Charah Solutions Inc (CHRA) 2019 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Charah Solutions' First Quarter 2019 Earnings Conference Call. (Operator Instructions)

I would now like to hand the conference over to Tony Semak, Head of Investor Relations for Charah Solutions. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us today as we're delighted you've chosen to participate in our first quarter 2019 financial results conference call. We're hopeful you've had a chance to review the press release we issued earlier this morning. In the event you haven't, you could find the press release as well as a supplemental investor presentation on the Investors section of our website at www.charah.com or simply ir.charah.com.

Joining me today on our call are Scott Sewell, President and Chief Executive Officer; and Nick Jacoby, interim Chief Financial Officer and Treasurer. Following their prepared remarks, we will conduct customary question-and-answer session and look forward to continuing the dialogue.

Before we begin, I would like to remind you that our remarks regarding Charah Solutions include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently disclosed in our earnings releases and conference calls. Those risks include, among others, matters that we have described in our earnings release as well as in our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q. We disclaim any obligation to update these forward-looking statements.

During this conference call, we will make reference to non-GAAP financial measures. Reconciliations to the applicable GAAP measures can be found in our earnings release, supplemental presentation and on our websites.

Again, thank you for joining us today. And now I would like to turn the call over to us Scott Sewell, our President and CEO. Scott?

Good morning, and thank you, everyone, for joining us today. I'd like to start by introducing Tony Semak, our new Head of Investor Relations. Tony has 25 years of capital markets experience, including Investor Relations, Portfolio Management and Corporate Finance. Most recently, he served as Head of Investor Relations for Invesco Mortgage Capital. Tony joined Charah Solutions in late April, and we are very pleased to have him working with us.

This morning, I'll briefly review our financial results and provide an update on business development since our previous call, including discussing the growing customer interest in our technology initiatives and our rollout expectations in a bit more detail. I'll also review our revised 2019 revenue guidance and highlight our confidence in achieving our growth expectations for 2020. I'm extremely excited about our Charah Solutions' future and our ability to deliver attractive value to our shareholders, given our competitive strengths, favorable market and regulatory dynamics and the expanding pipeline of opportunities before us. We are in an ideal position to capitalize on these opportunities as we partner with customers to bring customized solutions to their complex environmental challenges.

I'll now turn to a review of our first quarter 2019 results. Revenue increased 5% driven by acquisition of SCB, which we did not own in the first quarter of 2018. Gross profit and EBITDA declined primarily in our Environmental Solutions segment due to the impact of continued adverse weather and delays at 3 remediation sites. The above-average precipitation that we experienced in the second half of 2018 continued into the first 4 months of the year. 4 of our key states experienced above-average rainfall through April and on a 12-month trailing basis, have experienced the wettest periods on record. The hampered results in both our byproduct sales and remediation businesses. Although we expect to recover a portion of the lost byproduct sales in future periods, there were unanticipated cost increases on remediation side, some of which we did not recover from the customers, which reduced gross margin.

Our operating cash flow for the first quarter was positive and increased $2 million from the comparable year ago period despite an increase in CIE related to the Brickhaven contract. With respect to Brickhaven, we received final delivery of ash from Riverbend at the end of March.

As we noted previously, Duke will not be supplying additional ash to Brickhaven from other sites. Our contract with Duke laid out a process for handling the situation. We continue to expect a substantial cash payment from Duke for unrecovered costs associated with the project in the second half of this year.

Next, I'll review several recent accomplishments. Although it has only been 7 weeks since our previous conference call, we have made progress in several areas of our business. Our outstanding bids have increased to more than $3.5 billion from $3 billion previously. We opened an additional fly ash storage terminal in Massachusetts, expanding our MultiSource network. We continued to receive strong interest in our MP618 ash beneficiation technology from utility customers, including internationally and expect to convert this interest into awards in the second half of 2019.

Our 2 slag grinding facilities under construction are expected to be completed in the third quarter with both expected to contribute to revenues later this year. And we received several recognitions for our excellent safety performance, which further demonstrates our commitment to employees and our customers. I'll discuss each of these developments in a bit more detail.

