectations estimates and assumptions and are subject to risks and uncertainties, including but not limited to risks and uncertainties related to the COVID-19 pandemic, the willingness and ability of governments and other clients to undertake and complete infrastructure projects and our ability to maintain and support business development activities.
Although we believe that the expectations estimates and assumptions reflected in forward looking statements are reasonable actual results could differ materially from those projected or assumed in any of our forward looking statements.
Important factors that could cause our actual results to differ materially from estimates or projections contained in our forward looking statements are set forth in the risk factors section and elsewhere in the reports we have filed with the Securities and Exchange Commission, including that unfavorable global economic conditions may adversely impact our business.
Backlog may not be fully realized as revenue.
Our expenses may be higher than anticipated, we do not intend and undertake no obligation to update any forward looking statements.
We have prepared a slide presentation for today's call, which is available for your reference at our website Www Dot Hill I N T. L Dot com the safe Harbor provision applies to the information contained in the slides and those slides also include definitions of the non-GAAP measures, we will be discussing today.
With that said I'd now like to turn the call over to Ralph Ghali Hill, Chief Executive Officer. Please go ahead.
Thank you Devin.
Good morning, everyone and thank you for joining us today to discuss our 'twenty to 'twenty two first quarter financial results.
After a strong finish to 2021 I'm pleased to report a very promising beginning to the new year.
Revenue topped $100 million, increasing 17, 4% to $102 2 million from $87 million in 2020 one.
Consulting fee revenue Rose 12, 5% to $18 $4 million from twice from $72 4 million in the prior year period.
And was our first 80 million.
Quarter since the first quarter of 2018.
New contract awards were 88 million, resulting in a book to burn ratio of one point to wait.
Operating profit improved to $1 million from an operating loss of 154000 in the first quarter.
Of last year.
Our net loss.
Loss narrowed significantly from the prior year's quarter, and adjusted EBITA Rose to $3 2 million from 741000 in the same period last year.
Our backlog increased for the second consecutive quarter to 736 million its highest level in over two years.
And finally, we have taken steps to reduce our G&A expenses.
The annualized rate of approximately $4 million.
We believe that those actions will allow us to more fully capture profit opportunities associated with our anticipated CFR growth without sacrificing any aspect of client service or operational integrity.
Speaking of CFR.
Our topline growth. This year was driven in large part by infrastructure projects in the U S.
In particular.
In roads, and highways and transit programs and projects.
As we stated last quarter, we believe that the COVID-19 really related headwinds that we experienced these past two years.
Upsides are subsiding.
And that new delayed projects, especially in the U S and Europe are being given the green light to proceed.
Given our contract wins over the last several quarters, our new business outlook for the year.
And a second consecutive quarter of rising backlog, we remain very confident.
And our outlook.
We are monitoring accelerated accelerating growth opportunities across each of our end markets and geographies and continue to see significant opportunity in infrastructure projects.
With respect to New awards in Q1.
2022 many of our wins are infrastructure related including.
Delivering project management and project control services for San Francisco International airports noise installation program.
Managing construction for the capital Metropolitan Transportation Authority at the Mccullough station and Red line in Austin, Texas.
Being selected to provide construction management services to the Pennsylvania Department of Transportation's Central access Philadelphia or cap.
Project, which will replace and expand the existing bridge structure over the Interstate 95.
In Center City Philadelphia.
Being awarded the construction management services contract by the Port Authority of the Allegheny County, and Pennsylvania for their P. A a C bus rapid transit system project.
And providing construction management services for the flagship mixed use project Marina towers in Egypt.
On behalf of the new urban communities authority.
Approximately 40% of New awards in 'twenty to 'twenty, two first quarter, where infrastructure related.
These awards were not associated with the 'twenty to 'twenty two federal infrastructure Bill.
But instead or a combination of new projects and deferred programs.
That have been reinstated as we continue to exit the lockdowns associated with COVID-19.
We continue to expect that we will realize awards associated with the infrastructure Bill starting late this year.
Our low risk <unk>.
Professional services business model provides us with the flexibility and resiliency to grow under multiple economic circumstances.
Moreover, our diverse revenue profile, which is driven by very geographic and market.
And client exposure.
How's us to adapt to changing market environments and quickly pivot.
