Charah Solutions (CHRA)

Steve Brehm Vice President of Legal Affairs and Corporate Secretary
Scott Sewell President and Chief Executive Officer
Roger Shannon Chief Financial Officer and Treasurer
Brian Butler Stifel
Call transcript
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Good morning, ladies and gentlemen, and welcome to the Charah Solutions Incorporated Second Quarter’s 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After today’s presentation, we will conduct a question-and-answer session and instructions will be given at that time if you would like to ask a question. I would like to now hand the conference over to Steve Brehm, Vice President of Legal Affairs and Corporate Secretary for Charah Solutions. Please go ahead.

Steve Brehm

operator. you, Thank and everyone, for us joining Good thank today. morning, you answering participation We sharing quarter and in XXXX your our questions. earnings remarks to second forward our appreciate look call prepared your and we have had closed. to press the We hope issued a after you yesterday review chance the release market ir.charah.com. as at Investors may But our follow if release prepared not, www.charah.com, section supplemental a remarks find can as you the of during website our investor or press on the well presentation, you

today call Roger and Chief our me Chief Executive Financial Treasurer. President Joining Scott Sewell, on are and Officer; Shannon, and Officer

prepared will session. their the customary Following question-and-answer remarks, we conduct

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

for measures today. reconciliations supplemental our we and will joining the earnings conference call, certain you GAAP financial Again, We During to in thank us presentation. to this non-GAAP measures. nearest applicable refer provide release

Scott CEO. like to turn to Sewell, President our and would Scott? Now, the call I over

Scott Sewell

for an review you transition our call update and business everyone. to on have I'll briefly our providing pipeline our I'm with our quarter performance quarter and guidance. to you and quarter our good It's Roger XXXX for a happy on review update our morning, second and you of This I'll join current update morning, then of Steve, an the speaking be accomplishments, earnings second performance. Thanks, provide again on today. call an great opportunities. financial developments the update to during us on

adjusted provide perform challenging our environment, As we results. team and we utility to to we in to COVID-XX underpinned customers, contracts. our hold to press in are which existing with our is to as this continue the mission-critical are continuing and Based our on release, EBITDA continues ability by continue financial we improve our to well XXXX services guidance, pleased stated revenue progress our working

and the We cash amendment cash net $XX.X market activities of strengthen raise, our generated provided our expense in more about the to are improvement through additional increased the free later. expanding working cash opportunities. speak capital our our reductions flow seeing we and management, that disciplined compete operating all flow which are provided also credit agreement capitalize successful by will on recent encouraged financial second quarter. and Roger million Coupled of in ability by capital with the $XX.X liquidity and during and flexibility million by

we remediation expected continue announced customers' initiatives. increases in from resulting our to release, opportunities, As our significant highlighted award new and press in see

recycling across recent customer customized near Maintenance ash, continue and solutions, motivation growing awards term, our in on the won awards States. remediating the geographic for COVID-XX project the awards is base our and our today, uncertainties in coal the friendly our affect the timing and and reach increases new and impact of As of to million we may $XXX customer may to expanding resulting in through Environmental is and revenues as United environmentally Services pandemic both related Technical have economy business Solutions in U.S. XXXX, The continue with segments.

business our of additional United in than as The We company. impoundment implement business X,XXX growth in billion utility companies have mandated proposals regulatory $XX ongoing their the the address this surface been $X opportunities pending next more closures develop over States. and approximately expect the in increasingly near-term years. an plans to continue level to in opportunities development two the and We activity we in higher now the billion has pipeline history never in bid that of

Agency calls, As ash more states deadlines. with establish several ash we've means closure beneficiation work requirements, becoming remediation, on the recycling of to its impoundment Environmental continues discussed the are methods programs. on permit and to own the and guidelines states to their regulatory Protection prescriptive as continues and previous Further, EPA pond working

