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spk04: Greetings, and welcome to Williams Industrial Service Group fourth quarter and full year 2021 financial results. 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 a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Witte, Investor Relations. Thank you. You may begin.
spk01: Thank you, and good morning, everyone. Welcome to the Williams Fourth Quarter Conference Call. With me on the call today are Tracy Palliera, President and CEO, and Damian Vassell, Vice President and CFO. After Tracy and Damian provide their prepared remarks, we'll open the call for questions. Our fourth quarter results were issued yesterday afternoon, and a slide presentation is available on the company's website at www.wisgrp.com. If you now turn to slide two in our presentation, I'll briefly review the Safe Harbor Statement. This conference 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 indicated or 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 can cause actual results to differ materially from the company's expectations are disclosed in this conference call 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 this additional information in isolation or as a substitute for results prepared in accordance with GAAP. When applicable, we will have provided a reconciliation of non-GAAP measures with comparable GAAP results in the tables that accompany today's press release and slides. Please note that our conversation today will be about continuing operations unless otherwise noted. Starting with slide three, I'll now turn the call over to Tracy Pelliera. Please go ahead, Tracy.
spk07: Thanks, Chris, and good morning, everyone. A lot has happened since we last spoke. And the team and I are optimistic about the evolving landscape and outlook for 2022. But first, let me discuss how we ended 2021. Williams posted fourth quarter revenue of $799.2 million, up significantly year over year. And overall revenues for fiscal 2021 rose to $305 million from $269 million in 2020. We also posted a gross margin of 11.6 for the quarter and 10.3% for the year, and operating expenses of $6.8 million for the quarter, $24.5 million for 2021 in total. Adjusted EBITDA was $3.6 million for the quarter and $12.7 million for the year. While these metrics were within our revised guidance, they are not. where we want them to be, but rather reflect the factors I spoke about last quarter, including operating losses on projects in our Florida business and contract delays regarding a key Canadian nuclear contract. In early 2022, the company then announced it failed to renew the subject Canadian contract and separately that certain nuclear decommissioning work at three sites worth approximately $360 million of backlog through 2029 had been transferred to a competitor. As previously noted, the loss of the decommissioning business does not materially impact any particular year, including 2022. In addition, it was not high margin in nature. We began the year with roughly $271 million of backlog. While this is obviously materially lower than last quarter, it still leaves us in solid shape to meet our guidance for 2022. We also believe there are numerous opportunities to grow our backlog and accelerate the top line this year. After uplisting to the New York American Stock Exchange in 2021, we began a comprehensive review of our organization to determine whether we had the right people and structures in place to advance our core values, and meet our goals. As a result, and to address issues faced over the year, we reorganized and upgraded our leadership team in November and enhanced our business development focus and operating rigor. The company is also in the process of implementing new systems to streamline and strengthen the organization. In summary, Williams has addressed the root causes behind our operating and contract losses and is now poised to deliver good performance going forward with extensive opportunities to scale the organization in the future. Turning to slide four, I'd like to discuss the outlook a little bit further. As I just mentioned, our adjusted year-end backlog stood at approximately $271 million. However, on top of this backlog, we're betting on significant additional work currently in the pipeline. Some investors have recently wondered how we can make our current revenue guidance when the backlog itself is lower than this target. To this, I just want to clarify two things. First, the previously reported backlog had a significant percent of revenue to be recognized in future years, such that the impact of the decommissioning losses in 2022, as I mentioned, is small, only about $30 million. Second, we always have a meaningful portion of revenue in a given year that is actually won and booked within the 12-month period. In other words, there is nothing unusual about the amount of yet unbooked backlog in our anticipated total 2022 revenue. We're actually very excited by the opportunities on the horizon, including the 2021 Infrastructure Investment and Jobs Act. along with the expanding economy and overall demand for our services in general, lead us to be bullish about the future. There are multiple paths to grow our business based on the industries we serve, the investments and infrastructure being planned, and our diversified blue-chip customer base. William's reputation remains second to none, and we will continue to leverage our experience and relationships to penetrate new clients, expand business with existing ones, and pursue higher margin growth opportunities. I have more comments at the end, but we'll now hand it over to Damian to discuss our quarterly financial results in greater detail. Damian?
spk03: Thank you, Tracy, and good morning, everyone. Let's review the financials in greater detail. Turning to slide five, we posted a revenue of $79.2 million for the quarter, as Tracy mentioned, an increase of 24% over 2020. Sales rose year over year due to higher levels of work across numerous end markets, particularly decommissioning and nuclear maintenance. Revenue from Plant Vogel 3 and 4 was approximately $14.8 million during the period, slightly less than Q3. Even with the recent loss of several decommissioning projects, we expect growth within the nuclear segment to continue. As Tracy discussed, our backlog remains solid and we're continuing to diversify the company to offset lower plant and local requirements going forward. Slide 6 shows operating trends for the company. We posted gross profit of $9.2 million, or 11.6% of revenue, for the fourth quarter versus $9.1 million, or 14.2% of revenue last year. The lower gross margin reflects project mix, including less plant and local work, along with the ongoing impact of several previously announced fixed price projects in Florida, which experienced cost overruns last year, which now report on a zero margin basis. Going forward, we expect margins to remain under pressure, but will improve as the year progresses. Operating expenses were $6.8 million for the quarter versus $6.5 million last year, with the increase primarily due to higher SG&A costs. Our operating margin was 3.1% versus 4% last year. As always, We're assessing areas to further streamline overhead expenses and approve bottom line results going forward. I'll now turn the call back to Tracy for a review of our 2022 guidance and his closing remarks. Tracy?
