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spk05: Good morning and welcome to the Infrastructure and Energy Alternatives fourth quarter and full year 2021 earnings call. I'd like to note that all participants on today's call are in a listen-only mode. And with that, I will turn the call over to Aaron Reddington, Vice President of Investor Relations. Aaron, please go ahead.
spk03: Hello, and thank you for joining us today to discuss IEA's fourth quarter and full year 2021 financial results. With us from management are J.P. Rehm, President and Chief Executive Officer, and Pete Morbek, Executive Vice President and Chief Financial Officer. Before turning the call over to management, I would like to note that today's discussion contains forward-looking statements about IEA's future growth and financial expectations. Any forward-looking statements should be considered in conjunction with the cautionary statements in yesterday's press release and the risk factors included in the company's SEC filings. Except as required by law, IEA undertakes no obligation to update its forward-looking statements after today's call. Since management will be presenting some non-GAAP financial measurements as references, including adjusted EBITDA, the appropriate GAAP financial reconciliations can be found in the press release issued on March 7, 2022. And with that, I'll turn the call over to J.P. Rehm, Chief Executive Officer. Please go ahead, J.P.
spk07: Well, thank you, Aaron, and welcome, and thank you for joining our call to discuss the 2021 fourth quarter and full year results. On the call today, I will provide a brief overview of our performance in the fourth quarter, an update on our strategic priorities, and commentary on key in-market trends as we see them. I will then turn the call over to Pete for a more detailed financial review of the quarter and guidance for 2022. We finished 2021 on a very strong note with fourth quarter revenue up nearly 40% compared to the prior year and backlog at record levels. Our solid fourth quarter performances across each of our business lines enabled us to achieve both record annual revenue and results at the high end of our revised guidance range for the full year 2021. The challenges and concerns in the wind and solar markets are well documented. From the uncertain policy outlook, supply chain, and inflationary challenges to questions surrounding the outlook for domestic wind, we often see headlines highlighting these issues. While the challenges are very real and daily considerations for IEA's business, I'm proud of the way our team has continued to execute in the current environment to achieve record revenue and adjusted EBITDA in 2021. Revenue within our renewable segment increased by nearly 40% year-over-year on an organic basis, driven by broad-based demand within both onshore wind and utility-scale solar markets. Our specialty civil segment had a very strong fourth quarter as well, With revenues up 38% year over year, due in large part to strength in our environmental remediation business, we continue to see a growing multi-year opportunity within the coal ash remediation market. While supply chain and inflationary pressures were headwinds in the quarter, we were still able to grow adjusted EBITDA nearly 60% year over year for the fourth quarter. while improving our adjusted EBITDA margin by 110 basis points to 8.5%. We are very proud of how we finished the year, and we are even more excited about the opportunities that lay ahead. Our new award activity levels across both our renewables and specialty silver markets accelerated during the latter half of 2021, resulting in a record backlog in next 12 months backlog For the full year 2021, IEA signed nearly $2 billion in wind and solar awards, and the pipeline of new opportunities remains robust. We enter 2022 on strong footing and are positioned for another year of record revenue and earnings. A year in 2021, total backlog was $2.9 billion, up 41% from the end of 2020. Our renewables backlog ended 2021 up 35% over last year. And our specially civil backlog is up nearly 60% versus the end of 2020. Our next 12-month backlog was $2.15 billion at year end, giving us good visibility into another year of record revenues in 2022. Long-term demand fundamentals remain strong across each of our end markets. Within our renewable segment, increased commercial and industrial demand for clean energy, together with the increasingly competitive levelized cost of wind and solar when compared to carbon-based energy sources, remain key catalysts for our growth. We were awarded several important renewables contracts in the quarter that contributed to the strong backlog growth. Some of the highlights were as follows. We were awarded a 50 megawatt solar contract to construct the Turkey Creek Solar Ranch in Garrard County, Kentucky by Nashville-based Silicon Ranch Corporation, one of the nation's largest independent solar power producers. Turkey Creek Solar Ranch is the first utility-scale solar project to receive approval from the Kentucky Public Service Commission Siding Board. Construction began in December 2021 and is expected to be completed by November 2022. We secured a $75 million award with Invenergy, where IEA will provide construction services for the Sapphire Sky wind project. That's a planned 250 megawatt utility scale wind farm in McLean County, Illinois. The project commenced during the fourth quarter 2021, with targeted completion by the fourth quarter 2022. We were awarded a $44 million contract