We've continued to grow our pending bids, which are now in excess of $3.5 billion. Currently, these are weighted more heavily towards our Environmental Solutions segment. The total include a few remediation bids that are larger, more complex, multiyear projects, where the revenues may increase or decrease depending on the scope. Approximately, half of the total is spread across a much larger number of small- to medium-sized bids. Over the past few months, we have received verbal awards and are in exclusive negotiations with customers on potential contracts that represent approximately 15% of the $3.5 billion. 4 of these are in our Environmental Solutions segment, and 3 of those would bundle a remediation project with a byproduct sales opportunity. The fifth is in our Maintenance & Technical Services segment and represents a renewal of an existing contract that combines our ash management and byproduct sales capabilities, another example of our ability to bundle services to meet customer needs. We expect that these awards will be converted to contracts by the end of the third quarter with an expected contribution to revenues beginning in the first quarter of 2020.

I'd note that while our discussions have focused on the $3.5 billion of pending bids, our pipeline of opportunities is considerably larger and includes potential work that is not yet at the bid phase. We see continued expansion of that pipeline driven by supportive regulatory environmental dynamics favoring remediation and ash beneficiation.

As noted, we've made good progress in converting pending bids to awards, and we expect to have more success on this front and we will be reporting over the remainder of this year and into 2020. However, due to a shift in the timing of bid decisions from what we had expected earlier this year, we reduced our 2019 revenue guidance to a range of $550 million to $650 million from the previous range of $650 million to $800 million.

Importantly, we haven't lost any significant bids but award decisions are occurring later than we expected. As a result, the contribution to 2019 revenue from those we do win will be less meaningful than we had previously anticipated with most of the benefit occurring in 2020.

Despite the reduction to our 2019 revenue guidance, we remain confident in our outlook for at least 20% growth in revenue in 2020 from our original 2019 guidance.

We see growth driven by 3 catalysts: First, the size and quality of our outstanding bids, verbal awards received to date and our ability to convert additional bids to awards in the latter part of 2019 and 2020; second, favorable market and regulatory dynamics, including growing concerns about potential groundwater contamination that we see accelerating remediation projects into 2020; and third, our compelling value proposition to customers as the industry leader in ash excavation with a unique ability to bundle low-cost ash beneficiation technology in a highly scalable design and a history of solving complex environmental challenges. We also expect adjusted EBITDA margins in 2020 comparable to or higher than the revised 2019 guidance level due to the higher margin profile of the expected growth in revenues and the ability to grow revenues without materially scaling up our G&A expense.

Next, I'll provide an update on the developments in our byproduct sales business and our technology initiatives. Earlier this year, we opened a new fly ash storage terminal in central Massachusetts, adding to our MultiSource materials network in New England. In this region, many coal plants have been retired over the past several years. So there are insufficient local sources of ash to supply the growing regional demand. The terminal will allow us to more than double our regional throughput and increase our inventory available for sale to ready-mix concrete producers in the region. Our MultiSource network now has nearly 40 sourcing locations across the South, New England, the Midwest, the Rockies and California. We're continuing to invest in this network, and we are well positioned to respond to an expected growth in infrastructure spending as it occurs.

In terms of our 2 major technology initiatives, we have seen strong interest from potential utility customers in MP618 and are currently negotiating with several to begin deploying this technology in their business. In a couple of cases, as I noted previously, we have been given verbal award to negotiate a contract. We also have seen strong interest from couple of international customers, although these discussions are at an early stage. As we noted on our fourth quarter conference call, we have 2 slag grinding facilities under construction on the Gulf Coast and the West Coast. Both facilities are expected to be completed by the end of the third quarter, with one expected to contribute modestly to revenues in the third quarter and the other in the fourth. As noted on our previous call, we have another 2 grinding facilities in the planning stages, and we expect to start construction of those in the latter part of 2019.

In these facilities, we use patented technologies for grinding granulated blast furnace slag to create supplementary cementitious materials, or SCMs, which can then be supplied to ready-mix concrete producers. The advantages of this technology include its relatively low-cost profile and the ability to scale up and down production quickly on market demand. We believe there are compelling opportunities across both large and small markets, where the supply of fly ash is currently constrained. We expect these initiatives to be growth drivers for our byproduct sales business as the launch of additional facilities is expected to generate incremental volume and revenue, beginning modestly this year, but more significantly in 2020 and beyond.