Two words opportunities as they arise.
We reiterate our outlook for 'twenty to 'twenty two.
We are forecasting CFR of $340 million to $350 million, an increase of 11% to 15% from 'twenty to 'twenty one.
Our adjusted EBITDA guidance for 'twenty to 'twenty, two is expected to range between $22 million to $24 million up.
From adjusted EBITDA of $16 3 million and representing a growth of 35% to 47%.
That said.
Thank you for your attention.
And I'll now turn things over to Todd Weintraub Hills.
He is chief financial Officer.
Todd. Please go ahead.
Thank you Ralph.
Revenue increased 17, 4% in the quarter coming in at $102 2 million compared to $87 1 million in last year's first quarter.
CFR for the quarter increased 12, 5% to $81 4 million from $72 4 million in the first quarter of 'twenty one.
And an increase in project activity to pre COVID-19 levels.
The quarter the majority of our revenue was generated in the Americas, followed by Middle East Asia Pacific Region, Europe , and then Africa.
Gross profit.
Improved to $31 8 million or 31, 1% of total revenue from $27 2 million or 31, 3% of total revenue in last year's first quarter.
SG&A rose six 7% to $29 5 million from $27 7 million last year's first quarter.
SG&A included nonrecurring and noncash income of 1.1 million expenses, <unk> 4 million into 'twenty, two and 'twenty, one first quarters respectively.
Excluding these nonrecurring and noncash expenses SG&A expenses were $29 6 million in the first quarter or <unk> 91, 3% of gross profit, which compares to $27 3 million or 100% of gross profit in last year's first quarter.
This decline in SG&A as a percentage of gross profit reflected our continuing commitment to managing expenses to ensure cost more slowly than gross profits.
<unk> mentioned, we have reduced the run rate of G&A expenses by approximately $4 million annually. The initial impact of which is expected to be realized in the current second quarter ending June 30 X 22.
These expenses were achieved primarily by realigning certain parts of our workforce to improve utilization and efficiency.
Operating income improved $1 million from an operating loss of 154000 in the first quarter of 'twenty, one driven by higher CFR improved gross profit offset by an increase in <unk>.
Foreign currency exchange losses, and higher SG&A to support our growth initiatives.
On adjusted basis, adjusting operating profit grew to $2 4 million of adjusted adjusted operating profit of 161000 last year.
Net loss for the quarter narrowed to 544001 per share compared to a net loss of $2 7 million five cents per share in the year ago period adjusted net.
Net income improved to 864000 from an adjusted net loss of $2 4 million in last year's first quarter.
Adjusted EBITDA for 'twenty, two first quarter improved to $3 2 million up from 741000 from last year's first quarter.
A reconciliation for these just errors.
We did in our press release.
Our unrestricted cash position at March 31, 22 was $23 9 million and total liquidity was $27 8 million.
Net cash used in operating activities was $3 3 million.
While use of cash is consistent with historical first quarter performance first quarter is our lowest cash collection quite yet.
I want to note that as a significant improvement in cash net cash used in operating activities of $16 7 million from the first quarter of last year.
Free cash flow for the quarter was negative $4 1 million, which is much improved from negative free cash flow was $17 $5 million in last year's first quarter.
With the first quarter behind Us, we do expect to generate positive cash flow in the remainder of 2022.
We have amended our main revolving and term loan facilities to extend the maturity of the revolving facilities to may 2023, and the term loan to November 2023.
We paid a fee of 1% on the term loan facility and a half percent and revolving credit facility and will pay an additional half a percent on the revolver at the end of the second third and fourth quarters.
2022.
Interest spreads on both of these facilities will increase by 1%.
I also noted our total backlog for the second consecutive quarter of improving $736 1 million from $729 4 million at December 31, 21, reflecting a positive book to burn during the quarter.
Our 12 month backlog at March 31st 2022 was $264 million from a geographic perspective, our backlog remain concentrated in the Americas.
The 48% followed by the Middle East Asia region after that in Europe .
Thanks, very much for your time and I'll now turn the conversation back to growth.
Thank you Todd.
Thank you for your time today.
And I'll ask the operator to open the call to questions.
Thank you.
Ladies and gentlemen, we will now be conducting a question and answer session.
