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spk08: Greetings, and welcome to the Williams Industrial Services Group First Quarter 2021 Financial Result. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I'll now turn the conference over to your host, Chris Witte, Investor Relations Advisor. You may begin.
spk05: Thank you, and good morning, everyone. Welcome to the Williams First Quarter Conference Call. With me on the call today are Tracy Palliera, President and CEO, Randy Lay, Senior VP and CFO, and Kelly Powers, President of Operations and Business Development. After Tracy and Randy provide their prepared remarks, we'll open the call for questions. Our first quarter results were issued this morning, and a slide presentation is available on the company's website at www.wisgrp.com. During slide two of the deck, I will review the safe harbor statement. During this call, we may make forward-looking statements during the formal discussions as well as during the Q&A session. These statements apply to future events which are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release and slides as well as with other documents filed with the SEC. You can find all these documents on our website or at www.sec.gov. During today's call, we will also discuss some non-GAAP financial measures. We believe these are useful in evaluating the company's performance. However, you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. When applicable, we have prepared and provided a reconciliation of non-GAAP measures with comparable GAAP results in the tables that accompany today's release and slides. Please note that our conversation today will be about continuing operations unless noted otherwise. Starting with slide three, I will now turn the call over to Tracy Palliera. Please go ahead, Tracy.
spk01: Thanks, Chris, and good morning, everyone. As expected, our first quarter results reflected lower business activity and less favorable project mix due to a variety of factors we touched on during our last call. Our second half 2020 bookings were lower than planned due to COVID-19 delays and related matters, which directly impacted work levels in Q1. However, the 2021 revenue outlook is still very positive, and we're pleased by the active bid environment as well as loosening pandemic restrictions. I'll speak to that more in a moment. Our gross margin was 10 percent for the quarter versus 10.4 percent last year, and operating expenses rose slightly to 6.4 million as we invested in business development personnel and initiatives to win new contracts and strengthen the outlook. We ended the quarter with $460.6 million of backlog, but expect this to increase significantly throughout the remainder of 2021 including the anticipated expansion of decommissioning work at Indian Point, New York, which I will elaborate on further in a minute. We are also otherwise booking new orders to be converted to revenue this year at the pace projected when we issued our financial guidance. Against this backdrop, we are reaffirming our 2021 financial guidance and backlog expectations as a whole. which I will review later in the presentation. Before discussing our financial results and projections further, let me add that we recently strengthened the company's management team with the hiring of Ray Ruby as Senior Vice President of Key Accounts. Ray has had a distinguished career in leadership roles with a number of nuclear utility organizations, including most recently Bruce Power, as well as Southern Nuclear and the Tennessee Valley Authority. And we're excited to have him on board to support our nuclear business development initiatives, in particular the pursuit of long-term maintenance and project controls management agreements. Now turning to slide five, I'd like to provide some additional color on the current state of our end markets and our assessment of the year ahead. To reiterate, we continue to experience a more active and robust business environment in 2021 due to a number of factors. First and perhaps most obvious, communication and in-person meetings have increased as the threat from COVID-19 subsides. We're now pursuing new business in person rather than on the phone. In addition, there is clearly more demand for infrastructure projects due to delayed capital spending last year. We're seeing more interest across the board and remain optimistic about the outlook, given the large number of high probability opportunities in our pipeline. We expect to hear soon about one of these, a major expansion of decommissioning work related to the Indian Point Nuclear Decommissioning Project. In April, the New York Public Service Commission approved the transfer of the Indian Point Energy Center, otherwise known as IPEC, including IPEC nuclear units 1, 2, and 3 located at Buchanan, New York, from its current owner, Entergy, to Holtec International. The last operating reactor, Unit 3, was shut down on April 30th, clearing the way for this transaction to be Through our customer-centric focus and hard work, Williams has tried to say it has become part