On our previous conference call, I reviewed recent legislation in Virginia, which requires a combination of beneficiation and clean closure for Dominion CCR facilities. As I indicated, we see significant opportunities for our remediation business as well as our byproduct sales business over the next 15-plus years as a result of the legislation.

We believe our MP618 technology positions us competitively with respect to the new beneficiation business. Here and in other places, we see opportunities to bundle these capabilities to our competitive advantage.

Also, in early April, the North Carolina Department of Environmental Quality, or DEQ, issued a ruling requiring Duke Energy to excavate and move to lined landfills the ash at 9 storage basins, not previously planned for clean closure. Duke has appealed the DEQ order and a decision on the appeal may take 9 to 12 months. We view this as another example of regulatory trends favoring clean closure.

As we discussed last quarter, we continue to see much discussion and reporting of potential groundwater contamination at/or near coal plants and CCR disposal sites. The widespread reporting on this issue is another example of growing environmental concerns about this issue, which could result in remediation plans that create opportunities for Charah to provide environmental solutions. Regulatory and public policy trends are increasingly driving customer needs for creative remediation solutions, including those where beneficiation or recycling of ash plays a significant role. Our ability to bundle our proprietary technologies with more traditional remediation approaches puts us in a uniquely competitive position to develop these creative and cost-effective solutions.

Growing concerns about potential groundwater contamination could stimulate actions in other states to require clean closure. Also, approaching regulatory deadlines are likely to increase utilities' focus on developing their compliance plans. These developments have been key drivers of our expanding pipeline of opportunities and further support our confidence in the future of our business.

With that, Nick Jacoby will now provide more detail on our first quarter financial results and our 2019 guidance.

Thanks, Scott. This morning, I'll review our financial results for the quarter, provide an update on our balance sheet and liquidity and review our 2019 guidance.

As we discussed on our previous call, 2019 is a transition year for us in several ways. The early completion of the Brickhaven contract accelerated significant EBITDA into 2018 from 2019, but due to timing of new business awards, we will not offset the loss of that EBITDA with new business in 2019. We expect that new business awards later this year and into 2020 will put us back on track of the strong growth in revenue and EBITDA in 2020 and beyond.

Revenue for the first quarter increased $8 million or 5% to $163 million, in line with our expectations. The most significant driver of the increase was the acquisition of SCB in March 2018, which added $13 million in the first quarter of 2019 revenues.

Gross profit decreased $4 million or 19% to $15 million. Gross margin declined to 9.4% from 12.3%. The decline was driven by our Environmental Solutions segment. We reported a GAAP net loss for the quarter of $2 million as compared to a net profit of $1 million in the year ago period. The decline was primarily attributable to lower gross profit and a $1.4 million noncash mark-to-market adjustment on the fair value of our interest rate swap, which increased interest expense. Adjusted EBITDA of $9 million was down $8 million or 49% from the year ago period. About half of the decrease was attributable to lower gross profit. In addition, although reported G&A expense was comparable for the 2 periods. In 2018, we added back $4 million of nonrecurring G&A expense to adjusted EBITDA.

Turning to a discussion of our 2 reporting segments. In our Environmental Solutions segment, revenue increased $11 million or 22% to $58 million. Byproduct sales accounted for $18 million of the increase in segment revenues, including $13 million from the acquisition of SCB in March 2018. Remediation and compliance services revenue declined $8 million due to the net impact of remediation contracts rolling off.

Gross profit for the segment decreased $4 million or 34% to $8 million, and gross margin declined to 14.2% from 26.1%. Most of the decline in gross profit and gross margin in this segment was attributable to weather and issues at 3 remediation sites, as Scott noted in his remarks. This adverse weather and site-specific issues resulted in delays and unanticipated cost increases. Based on a review of the 3 affected job schedules, we recorded an adjustment to the expected costs and margin for each of these sites in our first quarter results.

