Orbital Energy Group, Inc.

Good day, everyone, and welcome to Orbital Energy Group's first quarter 2021 conference call. At this time, participants are in a listen-only mode. A question-and-answer session will follow management's remarks. As a reminder, this conference 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 first quarter 2021 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 Dex Officer, and Dan Ford, Chief Financial Officer. Today, We'll review the highlights and financial results for the first quarter, as well as recent developments. Following these formal remarks, we'll be prepared to answer your questions. I would also like to remind everyone that Tate'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 of error materially from those projected and forelooking statements. The company may experience significant fluctuations 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, and changes in the market demand, the performance or liability of its products, integrated 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 first quarter 2021 earnings conference call. During the first quarter, we continued to execute on our transformational strategy to become an infrastructure service provider serving the electric power transmission and distribution, telecommunications, and renewable markets. Just subsequent to the end of the first quarter, we successfully completed our creative platform acquisition of 100 percent of the capital stock of Gibson Technical Services, an Atlanta-based telecommunications company providing diversified telecommunication services nationally since 1990. During the first quarter, we launched a new subsidiary, Eclipse Foundation Group, a drill shaft foundation construction company that provides foundation services primarily to the electric transmission and substation markets. Also in the first quarter, Orbital Solar Services was named the Engineering Procurement and Construction, or EPC, company of choice for the newly formed Black Sunrise Half Century Fund, which over the next three years expects to build over one gigawatt of solar power with a beginning investment of $725 million. With this relationship, we have enhanced our presence in the renewable and alternative energy marketplace by securing a string of upcoming utility-scale projects along with planned follow-on developments for our solar division that should persist well into the next few years. Additionally, Orbital Power Services landed two additional multi-year master service agreements with investor-owned utilities. And finally, our orbital gas business has recently turned a corner as business activity is now returning to more normalized levels, moving past the effects of COVID-19 that it experienced most of last year. I will now provide more detail on Gibson Technical Services, or GTS, which is now a wholly owned subsidiary of OEG, and its results will be consolidated beginning with our second quarter results. This is our first strategic acquisition of 2021 and the first of several acquisitions we plan to execute upon this year. Since its founding in 1990, GTS has provided superior customer services, advanced technology solutions, and unparalleled quality to its customers in the telecommunication industry. GTS's customers include Cox Communication, Charter Spectrum, Comcast Communications, Verizon, and other industry leaders. GTS's management team, including their CEO, Mike McCracken, Chief Operating Officer, John Martin, and Chief Financial Officer, Robert Moore, will remain with the company. I'm very pleased with this acquisition and I believe it's an excellent platform for us to build out a telecommunications services group and to drive profitable revenue growth going forward. GTS is a recognized leader in telecommunications, including broadband and technical services, construction, distributed antenna systems, wireless capabilities and more. With its comprehensive suite of service solutions, GTS is well positioned to serve customers in a rapidly growing marketplace. The telecommunications market has significant industry momentum, primarily driven by the rollout of 5G spectrum and the increasing bandwidth requirements in areas such as healthcare, entertainment, and other public venues. We expect this momentum will continue for years to come. According to a February 2021 article by the Boston Consulting Group, the economic impact of the 5G spectrum will be significant. By delivering faster speeds, lower latency, and higher reliability, 5G will spur activity across consumer, industrial, and public domains. For example, the 5G spectrum could revolutionize healthcare, transforming telemedicine, and the remote monitoring of patients. Over time, the indirect benefits to the US economy are estimated to contribute an additional $1 to $1.2 trillion to the nation's GDP. An estimated $400 to $500 billion will be spent to deploy 5G across the nation by the year 2030. In addition to giving us a foothold in this attractive sector, the GTS acquisition further diversifies OEG service offerings and is another step towards our transformation into a full-service infrastructure platform company. In addition to its strategic benefits, this transaction adds immediate value to our shareholders. For the calendar year of 2020, GTS's audited results include gross revenues of approximately $40 million, gross profit of $6.8 million, and an unaudited adjusted EBITDA of $5.5 million. For calendar year 2021, GTS expects to generate revenues of approximately $50 million and EBITDA of approximately $8 million. Earlier this month, GTS was successfully awarded projects with a significant number of miles for the build-out of fiber optic broadband infrastructure over multiple states for several telecommunication providers. These projects will significantly increase OEG's backlog with revenue expected to be recognized over the next three to five years. We are very pleased with this development and look forward to sharing similarly positive news with you in the future as we continue to execute on our acquisition strategy. In the first quarter, we also launched a new subsidiary, Eclipse Foundation Group. Headquartered in Gonzales, Louisiana, just outside of Baton Rouge, Eclipse is a drill shaft foundation construction company that specializes in providing services to the electric, transmission, and substation industrial, communication towers, and disaster restoration market sectors. The Eclipse team has approximately 30 years of industry experience and is well known for its expertise in successfully executing projects in extremely difficult operating environments, such as water, marsh, or rock terrain. Eclipse utilizes amphibious equipment, vibratory caissons to construct up to 16-foot diameter shafts at depths greater than 80 feet in marshlands and deeper waters, and also has the expertise and equipment to successfully drill through hard