of Team Holtec. In light of this, we are optimistic about our ability to support decommissioning-related project work at IPEC over the next 10 years. We'll keep everyone posted as things develop. The rest of our business also shows great promise for 2021 and beyond. Our book-to-bill ratio was greater than one in the first quarter, and we expect similar or better performance going forward. As well, our New York office has rapidly recovered from the COVID-19 shutdown and has recently been very busy on work with Con Ed and other customers. Williams remains the number one project contractor for nuclear utilities in the U.S., with active jobs and noteworthy prospects, and has developed a new niche with its professional nuclear services in Canada. In addition, we are winning new projects and customers in our energy delivery and chemical and markets, and our Florida office just had the best quarter in its history in terms of new wastewater project bookings. Finally, infrastructure spending seems poised to get a boost out of Washington. positively impacting a diverse array of areas, including the electric grid and water wastewater. The Senate has already authorized over $35 billion to improve the country's drinking and wastewater systems. While these and other spending priorities still need to be ironed out, the discussion taking place bodes well for Williams. The hiring of Ray Ruby, coupled with the return of Mike Bruno to Williams late last year, has strengthened our business development team. With Kelly Powers at the helm, we have very talented and seasoned professionals aggressively seeking to expand our customer base and the scope of work we take on. I'm very optimistic that they will succeed. As we said last year, we have over 500 million of high probability potential orders in our current backlog and expect to book at least 300 million more backlog prior to year end. It should come as no surprise then that we remain upbeat about 2021. This includes revenue expansion and increased cash flow and in tandem further pay down of debt. Our goals are the same this year as last, position the company for improved bottom line results and a stronger balance sheet. We're on track to do just that. I'll make a few more comments at the end of the call, but we'll now hand it over to Randy to discuss our quarterly financial results in greater detail. Randy?
spk06: Thank you, Tracy, and good morning, everyone. Turning to slide five in the deck, we posted revenue of $60.9 million for the quarter, as Tracy mentioned. Sales fell year over year, reflecting a reduction in work at Fogel 3 and 4, where revenue was $17 million during the period. This was due to overall project timing partially offset by greater decommissioning work and other business growth. Revenue for the quarter was in line with our expectations, as discussed earlier. in our 2020 earnings release and as previously mentioned, this period represents the low point for 2021. Our backlog is building and we're successfully diversifying the business to offset the lower vocal levels. Slide six shows operating trends for the company. We posted gross profit of 6.1 million or 10% of revenue for the first quarter versus 6.9 million or 10.4% of revenue last year, reflecting changes in project mix. Going forward, we expect margins to trend up and are sticking toward 2021 overall guidance between 11% and 13%. Operating expenses were $6.6 million for the quarter versus $6.4 million last year, with a slight increase due to investments in new business development, reflecting a heightened level of bid activity. The operating margin was negative due to the lower revenue, but we anticipate operating margins to grow substantially in the quarters to come, adjusted for severance and stock-based compensation. I'll now turn the call back to Tracy for a review of our 2021 guidance and his closing remarks. Tracy.
spk01: Thanks, Randy. Turning to slide seven, I just wanted to reiterate our guidance for fiscal 2021, which we initially announced February 8th. We expect revenue to be in the range of $310 to $320 million, gross margins of 11 to 13%, and SC&A to be 7.75% to 8.25% of revenue. Adjusted EBITDA is forecast to be $16 million to $18 million. Our first quarter results, which were anticipated, do not change our estimated expected outcome for 2021. We believe the company is well positioned to capitalize on future opportunities across our end markets leveraging ongoing demand for infrastructure upgrades to grow top-line results and improve overall performance. We're bullish about the road ahead and the increasing diversity of our backlog. With our improved financial results, stronger balance sheet, and phenomenal resume, we are better positioned to win long-term agreements than ever before. Before turning the call over to the operator, let me Remind our listeners that we'll be participating in the Sigistoti Microcap Virtual Conference tomorrow, May 20th. We will post an updated investor presentation and hope you can participate in the conference. With that operator, we can open the line for questions.
