Williams Industrial Services Group Inc.

Hello, and welcome to the Williams Industrial Services Group third quarter 2021 financial results conference call and webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Chris Witte, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Williams third quarter conference call. With me on the call today are Tracy Pelliera, President and CEO, Randy Lay, EVP and COO, and Damian Vassell, VP and CFO. After Tracy and Damian provide their prepared remarks, we'll open the call for questions. Our third quarter results were issued yesterday afternoon, and a slide presentation is available on the company's website at www.wisgrp.com. If you'd like to turn to slide two in our presentation, how are you going to save hardware statements? This call may include forward-looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicator implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call, as well as with our 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 the non-GAAP financial measures. We believe these are useful in evaluating the company's performance. However, you should not consider 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.

Thanks, Chris, and good morning, everyone. Before addressing our financial results, I wanted to spend a few minutes on the rationale for the management reorganization we announced on November 8th, 2021. Following the up listing of Williams to the New York Stock Exchange American earlier this year, we began a comprehensive review of our overall organization to ensure we had the right people and structure in place to advance our values and meet our strategic goals. Based on that review, we concluded as follows. First, For the company to deliver the robust growth and operational execution envisioned by our strategic plan, our business development and operations functions required separate leaders. With this in mind, we appointed a new executive vice president, chief operating officer, and a new executive vice president, business development, each reporting to me. Second, safety has always been our fundamental core value and will forever be our highest priority. We thus appointed a new vice president of safety reporting to me to improve the efficacy of our critical safety program. Finally, our business systems needed to be upgraded for us to run our organization most efficiently to drive the achievement of our strategy. Therefore, we appointed a CIO who will be essential to the successful deployment of our new systems. Regarding our financial performance, let me start by saying that we were disappointed with the company's overall third quarter results, which were below our earlier expectations and are causing us to revise the guidance for the remainder of 2021. A variety of issues negatively impacted our operational execution, and we are vigorously pursuing every possible step to limit their impact and ensure that the company gets back on track to produce the positive outcomes we are accustomed to seeing. While revenues rose 11% year over year to $73.4 million, gross margins declined 9.2% versus 13.1% in the third quarter of 2021. Margins came under pressure due to project mix, cost overruns, and delayed incentive fee payments. Operating expenses, however, were lower this quarter, down to 4.6 million versus 6 million last year. This largely reflects reduced compensation and benefit costs. Our adjusted EBITDA was 3.8 million for the quarter, down from 4.1 million last year. We grew our backlog to 672.5 million, a record, but we anticipated it being at a higher level by this point. There is a significant potential contract, which we previously characterized as highly probable in our pipeline. However, we are still waiting for a decision to be made and the outcome is uncertain. Based on this delay in our overall gross margin performance, we are revising our guidance for 2021, which I will detail at the end of our prepared remarks. Turning to slide four, several factors impacted our Q3 performance. In addition to the delayed significant contract, an expected incentive fee of approximately $1 million that we disclosed last quarter has not yet been paid and is being disputed by our customer. These delays reduced our revenue and profitability. We also experienced costs for overruns on certain fixed-price contracts and less favorable project mix. Damien will review these items in more detail momentarily. We are working aggressively to improve our future performance. In early November, we upgraded and reorganized our leadership team to place greater focus on customer incentives, initiatives, and operational execution, including enhanced rigor and discipline regarding project controls. This should accelerate the company's growth trajectory while delivering better, more predictable financial results. At the same time, Although the supply chain environment is challenging, over 85% of our revenue is derived from time and material cost plus contracts. Thus, we are experiencing limited price pressure and have taken, where warranted, actions such that the impact of gross margin will be largely contained going forward. The opportunities in our end market continue to be robust. and the recent infrastructure bill passed by Congress calls for the expenditure of approximately $125 billion on water and power grid infrastructure. This continues to bode well for the top-line growth potential next year and beyond. As I mentioned a moment ago, we previously announced various changes to our management structure. As part of this, Randy Lay, who has been my right-hand man and an excellent CFO, is now Executive Vice President and Chief Operating Officer. This expands his role and responsibilities, giving him more of a say in our operations. While Damien Vassal, our prior controller, has taken the role of Vice President and CFO. Damien has been with us a long time and is a financially astute leader with the proven ability to lead our financial team. I'll now hand it over to Damien to discuss our quarterly financial results in greater detail. Damien.