In our Maintenance & Technical Services segment, revenue decreased $3 million or 3% to $105 million. In our Nuclear Services business, we completed 2 outages, flat with the first quarter of 2018 and started to work on 2 others. To date through mid-May, we have completed a total of 6 outages. However, the 2019 outages were reduced in scope relative to 2018 as we anticipated and the number of nuclear outage days was lower than the year ago period. This resulted in modestly lower Nuclear Services revenue for the quarter. The decrease in Nuclear Services revenue was partially offset by increased fossil services revenues, mostly from the startup of the APS contract in January.

Gross profit increased approximately $0.5 million from the prior period as higher gross profit in the nuclear business was offset partially by lower gross profit from fossil service offerings.

Gross margin increased to 6.8% from 6.2%. The lower gross profit on the fossil services side reflected a very modest amount of startup cost associated with the new APS contract and the fossil maintenance business effort. These were added back to adjusted EBITDA.

Before moving on from this discussion of our segments, I would like to point out a revenue disclosure in our 10-Q that you might find helpful. Our financial statements provide revenue by segment. In footnote 12, we have broken revenue down into 3 categories: Products, which includes only our byproduct sales revenue; percentage of completion, which includes those remediation and compliance projects that are accounted for on a percentage of completion basis; and services, which includes everything else but mostly reflects revenues in our Maintenance & Technical Services segment.

Next, I'll review cash flow. Our operating cash flow increased $2 million in the quarter to $6 million. Changes in working capital had a modest positive impact on operating cash flow in contrast in the past few quarters, despite a $9 million increase in cost and estimated earnings in excess of billings, or CIE, primarily related to Brickhaven contract.

CapEx in the quarter was approximately $6.7 million, split roughly equally between maintenance and growth CapEx and technology-related CapEx. We expect CapEx spend to trend higher over the remainder of the year as we receive new work awards and continue to roll out our technology initiatives.

Turning to our balance sheet and liquidity. At March 31, 2019, we had gross consolidated debt of $258 million, which was nearly unchanged from the year-end 2018 level. Our net leverage ratio was 2.78x, which was up from 2.5x at year-end 2018 due to the decline in EBITDA on a trailing 12-month basis to $90.3 million. Our liquidity was approximately $49 million, again, nearly unchanged from year-end 2018.

After we received a Brickhaven-related payment anticipated from Duke later this year, we expect to repay portion of our term loans and amounts outstanding under our revolver, which would reduce our leverage ratio. As the lower EBITDA in 2019 gets fully rolled into the calculation, however, we expect to see the ratio increase by year-end. Looking ahead to 2020 and beyond, the growth in EBITDA that we expect should drive improvement in our leverage ratio.

Next, I'll address our 2019 guidance. As Scott noted, we have reduced our 2019 revenue guidance to a range of $550 million to $650 million from the previous range of $650 million to $800 million. We remain confident about our prospects for converting submitted proposals to new work awards. However, as we continue to move through the year, it is clear to us that the timing of these awards has slipped relative to our previous expectations. Thus, we do not expect as significant a contribution to 2019 revenues as we had previously.

The lower end of our revised guidance range of $550 million is substantially underpinned by existing business and new work awarded to date and is only modestly dependent on receiving additional new business over the course of the year.

At the segment level, we expect that Environment Solutions revenue will be lower in 2019 than 2018 with a decline in remediation and compliance services revenues as a result of the acceleration of the Brickhaven contract from 2019 into 2018 and delays in timing of new business awards. The revenue decline in this business should be partially offset by higher revenue in our byproduct sales business. We expect revenue in our Maintenance & Technical Services segment will be modestly lower in 2019 than 2018 with growth in fossil services offset by the decline in Nuclear Services due to a lighter outage schedule this year.

In terms of the revenue split between the 2 segments, we expect more than half of the 2019 revenues will come from the Maintenance & Technical Services segment. Notwithstanding the reduction to our revenue guidance for 2019, we have maintained our 2019 adjusted EBITDA guidance in the range of $50 million to $65 million. We viewed this guidance as conservative when we provided in late March. With the lower revenue outlook for 2019, our internal expectations for adjusted EBITDA has moved lower but it's still within that range. Although the amount of revenue we expect from new business is lower, our expected gross margin on that new work is higher, based on our latest assessment of type, mix and complexity of anticipated new business awards. We also have identified a number of levers available to us, including, but not limited to, optimization of performance on existing jobs and cost efficiencies.