to lead the construction of a 60-megawatt utility-scale wind farm in Riverside County, California. The project is expected to commence in the first quarter of 2022 with targeted completion by the first quarter of 2023. IEA will self-perform all engineering and construction of 15 wind turbines, two substations and meteorological evaluation towers, and an underground electrical collection system. IEA will also be tasked with construction of new private land access roads, together with improvements to existing public roads surrounding the property. This is a good example of the synergies that are often leveraged between our renewables and specialty civil segments, as most renewable projects have some form of civil work that is included in the project scopes. The ability to self-perform these services enables us to provide better control of the project timing and retain more of the profit. Within our civil segment, we expect to be a beneficiary of the transformative $1.2 trillion federal infrastructure bill passed last year. As with all federal stimulus plans, it will take some time for funds to start to flow, particularly as states and municipalities seek to adjust bidding levels to reflect sustained raw materials cost inflation. Even still, We expect the infrastructure bill to provide rateable incremental cash flows over a multi-year period as stimulus funds find their way into new projects of scale. As I indicated earlier, we remain very excited about the opportunities evident within our environmental remediation business. We believe we are in the early innings of a significant capital spend cycle for coal ash remediation, a market where IEA brings significant scale and expertise. Recent EPA actions provide further momentum towards remediation of the approximately 500 unlined coal ash surface impoundments nationwide. The timing is a bit difficult to predict as utilities are working to get the cost of remediation included in rate-based adjustments. While the timing is worked out on a project-by-project basis, it is clear there is a huge opportunity for coal ash remediation. and IEA is uniquely positioned to be a key player in this market. Before I turn it over to Pete, I wanted to spend some time walking through our key strategic priorities for the business entering 2022. These priorities provide a clear roadmap for long-term value creation and are a way for the investment community to measure our progress as we enter this next chapter of growth. First, We continue to focus on developing a leading market position of scale within markets where IEA is competitively advantaged. IEA intends to leverage its technical expertise, geographic reach, and scale across its solar, wind, heavy civil, rail, and environmental services. We remain focused on developing a strong backlog of diversified infrastructure projects to support sustained profitable growth through the economic cycle. For the full year 2021, we generated total organic revenue growth of 19%, while the renewable segment revenue increased 28% on an organic basis versus the prior year period, reflecting strong progress in this area. Secondly, we intend to capitalize on the favorable long-term fundamentals within renewables. In 2021, approximately 70% of IEA's revenue was derived from solar and wind-related EPC services. Over the next five years, IEA expects more than 100 gigawatts of new utility-scale solar capacity to be installed within the United States, an increase of more than 80% versus the prior five-year period. Onshore wind installations are also anticipated to accelerate over the next decade, with 110 gigawatts of new installed capacity expected to be online by 2030. Third, we will maintain bidding discipline and drive economies of scale to support margin expansion. IEA intends to pursue higher value margin enhancing opportunities while leveraging its size and scale to deliver exceptional value for the customer. Solar is the fastest growing segment of the renewable energy market given the multi-decade trend towards decarbonization. Having entered the solar market in 2019, we have just begun to realize economies of scale, positioning us to achieve margin expansion within this business, despite the inflationary pressures. Over time, we expect the margins in our solar business to be at least equal to the margins in our wind business. Fourth, we will look to further simplify our capital structure while maintaining sufficient liquidity to support our growth. In November of 2021, our Board of Directors authorized a program to repurchase up to $25 million of outstanding warrants to further streamline the company's capital structure. Since announcing this program, IEA has repurchased nearly 64% of the outstanding warrants through last Friday, March 4, 2022. Finally, we will pursue a disciplined capital allocation strategy. IEA will continue to invest in organic growth initiatives by expanding product and service offerings to better serve our customers, further developing industry-leading technical expertise, and growing our skilled labor workforce. IEA also intends to consider complementary bolt-on acquisitions that increase its service capabilities in adjacent markets and expand its geographic presence and enhance its blended margin profile. We are committed to our strategic plan and are confident that as we execute against our goals, it will enable us to continue to grow the business, generate attractive returns, and create value for all of our stakeholders. And with that, I will turn the call over to Pete. Pete?
