Williams Industrial Services Group Inc.

Greetings and welcome to the Williams Industrial Services Group second quarter 2022 financial results conference call. 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. As a reminder, this conference is being recorded. I would now like to turn the call over to Chris Whitty, Investor Relations Advisor. Thank you. It may begin.

Thank you, and good morning, everyone. Welcome to the Williams Second Quarter Conference Call. With me on the call today are Tracy Pagliara, President and CEO, Randy Lay, Executive Vice President and COO, and Damian Vassell, Vice President and CFO. After Tracy and Damian provide their prepared remarks, we'll open the call for questions. Our quarter results were issued yesterday afternoon, and a slide presentation is available on the company's website at www.wizgroup.com. If you now turn the slide to the presentation, I'll review the safe harbor statement. This call includes forward-looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainty may cause the company's actual performance to be materially different from the performance indicator 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 could cause actual results to differ materially from the company's expectations are disclosed in this conference call 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 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 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 Valiera. Please go ahead, Tracy.

Thanks, Chris, and good morning, everyone. We appreciate you joining our call today. Williams posted second quarter revenue of $56.1 million as compared to $91.6 million in 2021. The lower sales year over year reflect the impact of previously announced customer losses, delayed projects, and the fact that fiscal 2022 did not benefit from biannual outage work in a nuclear utility. The lack of outage work for 2022 and the customer losses were assumed in our original earnings guidance for 2022. However, we did not convert pipeline to revenue at the rate previously anticipated for the second quarter, primarily due to project delays. Accordingly, our overall revenue outlook for the year has been reduced, but we remain optimistic about the second half as well as 2023. I'll speak to this more in a moment. We achieved gross margin of 4.1% for the quarter, reflecting the runoff of certain previously disclosed contracts in our Florida water business and non-recurring startup costs associated with new locations to serve our transmission and distribution customers. Damian will discuss these items in greater detail, but we consider the startup costs to be critical investments regarding the company's improved future growth and profitability. Operating expenses were $6.7 million in the second quarter, which include roughly $300,000 of litigation expense. As previously discussed, these legal fees are tied to action and action being taken against a former employee and competitor relating to the wrongful loss of William's business. Reflecting all these factors, adjusted EBITDA was negative $3.2 million for the quarter. We finished the period with a backlog of $234 million, which was also lower than anticipated due to delayed orders. However, we currently have approximately $400 million of active pipeline opportunities versus approximately $360 million at the end of March. Now, turning to slide four, I'd like to further discuss the state of the business and current outlook. As outlined August 4th, when the company's earnings guidance was adjusted, we remain optimistic about the second half of 2022 and future for Williams, even as recent events dampened our overall expectations for the current year. Williams is a strong business with solid end markets, near recession-proof demand, and several robust macroeconomic trends. As mentioned in the past, the $550 billion Infrastructure Investment and Jobs Act includes over $50 billion of new investments in Williams Critical End Markets, energy delivery, water, and nuclear. Moreover, nuclear energy also continues to gain attention as a core source for clean energy. An estimated $30 billion of production credits designed to keep existing nuclear facilities operating and $700 million to support the development of HALU fuel for use in advanced nuclear reactors are in the $370 billion Infrastructure Reduction Act, expected to be signed shortly in Washington. This stacks up nicely for a very bullish Williams future. Importantly, the decisions we're making today, including new investments in key markets, are based on a strategic plan focused on driving accelerated top-line growth and underlying performance, taking advantage of favorable industry trends that will benefit Williams in the near future and years to come. After Damien speaks, I'll come back to provide some more commentary and thoughts about the future of the company. Damien.