Orbital Energy Group, Inc.

Good day, everyone, and welcome to Orbital Energy Group's fourth quarter and full year 2020 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow for management's remarks. As a reminder, this conference call is being recorded. A replay of today's call will be available on Orbital Energy Group's website later today and will remain posted there for the next 90 days. I will now hand the call over to Mr. Eckstein. of KCSA for introductions and the reading of the Safe Harbor Statement. Please go ahead, sir.

Thank you, operator. Hello, everyone, and welcome to Orbital Energy Group's fourth quarter and full year 2020 conference call. A copy of the company's earnings press release and accompanying PowerPoint presentation are available for download on the events and presentations page of the investor relations section of the Orbital Energy Group website. With us on today's call are Jim O'Neill, Vice Chairman and Chief Executive Officer, and Dan Ford, Chief Financial Officer. Today, we'll review the highlights and financial results of the fourth quarter and the full year, as well as recent developments. Following these formal remarks, we'll be prepared to take your questions. I would also like to remind everyone that today's call will contain certain forward-looking statements made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in forward-looking statements. The company may experience significant fluctuation in future operating results due to a number of economic, competitive, and other factors, such as the COVID-19 pandemic, including, among other things, the company's reliance on third-party manufacturers, suppliers, and service providers, government, agency, budgetary, and political constraints, new or increased competition, changes in the market demand, and the performance or liability of its products, institutions, solutions, and services. These factors and others could cause operating results to vary significantly from those in prior periods and to those projected in forward-looking statements. Additional information with respect to these and other factors, which could materially affect the company and its operations, are included in certain forms the company has filed with the Securities and Exchange Commission. These forward-looking statements are based on information available to Orbital Energy Group today, and the company assumes no obligation to update statements as circumstances change. Now at this time, it is my pleasure to introduce Jim O'Neill, Vice Chairman and CEO of Orbital Energy. Jim, please go ahead.

Thank you, Scott, and thank you, everyone, for joining us today on our fourth quarter and full year 2020 earnings conference call. As most of you are aware, I joined CUI Global, now Orbital Energy Group, in October of 2019 as to guide its transformation into an infrastructure service provider serving the electric power transmission and distribution, telecommunications, and renewable markets. During 2020, despite COVID headwinds, we began to execute on our infrastructure strategy and lay the foundation for our long-term growth. Last year, we launched Orbital Power Services, which provides electric transmission and distribution construction and maintenance services to the electric power industry. We also acquired the REACH Construction Group, now Orbital Solar, which provides engineering, procurement, and construction services to the utility-scale solar industry. And in the first quarter of this year, we launched Eclipse Foundations, which provides drilled-peered foundations to the electric power industry. We believe the powerful market drivers for our infrastructure services will only increase over time and should drive increased demand for our services for many years to come. The drivers include the nation's transmission and distribution infrastructure, which is aging beyond its use for life, and renewables replacing fossil fuel generation, which is a top priority for the Biden administration, as well as the 37 states and four U.S. territories that are mandating a reduction in carbon emissions. Other factors, such as advances in technology to provide an intelligent and secure grid and the rollout of the 5G spectrum, are some but not all of the major drivers that we expect will drive our future growth. As such, we have acted to capitalize on these market opportunities. Orbital Power Services has established a multi-year master service agreement with cooperatives in Oklahoma and Georgia, and in the fourth quarter of last year, a major investor-owned utility in the Southwest, which has increased Orbital Power's annualized revenue run rate by 30%. We are currently in discussions with several investor-owned utilities to provide crews for ongoing services to support capital projects and maintenance on their transmission and distribution systems. Based on the steady increase in the business over last year, we expect Over the Power to be cash flow positive in the second quarter of this year and anticipate increased demand for their services going forward. It is important to note that most of Orbital Power's revenues are under master service agreements, which provide a stable and recurring revenue stream. Complementing this, our Orbital Solar Services business is a provider of engineering procurement and construction services to the utility-scale solar market. Our solar business and to a greater extent, the overall activity in the utility-scale solar market industry at large has been limited over the past few quarters. This is mainly due to the effects of COVID-19, which created manufacturing setbacks and delivery delays of solar panels from China to the United States, as well as a pause in project momentum from people waiting on potential incentives and tariff relief from the Biden administration. Seasonality also plays a factor here and will do so in the first quarter of 2021. In this industry, most of the projects will start late in the second quarter with significant activity in the third quarter and projects winding down sometime in the fourth quarter. Our backlog of $52 million at the end of the third quarter of last year was largely around one project, which was delayed, resulting in an accelerated construction timeline. We subsequently could not come to an acceptable commercial terms on the revised pricing necessary to support this quick turnaround, and as a result, the project contract was canceled. Though this project was canceled, we have maintained a strong relationship with this developer and expect that there will be opportunities to work on their future projects. It's important to remember there is a