spk02: Thanks, JP, and good morning to everyone. Our earnings release updated investor debt, and Form 10-K were filed last night. So I'll limit my remarks to providing some financial highlights, giving an update on our liquidity and our continuing capital structure simplification, and wrap it up with a full-year 2022 guidance. Before focusing on the fourth quarter, I do want to note that our 2021 full-year revenue of $2.1 billion is exceeded the guidance at the start of the year, and that even with the negative impact of the pandemic and supply chain constraints, our adjusted EBITDA of $135.1 million was right in the middle of the guidance provided at the start of the year. For the fourth quarter of 2021 compared to the fourth quarter of 2020, total revenue increased 39% to $544.1 million, reflecting strength across both our renewables and specialty civil segments. The increased revenue helped us achieve gross profit of $63.9 million in the quarter, up 50% versus last year, and our gross profit margin for the fourth quarter 2021 was 11.7%, up 90 basis points from the same period last year. For the quarter, SG&A expenses increased by $5.6 million compared to last year's fourth quarter, primarily from higher employee compensation and benefit expenses. However, as a percentage of revenue, SG&A expenses declined to 5.8% compared to 6.6% in the prior year period. Interest expense for the quarter totaled $6.4 million, down from $14.5 million in the fourth quarter of 2020, demonstrating the benefit of the recapitalization transactions. We expect that these transactions will provide an annual reduction of $22 million in interest expense and cash interest payments going forward. Net income for the quarter was $31.7 million, compared to a net loss of $1.4 million in the prior year fourth quarter. Fourth quarter results included $12.9 million pre-tax benefit relating to the fair value adjustment of our publicly traded warrant liabilities. Adjusted EBITDA increased 59% on a year-over-year basis to $46.2 million in the fourth quarter 2021 versus $29.1 million in the prior year period. Adjusted EBITDA especially benefited from the combination of strong revenue growth and overall gross margin expansion. Now, turning to the segments. Renewable segment revenue totaled $338.7 million during the fourth quarter of 2021, an increase of 39.5 percent compared to the prior year. Wind revenue was up 30 percent during the quarter, while solar revenue nearly doubled. Renewable segment gross profit was $34.8 million, or 10.3 percent of revenue for the fourth quarter of 2021, compared to $26.7 million, or 11% of revenue, for the same period in 2020. The decrease in gross profit margin percentage for the segment was primarily due to supply chain disruptions, especially in the company's solar business. Although we finished the quarter within our long-term margin percentage goals of 10 to 12%, We were somewhat disappointed in the 70 basis point reduction from last year's quarter. We recognize we are working in a challenging operating environment and we expect that these challenges will continue into 2022 and perhaps beyond. These factors coupled with recent earnings guidance from our peers up and down the solar and wind supply chain are worth noting. Of course, IEA is not immune to market pressures. Let me briefly discuss why we fully expect we can achieve our renewable margin targets. While we are rapidly growing our solar business, we are still gaining scale. We did not reenter the solar market until the end of 2019, and in the past two years, solar revenue has grown to over $300 million, and in 2021 was more than 20%. of our total renewable segment revenue. As expected, there has been a learning curve, but as we gain scale and experience in solar, we fully expect our solar project margins to be like our wind project margins. As the solar utility market is maturing, we see many similarities to the wind market, especially in the forms of contracting. Let me highlight the factors that help us protect our margins from some of the inflationary and supply chain challenges impacting the market today. First, our contracts are relatively short in duration, with most projects finishing within 12 to 18 months. Thus, we have less risk than we would in a multi-year project. Second, our customers supply most of the larger and expensive components, such as panels, blades, and turbines, so we do not have inflation risk, on these key components. Third, we often adjust contracts at the notice to proceed date and place most of our material orders while the pricing is still fresh, so there is reduced price pressure on materials. Fourth, we are fortunate to have a highly skilled and dedicated workforce, many of whom have been with IEA for many years. To date, we have not had significant retention issues although we remain concerned about labor inflation. We also have some ability to shift workers among wind, solar, and civil projects, which helps from a planning perspective. Finally, our contracts contain force majeure provisions that provide a level of protection from unexpected events, such as unusually inclement weather. We all remember 2018 when weather was a meaningful headwind for our industry, But with the improved contract structure, we are largely protected from such issues. As I said earlier, we will be affected by market issues, as we have seen when supply chain challenges negatively impacted the efficiency and sequences on some solar projects. However, we have been able to structure the business so that we are insulated from many of the issues being discussed every day in the market and we remain confident that we can achieve our renewables long-term margin goal of 10 to 12%. Now, turning