ENGlobal Corp (ENG) 2020 Q4 法說會逐字稿

Good morning, and welcome to the ENGlobal 2020 year-end financial results conference call. Your hosts for this morning are Chief Executive Officer, Mark Hess; President and Chief Operating Officer, Roger Westerlind; and Chief Financial Officer, Darren Spriggs. At the request of ENGlobal, today's call is being recorded and will be available for replay on the Investor Relations section of the company's corporate website, englobal.com.

(Operator Instructions) This replay will be available shortly after the completion of this event through 9 AM Eastern Time on March 18, 2021.

(Operator Instructions) At this point, I would like to turn the call over to Rick Eisenberg, Media Relations Director with Eisenberg Communications.

Thank you, operator, and thanks, everyone, for joining us on this call. Before we begin, I'd like to review our forward-looking statements provision. During today's conference call, company representatives may make forward-looking statements. Any statements made in this presentation about future operating results or other future events are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Please note that actual results achieved by the company may differ materially from such forward-looking statements. A discussion of factors that could cause such differences appears in the Risk Factors section of the company's 10-K.

And now, ENGlobal's CEO, Mark Hess, will present an analysis of the company's performance for the year 2020 and provide some outlook for 2021. Mark?

Thank you, Rick, and good morning, everyone. Thank you for joining the call. On March 1, we announced the retirement of Bill Coskey from his executive positions at ENGlobal while remaining as Chairman of the Board. The Board has appointed me as CEO.

As you can imagine, I've had a close working relationship with Bill over the last eight years and a close personal relationship with Bill over the last eight years. So it is with mixed emotions that I see Bill step away. I'll miss seeing him in the office, but I'm happy to see that he's going to be able to spend more time with his growing family.

The Board has also appointed Roger Westerlind as President. I've been acquainted with Roger now for a couple of years. And over that time, I've become familiar with Roger's background, his experiences and capabilities, but most of all, his approach to servicing customers. And I'm pleased that Roger has chosen to join our team. He's really made a positive impact on us internally that will become more visible in the coming months.

Darren Spriggs will replace me as CFO, Secretary, and Treasurer. Darren has been with us for several years as our VP, Corporate Controller, and I have full confidence that he will be successful in his new role. Darren will be speaking to you today about our 2020 results, and Roger will give you an overview of some of our initiatives and current trends. Afterwards, I'll have a few comments and then we'll open up the call for questions.

At this time, I'll turn it over to Darren.

Thanks, Mark. Just a quick introduction before we get to the 2020 results. Before becoming CFO, I was the Corporate Controller at ENGlobal for approximately two years. Additionally, I have over 20 years' experience in various accounting management positions. My industry experience includes both private and public and different industries, including oil and gas, engineering, and construction.

Now, on to the 2020 results. We ended the year with $64.5 million in revenue. The company's $8 million or 4.2% improvement in revenue compared to the prior year was a result of an increase in revenue in both our reporting segments.

Revenue from the engineering, procurement, construction management, or EPCM, segment increased $6.5 million or 33.5% to $25.9 million for 2020 compared to $19.4 million in 2019. Our automation segment increased revenue by $1.5 million or 4.1% to $38.5 million for 2020 as compared with $37 million for 2019. These improvements in revenue were partially offset by delays in automation segment government projects due to military base closures and COVID-related travel restrictions imposed by the US government, as well as automation projects that were not renewed or replaced due to the uncertainty from the pandemic.

The company recorded a net loss for the year of $625,000, or a negative $0.02 per share, which is an improvement of 57% over 2019. In 2019, we recorded a $1.5 million loss, or a negative $0.05 per share. The improvement was primarily a result of the increase in revenue on higher margin projects from the company's EPCM segment, as well as a decrease of $500,000 in SG&A costs year over year. However, COVID-related project delays and resulting inefficiencies experienced by the company during the latter half of 2020 served to partially offset these improvements.

We ended the year with $13.7 million in cash, which is a $5.4 million increase versus the cash balance at the end of 2019. The increase was a result of the proceeds of the PPE (sic - see press release, "PPP") loan of $4.9 million and $1.4 (sic -- see press release, "$1.5") million under the revolving credit facility with Pacific Western Bank. The PPP funds were used to keep our employees at close to normal levels during the PPP coverage period. We have submitted the application to the SBA for full forgiveness, and we expect a decision in the near future. Our working capital also increased by $2.8 million.

We believe our cash on hand, internally generated funds, and availability under the revolving credit facility, along with other working capital will be sufficient to fund our current operations and expected activity for the next 12 months.

In conclusion, we can continue to experience certain effects of the pandemic, just like most of our customers. But we feel with the vaccines now available, decreasing cases, and the lifting of restrictions, we are cautiously optimistic about the future.

I would now like to turn the discussion over to Roger to discuss our growth prospects and opportunities in 2021.

Thanks, Darren, and very happy to be on board. I thank both Bill and Mark for the opportunity. ENGlobal kind of reminds me about the early days of ABB: a lot of skilled people and a lot of opportunities. As a born Swede, I was part of ABB for many years and worked across many segments; lived in Germany, South Africa, London, and here in Houston since '99. I have a long background in engineering and projects, working across automation, power, renewables, and many other industries.

We've been especially successful working with the big IoCs, long background working with Chevron, Exxon, BP; also major partners in South Korea, as DSME worked here in the US with McDermott, [South Korea], and many others.

I also, from 2004, was part of Dynamic Industries, which we grew from a local offshore-onshore construction company to over a $500 million company, which we sold to Carlyle/Riverstone back in 2004.

What I see here at ENGlobal is a great delivery platform, which we will use as a delivery of innovation. What we mean by that is simply we're going to have a delivery model, we're going to go across many industry segments. So what we have done in the first few months of my tenure here is to reorganize the very flat matrix organization, very similar to what we had in ABB early days.

So if you see a picture in front of yourself with a matrix of the horizontals, it's the delivery system, which consists of project services, that's engineering, procurement, scheduling, or fabrication facility and our integration facility. That's the delivery system, and the horizontals is upstream, renewables, government services, refinery and terminals, and obviously, automation. I think this is a great platform to build on and I'm really excited for the future.

Obviously, our renewable segment has a lot of focus, and we have a number of projects that is either in proposal stage or negotiation stage. When we talk about renewables, the focus so far has been hydrogen. Obviously, around renewables, we have clean diesel, we have solar, and we have many other processes. We are actively looking for more projects and more opportunities within that.

I guess the concern, as Darren and Mark touched on, is the COVID and the delay of projects. I think I'm cautiously optimistic about what we see. I think my personal view is that we are still not over the COVID. And

as setback], if you listened to the market this morning, that Denmark has stopped some of the vaccines. I think it's a fragile time and I think we need to be very careful.

The backlog of $24 million obviously is concerning. But if you look at the pipeline forward, as we see it today, it looks quite promising. So thank you.

Thank you, Roger. As Roger mentioned, the pipeline does look promising. I think at this point, we've got -- we've issued or have in process about $278 million in opportunities. A lot of those opportunities are in the renewable and green energy space. Many of these opportunities are fairly large.

Darren talked about our working capital and our cash availability, which we believe is enough to manage these projects. But in addition to that, recently, we filed an S-3 with an ATM where we can go to the market to get additional funds to manage these projects if necessary.

So with that, I will turn it over to the operator for questions and answers.

Thank you. Ladies and gentlemen, the floor is now open for questions. (Operator Instructions) We have no questions in the queue at this time. Do you have any closing comments you'd like to finish with?

Yes. So thank you very much for attending the call. And as the operator mentioned, it will be on the website for replay, and thank you again.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.