Although we are not providing quarterly guidance, I would note that we expect the second quarter to be the weakest of the year with adjusted EBITDA lower than the first quarter level. While we continue to record EBITDA associated with the Brickhaven and Riverbend contracts in the first quarter, these contracts were completed in March and have not yet been replaced by comparably sized new projects.

From the second quarter level, we anticipate a meaningful ramp-up in subsequent quarters with the fourth quarter being the largest contributor of the year. I also would like to review with you several 2019 items, on which we provided some color on the previous call, detailed in the appendix of our supplemental presentation.

For 2019, we expect depreciation and amortization expense to be approximately $20 million lower than the 2018 level of $42 million, mostly due to the completion of the Brickhaven contract, which accelerated significant depreciation into 2018. We note that the amortization component is included in G&A expense and includes $8 million of amortization expense of intangible assets, partially offset by $3 million amortization credit of the Brickhaven purchase option liability that was recorded in the first quarter of 2019.

For 2019, we expect recurring, general and administrative expense to be in the ballpark of the comparable 2018 figure of $60 million. This excludes nonrecurring items and the amortization of the Brickhaven purchase option liability. Approximately 20% of the G&A is noncash expense, consisting of amortization and stock comp expense.

We expect cash interest payments to be significantly lower this year as a result of our 2018 term loan refinancing in the range of $13 million to $15 million depending on the timing of debt repayment and the level of capital expenditures. However, the level of GAAP interest expense will vary depending on noncash mark-to-market adjustments we record with respect to the value of the interest rate swap on our term loan.

As noted, we expect that free cash flow will be significantly positive this year as a result of the expected cash payment later this year in connection with the early completion of the Brickhaven contract. Although, we are not providing cash flow guidance at this time, pending finalization of the Brickhaven-related payments, we plan to do so by our second quarter conference call.

I'd also like to provide an update on our 2019 capital expenditures. Our forecast has not changed from our fourth quarter commentary. We continue to expect maintenance-related or replacement CapEx of approximately $12 million. Growth CapEx will be dependent on the timing of new business awards, and we expect the rate of this CapEx spend to increase in the second half of 2019. As we proceed through the next several months and obtain greater clarity on the timing of required spend related to new work awards, we will provide an update as necessary.

With respect to technology CapEx, the rollout of slag grinding facilities is at our discretion and driven by our assessment of market conditions, while the MP618 technology rollout is customer-driven. As Scott noted, we're seeing strong interest by potential utility customers and are optimistic that we will be able to announce contracts this year. Our estimate for 2019 technology-related CapEx of $25 million to $30 million could increase or decrease as we continue the technology rollout. Depending on the timing of awards, a portion of this could slip into 2020.

With that, I'll turn the call back to Scott.

Thank you, Nick. As I noted in my recent letter to shareholders, we will continue to build on our competitive strengths and significant service advantages by executing on our strategic priorities. First, bringing cost-efficient and effective new technologies to the industry. During the quarter, we continued to advance the rollout of our technology initiatives. Customer interest in our MP618 and grinding technologies has been strong. We are the market leader in ash excavation, and we believe we have a leading technology in ash beneficiation. We think the combination of these is a key differentiator in our industry, and we will continue to create opportunities that would not otherwise be available to us.

Second, remediation contract acceleration. As you've heard this morning, we've made strong progress in increasing our outstanding bids and advancing a number of them to an exclusive phase. We expect to convert these verbal awards to contracts over the next several months.

We also expect to convert additional pending bids to awards in the second half of 2019 continuing into 2020.

Third, byproduct sales and marketing growth. We will increase our ash and SCM sales by continuing to expand our MultiSource network through the addition of facilities such as the fly ash storage terminal in Massachusetts.