to our specialty civil segment, revenue for the quarter totaled $205.4 million, an increase of 37.7%, or $56.2 million year over year, primarily due to growth in environmental and heavy civil. The environmental remediation business is benefiting from the ramp-up of a large customer as well as contract expansion of an existing customer. Heavy civil revenues were up approximately 20% as some work that had been delayed was pushed into the fourth quarter. Rail revenues were down modestly due to reduced customer capex resulting from the last two years of COVID-19 pressures. Specialty civil segment gross profit was $29.1 million or 14.2 percent of total revenue for the fourth quarter of 21 as compared to 15.8 million or 10.6 percent of revenue for the same period in 2020. The increase in the segment's gross profit percentage was primarily due to growth in the environmental remediation market and favorable year-end project completions. At December 31st, our balance sheet showed cash of $124 million, and total debt was $358 million, which included our $300 million unsecured notes, $3.6 million in commercial equipment loans, and $54.4 million of construction equipment financing lease obligations. Our net debt to adjusted EBITDA ratio was a sparkling 1.7, a meaningful improvement from where we have been. At year end, we had nearly $119 million of availability under our credit facility. Net of letters of credit, which when combined with cash, gave the company total liquidity of $243 million. Because some of our projects were pushed toward the end of 2021 or even into 2022, we incurred a negative cash flow from operations for the year of $11 million. This is the result of a construction industry characteristics. Namely, owners do not want to negotiate or especially pay for change orders until the end of a project. On average, our larger projects accrue 5% to 8% of revenue as change orders, and the delay in completing projects has a direct impact on billing and cash collections. We obviously monitor this situation closely, and while the number is frustrating, we are not anticipating a significant issue as we go forward. This construction industry characteristic is another reason to maintain a strong balance sheet. Last November, our Board of Directors authorized us to spend up to $25 million to buy back the public warrants. These warrants, which trade under the symbol IEAWW, are the last vestiges of the SPAC process in our capital structure. The warrants expire on March 26, 2023. At the end of 2021, we had repurchased 9.27 million warrants, or about 54.8% of the total, at an average price of $1.27 per warrant. While the pace of repurchases has slowed, as of March 4, we had repurchased almost 10.9 million warrants, or almost 63.9% of the total warrants, for a total cost of $14.6 million. We benefit in three ways from the repurchases. First, we reduced the number of potential shares that would need to be issued in the first quarter of 2023. Second, there remain anti-dilution covenants from the Series B preferred agreement And for every share issued on the conversion of the warrants, we would owe 0.3 shares to the former Series B owners. To date, the repurchases have reduced by over 7 million the potential shares issued on the exercise of the public warrants. That means we have reduced the SPAC warrant overhang from 120% to 108% of diluted shares. Lastly, we are reducing the number of publicly traded warrants that must be marked to market at the end of each quarter, thereby slightly reducing the volatility of our earnings calculations. Now, pivoting from the past into the future. Total backlog at the end of 2021 was $2.9 billion, an increase of 41% compared to the end of 2020. Renewable segment backlog at December 31st, 2021 was $2.0 billion, an increase of 35% compared to the prior year, driven by strong growth in our solar market combined with steady performance in wind. IEA signed nearly $2.0 billion in wind and solar awards in 2021, and the pipeline of new opportunities remains robust. Specialty civil backlog at year-end 2021 was $881.3 million, up nearly 60 percent compared to last year, due in large part to favorable market trends in our environmental business. The company expects to realize approximately $2.15 billion of its estimated backlog during the next 12 months, up $523 million from the end of 2020. Now on to guidance. The long-term outlook for IEA's business and our markets remain strong. We see 2022 as another record year for our business, both in terms of revenue and adjusted EBITDA. However, we recognize that challenges from 2021, including the impact of supply chain disruptions and COVID-19, will continue into 2022. IEA's guidance for 2022 reflects our efforts to recognize the uncertainties associated with these challenges. For 2022, we project total revenue of between $2.1 billion and $2.2 billion. We expect that the renewable segment will generate approximately two-thirds of that revenue. We expect that wind revenue may decline from 2021 by 15% to 20%, but that solar and wind services revenue will more than make up for that decline. We expect that we will continue our normal seasonal patterns with approximately 40% of the revenue in the first two quarters of the year. Our projection for 2022 adjusted EBITDA is $140 to $150 million. That includes approximately $48 million of depreciation and amortization, interest expense of around $26 million, and a tax rate of around 26%. We expect to invest around $45 to $48 million in CapEx. Finally, because we absorb more fixed costs as our revenue increases, we expect to recognize between $25 and 30% of the adjusted EBITDA amount in the first two quarters of the year. With that, I will turn the call back to JP.