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Please call for questions.
Our first question is from Pete Enderlin with Amazing partners. Please proceed.
Thank you good morning, Ralph and Todd.
Yeah good morning.
You know you have had book to bill ratios of more than 1.0 wait in the past recent past even.
So I'm wondering you know with the infrastructures beginning to.
Start to flow and in an economy, that's fairly strong although that's a question about how sustainable that is.
Where there were there more.
Wins that that you could have gotten that somehow were just delayed at this point in the cycle.
Yeah.
And you are right we have had.
Our book to burn a much higher in the fourth quarter.
And other quarters prior.
Prior to that however, typically first of all our first quarter is usually the slowest one for bookings just because most of our business is really with the public sector and it takes some time for the public sector.
For the awards during the period.
Early parts of the year, but.
Two to answer your question on the infrastructure, we have not seen any of the procurement that's coming out of the infrastructure Bill yet hit the street think it's trickling down through the administrative burden.
Between the federal and state governments were expecting to start seeing really.
Potential awards happening towards the later part of this year.
I mentioned that during during the during our call earlier right.
Yeah, and then the related question to that is have there been any significant cancellations, which as I understand the way you account for the wood.
So up is as a reduction in the book to Bill ratio.
We have we've not had any major cancellations.
We've had some minor adjustments as we usually do in a certain tasks orders or contracts.
<unk>.
Contracts are now fully absorbed and they're coming to an end, there's sometimes some minor adjustments, but other than that we have not had any cancellations now.
And you did mention and have had some reductions in the ongoing level of SG&A. So what how should we think about that level is sustainable amount for this this year and next.
I think the amounts that we've done are sustainable and.
Let Todd as well weigh in on it and add to what I have to say they are sustainable to what we're doing is not a temporary.
This was mainly taking looking.
Looking out of utilization getting it more efficient are looking at some of our indirect.
Our overhead staff and really.
Fine tuning some of the things.
We had added some some indirect for some growth that we've seen and now we're just fine tuning some of the some of these elements. So what do you think that the.
No.
Budget ruble level of SG&A going forward would be.
Yeah, Yeah, we haven't really given out.
Yeah, we haven't given any.
Any specific guidance on.
We have in the past though.
A couple of years ago, we did but we.
We don't have any current guidance on that SG&A levels, but.
I think you can look at the run rate and.
As we said.
We should be able to reduce.
From the current run rate that we have.
I would add to that that we're.
We're also constantly we got more efficient as Rob said, we have.
Better staff utilization at this point, we put some efficiencies in April eliminate some positions.
On the other hand as we go forward, we expect we're going to have opportunities to make investments to support future growth as well so there'll be some counterbalance to that but I think what this really does is it positions us to be able to do that without.
Increasing SG&A and with being able to sustain stinker right levels.
Okay, and then one more if I might and that is.
Is there anything you can say specifically about the kind of pricing that goes into some of these bids I mean, it doesn't appear that there's a lot of <unk>.
Pricing sensitivity, but I mean, obviously, especially for some of the government business.
There may be an increasing amount of sensitivity.
And competition is pretty competitive business.
Ah you're correct. It is a competitive business our gross margin has not been coming down.
We've been defending the gross margins were not going.
And just to buy work or get work I think theres going to be a lot of work coming down. So we're looking at it very carefully resources or something.
And the talents in the market.
Our scarce. So we wanted to make sure were putting our talent and our resources to the best use for both our clients and our shareholders for the maximum returns.
Okay, great. Thank you very much.
Thank you.
Our next question is from Bill does Ela with Teton capital. Please proceed.
Thank you our first.
First question I'd like to start with is is relative to Libya did you collect $487000 in the quarter.
Yes, we did yes.
And.
And.
What is the I mean, that's it I mean, congratulations but that is a small number relative to the total what were the what were the circumstances of that collection and and how are you thinking about future collections.
Given the Oh.
Now fractured a refracture and government.
Beverly we continue monitoring and being part of the situation in Libya to make sure that we collect all our money.
Again, as I said before it's a matter of timing the reason why this time.
<unk> were relatively smaller.
Than previous times in other collections.
Our contract has a.
Certain percentage of collection, where we collect in local currency.
