WLMS - Williams Industrial Services Group Inc. (WLMS) Q1 2023 Earnings Call Transcript

2023-05-18 10:49:17 ET

Williams Industrial Services Group Inc. (WLMS)

Q1 2023 Earnings Conference Call

May 18, 2023, 10:00 AM ET

Company Participants

Chris Witty - Investor Relations

Tracy Pagliara - President and Chief Executive Officer

Damien Vassall - Vice President and Chief Financial Officer

Presentation

Operator

Hello, and welcome to the Williams Industrial Services Group First Quarter 2023 Financial Results Conference Call and Webcast. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Chris Witty, Investor Relations. Please go ahead, Chris.

Chris Witty

Thank you, and good morning, everyone. Welcome to the Williams first quarter conference call.

With me on the line today are Tracy Pagliara, President and CEO; Randy Lay, EVP and COO; and Damien Vassall, Vice President and CFO. After Tracy and Damien provide their prepared remarks, we'll open the call for questions.

Our first quarter results were issued yesterday afternoon and a slide presentation is available on the company's website at www.wisgrp.com.

If you now turn to Slide 2 in our presentation, I'll review the Safe Harbor statement. This conference call may include forward-looking statements that represent the company's expectations and beliefs concerning future events that may involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicated or implied by such statements.

All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the company believes that 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 financial measures with comparable GAAP results in the tables that accompany today's release and slides. Please note that our conversation today will be about continuing operations, unless noted otherwise.

Starting with Slide 3, I'll now turn the call over to Tracy Pagliara. Please go ahead, Tracy.

Tracy Pagliara

Thanks, Chris, and good morning, everyone.

Williams posted first quarter revenue of $103.5 million compared with $69.6 million in last year's comparable period. The company benefited from certain nuclear outage-related project work, all of which will be completed in Q2.

Our gross margin was 7.4% for the quarter, reflecting ongoing pressure from our Florida water, T&D and chemical operations, for which we lost $3.8 million in the first quarter. Excluding these underperforming areas, which we are exiting, our adjusted gross margin was [12.12%] (ph).

Operating expenses were $6.1 million this quarter versus $6.5 million in 2022.

Williams achieved adjusted EBITDA for the quarter of $3.3 million versus $100,000 last year. Excluding the underperforming operations I just mentioned, pro forma adjusted EBITDA was $7.1 million this quarter compared to $2 million in 2022.

At the end of the quarter, the company's backlog stood at roughly $235 million. While continuing to work on cutting costs and exiting non -- underperforming operations, we remain focused in tandem on assessing strategic alternatives for the company's future.

Now turning to Slide 4, I'd like to provide a bit more color regarding our operations and outlook. While first quarter results were much better than last year, we want to be forthright in setting expectations for the remainder of 2023.

As I mentioned a moment ago, we benefited in the first quarter from nuclear project work performed during outage periods, which can have a sizable impact when they occur. At this point, we anticipate these projects to complete during the second quarter.

Our backlog has contracted due to a combination of many factors, including the fact that the outage-related nuclear work for this year is nearly complete, a softer-than-anticipated bid environment in our core business, and the backlog associated with the exited T&D business.

We are facing a challenging award environment wherein even as the potential for our business remains sizable, due to expected government outlays tied to several pieces of the legislation, including the Infrastructure Investment and Jobs Act, and the Inflation Reduction Act, actual federal budgets for such programs have been slower than anticipated to materialize.

In addition, we are obviously bidding on less business as we scale back our operations and exit the water, chemical and transmission and distribution markets. As such, the overall outlook for Williams' top-line is less robust in the second half of the year.

At the same time, we will continue to face costs related to finishing certain outstanding contracts in our underperforming operations and exiting those operations. Such costs include additional funding. We are doing everything possible to rapidly streamline the company, but need to face realities associated with restructuring and rightsizing the organization.

Given all the issues I just mentioned, liquidity challenges will remain for the foreseeable future. We will keep our investors informed as to the issues involved. In the meantime, our shareholders' patience as we continue to work through this period of adjustment and transition is appreciated.

With that, I'll hand over the call to Damien to discuss our quarterly financial results. Damien?

Damien Vassall

Thank you, Tracy, and good morning, everyone. Let's review the financials in greater detail.

Turning to Slide 5, we posted revenue of $103.5 million for the quarter, as Tracy mentioned, versus $69.6 million in 2022. Sales rose year-over-year primarily due to higher nuclear work, much of which was related to services provided during customer outages. That said, given our reduced backlog and a more difficult award environment, our revenue forecast is expected to be at lower levels for the remainder of 2023, particularly as we have exited certain parts of the business.

Slide 6 shows operating trends for the company. We posted a gross profit of $7.7 million for the first quarter versus $5.7 million last year. This performance reflects improved project mix and higher revenue, partially offset by the negative impact from underperforming operations, as Tracy discussed. Excluding such projects, our gross margins would have been 12.2% for the quarter. Such profitability levels are expected to continue within our core markets although the impact from underperforming operations will persist into the second half.

Operating expenses were $6.1 million for the quarter versus $6.5 million last year. We continue to target streamlined initiatives to reduce expenses going forward.

With that, operator, we can open the line for questions.

Question-and-Answer Session

Operator

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] If there are no questions at this time, I'd like to turn the floor back over to management for any further or closing comments.

Tracy Pagliara

Thank you, everyone, for participating today. We appreciate your time and interest in Williams, and look forward to talking again next quarter. Take care and be well. Thank you.

Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

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