spk08: And at this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For the participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And again, just as a reminder, if you have a question, you may press star 1 on your cell phone keypad. Doing so will indicate yourself in the question and answer queue. All right. And our first question is from Dick Ryan with Collier's. Please proceed with your question.
spk07: Thank you. Hey Tracy, it looks like Vogel revenues were down in Q1 versus a year ago and sequentially. Is this kind of a new normal with those two projects expected to come online over the next 12 to 24 months or was there something in the quarter that was more timing related?
spk02: Sorry about that. Yeah, sorry about that. So, Bill, I think that this is expected as the project goes into its final phases.
spk01: As you recall, the nuclear reactor number three is expected to go online in January. or thereabouts. And the second reactor would be later in 2022. So there's the first quarter we saw about $15 million less in revenue than we did the first quarter last year. There are things that are going on the site where we think there may be opportunities for us to pick up scope. So, but you know, overall the project's going to end. So as more things get completed, generally speaking, there'll be less revenue for us at that site.
spk07: Typically when those projects come online, I mean, I don't think the revenue necessarily drops off. I think you have some lingering or some ongoing project work from them. Is that the case in Vogel 3 and 4?
spk01: That's That's our expectation, that there'll still be, you know, cleanup work that would be consistent with certainly the last time we were involved in a major construction project like Watts Bar back five, six years ago. And, you know, we are still very keen to continue to work for Southern Nuclear and do project work. So I think a combination of the two would would certainly give us optimism that we'll continue to be working in some capacity on that site, whether it's cleanup work relating to the nuclear construction or new project work as we go forward.
spk07: Okay, thank you. On Q2 results, I think, will the outage business kick in again in this June as it did in June of 2019? And if so, can you give us kind of an order of magnitude of the impact that that may bring?
spk01: Yes, it will. It'll be comparable to what you saw in 2019. So we're somewhere in the range of $20 million of revenue, you know, in that range.
spk07: And what's the margin of that business versus some of the other project work?
spk01: Well, there's a blend of work that's being done, some of it's projects, some of it's just maintenance. Kelly, why don't you try and explain that a little bit?
spk03: Yeah. You know, from a volume standpoint, there is more of the straight T&Ms that is at kind of the lower end of our margin profile. So you look at the blend for the second quarter, that's offset by a lot of project work that's even outside of outages. So the general outage margin profile would probably be about 9%. Okay.
spk07: And Tracy, I'm not sure if I caught, did you talk about the amount of wastewater business you booked in the quarter and kind of what's the, you talked some generics about the strengthening infrastructure build for wastewater, but do you have any numbers behind what you booked in Q1?
spk01: We booked, just for the floor office, we booked over $39 worth of orders So that's an all-time high point for us, one quarter.
spk07: Okay. Great. Thank you.
spk08: And again, as another reminder, if anyone has any questions, you may simply press star 1 on your telephone keypad. Doing so will join you into the question and answer queue. Our next question is from Deirdre O'Neill with Litchfield Hills. Please proceed with your question.
spk04: Thank you very much. I dialed in late, so forgive me if you've covered this in detail, but do you have any more insight into Indian Point and timing of that and the scope of the project?
spk01: Well, the Public Service Commission... has to meet to formally approve the final license transfer. I believe it's scheduled to do that today. And so in terms of the actual dollar scope, I'm not liable to say exactly what that would be, but it will be a 10-year project with three nuclear reactors. So it will be a very significant project for us.
spk04: Okay, thanks very much. Sure.
spk08: All right. It looks like we have reached the end of our question and answer session. I'll now turn the call back over to CEO Tracy Pallaria with her closing remarks.
spk01: Thank you, everyone, for participating today. We appreciate your time and interest in Williams and look forward to talking again next quarter or perhaps tomorrow if you're participating in Sedoti. So thank you very much. Take care and be well.
spk08: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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