Gulf Island Fabrication, Inc. (GIFI) on Q1 2021 Results - Earnings Call Transcript
Company Representatives: Richard Heo - President & Chief Executive Officer West Stockton - Executive Vice President & Chief Financial Officer Cindi Cook - Executive Assistant to CEO
Operator: Good afternoon ladies and gentlemen and welcome to Gulf Island's conference call to discuss first quarter 2021 results. All participants will be in a listen only mode for the duration of the call. This call is being recorded. At this time, I would like to turn the floor over to Ms. Cindi Cook for opening remarks and introductions. Cindi, please go ahead.
Cindi Cook: Thank you, and good afternoon. I would like to welcome everyone to our first quarter 2021 teleconference. Our results were released this afternoon, and a copy of the press release is available on our website at gulfisland.com. A replay of today's call will be available on our website after 07:00 PM this evening.
Richard Heo : Thank you, Cindy. Good afternoon everyone, and welcome to our first quarter discussion of our results, business trends and outlook. I'm happy to be here with you this afternoon and hope that each of you and your families are continued to stay healthy and safe. I’ll provide an update of the execution of our strategic priorities, including some of our key areas of focus for 2021, the status of our key projects, and the current business environment and end market opportunities. West will then discuss the financial impact of the Shipyard Transaction which closed in April and discuss our quarter results in greater detail, including our backlogs and liquidity position. We will then open up the call for questions and conclude with some closing remarks. During 2020 we focused on key strategic priorities to improve our financial strength and establish a stronger foundation for our future profitability and growth. As a reminder, these strategic initiatives included; one, improving our risk profile. With the Shipyard Transaction we were able to divest our higher risk, long term construction contracts that represented 90% of our backlog, which was generally breakeven or in a loss position. Two, strengthening our liquidity by implementing cost reduction efforts and through the sale of our underutilized assets. The Shipyard Transaction further improved our financial position by reducing bonding and letters of credit requirements. Three, improving our resource utilization and project execution through the rationalization and integration of our facilities, and putting our best people in one location with improved processes, which has resulted in improved project execution for fabrication and services.
West Stockton : Thanks Richard and afternoon everyone. I will discuss our consolidated results and then provide some additional details regarding our segment results, putting in context the factors mentioned by Richard and their impact on the quarter. I will then conclude with a discussion of our backlog and liquidity. However, prior to getting into the details of our quarterly results, I would like to discuss the impacts on the quarter of the Shipyard Transaction that closed in April. During the first quarter we recorded a charge of $23.4 million attributable to the impairment of our Shipyard asset and transaction cost incurred through the end of the first quarter. We anticipate incurring an additional charge of approximately $2 million in the second quarter related to additional transaction and other costs associated with the Shipyard Transaction. The current quarter charge is classified with an impairments and gain loss on assets held for sale on our statement of operations. Throughout my discussion I will reference adjusted net income and adjusted EBITDA, which reflect the removal of the impairment and transaction costs for the quarter. Adjusted net income and adjusted EBITDA for comparative periods similarly reflect the removal of previous impairments, gains and losses on assets held for sale and certain other non-recurring items. So with that backdrop, I will discuss our results for the quarter in more detail. Consolidated revenue for the first quarter 2021 was $59 million, a 2% sequential increase compared to the fourth quarter 2020 due to higher revenue for our shipyard division, offset partially by lower revenue for our fabrication and services division. First quarter revenue was down 25% year-over-year due to lower revenue for both our divisions. Consolidated net loss for the first quarter 2021 was $18.6 million compared to a net loss of $15.4 million for the fourth quarter 2020 and net income of $5.9 million for the first quarter 2020. Adjusted net income was $4.8 million for the current quarter, compared to an adjusted net loss of $11.3 million for the trailing quarter and adjusted net income of $5.9 million for the prior year quarter. Our adjusted net income for the current quarter included project improvement of $7.7 million for our Shipyard Division and approximately 600,000 for our fabrication and services division, and reflected strong project gross margins for our remaining fabrication services backlog. These positive impacts were partially offset by low volume levels for our fabrication and services division and the overall underutilization of our facilities and resources.
Operator: Thank you. . And we did get a question, and that will come from Jeff Geygan of Global Value Investment Corp.
Jeff Geygan: Hey! Good afternoon guys. Thanks for taking my question.
Richard Heo: Good afternoon, Jeff.
West Stockton: Hey Jeff!
Jeff Geygan: Can you talk a little bit about the expanded services in your fab division, possibly touching on the economics of the average job size, the duration and any other color around that?
Richard Heo: We’re Jeff at the primary stages, but we are organically looking at growing incrementally the services business. These contracts are going to be relatively small and in terms of margin expectation, we are looking at low single – low double digits kind of range.
A - West Stockton: And just to give you a frame of reference, Jeff for the quarter our services business with which of course is within the fab, the fab and services segment was right at $6 million of revenue, a quarter ago that was right at $9 million. So just as the business exists today, it can range anywhere between $30 million and $40 million of revenue annually, and that's the business Richard’s referring to that we're looking to grow, and those gross margins are at the low double digit.
Jeff Geygan: I appreciate it. You also have alluded to the collaborative partnerships. I was wondering if you can give us an update in terms of, do – have any of those literally been established? If not, what does the pipeline look like and again, talk around the size, the economics, the duration.
Richard Heo: Yeah, certainly. Those are also at the primary stages. We had a couple of arrangements that we are trying to formalize, but again those contracts sizes and really the magnitude I guess of the opportunity is still relatively small.
Jeff Geygan: I see. Alright, and lastly throughout your prepared comments you talked about higher growth opportunities, presumably that will improve your margin profile. Is that the correct way to read through that?
A - Richard Heo: Yeah, that’s absolutely correct, yeah.
Jeff Geygan: Alright, great. I know you guys have been through a pretty challenging period here. We look forward to seeing more positive news in the future. Thank you.
A - Richard Heo: Thanks Jeff.
West Stockton: Thanks Jeff.
Operator: This concludes today’s question-and-answer session. At this time I would like to turn the conference back over to management for additional comments.
Richard Heo: Thank you, Kathy. We talked about the possibilities for our future. We’ve made significant progress and I'm confident that as the market picks up, we’ll win our fair share. Recently that performance in the fabrication services business gives me the assurance that our process improvements and consolidation activities are making a positive impact on the bottom line. While the past year has been difficult, we're focusing our efforts on sales and growing our pipeline with opportunities where we can continue to demonstrate our commitment to our customers and deliver quality products with a “Get it done” attitude. For those on the call, thanks again for your interest, and I look forward to speaking with you on our second quarter results conference call and updating you on our progress. Be safe and take care. Thank you.
Operator: And again everyone, this does conclude today's call. We'd like to thank you again for your participation. You may now disconnect.