And finally, commitment to industry-leading safety culture. Our safety program was recognized with several recent awards, including 2 from the North Carolina Department of Labor for our safety record at 2 sites in 2018. We are proud of our teams and their commitment to delivering high-quality services without ever compromising on safety.

In closing, we have strong confidence in and enthusiasm for the growth potential of our business. We have the necessary experience and expertise to deliver competitive and innovative solutions for our customers, and we have the right team in place.

With that, operator, let's open it up to questions.

(Operator Instructions) And our first question comes from the line of Hamzah Mazari from Macquarie.

This is Mario Cortellacci filling in for Hamzah. Could you just give us a little more color on the timing of the awards? I guess, we all kind of expected for, I guess, it to be a little bit faster than it has been. And maybe you can even give us some color on the risks to the wins or the verbal wins and maybe what could happen during negotiations? Is there any possibility for a lower revenue to come in or increased cost? Or maybe give us some kind of idea of how those negotiations have gone in the past?

Sure, Mario. Thanks for the question. You're right. The timing is a little bit slower than we anticipated, and we don't always have insight into why that is. But I think it's important to note that as we've talked previously, these jobs are getting more complex. The proposals are larger. This -- the projects that we're looking at right now -- in that group that we're talking about the verbal awards that 15% of the $3.5 billion, those projects range in timeframes of 2 years to 8 years for terms. So, I mean, these are long, complex projects. Some of which -- a lot of which were great examples of us bundling our technology with our ash remediation experience and providing utilities with some unsolicited opportunities that aren't going down that conventional RFP path. But I think for us, we -- it's just an example of how we're performing and how we're going to make these projects closer to pipeline faster. Again, these delays are more months than years. So we would expect a solid -- expect to get on the phone with you guys for the Q2 conference call. And I'll be announcing a lot of these projects here in next coming months. So we think it's very soon. I don't -- I think it's also important to note that, that pipeline is increasing. So we're not losing any, it's just more of the timeline, Mario.

Got it. And I think you mentioned international opportunities, I'm just hoping you can expand on that a little further. Are there any regulatory environments outside the U.S. that support that business model? Or maybe I don't know -- not too sure if you guys have sized that up at all yet?

Yes. So there are a lot of regulatory environments in different -- whether it be in Europe or South America or anywhere else. But really what's driving it is the acceptance of the beneficiation technology right now. So as we continue to bring potential customers through the Louisiana facility and have them watched the unit operate and as well test our ash. We've tested several international ashes at that facility. It's really just the cost competitiveness of that technology and its performance right now. So really, really just high confidence in that technology is what's driving those opportunities for us.

Our next question comes from the line of Toni Kaplan from Morgan Stanley.

This is Jeff Goldstein on for Toni. Can you provide a little more color on the margin decline within Environmental Solutions in the quarter? I know you mentioned project-specific issues causing cost increases and project delays there, but can you talk about what happened specifically and the potential for that to continue throughout the year?

Sure, Jeff. I'll take that one, and if, Nick, you want to -- if I miss anything, go ahead. But those impacts vary from site to site. And on a couple of those, frankly, our performance probably was not what it should have been. So we thought we were going to be able to get schedules back on track but the weather in the first 4 months just didn't cooperate with us necessarily on those. So really it's an unfortunate confluence of events at those 3 very specific sites and not a systemic issue. So as we've looked over a portfolio of projects and everything else, we do not see that recurring. Nick, I don't know if you have anything else to add.

No. The only thing I'd say is that environment margin not too far off where it was in the fourth quarter. We certainly see that, when you think about full year 2019 coming up quite a bit the balance of the year.

All right, that's helpful. And then you lowered your 2019 growth guidance within Maintenance & Technical Services. I think before you were expecting modest growth and now you're saying a modest decline. Was that guidance reduction also related to contract timing? Or is that something more specific? Maybe just help me with your thinking there.

Yes. No, I think it's as simple as you said it. I think contract timing, as Scott mentioned, we're not really losing awards. So it's really more just the timing of such. And again, months, not years.

Our next question comes from the line of Brian Butler from Stifel.