considerable degree of revenue cyclicality in this service line, where construction revenues are primarily driven by large projects. However, we are currently evaluating a project pipeline in excess of $1 billion, of which many of these projects will go to construction this year. Based on the opportunity pipeline, we continue to believe it is reasonable that revenues for 2021 will be in the $200 to $300 million range. In addition to the opportunity pipeline we are currently evaluating, in January we announced that Orbital Solar is the exclusive provider of engineering, procurement, and construction services to the Black Sunrise Half Century Fund and AECON Lighting America. Recently, the Black Sunrise Fund announced that over the next three years, it will be building over one gigawatt of solar power on retired coal generation facilities with a beginning investment of $725 million. Construction on these projects will start as early as the fourth quarter of this year. Again, this is additive to the $1 billion opportunity we are pursuing this year. and a multi-billion-dollar pipeline over the next several years. Subsequent to quarter-end, we launched Orbital Foundations, a drilled shaft foundation construction company operating as Eclipse Foundation Group. Eclipse is complementary to our other service lines, primarily to Orbital Power, as building electric transmission or substation facilities often requires foundations. Our ability for Orbital Power and Eclipse to provide customers with a total solution positions Orbital Energy Group to capitalize on more opportunities at higher margins. Our Orbital Gas Systems North American business was the most impacted compared to our other service offerings by COVID in the 2020 oil price drop. In the fourth quarter, customers, particularly in the Gulf Coast refining market, signaled that spending would resume in 2021. As a result, Orbital Gas Systems in Houston has a $4 million backlog with a high potential for additional project awards in the near future. Of note, our VE technology sampling probes have been widely accepted and approved by Tier 1 or major oil companies. These companies are now relying on Orbital Gas to solve their challenging probe applications specifically obtaining accurate and faster sampling of trace elements such as mercury, H2S, and moisture. This is a result of, then, for the first time, Orbital Gas being approved as an integration supplier to Tier 1 customers, expanding our opportunity to win larger projects. Of note, in the first quarter of 2021, Orbital Energy Services acquired full ownership of the VE Technology project, patent portfolio. We have also expanded our integration and technology applications into the renewable markets and received our first biogas to grid entry order this year. We are now building momentum to win the integration of analytical packages and also provide maintenance services for these systems in the biogas market. Over the past three years, the recognition of Orbital Gas North America's workmanship and technology and subsequent approval as a tier one vendor has significantly changed the opportunity to grow revenues in 2021 and beyond. The impact of COVID to the orbital gas in the UK was not as severe as in the US. Our UK operation has been cash flow positive since the third quarter of last year, and cash flow should remain favorable through at least the first six months of this year. This is a result of our UK operations recently expanding into developing markets outside of its traditional core gas network business. These efforts have led to significant orders in the renewable gas markets in excess of $2 million. Despite COVID, the UK operation has also taken on more staff to take over service contracts on analytical systems, replacing incumbent equipment manufacturers, or OEMs. Now I'll review some highlights on our fourth quarter and full year 2020 results. Total revenues for the quarter were $11.3 million, a 99% year-over-year increase compared to $5.7 million for the fourth quarter of 2019. The year-over-year increase was primarily due to the cadence of business returning to pre-COVID levels throughout most of our operations, as well as the addition of revenues from both orbital solar and orbital power services, collectively our electric power and solar infrastructure segment. The revenue from our electric power and solar infrastructure segment was offset in part by lower revenues from our orbital gas systems operation in Houston, which, as I mentioned earlier, continue to experience project delays related to the pandemic as well as lower oil prices. For the most part, customers and service providers alike have adjusted to operating in the current COVID environment and have implemented appropriate standards that provide for everyone's safety while also maintaining business continuity. The net loss for the quarter was $7.5 million compared to net income of $4.5 million for the comparative period last year. We had higher SG&A expenses compared to last year, primarily due to the addition of overhead costs associated with supporting both orbital solar and orbital power services operations, which commenced this year. Also, Q4 2019 net income included $7.4 million of income from discontinued operations compared to only $0.2 million in fourth quarter of 2020. As we stated on our last earnings call, we expect our electric power and solar infrastructure services group to contribute positively to our 2021 consolidated results as revenues in this group continue to increase. On a consolidated basis, we continue to believe that OEG is on track to be EBITDA and cash flow positive as revenue momentum continues throughout 2021 and beyond. Dan will provide more details on our financial performance shortly. OEG's total consolidated backlog stood at 40.4 million at the end of 2020, with an opportunity to add additional orbital power master service agreements and solar project awards to the backlog in the second quarter of 2021. Looking at our business segments going forward, for orbital power services, we're expecting to continue adding additional crews as we're seeing increased demand for transmission and distribution services. Indeed, the number of orbital power crews has grown rapidly since inception early last year and recently surpassed 30 crews in total, up substantially from 17 at the end of 2020. The industry trends I mentioned earlier are the drivers for the strong demand we are experiencing, and we continue to remain confident about orbital power services' continued opportunities for growth. Turning to orbital foundations, which we launched less than two months ago, Eclipse