spk07: Thanks, Damien. Slide 7 sets forth the 2022 guidance that was first provided in January. We envision revenue of between $305 and $325 million and expect to post gross margins between 10.5% and 11%, including the impact of changing project mix and the zero margin contracts Damien discussed. While keeping a tight lid on costs, we anticipate SG&A to be 8.75% to 9.25% of revenue largely due to some critical investments in upgrading our IT systems, both ERP and HR. Without those investments, SG&A would be between 8.25 and 8.75%. Reflecting all the aforementioned items, our adjusted EBITDA forecast is between $10 million and $12.5 million. Williams was clearly tested during recent challenges associated with certain operating and contract losses, but our persistence in pursuing our strategic plan, the DNA for the entire organization, helped sustain us through a very tumultuous period. I am optimistic that the company is now in a better position for future success. The management and structural changes announced in November have made Williams a more growth-oriented enterprise. with greater focus and discipline regarding operational execution. We are also unyielding in our quest to constantly upgrade the key areas of our organization, safety, systems, and leadership among them. Williams has the right people in the right place with the fortitude to succeed. With a new team, systems, and controls in place, we stand prepared to execute in 2022 and beyond. My belief in Williams and its vision for the future remains steadfast, and we are grateful to our loyal stockholders who continue to support us as we move forward into the next phase of our growth story. With that, operator, we can open up the line for questions.
spk04: Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may 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 participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Theodore O'Neill with Lynchfield Hills Research. Please proceed with your question.
spk06: Thank you very much. I have two questions just looking over the K this morning. It says you're going to be exiting the Canadian market, and I was wondering if you expect any meaningful savings, or will those assets be redeployed elsewhere?
spk07: It was pretty much a self-contained operation. There wasn't a lot of SG&A related to it in the U.S. business, so I don't expect a lot of savings there. And we didn't, you know, we just had some offices up there. So in terms of redeploying assets, you know, our assets were our people, essentially. So I don't see that either. Damian, you may have additional thoughts.
spk03: No, I agree with that, Tracy. We had minimal operating expenses there. And it was primarily our people which generated the revenue. So nothing further to add.
spk06: Okay, the other thing that caught my eye was you talked about the analog to digital factory control conversions, and I was wondering if you could give us some insight into the opportunity you see there.
spk07: There's a very significant opportunity for that. For example, Southern is in the midst of a multi-year digitalization upgrade, and we know we have a piece of that work So we're pretty excited about it. Those are 100 million plus projects over, I don't know that you remember the exact amount of the southern project as we sit here, but it's very significant.
spk06: Okay, thanks very much.
spk04: Our next question comes from the line of Julio Romero with Sedodian Company. Please proceed with your question.
spk08: Hey, good morning. I was hoping to dive a little deeper into the revenue opportunities that you mentioned, how you're thinking about replenishing the backlog, if you could talk about opportunities by in-market and maybe specifically which ones are
spk07: highest probability to convert to new awards over the next 12 months sure we've got um we have in the high we have what we consider for um 2022 our unweighted pipeline is over is about 178 million um we think that the weighted weighted pipeline is just for 22 now. The total weighted pipeline is $400 million, but just focusing on 22, the weighted pipeline is $70 million of that. More than half of it is going to be nuclear. And we have some opportunities in our water business, It's pretty much about evenly split among the rest of the end markets, so energy delivery, water, chemical, although we do have a pretty significant this year opportunity in chemical. Over $10 million of that would be chemical, and then pulp and paper would be about the same as the water and the energy delivery.
spk08: Okay, I appreciate that. That's helpful. And maybe, I don't know if you can talk about some of the T&D projects that I think you've talked about over the last couple quarters and how bidding trends are going in that sector.
spk07: Trending well. We're doing work for Eversource. We're looking at adding more crews throughout the year as we are with TECO down in Florida. Tampa Electric. So we're further along with Oversource because we started at the beginning of, you know, in the beginning of 2021. So I think we're looking at having about 10 crews by, you know, mid-year. And with Tampa, Florida Electric, up to, you know, five crews. Damian, if you've got better information, pipe in. But the crews are, you know, continue to do very well with the customer. We're getting good feedback and we're seeing it's a very high growth area for us with margins in the range of 15 to 20%. So we're pretty excited about it.