rock and granite. The addition of Eclipse to our electric power infrastructure platform enhances our overall service offerings in an industry that is experiencing growing demand. Eclipse serves as a valuable asset to many of our other operations where we can realize operating synergies, perhaps most notably with orbital power services. The multiyear outlook for capital spending on electric power transmission and distribution infrastructure remains strong. An Edison Electric Institute presentation from February of this year indicated that utility capex spending has increased every year in the last decade, increasing from approximately $74 billion in 2010 to an estimated spend of $140 billion in 2020. These figures are the sum of generation, transmission, and distribution spending by our customers. Additionally, over the same time period, not only has the total capex spending increased, but the amount of transmission and distribution spending as a percentage of the total capex has increased as generation capex has decreased about 10% of total capex over the 10-year period. Market drivers include state regulatory and legislative mandates to modernize the grid reconfigure the grid from fossil fuel generation to renewables, smart grid investment, and grid security. In addition to our progress in telecom and foundation construction, during the first quarter, Orbital Solar Services subsidiary was named the Engineering Procurement and Construction, or EPC, company of choice for the newly formed Black Sunrise Half Century Fund. The Black Sunrise Fund, or BSF, was created in concert with Akon Lighting, a leading developer of clean energy projects across the globe to bring large-scale solar power to North America by decommissioning coal-fired plants throughout the United States and converting them into utility-scale solar energy farms, producing clean energy. As I mentioned previously, over the next three years, BFF expects to build over 1 gigawatt of solar power, beginning with the beginning investment of $725 million. Orbital Solar Services is responsible to provide full EPC services for these solar facilities with work commencing as early as the fourth quarter of this year. We're thrilled to partner with the Black Sunrise Fund in this socially responsible and environmentally friendly endeavor which I believe is a great example of showing that corporate America can do well by doing good. These utility-scale projects, along with planned follow-on developments, will enhance our presence in the renewable and alternative energy marketplace well into 2021 and beyond. Further, this venture with the Black Sunrise Fund also advances one of our key priorities, which is to raise our environmental, social, and governance efforts. ESG initiatives are something every corporate entity should consider a priority. And this endeavor will open up significant opportunities for black entrepreneurs and black-owned companies throughout the industry. As I've noted previously, at Overland Energy Group, we intend to be a catalyst for change in the electric power and renewable construction industry, making a meaningful impact to provide opportunities and quality of life for people in need in this country. Now I will review our first quarter 2021 results. Total revenues for the quarter were $9.5 million, a 67% year-over-year increase compared to $5.7 million for the first quarter of 2020. The year-over-year increase was primarily due to the addition of orbital solar services, the ramp-up of orbital power systems, and the startup of Eclipse Foundation Group. This was partially offset by lower integration revenues in the orbital gas systems operation. The net loss for the quarter was $18 million, compared to a net loss of $7.4 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 last year, as well as to support our newly formed Eclipse operations. We continue to see increasing opportunities here, but in the short term expect to incur costs of our growing fleet and related personnel. We expect these short-term costs will be mitigated once these operations gain traction with additional customers, which we expect will happen throughout the course of the year. We also incurred equity compensation related charges, and other compensation expenses during the first quarter, along with M&A costs as we continue to pursue acquisitions. At March 31st, 2021, OEG's total consolidated backlog was $62.1 million, a sequential increase of $21.7 million, or approximately 150% from the fourth quarter of last year. as well as a significant increase year-over-year as backlog at the end of the first quarter of 2020 was $9.5 million. More notably, second quarter backlog should increase substantially compared to the first quarter due to the GTS acquisition plus the addition of broadband build-out project awards that I mentioned earlier. Also during the second quarter, Orbital Power Services added two additional multi-year master service contracts with investor-owned utilities. More notably, almost all of this backlog is recurring predictable revenues, which somewhat offsets the cyclicality and uncertainty of the large project solar work we are pursuing. Now, let's review our outlook for the business segments going forward. As I noted earlier, we continue to see an improving operating environment and financial performance in overall gas systems in both North America and in the UK. At overall gas systems in Houston, the year started off, as anticipated, with strong backlog, which is further increased during the first quarter. However, during the first quarter, the production floor was slow as we completed the required engineering for several control buildings and one biomethane skid with backlog production scheduled throughout 2021 based on customer schedule requirements. Mid-year through the fourth quarter, we expect to be heavy into the production cycle and may need to bring in subcontractors to assist with the workload. We expect momentum to continue throughout the year as we are in discussions with several customers to build gas measurement and sampling skids and analyzer cabinets. We're also experiencing an uptick in our service revenues, which are approaching activity back to pre-COVID levels. As you may recall, our North American business was the most impacted compared to our other service offerings by COVID in the 2020 oil price drop. Also in the first quarter of 2021, Orbital Energy Services acquired full ownership of the VE Technology Patent Portfolio. We have also expanded our integration and technology applications into the renewable markets and received our first biogas to grid system entry order this year. We continue to focus on winning the integration and analytical packages and also providing maintenance services for these systems in the biogas markets. In our oil and gas UK operations, we continue to see a stronger resurgence in activity as the impact