And a much bigger portion of the contract Thats collective and foreign currency, our hard currency as they say.
This was a portion of the local currency that was being paid and we got the approval process, obviously, having a fractured government it takes longer for approval process and longer for.
Any money to flow.
So we took whatever we could get and we continue making.
Making headway is and in order to make sure that we collect every penny of it.
And at one point.
We had the sense that there was some.
Some desire on the Libyan government front too to restart the project, but I think your your mindset was that that would be a that would be terrific. After they paid you for what you have done.
Where where are you sensing their mindset is relative to wanting to to restart that project.
They have they're very eager to start the projects they have already.
<unk> been talking to.
The contractors that were on the project contractors, we're mobilizing they've just finished their one month of Ramadan, which really.
Puts a damper on any activities.
It is one of the priority of projects.
But we maintained our our position that we need a significant amount of money before we can go back in there.
I'd just like to remind you that you know.
The debt is now our outstanding debt is 20 million from a initial 60 plus million that we had so we've collected a significant amount in the last.
18 months I think over 10 million was collected.
We would expect things to collect more and once we do and we see that.
Without putting the company in any high risk we would've support.
Our clients, but just to make sure that.
With a low risk and that we've collected most of our money.
And Ruth who is it.
A fair perspective that with oil prices being higher.
That is the government would have a lot more cash too.
Two.
<unk> to them and is that even relevant.
Is that even a relevant factor given the the fractured.
The fractured government.
Obviously with oil prices being higher or there is a lot of.
Additional cash that's coming into the country.
The issue of us of the Libyans government not paying was not a lack of money.
And it was not.
Not recognizing that debt because obviously they've recognized that they had been continues to do so it's a matter of the political environment that allows them to be able to make payments.
And the reason to make payments is for them.
Believing that the economy is coming back on and they need to.
Restart immediately the priority projects, which this one is one of them.
So having a fractured government does provide a challenge but.
But we've we've.
Been collecting money during any of the previous times when there was a fractured.
And our dual government within within Libya.
Yeah. That's helpful. A couple of additional questions. If I may please.
Facilities management would you please.
Provide an update on that aspect of your business place.
Sure Yeah, we continue.
Drawing in the facility management.
We are pursuing two or three large assignments.
Mainly in the Middle East and North Africa.
The facility management, they have been postponed for one for the.
One of the month of Ramadan, where things were very slow on it.
But we're expecting to have hopefully some good news by our next quarter results.
On it.
Well I won't say, congratulations but good good luck Scott.
But pulling pulling that off.
And I know that you had a big facilities management contract in Saudi Arabia.
That I'm not sure if it even was able to start before COVID-19 shut it down where does that where.
Where does that line.
I believe you're referring to the school projects.
We're managing our I believe a total there was a total of 3000 schools that are initially we're managing probably.
600, I believe 640 of them.
And to answer your question, Yes, we have started before COVID-19.
During COVID-19 Unfortunately, with the schools being closed down we demobilize most of the most of our staff all our staff have been removed lies right now.
And we continue providing that service.
Got into an extension for for next year or so we continue providing those services.
And you had mentioned it that was approximately 650 schools out of 3000.
What about the remaining schools is there an opportunity to to pick up the the remaining.
Yes, there is an opportunity we're waiting for the task orders too to come out and we'll see where what are they going to go obviously they have several options one of them is us.
Great. Thank you and then relative to your guidance.
I'd like to just kind of worked through a couple of numbers if we may.
The low end of the guidance, if you take off or remove the first quarter.
<unk> that leaves about $86 million per quarter of the CFR to achieve to achieve the low end, where it's closer to $90 million two per quarter to achieve the high end for the remaining three quarters.
The question is do you anticipate with what you see developing with your business that CFR essentially ramps.
Sequentially and so we would we would just see a.
I don't want to overstate this but really a smoothness to a two year growth on a sequential basis throughout this year is that the right way to look at it or is there. Some is there some lumpiness that we need to be thinking more about.
Usually our first quarter is probably the slowest quarter.
And then it's just because of the amount of working days.
You start off the year with new year's and.
Some some vacation time that that drills down from from.
From January then you have a couple of public holidays.