We Charah continue for to see positive these Solutions. movements as

the and added expect mission-critical projects to maintenance situated we is Among and at utilities on industry, for remediation sales full-service announcements services, partner of of the Southeast management proposals provider ash two make services $X major with environmental company bid needs. that to compliance their ideally utilities impoundment that have the billion utility and only As deliver closure are by-product upon to requirements them award the soon. these pending we and significant operations, for proposals

a greater Additionally, sales that projects. the announced utility remain our about pond very to expectations recently driven major be we optimistic for soon infrastructure intentions will proceed opportunities, We with spend. ash by-product remediation submitting third proposals for large Southeast by

well record add expand new network and to we we of million exceed this reach year. to $XXX the awards of new we are MultiSource in believe last As materials positioned continue customers, our year's

and was with the outage Power through new our a new nuclear recent of One operations. customer for Allied maintenance work awards

And outages the high nuclear outage conditions largest the by XX award As we maintenance the very caused nondiscretionary COVID-XX Allied call, reflects services further Allied this our of quality provides. discussed previous challenging X pandemic. new on its mission-critical customer during maintenance completed Power for of nuclear

are that we Allied congratulate growth We success. performs, continued proud and work and on of our Power them the their team

services period disruption COVID-XX uncertainty for by to as our remediation this high continue and customers our resiliency utility and new services. our the our of ability and as the partners speaks daily Our nature mission-critical add team new essential caused during provide and to awards pandemic operations the of ability to to well of

continuity priority our pandemic utilities committed COVID-XX to Charah customers' any have business date. to Due business. evolve, safety to continues disruptions to keeping our challenging significant have again not customers monitor surrounding and continue our to growing utility staff are with situation believe we to our to partnered services nature the we dedicated very I period. every operating proud employees regulated And electricity. customers way remains provides working We needs the safely. But during that employees operations, observed day continuity of service to our continue continue that we to of to who to to addressing our and we providing and closely. well help highest essential are customers' of service I'm the safe, our thank our the power to As vital to our the remain people this customers. ensure provide and utility situation keep must prepared of maintain Charah country, we customers protect want to the Solutions our the

working want the to personnel again all our team, who medical the on tirelessly pandemic. Finally, continue to first environment. to it sincere more this all market I our Charah more in express of entire turn who and address consequences responders, detail I'll on expectations XXXX gratitude clarity others behalf in our of over discuss that, for financial quarter and second the Roger? will results, provide outlook current Roger, to With our

Roger Shannon

to million million increased Thanks, of increased and $XX.X or million the June Gross million sheet, for $XXX.X balance XXXX to Scott. XXXX I'll three review XXX.X% ended update Revenue XXXX, to XXXX ended both liquidity by XX, for provide the million continue an months XX, compared outlook. the XX, revenue results XXXX. months driven in ended $XX.X for $XX.X a three increase June to and June a or as months financial gross our in the in ended three on months of an XX, loss as three our June $XXX.X million the compared segments. $X.X XX.X% profit

the as related reported the months to $X.X profit increase in and gross general of improvement in to cost-cutting This to to compared loss $XX three pandemic due for was loss Solutions decrease in and three the paid-in-kind and to to of net XXXX amendment EBITDA during in the a June a facility, higher XXXX. ago to million QX period. expense percentage our general expense was expenses profit months a June net X.X% over up higher of the income rates ended gross was from year The of and XX, compared June attributable of an a the We quarter to debt partially lower The to three net. adjusted expenses, $X.X response offset second and increase general a million primarily June $X.X ended profit was by three initiatives. million for to ended and gross XX, $X.X a million other lower benefit received and million XXXX recovery insurance the attributable period, Charah balances. partially attributable interest as credit decrease primarily administrative the The and lower interest primarily in a X.X% gross XXXX. implemented attributable measures primarily by current administrative for cost-saving As interest interest higher administrative for COVID-XX ended was expenses. XX, the improvement months revenue, months loss XX, XXXX was offset tax