Just on the gross profit change and the adjusted EBITDA change. So the difference there was $4 million, if I heard correctly, of add backs that didn't occur in 2019? So should I be thinking about that as SG&A on a recurring basis, is there actually kind of increase because those are items that can no longer be added back?

Yes. It's Nick. I'd say, when you think about the -- you're talking specifically to the add-backs we recognized when we talk about the G&A year-over-year. From a GAAP perspective, it was flat. But if you look at it on a more normalized basis without the add-backs, it did increase. A few factors I'd say there. First, SCB was not owned in the prior year. So that's obviously a big impact and there's various other items year-over-year, if you look at noncash loss on sale of equipment or stock comp, et cetera. And then frankly, just -- we weren't a public company first quarter of last year. So that helps drive the increase but the increase that we have was certainly within the expectations that we had for ourselves at the beginning of the year. And if we look at the full year estimate, we still feel like we're pretty good and on track for what we said last quarter.

Okay. And do you guys have maybe a breakdown within the segments between remediation and byproducts and fossil and Nuclear Services for revenue and growth gross profit, is that going to be in the Q or can you give some color now?

Yes. In terms of reported results, we do have a footnote. I believe it's footnote 12. Let me confirm that for you. But it's the segment footnote. There is a breakdown that we have revenue by byproduct sales percentage of completion, which is -- all of percentage completion is remediation compliance but not necessarily all remediation compliance is percentage completion and then services, which is everything else. So that's the extent of that below the segment. We haven't historically been giving information that detailed below that but that I think will help you achieve directionally there.

Our next question comes from the line of Michael Feniger from Bank of America.

Just -- when you guys reported (inaudible) for us March 27. So in the month and a half -- I understand that like on the revenue side awards got pushed back. Can you help me understand the (inaudible) margin or the margin mix? Is it the mix of the revenue that's coming in? I'm trying to get a feel for how the margin range has (inaudible).

Yes. Michael, it's Nick. I think I got all of that. Your line is a little quiet, but yes. So a couple of things we say in terms of touching on the segment guidance for 2019. On the environmental side, we mentioned some of the new work that we'll get will raise the average margin that we'll get. And also, we have -- we touched on some of the specific improvement levers we alluded to that will also impact the environmental side. So as far as the environmental segment goes, when you look at the 2019 year-end figure, we think that'll be a little bit higher than where we ended 2018. On the Maintenance & Technical Services side, we started the year pretty consistent with 2018 but do expect that the '19 full year figure will end up a little bit higher than where we were in 2018. And so if you model out the mix of revenue and then sort of the margin guidance that I walked through there, that's how you get to sort of a gross profit number. Does that help?

Yes. It seems like I think with what you guys kind of guided for Q2, it's -- is it more fourth quarter weighted as well or is it just significantly back-end? How we think about the margins for the full year? How Q1 developed? And what you guys are guiding for Q2?

Yes. I'd say, Q1 certainly had some quarter-specific issues, as Scott touched on. So that -- those should not be recurring. Q2, I think, from a margin perspective, should be better than first quarter. But then, yes, you'll definitely see a ramp but not all certainly fourth quarter. You'll see it ramp in the third and then certainly more in the fourth as we layer on jobs. And again, one of the reasons we're excited about 2020 is you'll start to get the full year impact to that plus the new work that we get.

And the new work that you get, I'm just curious when we think of big, is it bigger projects that are starting? You guys talked about how the pipeline is bigger more complex projects. Just in terms of how these projects flow through the P&L, is it just -- how do they kind of flow through the P&L? Is it usually higher margin in the beginning? Or is it lower margin in the beginning? And then as you guys work through the project, there could be release if you're getting -- if you're budgeting ahead of the call schedule? I'm just trying to get a feel for how we think about all these new projects that are -- that should be coming through, particularly in 2020? How that ends up impacting the margin profile?

Yes, Michael, this is Scott. Those margin profiles will be equal throughout the course of the project. However, there will be a ramp as we start these projects out. So like Nick was saying, you'll see a ramp from Q3 to Q4 and get the full benefit in 2020. Again, big reason why we still have high confidence in our 2020 outlook. But the margin profile will be the same throughout the duration of the project. It's going to be a ramp to get those started, and then you'll essentially see a plateau for the life of the project.