During the during the first quarter were truly you have February which is a which is a short month. So typically the first quarter is usually our weakest or slowest quarter in CFR.
And third quarters are usually strong quarters.
Even though you have a summer vacation as well, which are little bit dampens, it, but that's offset by by some a couple of months that have.
More than.
The average working days.
And you know one day working day difference makes a lot of mixed makes a lot of difference because your cost is the same but your revenue differs.
And the fourth quarter.
Somewhere in between is stronger than the first but sometimes most of the times not as strong as the third and fourth.
As the second and third quarter.
And this year given what you've said a couple of times throughout this call about the infrastructure build projects picking up as the year progresses.
Do you believe that the normal seasonality of that slowing or a lower level of.
CFR in Q4 will repeat or is this a is this a unique year, where you have an opportunity to see <unk> grow sequentially in Q4 in spite of the normal seasonality.
Well I think that this year.
<unk> unique in one aspect is.
Our first of all our 12 month backlog is.
Probably the highest its been.
In comparison to this expected CFR, so a lot of the.
Anticipated book is already in hand.
Versus having to.
Really book and then burn in the same year.
Having said that we're expecting some some additional new wins to come in.
I don't believe that the fourth quarter is going to be much slower than the rest.
And then the third and fourth quarter, which is.
Usually sometimes we see that in this.
But it's not going to be due to the infrastructure Bill is because our backlog is very strong and our 12 month backlog is strong.
Well I believe the.
The infrastructure Bill if we start seeing the procurement and some of the money flowing youre going to get the awards, but youre not going to have time to to really impact the CFR that much by it.
Understood that makes sense. Thank you for the color and congratulations on a great start to the year.
Thank you very much.
Okay.
Our next question is from Tim chatter with medalist investments. Please proceed.
Yes, all right. Thank you a couple of questions related to debt.
My understanding last year was that you.
You were progressing towards refinancing your debt.
Lower.
Far as rigs so that you might be able to pursue M&A and then that.
Narrative changed into a situation where.
The debt was renegotiated and extended at higher rates.
And I guess, a couple of things there I guess maybe.
Why did that occur.
And.
Why can't you use unrestricted cash to pay off some of that debt.
Now.
That's my first question.
So in terms of what happened we initially did have a.
A commitment letter from a major financial institution.
If we talked about that.
That would've been favorable unfortunately.
We were not able to get that syndicate it.
The market was not accepting.
What has been proposed and.
So now we as you see.
The amendment extended so that will put in salute.
<unk> solution.
Within <unk>.
In the next within the next few months.
In terms of.
In terms of unrestricted cash.
The levels of cash we're running at now that's pretty much the level of operating cash we need to have on the balance sheet. Our cash because we are an international company we have we.
No. We don't have one bucket of $23 million of unrestricted cash sitting there it is.
Broken up amongst all the different regions and even within the regions. There is a number of countries within Europe within the middle East within North Africa.
And we've got local operations. So the cash is fairly well dispersed.
Throughout the country not just even though it is unrestricted and that there is no restriction on it.
It is not readily available to go ahead and pay down debt, because we do need to have that to meet our.
Day to day operating needs and.
Working capital needs. So the level that we're at now.
It really is not an excess in order to be able to pay down debt.
And we do manage that I mean, if we if we do have an opportunity to pay down debt occasionally because we've got an influx of cash we'll do that but typically we're in half two and half to redraw that.
As well as you know.
As the cycle goes.
Yeah that was my suspicion and I.
I noticed in your.
Debt renegotiation with the banks.
I guess.
Put the Libya receivables.
Pay down where they are.
The move those to the front of the line requiring debt pay down and what those receivables can you add any more color.
<unk> two <unk>.
Libya receivables will function, specifically with the debt.
I'm not sure that there's much to add essentially.
I think that.
I think the lenders are looking at maybe your receivables as.
Yeah.
End of <unk>.
Not really included in the plan.
We don't I mean, theyre not part of our our budgeting Derrick they are not part of anything that we put in.
So to the extent that we're able to collect.
Over and above.
The lenders would like to see that go towards pay down and we think that that makes perfect sense.
And it's a good idea to so.
We agreed to go ahead and to the extent that we get those lithia payments will go ahead and reduce the.
Scott.
The formulas are a little bit more.