of COVID-19 was not as severe as here in North America. As I noted on our last call, our UK operations have been cash flow positive since the third quarter of last year, and cash flow should remain favorable throughout at least the first half of this year. This is primarily due to our continued focus on expanding into developing markets outside of our traditional core gas network business. Already in the second quarter, our U.K. operations have been notified of a significant contract award from the Irish gas networks and have been qualified as a supplier to perform services for the U.K. transmission operators Rio2 project which is a five-year contract to upgrade the gas network. This project will guarantee a minimum volume of work over the contract period, and first orders are anticipated in the second half of this year. The renewable gas market is also accelerating as the UK government incentive program to build biomethane facilities is set to end in March of 2022. As a result, significant orders are expected in the second and third quarter of this year. And finally, Orbital Gas UK will complete another hydrogen project in the second quarter, which strengthens our market position as a proven service provider in this emerging market. Looking at Orbital Solar Services, which provides engineering procurement and construction services to the utility-scale solar industry, customers, we continue to see limited activity during the first quarter. This is consistent with the industry at large, mainly due to COVID-19 and its related impact on the manufacturing and delivery delays of solar panels from China to the United States and continuing project delays as people wait on potential incentives and tariff relief from the Biden administration. Progress on solar warts has been slower than anticipated. While we remain bullish about our multiyear outlook for solar, our opportunities have shifted into the second half of this year. Currently, we are in exclusive and final discussions with a major international utility to provide EPC services on the utility-scale solar project in Pennsylvania. Additionally, we're exclusively negotiating to provide EPC services to several community-scale solar projects that are expected to move to construction in the second half of this year. These projects combined are approximately 200 megawatts of utility-scale solar. We continue to pursue other projects in our Opportunity Pipeline, which is in excess of $1 billion, with many of these projects planned to move to construction this year. As I mentioned on our year-end earnings call, the Black Sunrise Fund project opportunity will likely be in 2022. As I've stated in the past, we remain bullish on the multiyear outlook in the utility-scale solar market. According to the U.S. Solar Market Insight Report, March 2021 publication, the solar industry will see historic growth over the next decade, growing four times by 2030 to 419 gigawatts of capacity. This growth continues to be driven by factors driving renewable energy development, including strong demand, declining costs, gains in battery storage technology, and growing incentives and state mandates for the grid operators to move from fossil fuels to renewable power generation. Turning to our Orbital Power Services subsidiary, which provides electric transmission and distribution construction and maintenance services to the electric power industry, we continue to ramp up crews as we are scheduled to start work for two more investor-owned utilities in the coming weeks under master service agreements, which provide us with stable and recurring revenue streams. The gating factor in supporting these customers is to ensure our customers have qualified electric transmission and distribution crews that can perform their work safely and efficiently. As a result, we onboard our crews well before they are placed on the customer system to evaluate the technical competency and experience level of the new employees, including providing appropriate technical and safety training, which resulted in additional costs during the first quarter. Also, we had several lump sum projects which were impacted by weather issues that generated losses for the quarter. These projects are now completed, and the vast majority of our electric distribution activity is now under unit price contracts. Since its inception earlier last year, orbital power revenues continue to increase as we expand geographically and secure new customers, as well as increase crews for existing customers. Related to this, our newly formed Eclipse Foundation Group has continued to see strong demand since we launched it in January. During the first quarter, Eclipse successfully completed its first project, finishing the quarter with backlog of approximately $200,000, which as of today has increased to more than $1 million, as Eclipse continues to build momentum in the marketplace. In addition, we are currently reviewing several million dollars in 2021-related opportunities. As I mentioned earlier, Eclipse is complementary to our other service lines, especially Orbital Power, as foundation work is often a part of building electric transmission or substation facilities. With Eclipse, we can now offer our T&D customers a complete solution package. In conclusion, I want to reiterate that Orbital Energy Group is a forward-looking store with considerable prospects for both organic growth and growth through strategic targeted acquisitions. Our orbital gas business continues to rebound in 2021, both in North America and in the UK. In addition, orbital power continues to gain traction in the industry as we continue to speak with several electric power transmission and distribution construction companies that already have multiple MSAs with blue chip customers. Further, Orbital Solar Services, while experiencing little activity in the first half of this year, is under exclusive negotiations on several projects and is pursuing additional opportunities from a robust project pipeline. In addition, we expect meaningful revenues from our partnership with the Black Sunrise Fund to begin next year. Adding to this organic growth, we continue to pursue our acquisition strategy targeting attractive companies in the electric power and telecommunication industries that primarily provide steady, dependable, recurring revenue streams. The Gibson Technical Services Acquisition and subsequent contract award is an example of the potential that established companies with a clear strategy for growth can bring to OEG's long-term success. With these dual paths, We are well positioned on the path to achieve profitable growth on a run rate basis during the second half of this year as we continue our transformation to a diversified infrastructure services company. This concludes my opening remarks, and now I will pass the call on to Dan, who will review our financial results. Dan?