spk07: Well, thank you, Pete. 2021 was an important year for IEA, and I am extremely proud of everything we accomplished despite the sometimes uncertain and volatile market conditions. Looking at the year in review, some of the important highlights were as follows. We significantly simplified our capital structure by redeeming our Series A and Series B preferred stock, refinanced our debt facility, and are in the process of repurchasing a portion of our warrants, all to the benefit of the common shareholder. We continue to grow our renewables business, and in three short years have become one of the leading utility-scale solar EPC firms in the country. We see significant growth in the solar market in the coming years, and IEA is very well positioned to take advantage of these trends. We executed very well in our renewables business despite the supply chain, inflationary, and labor headwinds. We did have some modest margin compression, but we think our performance validates our ability to execute even in the most challenging times and highlights how IEA is different than the wind OEMs, blade manufacturers, or residential solar firms that saw significant margin compression in 2021. We positioned IEA to be a leader in the environmental remediation market and have successfully ramped up our business in recent quarters. With approximately 500 unlined coal ash surface impoundments nationwide, we see a long path of growth in this market. I want to leave you with one key thought regarding our growth opportunity in renewables. We are excited about what we see in the coming years for both wind and solar, but I think it is important to understand that IEA and the wind and solar market are not policy or tax credit stories. We certainly hope the renewables industry is supported with extensions to the ITC and the PTC, as it will help our business near term. That said, we are not dependent on policy to drive profitable growth. Currently, nearly 200 gigawatts of legacy power capacity is scheduled to come offline in the next 30 years. Low-cost wind and solar are going to be the key beneficiaries of this replacement cycle. The reduction in the levelized cost of wind and particularly solar have made it such that renewable energy is not only the right environmental choice, it's also become the right economic choice as well. The growth opportunity is large and as one of the few EPC firms with the scale, expertise, and experience to execute on this opportunity, we are very well positioned for years to come. This concludes our prepared remarks for today. Operator, would you please open up the call to questions?
spk05: Thank you. And at this time, we will 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 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 our first question comes from the line of Brent Thaleman with DA Davidson. Please proceed with your question.
spk01: Good, thanks. Good morning, JP, Pete. Congrats on a great morning. Hey, Brent. Thank you. I guess first question, it seems like potentially the revenue guidance could be sort of handicapping some ongoing supply challenges, obviously, and solar, which we all hear about. I guess my question is how much of that business today or backlog today is really scheduled to get done this year versus what you're sort of currently embedding in the revenue outlook to get work through as you try to anticipate some of these ongoing challenges?
spk02: You know, that's a good question, Brent. I think that when we look at the numbers, we recognize that we have a situation where we are showing a $2.15 billion in near term, but we may not achieve all that this year in the same way that we did not get to our total next 12 months in 2021. So we are recognizing that some of the jobs may get pushed, and so the guidance is trying to kind of walk a middle part between what we have been told we could build versus what we're afraid some of the supply chain limitations means. So that's why you see kind of a, you know, middle of the road type guidance.
spk01: Okay. Appreciate that, Pete. On the wind business, again, I think nothing too surprising about the outlook here for 22 there. I guess, JP, any thoughts on, you know, how we ought to think about, you know, kind of a revival here in 2023 or what are the things we need to see through this year to get more comfortable that business can get back on better footing next year?