the during Now, XX, our in million, resulting component Solutions our the sales absence $XX Solutions' offset Environmental increased the compared as revenue reversal during I completion completions and $XX XXX.X% revenue XX, segment, to $X.X or increased spring primarily offerings. fossil from and reporting XXXX. June months $X.X by an million services three a months three $XXX,XXX, gross compared June compared or ended gross of profit the and months offerings. a quarter to Technical revenue ended will from XXXX, million profit $XXX,XXX deemed attributable June by-product project XX, ended the million of project primarily $XX.X for partially Maintenance increased compared ended million fossil XXXX, to current million in remediation $X.X additional June segment to three driven in nuclear $XX.X as for XXXX. the decrease million gross the from or in with Brickhaven Environmental work XX, period to as revenue or to decreased was gross profit In and X.X%, and primarily termination quarter. within to XXXX. decrease our a $XX the segment, associated outage Services' for discuss the month in level. our the of to XXXX, million increase of increase by the Services revenue compliance our the million to million loss to XX, months ended increase attributable June three services This second service Maintenance for the million was The $XX.X results Technical as at In XX.X% during three the $X.X $XX.X our X.X%

sheet Turning balance to and our liquidity.

flow primarily on June $XX.X quarter provided principal due cash by the free the XXXX, primarily For builds $XX.X working QX, was operations in unwinding of working payments CapEx total was million. XX, improved nuclear The $XXX.X in cash of had resulting the our consolidated long-term million. within outage $XXX,XXX, we debt and debt driven Solutions. At by capital operating gross Environmental was million. flow capital spring during loans. decrease was to debt dynamics for our Cash quarter of the second

million $XX.X Our June approximately liquidity of XXXX. was as XX,

Next, guidance I'll our XXXX address update.

specifically contracts was limited worsening year-end a revenue not based net no outlook. million no loss no we positive. quarantines. That XXXX of significant XXXX $XX during guidance work employee Scott to, of no reaffirming pandemic our expectations free of and earnings could This COVID-XX was As of and Any EBITDA stoppages, materially including, is material pandemic on affect our government-mandated guidance COVID-XX and cash customer that existing the of XXXX provided are current worsening of absences and $XX the but call. of material $XXX guidance expectation our the be to expectations mentioned, adjusted million, million, the flow

With us period ability back I'll over Our new of this with through to in me Scott. minimal and disruptions future Solutions. reaffirm coupled the awards, this gives we manage the difficult gaining confidence Charah allowed call from expanding and to with momentum are has turn the guidance addressable to increased that, the market,

Scott Sewell

to existing long-term take our balance closing, to Roger. advantage enhance of to actions ourselves anticipate support positioning In Thanks, contracts, with success. market contract for growth our company the and We committed expanding value while new we remain long-term coupled to position opportunities. continue will taking of sheet preserve awards, the cash, expected the

and Charah utility closely remediation many initiatives, are with for we our should to years growth Importantly, aligned which potential environmental come. significant Solutions provide sustainability with partners,

their suite power of service Our a environmental Q&A success momentum confidence in full during positive financial These new session. generation flexibility, with record. new partner believe We an our the again specialized winning of for that, the to record and bring And participation. to Thank begin ability and from needs. demonstrate interest activities in continue mission-critical customers' remain our pace. successes with are awards, second maintenance and let's along we the you quarter services meet gaining and industry, exceptional quality, the our winning to safety operator, compliance the choice enhanced in business at our for expand your with our liquidity we


question have You Stifel. Instructions] [Operator with Brian Butler from a

Brian Butler

taking questions. for Thanks my morning. good Hi,

Scott Sewell

Brian. morning, good Hey,

Brian Butler

half I how from second mean just you guidance results needs what try to of half. kind EBITDA kind guidance. and half the are to on the results first the wanted revenues like get in to I of really delivered, but then it the understand looks to pace, increase you and on the first start

hoping out was to $XX help I go to almost that the in second the second. maybe really million what drive kind $XX buckets first half of in the the Now reaching you from break in million could

Scott Sewell

contribute the We new those been expect here year. and it. question. assumed of ramp will the – and then as contribute I our the that question. new deeper over XXXX getting Good kind you will ramping really starts as the XXXX from it's continue – awards No. will And bit in well. of as dive the same in in be Roger record think, to of XXXX just of lot half time, to little beginning in people about a XXXX we're awards asking we think awards that to will But the continue here of we to into back

here continued So an that? perspective that, contribute to anything our significantly continue with well, the on half from back year. to do also want to SG&A savings initiatives cost coupled add the Roger, more as of you to even

