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spk06: Greetings and welcome to Williams Industrial Services Group's second quarter 2021 conference call. At this time, all participants are on a listen-only mode. A 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. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Chris Witte, Investor Relations Advisor. Thank you. You may begin.
spk04: Thank you, and good morning, everyone. Welcome to the Williams Second Quarter Commerce Call. With me on the call today are Tracy Pelliera, President and CEO, Randy Lay, Senior Vice President 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 second quarter results were issued this morning, and a slide presentation is available on the company's website at www.wisgrp.com. If you turn now to slide two on 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 the 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 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'll now turn the call over to Tracy Palliera. Please go ahead, Tracy.
spk01: Thanks, Chris, and good morning, everyone. Our second quarter was one of many accomplishments, starting with top-line growth. Revenue rose 26% year-over-year to $91.6 million, with strong performance across the business. Even as revenue from Vogtle 3 and 4 was down, this was more than made up by higher sales in other areas, as Randy will review further in a moment. Suffice to say, we are well on our way to meeting our revenue guidance this year based on our current run rate, backlog, and active pipeline. Moreover, our backlog rose over $200 million, more than 44% since the end of the first quarter, due to the expansion of work at Indian Point and other recent rent wins, leaving us with a record of $664.4 million. At the same time, we kept operating expenses in line with the first quarter, although gross margins were impacted by mix and other factors, including timing, which again, Randy will go over in detail. We posted adjusted EBITDA of $4.9 million. Overall, the company remains well-positioned to have a great year due to our current book of business and ongoing demand for our array of infrastructure services, as shown on slide four. To reiterate, our total backlog is the highest it has ever been since we began reporting this metric, an achievement that underscores our commitment to customer satisfaction, the capabilities of our highly skilled staff, and our ability to win new business across a variety of end markets. As a reminder, in April, the New York Public Services Commission approved the transfer of the Indian Point Energy Center to Holtec, including three nuclear reactors. Through our past work and reputation, we're proud to be considered part of Team Holtec, which was instrumental in securing the additional decommissioning work at Indian Point. As you can see from the chart, Our business mix continues to evolve consistent with our goal to both scale our core nuclear business and further diversify the company into other attractive adjacent end markets. We have strengthened nuclear with new contracts and fuel storage and decommissioning as well as more projects for utility customers. We also achieved a number of other noteworthy wins during the quarter regarding other end markets, including one, the largest orders in the history of our New York and Jacksonville Florida office in the energy and delivery wastewater end markets, respectively. Two, our first order for natural gas distribution infrastructure replacement work in Connecticut. And three, the initial master contract services work for power distribution upgrades in Florida, a three-year project. Our backlog has grown further since the end of the quarter to 684.1 million as of July 31, 2021, and we anticipate it being even larger at the end of 2021. We have approximately 200 million of further highly probable pipeline opportunities, of which we expect to book at least another 100 million of orders during the second half. As a reminder, we began the year with over $500 million of highly probable backlog and have converted approximately $300 million of that pipeline to backlog year-to-date. Longer term, we're pleased to see the infrastructure bill in Washington making its way through Congress. As I've said in the past, we believe this initiative offers many opportunities for growth going forward. There appears to be plenty of funds to upgrade the electric grid and improve water wastewater facilities. While the fine print has yet to be revealed, this can only provide positive momentum to Williams in the years to come. And we're glad it has bipartisan support. In addition, the American Nuclear Infrastructure Act, another bipartisan bill introduced by the US Senate in July, 2021, supports continued operation of America's existing reactors, and sets the stage to deploy advanced nuclear technologies. Against this backdrop, as I'll discuss in a moment, we are in good shape to reach all of our previously announced guidance targets this year. In addition, our cash flow typically picks up in the second half, so we are poised to pay down additional debt and strengthen the balance sheet in the coming quarters. We're on track to do what we said we would this year, post solid top line growth, manage expenses, reduce debt, and provide healthy returns to our investors. 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?
spk05: Thank you, Tracy, and good morning, everyone. Turning to slide five, we posted revenue of $91.6 million for the quarter, as Tracy mentioned, an increase of 26% over 2020. Sales rose year over year due to higher activity with numerous customers and outage-related work, more than offsetting a reduction of over three and four where revenue was $18.6 million during the period. We saw an uptick in decommissioning as well as in nuclear maintenance at locations undergoing planned outages, and we expect similar sales trends for the remainder of 2021. Our backlog, as Tracy mentioned, is now at record levels as we successfully diversify the business to offset the lower global requirements. Slide 6 shows operating trends for the company. We posted gross profit of $9.4 million or 10.2% of revenue for the second quarter versus $9.4 million or 12.9% of revenue last year, with the change reflecting several factors. Aside from project mix, including a lower amount of global work, Margins were also impacted by the timing of an incentive related to a multi-year contract. While the associated incentive was booked in last year's second quarter in the amount of $1.1 million, this year will be recorded in our third quarter. Going forward, we expect margins to continue trending up and are sticking to our overall 2021 guidance between 11% and 13%. Operating expenses were $6.6 million for the second quarter versus $5.6 million last year. with the increase due to investments in new business development, reflecting a heightened level of bid activity, as well as an increase in salaries and stock compensation expense. The year-over-year comparison also reflects the impact of COVID-related expense reductions in the 2020 second quarter. The operating margin was 3% versus 5.2% last year. However, as SG&A is expected to remain relatively flat going forward, we anticipate operating margins to grow substantially in the quarters to come. As an administrative matter, the company is now classified as an accelerated filer and will file its 2021 10-K next year in 75 days, that is, on or before March 16, 2022, and its 10-Qs in 40 days following the end of each of our fiscal quarters. Also this year, as a smaller reporting company and a non-accelerated filer, the company has not been subject to the order attestation requirements of Section 404 of the Sarbanes-Oxley Act. However, because of the measurement period results of the second quarter, the company has now met the requirements as an accelerated filer and will become subject to the order attestation requirements of Section 404 of the Sarbanes-Oxley Act when filing the annual report on Form 10-K for the year ended December 31st, 2021. I'll now turn the call back to Tracy for review of our 2021 guidance and his closing remarks. Tracy.