has built two crews and is already mobilized on its first job. We are currently reviewing $4 million in near-term opportunities, and the pipeline for drilled peered foundation services continues to grow each week as we get established in the market. We expect to win our fair share of this work, as the leader of Eclipse is an established leader in foundation services to the electric power industry. As I mentioned, we believe Orbital Solar will begin to secure project awards in the second quarter and be on track to generate $200 to $300 million in revenue this year. We also anticipate that the engineering and design on the Black Sunrise Half Century Fund will start in the next few months with construction scheduled to begin as early as the fourth quarter of this year. We believe orbital gas systems will continue to show improvement. In the UK, where we serve the gas grid and renewable energy customers throughout the UK and continental Europe, the biomethane injection-to-grid market has continued to develop under the UK government's current renewable heat incentive scheme. with a notable acceleration and growth of the number, size, and speed of execution of such projects. Renewables represent an increasing opportunity for the UK. Orbital has also developed an all-new Mitsubishi-based control system platform far superior to previous models and to its competitors in terms of functionality, reliability, cybersecurity, and operator usability. These advantages have generated repeat business from some of the major players in this market. As a result, our UK operations is expected to improve financial performance in 2021. Orbital Gas in Houston, which largely serves the industrial Gulf Coast refining market, has experienced a resurgent inactivity in 2021. With a strong and growing backlog and our acceptance by Tier 1 customers to work direct, we believe the positive trend in the US will continue throughout 2021. Our VE technology continues to gain acceptance in the marketplace, and as a result, many customers are looking to Orbital to solve their sampling and measurement challenges. And last, but certainly not least, when I joined the Orbital Energy Group, part of my strategy was to utilize the public company equity to make accretive strategic acquisitions in the electric power transmission and distribution, telecommunications, and renewable infrastructure markets to grow shareholder value for many years to come. Last year, it was challenging to implement our acquisition strategy, as a sub $1 stock price was not conducive to acquiring companies. Earlier this year, based on continued execution of our strategy and market trends, our stock price increased and stabilized to a level where we could go on the offensive with our acquisition strategy. Now we're in much better position to leverage my knowledge and relationships within these industries, as well as the ability to offer a different and compelling acquisition strategy to privately owned companies who do not want to sell into a large strategic or private equity model. We have several acquisition targets that meet our criteria and can add immediate shareholder value. Orbital Energy is a forward-looking story with a significant runway to achieve profitable growth from continued growth of our existing operations to adding well-established, properly held companies that want to join our team and build shareholder value for years to come. Our announcement today to acquire Gibson Technical Services, or GTS, is our first strategic acquisition in 2021. GTS, founded in 1990, is located close to Atlanta, Georgia, and is a national provider of engineering, design, procurement, and project management services to the broadband and wireless industries, serving blue chip customers under multi-year master service agreements. GTS has a diverse customer base, which includes traditional telecom and cable system providers, healthcare, public safety, and entertainment and sporting venues. This was an extremely attractive transaction for us, as GTS anticipates multiple growth opportunities over the next several years and needed a strong financial partner to invest in these opportunities. I'm very happy about this announcement and look forward to answering questions that you have on GTS and our Q&A. We are also in discussion with several electric power transmission and distribution construction companies that are proven leaders in the industry and have multiple MSAs with Blue Chip customers. We have agreed to terms with one of the targets, now under LOI, and due diligence has commenced. These represent attractive acquisition candidates that we want to be part of the orbital team. We believe the company is positioned now to make significant acquisitions like GTS that will serve to build our infrastructure offerings going forward. And finally, as we continue to execute on our energy infrastructure strategy, a critical component of this will be creating a robust environmental, social, and governance platform that will be essential in reshaping the culture of our company. Specifically, our desire to provide services that continue to reduce carbon emissions or providing opportunities for people of color and other underserved or disadvantaged people to be trained, employed, and advanced in our industry. We recently named a chief diversity officer for our company, Paul White, who also serves as our vice president of human resources and is a member of our board of directors. Paul will be instrumental in assisting me to further develop and advance our social platform within the company. ESG is a top priority for our investors and is also an area of responsibility for corporate executives to advance because it's the right thing to do. At Overland Energy Group, we intend to be the catalyst for change in the electric power and renewable construction industry, making a meaningful impact to help people improve their own lives. In summary, Overland Energy Group is a forward-looking story. To date, we have already made considerable progress in building a diversified infrastructure services company focused on electric transmission and distribution, telecommunications, and the renewable industries. Going forward, we will be targeting acquisition opportunities in the electric power and telecommunication industries that primarily provide steady, dependable, and recurring revenue streams. In time, the recurring business we acquire and grow organically will more than offset the cyclicality we experience in the utility-scale solar business. This concludes my opening remarks. Now, I would like to turn the call over to Dan Ford, our Chief Financial Officer. Dan?