spk08: Okay. And then maybe just the last one for me is just on the OPEX spend. You mentioned some critical investments you're doing in 22 in ERP and HR. Do you think that kind of, uh, recurs in 23, or do you see maybe OPEX reverting, um, beyond this year to talk about how you see, you know, normalized OPEX spend maybe beyond this year?
spk03: Yeah, let me take that. As far as the OPEX spend, you're right. So we we've talked about some investments back into the business specifically with our ERP. We fully expect to complete this project and the integration in 2022. So with that, those savings, we would see those into 2023 as these expenditures would not repeat.
spk08: Got it. Thanks very much for taking the questions.
spk04: As a reminder, ladies and gentlemen, it is star one to ask a question. Our next question comes from the line of Dick Ryan with Colliers. Please proceed with your question. Thank you.
spk05: So Tracy, on the decommissioning work, just kind of wondering about the fluidity of it, can you discuss the reasoning of the customer, the partner of the 360 going elsewhere, and also in the current backlog of 271 million, it looks like there's still a fair chunk of decommissioning work there. Is that at risk as well?
spk07: I'll take the second one first. We're still doing the operating plant fuel movements for that customer. So we have no reason at the current time to believe that's at risk. We can continue to get more orders. The business we lost relates to the non-operating plants where they're actually deep, you know, they're taking the plants, disassembling the plants, um, that, uh, you know, the customer, customer made a decision, uh, not based on our performance to just move that business to a competitor. Um, one of our former employees went to a couple of our former employees went to work for that competitor and, uh, they want the, the, um, the customer decided to move the business to the competitor. So that's about as much as we can say about that.
spk05: Okay. Looking at the Florida contract, the loss there, how long will that be a drag?
spk07: We expect that to run through late Q3, early Q4.
spk03: That's been reflected in our guidance. Those projects are costing us for approximately 90 basis points on our gross margin simply because we're generating revenue with zero gross margin on those projects. So we expect it to run through this year. They will largely be completed in 2022. Okay, thank you.
spk04: As a reminder, it is star one to ask a question. Once again, that is star one to ask a question. There are no further questions. We do have a question from John Dysher with Pinnacle. Please proceed with your question.
spk02: Hey, good morning, Tracy and Damien. Sounds like we have a lot to be hopeful for in 2022. Just a couple of quick questions. In the backlog, revised backlog, $270 million, how much of that is Vogel?
spk03: Damian, do you have that handy? Yeah, I believe that there's about, well, specifically for 2022, I believe there's about $35 to $40 million in there. I'll need to verify that number.
spk02: 35 to 40 million, because it was, I think, about 31 million at the year end a year ago, so it's actually going up?
spk07: Yes. Okay. John, we're picking up more work as the site starts to get closer to the finish line. We've been picking up more work the last several months, so we're in good shape at Google
spk02: So it was 34 to 35 million, you think?
spk03: Yeah, 35 to 40. I'll verify the number, but it's going to be in that range.
spk02: Okay. All right. Well, that's good news. One of the priorities on the slide deck was reducing debt. And I was just curious, how much do you think you might be able to reduce debt by a year from now?
spk03: Yeah, so the way I look at our debt situation is that obviously it runs through, the debt runs through December of 26. As we generate excess cash flows, those cash flows would be earmarked to reduce the debt levels on our term loan. So I don't want to sit here and today say a specific number of percentage, but it is a priority for us to reduce those debt levels as we generate excess cash.
spk02: Okay. All right. And I guess the other question is on the K in the personnel section, it looked like headcount was up significantly both at the corporate level and the craft level. And I'm just wondering, has that come down at all given the contract losses, or is that still the same today because you're anticipating much more business? How should we think about that?
spk03: Yeah, so from a corporate office perspective, our headcount is approximately the same. Actually, it's down slightly. But the way you should think about it is, As it relates to our craft labor, think of that as variable headcount. So as we've exited the Canadian market and are moving away from the decommissioning loss contracts, the craft labor headcount is going to come down. It will go back up as we bring on additional backlog. So that labor force is variable for us. If we do not have the work, we do not carry the labor.
spk02: Okay. But back to the corporate, I mean, it was 572 people at the end of the year versus 460. Why the big jump, you know, given that revenues were only up slightly?
spk03: Yeah, just a point of clarification. Those numbers that you're referencing, those aren't entirely corporate folks. Those numbers include our project and site management. the folks who are actually on the ground at these various job sites overseeing those projects. There is some correlation as revenue has gone up. You would expect the staff headcount to increase, but that's something that we're looking at to make sure that we're in line with our expected revenue generation.
spk02: Okay, all right, good. I think that does it for me. Good luck going forward.
spk07: Thanks, John. Thank you.
spk04: There are no further questions in the queue. I'd like to hand the call back over to Mr. Palliera for closing remarks.
spk07: Yes, so I just want to issue a clarification on an earlier question. We're projecting 10 five-man crews for Eversource by the third quarter. and nine three-man crews for TECO by the third quarter. My numbers were a little bit off earlier. So I just want to thank everyone again for participating today. We appreciate your time and interest in Williams. Look forward again to talking next quarter. Take care and be well. Thank you.
spk04: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
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