spk01: Thanks, Randy. Turning to slide seven, I wanted to reaffirm that our guidance for fiscal 2021 remains unchanged. The company initially announced these expectations on February 8th, and we are confident that we will attain them. We expect revenue to be in the range of $310 to $320 million, gross margins of 11% to 13%, and SD&A to be 7.7% to 8.25%. Adjusted EBITDA is forecast to be $16 to $18 million. I'm pleased that Williams continues to post solid, reliable results and is on the road to drive greater returns. I want to thank all of our employees for the tremendous job they've been doing, winning more business and executing in a way that meets our customers' expectations. We're upbeat about 2021 and beyond as the company benefits from increasing infrastructure demand and and numerous plans to upgrade the country's nuclear, water, wastewater, and electric grid facilities. With that operator, we can open the line for questions.
spk06: Thank you. At this time, we'll be conducting a question and answer session. If you'd 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'd like to remove your question from the queue. For participants using speaker equipment, It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Theodore O'Neill with Litchfield Hills Research. Please proceed with your question.
spk02: Theodore O' Thank you. Congratulations on the good quarter. Two questions, Randy. The first is on the contract incentive related to the multi-year customer contract that is going to appear in the third quarter of 2021. is it going to be similar in size to what got booked in the second quarter of 2020?
spk05: Yeah, that's our expectation, that it won't be materially different.
spk02: Okay. And as you say here, you're going to reduce debt. Can you tell us, are you going to be reducing it by more or less than 10%?
spk05: I'd say that it's probably, I mean, 10% is probably a good number. The ABAL moved up a bit in the quarter, as you saw in the filings, although not very much, frankly, as we also paid down the amortization on the term debt. So, yeah, I'd say that's a reasonable expectation that that would sort of be the benchmark, and then we'd, you know, depending on where cash flows are, we may, in fact, do something a little bit more than that. But we'll see where we are as we go through Q3 and Q4.
spk02: Okay. Thanks very much.
spk06: Our next question comes from Dick Ryan with Collier's. Please proceed with your question.
spk08: Thank you. Say, Randy, will there be any outage work hanging over into Q3, or was that pretty much just all Q2 event?
spk05: Q2 event, pretty much done.
spk08: Okay. Okay. And Tracy, the delays or push-outs of Vogel 3 and 4, how are you kind of handicapping that within your guidance that you've provided?
spk01: It's incorporated in the guidance. I mean, we think that, you know, we're obviously committed to Southern and Bechtel at the site to meet all their stated timelines and You know, as the project gets moved out, we tend to pick up more work. So we think it's in there that would, you know, potentially provide a little bit of upside. But right now, you know, it's incorporated in the guidance as we've given it.
spk08: The orders, obviously, Indian Point was the biggest factor there. What else in Q2 and then so far in July, what other sorts of projects have you booked?
spk01: It's been water. In terms of what we, you know, if we look at the original 500 million and then the 300 million of high probability that we booked, It's energy delivery. It's natural gas distribution. It's some more nuclear. It's Canada nuclear. So it's a pretty broad spectrum of cross-end markets of other orders besides just Indian Point.
spk08: Okay.
spk01: One last one.
spk08: You mentioned Canada. With Canada starting to reopen, what's the outlook up there and kind of the pipeline of bidding opportunities that you might have going forward?
spk01: We're definitely more optimistic than we were. Canada was essentially... has been very, very slow. So we definitely see some opportunities in the pipeline and continue to believe that Canada will be one of our strongest markets going forward.
spk06: Great. Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from John Waldhausen, a private investor. Please proceed with your question.
spk07: Yes, good morning and congratulations on a good quarter. I was curious about the Indian Point work. At what point do we start seeing that go through revenues, and is there something that we should understand about the way that profits will be recognized on that work?
spk01: Well, we're already starting to work, do work, There's nothing particular about how the profits will recognize revenue the way we recognize revenue on other time and material work, and to the extent that there's lump sum work blended in with other projects, it would be on the same revenue recognition standpoint. Kelly, do you have anything further to elaborate about that?
spk03: Yeah, what I would say is, like you said, we're already doing work and we're ramping up continuously over, say, the next three months to be prepared to, you know, have a high volume of work at the end of this year and through the next two years. on this site until next year, and that's when we'll be at peak volume, and we'll be next year.
spk07: Okay. That's helpful. And is this primarily cost plus, or are incentives for performance a particularly meaningful part of this work in complexity?
spk01: Yeah, I mean, it's primarily cost plus, yeah. It's primarily cost plus, yeah. Thanks. Thanks. Occasionally, we will get additional project work that will be fixed price or target price where we'll have incentives to earn better margin, but primarily cost plus.
spk07: Okay, thank you.
spk06: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. At this point, there are no other callers in queue, so I'd like to turn the call back over to Mr. Pagliaro for any closing remarks.
spk01: Thank you, everyone, for participating today. We appreciate your time and interest in WIMS and look forward to talking again next quarter. In the meantime, take care of yourself and be safe. Have a good day.
spk06: This concludes today's comment. You may disconnect your lines at this time, and we thank you for your participation.
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