Complicated.
Go for it because we do have two.
We do have two facilities within the revolving credit facility, there's a domestic and international so in the first instance, it would go to pay down the international facility that is much less.
After that we would look to pay down debt.
Facility with anything that would be.
During the year.
And back.
Back on the back on the SG&A question has come up a couple of times in order to hit your guidance for the year.
SG&A in hard numbers is going to be between 120 to 125 million I think.
Notwithstanding kind of the stage target you put out there.
Aggregate dollar terms the SG&A dollars will rise this year my question.
Is what's the best way for us to look at SG&A would it be as a ratio of CFR or you in your in your prepared comments referred to SG&A as a percentage of gross profit and I am just wondering which do you think is the best to look at and you have any longer term.
Targets for the ratio that you do think is best.
So I.
I think that you could look at either.
I would not look at it as a percentage of.
Revenue.
Because we do have pass throughs in there that could start but I think.
Our gross our gross margin or gross profit as a percentage of CFR. That's been fairly consistent we expect it to remain to be fairly consistent so whether you look at SG&A as a percentage of CFR or gross profit.
I think you could do it either way.
And get the same answer.
So.
That's the way I would kind of think about it but.
And no there's no.
We haven't put out any guidance in terms of what a target percentage would be in either of those.
I think what we put out a target other than to say that you should see that percentage declining.
<unk>.
We have said that we expect.
Not just expect we're very adamant that our costs are going to grow less than our our profits. What do you want to think about that in terms of gross profit or in terms of C. A R.
You know it.
We said that.
We're going to grow CFR by 11% to 15% over last year guidance. So our question certainly grow by something significantly less.
And.
Theres not theres not headway within.
Our cost base to be able to continue that for a good period of time before we really haven't yet.
Take any step level function up in SG&A. So shall we expect that to continue to be the trend that overall when you look at it SCR or protective gross profit cost and SG&A will continue to grow at a lower rate than that.
And what we have said and I don't think the change that we expect.
We're driving towards getting to a.
EBITDA at our ratio of about 10%.
We're still well below that but we expect that we're going to get there by continuing to growing costs less than we're growing CFR.
Yeah Okay.
Helpful.
Yet your guidance this year that the SG&A to gross profit would be about 89% and looking historically here you had been as low as about 86, 5% in 2019 and that would get you.
That would get you somewhat closer to that to that EBITDA target, but.
That said that's good to know that that's the right ratio.
Yeah.
Thanks.
Our next question is from David <unk>, a private Investor. Please proceed.
Okay.
And our next question is from Eric Goldberg, Another private Investor. Please proceed.
Okay.
Our guys for the update.
So all of a long term investor and and Hill I've only got the equity for about eight years, now and I invested largely because of the sophistication of the board and particularly the specification of the management so that doesn't seem to align with your failures, let you reported last quarter and your ability to be SEC requirements <unk>.
Requirements.
I mean surprisingly it seemed like you didn't have a fully functional billing department.
My question is to Todd are those problems behind US do we have to worry about FCC failures in building.
Staffing is that behind us now.
And then just a second question if I married on the claims management business have you started selling that service now and have you contracted it generated any revenue from that and I guess lastly.
The difficulty of the equity is trading you know dollar 19 or so.
In your sales process that start starting to become a concern for the sales effort from the clients potential clients.
Thank you.
So I'll take the first two regarding billing.
Drilling in FCC.
The others too.
Zero.
Yes.
Issues are.
Are behind us.
Yeah.
We've increased staffing for our billing department.
We've also Ivy.
<unk> had some improvements in the process itself.
So with that that has that has come back under control.
And we're starting to see the impact of that now.
Yeah.
It takes some time to work through but we have seen an improvement in the.
Year to date so far.
And being able to take care of the Unbilled receivables out there and get those built so so that is that is behind us in terms of STC issues I guess I need some clarification on the question.
I don't know exactly what you're referring to when you say SEC failures.
So basically just a.
It could certainly the reporting failures did at the SEC or did you have a could be talking about control. Okay. You are talking about.
Okay, yes so.
But.
I just wanted to take a step back and put a little perspective.
Out that that.
When we.
We initially had restatement three year statement.
