ENGlobal Corporation (ENG) on Q1 2022 Results - Earnings Call Transcript
Operator: Good morning, and welcome to the ENG's 2022 First Quarter Financial Results Conference Call. At the request of ENG, today's call is being recorded, and will be available for replay on the Investor Relations section of the company's corporate website www.englobal.com. You may access the replay by dialing toll free 877-481-4010 domestically or 919-882-2331 internationally, and referencing conference ID 44765. This replay will be available shortly after the completion of this event through 9:00 AM Eastern on May the 5. I would like to inform all parties that your lines have now been placed in a listen-only mode until the question-and-answer segment of the call begins. At this point, I would like to turn the call over to Rick Eisenberg, Media Relations Director with Eisenberg Communications. Rick, please go ahead.
Rick Eisenberg: 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. Presenting on the call today will be Darren Spriggs, ENG’s CFO; and Roger Westerlind, ENG's President. Following the presentations, Darren, Roger, and Mark Hess, ENG’s CEO, and will be available for questions. And now, I'll turn it over to Darren Spriggs. Darren?
Darren Spriggs: Thank you, Rick. I would also like to extend my welcome and appreciation for those on the call today. For the quarter, we reported approximately $7.4 million in operating revenue and $8 million in direct operating costs. Included in the direct operating cost is $426,000 related to underutilized staff, which is lower by $369,000 compared to the same period last year. Our current staffing level is necessary to maintain our essential workforce. Also included in direct costs is $829,000 of proposal costs, which has significantly increased over the same period last year due to the increase in volume of proposals. Our SG&A increased $282,000 compared to the same period last year, which included non-recurring legal fees of $70,000. The remaining increase is primarily related to the investment in our business leaders and an increase in T&E, now that our clients are more accessible with the lifting of travel and office restrictions. The success of our client relationships is driven by personal interaction with our customers, which has suffered since the beginning of the panic. Our income tax expense consists of state income tax, primarily in states that do not use net income to calculate tax like Texas. Our federal income tax expense is offset by an adjustment to the valuation allowance recorded against it. We recorded a net loss of $3.6 million or a negative $0.10 per share for the year compared to the net profit of $46,000 or $0.00 per share last year. Our backlog increased by $500,000 to $13.3 million compared to $12.8 million at the end of last year. This is the second consecutive quarter our backlog has increased. The backlog as of the end of third quarter of 2021 was $8.4 million. As of the end of last year, it was $12.8 million, and this quarter, it was $13.3 million. This increase in backlog is an indication that the investments we made last year are starting to pay off. As a reminder, last year, we completed a rebranding campaign, relocated our corporate office to be closer to our client base, redesigned our website, hard key business development personnel with strong relationships to clients in our industry. Roger will elaborate more on the positive signs we're starting to see you later in the call. Our cash balance was $17.7 million as of the end of the quarter, a decrease of $1.5 million over last year's balance of $19.2 million. Our working capital decreased $3.5 million from $26.3 million to $22.8 million. The change in our working capital is primarily related to the $3.6 million loss for the quarter, but it included an employee retention tax credit refund of $1 million. We believe this cash on hand, along with internally generated funds, availability under the company's revolving credit facility, and other sources of working capital will be sufficient to fund ENGlobal's current operations and expected near-term growth. And now to you, Roger.
Roger Westerlind: Thanks Darren. Good morning, everybody. As Darren indicated, the strategy, which we have spoken about before start to pay off. Our bookings in April actually exceeded the bookings in the first quarter, which we think is a great indication that all the things we have done is starting to pay off. A few highlights as we announced a few weeks ago, we have been awarded another sustainable airplane fuel plant to be built up -- built in the US. We expect that work to turn over and we completed the first phase midyear and then we will start the EPC phase. As also announced, we opened a construction group in West Texas. As I will come back to a little bit later, we also have a number of bookings in our government group. So to reiterate rate, the things we have done, which we then again believe to pay off. We have a great new office. We have increased fabrication capabilities by investing in Anderson. We have implemented a customer relation system, which is a great tool to managing our business. We have a new construction division. We continue working with a high-value, low-cost engineering center in Brazil, which is key to execute the work we are bidding. We have rebranded our company, which we think is very successful. We have engaged in a big marketing campaign on social media, LinkedIn, et cetera. We're working on a key account strategy for the clients now we have entertained for the last 12 months. We have a new management team, which has now been in place for over six months. We look at a number of opportunities across a lot of industries. Our alliance partners is in place and works nicely. And as we have discussed before, we have strategies broken down in place for the segment we're working in. So a few specific highlights, as the press release we signed out a few weeks ago, we're going to build another modulized, standardized, sustainable airplane fuel for a client up in Northern US. This is -- will be our second project. We think this is a very, very good example of our strategy forward. We have a number of these projects, and we expect the value for ENGlobal to be in excess of 100 million. We're also expanding on that group. So it will be labeled from here on energy and renewables. And in the energy side, we have a number of projects. For our engineering and project services, we have four awards, two for Chevron, one for Exxon and one for Oxy again, illustrates that our hard work starts finally to pay off. In the Government group, we have over 120 million in outstanding quotes in our automation group, a significant amount as well. In that, as I earlier said, we have won a number of contracts for SCADA systems, automation system, for the DoD. In our oil, gas and petrochemical, we have over 150 million in identified opportunities, where we are actively bidding almost €100 million in a spread from OxyConaco