Yes, dollar ramp margin, pretty consistent.

Correct. Thank you.

And pricing within these negotiations, you mentioned some of them, you had some verbal commitments. But can you help us just on these projects? Seems like they're bigger, they're more complex in scope. Are these fixed cost-type projects? Is it reimbursable? How is it -- is it kind of different from how pricing kind of develops with these contracts versus prior cycles? Just give us a feel for that?

Sure. Absolute mix of contract structure across the spectrum of projects we're talking about. All of which though, we've built in a good bit of conservatism and what's really raising that margin for us is the ability for us to bundle our technology along with the excavation expertise we have.

Got it. And then just lastly on the Brickhaven, the cash inflow or the settlement. Is there any risk to that? Is that something -- I mean, you guys will probably give us more information, it feels like at the Q2, but is that something that has to go through litigation at all? Or is that something that's kind of just has to work through the process? Just to give us a feel if that could be delayed or not?

Yes. I mean, you're exactly right. We'll be in a position to give you a better update on the second quarter call. But it's not a litigation issues you described, it's purely working through the mechanics of the contract right now. Like we stated before, we finished shipping ash from Riverbend to Brickhaven and now the kind of procedural steps within the contract take over. And we're just working through those with Duke and hopefully, we'll update you on that on the next call.

Our next question comes from the line of Steve Schwartz from First Analysis.

I guess as first question with respect to cash flow for the quarter. You note the CIE impact in working capital, just wondering if you were to back out these particular dynamics at Brickhaven, what would have been your operating cash flow? Is it strictly related to the one item -- line item you note or are there other -- are there elements in there that make it kind of messy?

No. The CIE component of Brickhaven, we -- let me back up, when we talked about it in the remarks, we told you that obviously we were -- we have better free cash flow dynamic in the operating side year-over-year in spite of the growth in CIE in the quarter. I'd say more than half of the CIE growth, which was $9 million, was Brickhaven. So if you pull that out, obviously the free cash flow dynamic gets certainly better in the quarter. So I think we did a pretty good job there with working capital and other things on the quarter.

Yes. Okay. That's why I'm been asking, it's a good-looking number there. And then just with respect to CapEx. I think, Nick, when you went through the distinction between growth and maintenance and technology, I think there is also a significant element, at least in '18 there was for vendor financed equipment. And I'm just wondering how we should factor in a number like that for 2019? Is that something you can talk to at this point in the year?

Yes, good question. And for those listening who might not get the question, let me just maybe restate it. If you go to our cash flow statement in the prior year, underneath the cash flow statement, we have some verbiage where we did purchase some equipment from the vendor directly where they sell or finances and that just under GAAP rules, does not flow to the cash flow statement, which is what he's referencing. So if you were to just look at the purchase of property equipment in the cash flow statement, it's actually lighter than what we spent. So that's sort of the backdrop for it. What I'd say is, we did not have any of that in the first quarter. We could have more here throughout the year, but I'd say it would not change our guidance of what we've talked about of spend. It would only change perhaps where it shows up geography-wise on the cash flow statement. So that's how we're thinking about that one.

Got it. Okay. That's helpful. And then my last question. Just with respect to MP618, you're noting that you've got some potential contracts in the works, and just wondering if there's anything about those contracts that we should be aware of. Just with respect to maybe like a take-or-pay element, a minimum volume, exclusivity or pricing element, and anything we should know about there?

Steve, that's something we don't necessarily speak specific to our contract terms. At this level, we haven't shared in the past. However, the pricing and the contract dynamics will be very favorable for the company.

And we have no further questions in queue. I'll turn the call back to the presenters for closing remarks.

Great. Thank you. Thanks, everybody, for joining us today. Again, we remain very enthusiastic about our growth prospects as demonstrated by the progress we made advancing our pending bids and rolling out our technology initiatives. We expect to have further positive news on this front over the next several months, and I really look forward to updating you guys in the second quarter call. So hopefully, we'll see some of you on the road, and we'll have definitely very positive news here in the next couple of months. So thank you, again, for your time today.

This concludes today's conference call. You may now disconnect.