Back in 2017, and finally got that filed in the fall of 2018.
We had.
We had 19 material weaknesses that you disaggregated basis that were identified.
We have spent.
This amount of effort.
Since then remediated those during 2019, we were able to remediate about half those during 2020.
We were able to remediate the remainder except for two of them.
And then during <unk> and <unk>.
During the past year, we did complete remediate.
Immediate while the ones that have been existing.
Unfortunately.
There was one more that popped up.
And to put some context around that.
The work that we had really done was to put in an effective control system.
To avoid the problems of the past and to put in.
A well designed to control system and largely the workovers over couple of years to accomplish that was completed.
What we found during the final year is that.
Execution of those controls that had put into place was not done on a consistent basis.
And that led to the.
Weakness one material weakness that we have now.
The weaknesses.
It's more a matter of execution of control that it is not having the controls in place.
<unk>.
Yes.
To explain the way that.
The auditor's assessment works.
First the control operation throughout the entire course of the year. So they were not consistently performed throughout the course year by the time, we got to the fourth quarter. There were no testing issues in the fourth quarter of last year.
We did execute everything everything was properly in the fourth quarter, but have not been consistent throughout the year.
We're now.
Through the first quarter were testing the first quarter and the expectation is that it.
Was that throughout the year, we are compliant now and we're executing all of the controls properly we haven't seen any exceptions year to date, we need to continue testing, but there is every expectation that that.
That we are.
Remediated, we continue to take steps to improve on that.
When when the opinions issued for next year, it will be completely clean opinion.
Great. Thank you very much.
The claims management business I'm interested in that so any update on that.
Sure Let me take this one.
As of last week.
Our noncompete has expired and.
We can we are not restricted in how much of the claims business. If we can take on so to answer. Your question is yes, we have already couple of assignments have shown up.
Uh huh.
Even before from clients that knew us and needed claims work on it.
We have mobilized already some some staff.
But we are as I mentioned it last time, we are structuring it a bit differently, we're going to we're going to have it as an extension of our project management services because we continue.
As part of our project management services claims is still a big part of it.
Especially during supervision.
And.
And inspection services. So we have taken a couple of new claims assignment, we're expecting that we're going to take on quite a lot more.
But we are going to be starting.
That business again organically for now.
And we're going to do it.
With existing talent augmenting it with.
Just a few hires.
As long term assignments come in.
And work with a lot of independent consultants that are in that business. So pay only when when theyre available.
We expect our margins are going to move upwards because of that business.
And as it grows we're gonna look re look at the organization and how are we going to develop it once we have a critical mass assembled on the claims business.
Syed.
Does that give you enough color.
No that was great to me it seems like an exciting opportunity.
With incremental investments being somewhat limited so.
I'm excited about that.
As in the in the selling profit has there been an express concern over kind of the position of a coffee now from a.
Financial strength.
Have you seen that.
No we have not we haven't I haven't had any calls from any of our clients weather.
In the U S or overseas.
Concerned about our price of stock in what we're trading at levels was trading at I think as long as you know we can provide them.
Services.
And the quality that we have always been providing and we you know any.
Subs in particular with the U.
U S state and local and federal governments.
As long as we pay ourselves on time.
I am not sure that there's any concerns or.
Any issues with what level of our stock has traded at.
Just one last question you seem to talk about the Libya outstanding debt on that recall.
There been any thought about just selling that receivable and.
Paid off debt and being done with it.
Just like to clarify one thing.
Try not to talk about the Olivia receivables, but I answer any questions. They tell me so.
Yes, we would if there wasn't opportunity to sell that receivable that we would have.
Obviously.
We didn't because we couldnt find theres very few buyers and in particular since Livia wasn't a flux and.
Politically.
But given where we're at.
Having started with 63 million of our outstanding debt.
<unk> down to $20 million.
We've taken the lion's share out of it and we're pretty confident we're going to get the remainder it's a matter of time and hopefully.
Shorter than what it has taken so far.
Alright, Thank you very much.
Thank you.
Thank you.
And gentlemen, this concludes our question and answer session I would like to turn the call back to well golly for any closing remarks.
Thank you all very much for your time.
And have a wonderful day.
I look forward to speaking with you in connection with our 2022 second quarter financial results.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.