spk07: Well, you know, I think this has kind of been an ongoing question we've handled in this last two or three calls. But, you know, I'll kind of restate some of the things I've said before, the fact that, you know, I think while we see, as we discussed in the commentary here on the call, we see wind maybe down a little bit this year. We certainly don't see it down as much as what we've seen some analysts predict in the market. So that kind of level sets 2022. But to your question going forward, I've said this repeatedly, our customers are our barometer for how we plan our business going forward. And we see a lot of strong wind demand. I think we've heard particularly one wind OEM indicate they've seen an uptick in orders in the last part of 2022 going into 2023. So we do see kind of a resurgence. I don't think that's kind of picked up in the analyst reports yet, but from our feet on the ground, we see kind of a resurgence of wind. We've also seen some of our clients kind of in this supply chain uncertainty times for solar that have kind of shifted their their capex spending more towards wind next year. So all to be said, we're a diversified renewable contractor. Obviously, we've got a long storied history in wind. But any kind of federal legislation or not, we think wind is kind of here to stay and a part of this energy transition for the future.
spk01: Okay, thanks for that, JP. And then outstanding margins and specialty civil, maybe just kind of help us understand how much was transitory things this quarter versus, you know, what should still benefit the margins in the segment on a go-forward basis, and kind of what are you assuming for margins in the guidance?
spk02: We saw some very strong benefit in our environmental work, so I think that will kind of stay, and then, you know, we did get some benefits from you know, as we got to the end of jobs and were able to negotiate, you know, the final change orders, I would say, you know, that our guidance has been that, you know, we want our specialty civil segment to be, you know, 9 plus percent margin points. And I think that that's kind of where we expect it to stay with, you know, occasionally being able to get to the outstanding margins that we got at the end of 2021.
spk07: I appreciate you pointing that out, Brent. We spent a lot of time talking about renewables on these calls, but I appreciate you in particular pointing out that performance in the quarter. We're proud of our team and their performance, and quite frankly, it's a great goal for them, as Pete mentioned, in the future. But thank you for pointing that out.
spk01: Yep. Last one just for me. Could you talk about the offshore wind partnership you've engaged in, maybe what your role will be, and certain financial implications are further down the road, but what those could potentially be?
spk07: Yeah, I'd say we would – one thing that I would say before I'd really get into it is we're very early on into this partnership, and the industry – is very early on into what could be a pretty substantial industry by 2030, as predicted. And with any industries, it is continuing to mature. Since it's never been built in the United States before, the means, methods, jurisdictions of trades, everybody's kind of still working that out, so to speak. We think it has potential to be a meaningful contributor in the years coming, or we wouldn't have done it. But our strategy is pretty simple. We are focusing on the onshore component of offshore wind. So what's that mean? Well, what that means is running the port that services the project managing all the inbound shipments that come in from various OEM vendors and receiving those shipments, no different than we do out on an onshore project, but doing pre-assembly as required and prepping those components and loading them on a barge that would ultimately take them out into the water for assembly by others. I want to reiterate, I think that I've mentioned several times in the past, we currently do not have a, we're not pursuing a strategy that would be involving IEA out in the water. Everything that we are currently pursuing for IEA in the offshore business is port-type onshore work.
spk01: Okay. Thanks for that, JP. Best of luck. Thank you.
spk05: Our next question comes from the line of Adam Dallamer with Thompson Davis. Please proceed with your question.
spk04: Hey, good morning, guys. Congrats on the strong Q4. Thanks, Adam. Thanks, Adam. Where are you guys in terms of the wind services revenue? And I think you said that would help to offset some of the decline in the wind project revenue this year.
spk02: We have not fully broken that out yet. I mean, it is still going to be, you know, order of magnitude less than 100 million, but we're seeing some great growth opportunities. They had a good year. They actually broke even this year, and we look for them to continue growing. You know, it's going to take a while, obviously, to get to scale, but we think we can be one of the real strong operators in that field. Okay.
spk04: And I was glad Brent asked the question about the specialty civil margins, because if those are kind of in the 9% to 10% range, I think the guidance would imply that you get back to 10% to 12% at renewables. And I guess the question would be just what gives you confidence that you'll be within that range this year at renewables?
spk07: Well, certainly we've historically been able to accomplish that. One thing's for sure, we We've been building wind for 18 years now, so we certainly understand wind. We've been in and out of the solar business over the period of years, but in it solidly now for over a period of three years. As Pete mentioned in his commentary, we had some ups and downs in solar last year, but basically where you've seen us come out is our conviction that we've We certainly have learned and continue to scale that business and have a firm conviction of where we believe we can bring that business in. As we indicated, we also believe that it should be approaching, if not at margin, with our wind business. From what kind of lessons learned over the last couple of years, we believe that's where we can land.
spk04: Great. And then lastly, I guess for Pete, how do you think the cash flow shakes out this year? Or maybe even if you just want to kind of address it in terms of quarterly cadence, that'd be helpful.
spk02: Yeah, I think that one of the humorous things in life is that unfortunately, There are specific dates. We picked up almost $40 million of cash on January 4th, which was the first day of the new year, and we would have looked obviously a lot better from cash flow of operations, but for that weekend. I think what we will continue to see is stretching out, some pushing until we finish the project and get all the change orders done, so it's going to go probably, you know, first year, first quarter is, you know, we should be okay toward the end of the quarter, maybe April before we settle some of these. And I think then we'll get back into a much more normal cadence. I think that, you know, that what's happened to us is by pushing back some of the projects you've just delayed our ability to collect because we haven't finished all the change orders. Helpful.
spk04: Okay.
spk02: Thanks, guys.
spk07: Thanks, Adam.
spk05: Our next question comes from Char Perez with Guggenheim Partners. Please proceed with your question.
spk06: Hello. It's actually Constantine here for Char. Congrats on a great quarter.
spk02: Great. Good morning. Thank you. Good morning.
spk06: I wanted to start off with a question on the 2022 outlook. Appreciate the revenue projections outlined today. And just as you continue to sign more projects, essentially starting in the 2022 timeframe, Would you expect a cadence of the revenue recognition to impact the guidance of the upside, especially as you keep announcing projects here in 1Q?
spk02: Well, you know, as I said in my remarks, we expect to see about 40% of the revenue in the first half of the year and 60% in the second half of the year. To the degree that any of that moves up, obviously, we do a better job of absorbing overheads and increasing EBITDA and EBITDA margins. I think the big challenge for us will be the point at which our customers feel comfortable that they can give us notices to proceed and the point at which they can get, especially in the case of solar panels, that they can get delivery. Anecdotally, we're hearing that some of them are still not – they're ready to give us a notice to proceed, but they have not yet acquired the solar panels because they're still negotiating with the manufacturers. So those are the sort of things that keep us up at night as we, you know, our issue is that especially with solar, you want to do all of the manufacturing, all the construction once. You don't want to have to go back in and change anything. So, you know, for us, if we were in a position where we could get everything when the clients want us to start the jobs and we could work our way through, then, yeah, you would see we would do even better both on revenue and and margin, what we've tried to do is kind of do a middle of the road case that gets us through hopefully most of the issues associated with inflation and associated with the start of the projects.
spk06: That's very helpful. And just kind of on the same note, in terms of the kind of operating leverage that you're embedding in plan, is there some inflationary contingency around input costs
spk02: Yeah, and as I said in my remarks, there are a lot of input costs that are not our responsibility. You know, the actual purchase of the panels, the purchase of the turbines. Secondly, in a lot of cases, we have the ability that at the time we are given the contract, the notice to proceed, that we will go ahead and commit to purchase or actually purchase a lot of the materials that we need. And then we benefit, obviously, from having a relatively shorter time timeframe within which to do construction. But having said that, yeah, we are somewhat susceptible. Obviously, labor is always going to be a challenge. We have tried to address that issue in our forecast, in our projections. And some of that, unfortunately, we won't know until we actually see what happens. But we certainly learned last year in third quarter that this is a real impact and that we need to take into consideration going forward.
spk06: That's very good clarity. And maybe just lastly, shifting a little bit more broadly, the financial strengthening that was done in 21 was well received. And how are you thinking about capital allocation for 22 and beyond just getting a sense of the stack of priorities between kind of taking out the dilutive security and expanding the platform organic, inorganic, et cetera?
spk02: Um, I, probably start and let JP finish. I think from the financial side, we are looking, and obviously we've taken out a lot of the publicly traded warrants. We're probably approaching the point at which we're not going to do a whole lot more. At this point, we are looking to make sure that we have the availability in cash that we need for organic growth. Obviously, we can generate good cash flow out of our projects, but You know, when we look at where we're going, I think we certainly are looking at potential opportunities, bolt-on acquisitions. You know, and JP, you might, you know.
spk07: Yeah, from my standpoint, you know, I think if you look at our track record on organic growth, it's almost kind of second to none of any of our public peers the last several years. And I believe that our ability to continue to do that is – going into this year is continuous. So primarily we're going to be thinking of organic growth and in margin enhancement. I think those are those are no doubt are our two key themes of this year. Now that being said you know these weren't in markets that are very tough to organically grow and we've been very successful at it but still in order to continue to scale it to facilitate the appetite of the market, it might be best to inorganically grow or execute a bolt-on acquisition. So we're always looking for, particularly in our key end markets, for those type of opportunities. But as I would think about us in the near term, I would think about us concentrating on on organic growth and margin enhancement opportunities.
spk06: That's perfect. Abundantly clear. Thanks for taking our questions.
spk05: Thank you. And our next question comes from the line of Noel Diltz with Stifel. Please proceed with your question.
spk00: Hi, guys. I just was hoping you could comment a little bit more on the coal ash remediation opportunities you're seeing. You know, when you look out kind of what's in the market, are these kind of smaller opportunities or do you see, you know, some additional large contract opportunities over the next couple of years? Thanks.
spk07: Well, it's a great question. I'm glad you asked it, Noel. You know, earlier, earlier in the quarter, the earlier in the first quarter of this year, the Biden administration kind of announced or the Biden administration's EPA announced that they were going to, even further crack down on the guidelines and the requirements for remediation. So certainly I think what was already kind of an incredible opportunity has even gotten better in the near term. It is a, we would kind of reiterate as we talked in the past, Since it's not a revenue producer or margin producing for the utility, they move very slowly. And quite frankly, they analyze any and all opportunities, depending on which state you're in, to get rate-based recovery. And then, you know, they kind of get curveballs every time that the federal government kind of changes the guideposts on them. So that's all to be said is we continue to see opportunities move forward. We continue to respond to RFPs, and it's growing for us. But we think this is not a one- or two-year opportunity. This is what's more than a decade opportunity, and we expect to be continuing to incrementally grow this business for quite some time. And quite frankly, that's good from the standpoint it is a very resource-intensive business, both especially from the manpower that it takes, but also the specialty equipment. And there's, with the market that's out in front of us, certainly not the opportunity to ramp this business up overnight. So You know, we are glad to be the player in scale and expertise that we are. And here again, just reiterate, we're going to be a big player in coal ash as it continues to grow over the next decade plus.
spk00: Okay, great. That's really helpful. And then, you know, recognizing your comments that the business is not necessarily dependent on within Wind and Solar on policy and tax credits, but Could you just speak to kind of what your expectations are around the potential for, you know, given that Build Back Better is sort of in limbo, how you're thinking about what, you know, may or may not occur in terms of the wind tax credits and how you've sort of incorporated that into your guidance. In other words, you know, if we do see the direct pay option come through and then a multi-year extension of the tax credits, does that just represent upside to your guidance, or do you think it would really be something that might benefit 2023? Thanks.
spk07: Well, I'll take the last part of it first because it's the easiest answer. I don't see any change in our guidance for what happens legislatively in Washington. It'll all be 2023 or after. As far as... What a roller coaster this last 90 to 120 days has been for anybody in this industry. Obviously, Build Back Better looked very favorably back before the holidays, and then obviously suffered some headwinds, and then obviously with things that have happened at more of a world scale, Russia and Supreme Court justice and things of that nature, it's kind of almost fallen off. or had fallen off the kind of the day-to-day rhetoric. But however, that being said, I think, you know, all our kind of connections to Washington, I think this may be coalescing around a, it may not be Build Back Better, maybe more of just a climate bill or more of an energy security type of bill. But I think the situation you have in Russia is bringing really the two sides together. And I think that what you see going on with oil and everything else right now, I'm feeling very strongly from what we hear is you'll see some legislation soon, hopefully within the second quarter, that... kind of re-engages some of the principles on the climate side from Build Back Better. Okay, got it. Thanks very much. Thank you, Noel. Thanks, Noel.
spk05: And we have reached the end of the question and answer session, and I'll now turn the call back over to J.P. Ream with the closing remarks.
spk07: Well, we appreciate each and every one of you for joining us today as we reported on year-end 2021 and fourth quarter 2021. It'll be just a short few weeks here before we're back together in early May as we look forward to reporting to you on our Q1 2022 results. Everybody be safe, and we will talk to you soon. Thank you.
spk05: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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