Roger Shannon

And revenue Brian, the on second-half scope we've larger number we consistently by higher nuclear would loaded. of did said And more be first along with the XXXX about the right. first after as talked outages maintenance our that We there. driven in That's increased half. have quarter, side, some

margin. know, As that business is a lower you at

said, year. in Scott new second awards we are that As kick starting to have in the more half the of

second So to see as improvement over year half the those expect we the on. of would come gross margin

you So so. increasing if about to think the going half, second be million $XX about or we're year-over-year,

profit, that over We of the in to SG&A margin and improvements other expect – profit place gross in come half put from initiatives year. from cost-saving gross roughly that we the continuing and half gross XXXX beginning this

Brian Butler

a is that, just As side higher on, And gross are come mix? they mix? profit on projects new of these the that a

Roger Shannon

right. – these mean I Yes.

MTS, come think So margin higher lower that a work gross at second if be over at profit, will percentage, half about the have contributions the a you the that's gross – margin. gross outage the in

will second profit So the of the mix of the that drive a improvement. gross over half lot year

Brian Butler

Is X.X%. that that is sustainable – X%, higher moderated come looking the a is first you – come because And around forward? does that margins, I the you're awards new back of somewhere XXXX? as half EBITDA get with at sustainable Or in business that in? kind does number, margins, – going down the that think XXXX margin when half Or about have it back

Roger Shannon

outage have first saw quarter. of work, Well, as course like in we fluctuate year the to it's going the the over we the

to that outages. gross going period. It's be during lower more margin We have higher revenues,

and continue said, compliance remediation to is the required we that and that unremediated will believe, in margin X,XXX-plus business going improve the have in forward. Where gross cleaned up. we We services, be see on are the projects growth remediation impoundments to these the

remarks, work. is in work, significantly see M&TS where the mentioned to bidding remediation is we that compared as we a certainly, of as And opportunity at work that, prepared in the margin. growth and the higher the on yes, So the we're bulk that

So yes, margin. I higher

do yes, to going customer, up in I remarks, pick mean, through yet. over a business. our But mentioned increasing guides We're specific Allied new we contract the prepared on a time. XXXX So margin we see into we're – not get did new the side M&TS as our

coming that think, with from see So That significant continuing business our the growth, of opportunity bulk is remediation over grow. to still opportunities. I said, we the the years the

Brian Butler

on Okay. and translate second flow? mean, half. stronger gross in driven how I the what would And had there be that savings, that $X I by into cost Is million to half with the EBITDA. first you flow when improvement would half? you movements EBITDA kind some higher the free second guess, Or does think better profit – offset other stronger being the in what about cash working I is that of the expect a capital cash be the

Scott Sewell

that's think right. I No,

number the the year. is for pretty half Your close first of

you If million. working of unwind a from outage. quarter from cash about look flow driven our the had $X statement, $XX operations capital million, large at the is QX We very the in cash by QX, strong

think positive flow said guidance for we year. free that to be in I the cash we expect our

think XXXX. we're of terms operating quantifying in probably the cash that $XX flow a area bit, just think I of thinking kind little for I for million in

Brian Butler

here Sewell been look Okay. guess, been of guess, has XXXX? Charah of XXXX new the when awards, the awards and had Andrew questions awards. a I business new your, months you at you And I the in – quick What couple your, first just on What has then awards. new rate seven Scott win through

Scott Sewell

haven't win is rate we that historically shared. Brian. The Sure, something

getting our of are great feedback customers. a lot we from However,

at at this in wins the point already the number this that million think $XXX year. year I

And again, historically some new it's going metric, continue confidence something of we shared. some potential very large, to to not highlights, here new the as the in And market. far soon, our just a fair reputation, strong other have as we're awards in share our position our business. very But win

Brian Butler

you from the average I more a revenue year a the this kind awards? that even Or ask. at the going a thought heavily about really taking you exceed front of few awards? these how next the this average I'd mean of – million should about Last these if cycle? the going you're be right business. we on Or to six- think be do XXXX, this new mean this think if over to a five-, the pace? or I one $XXX contribution – is should we the How the is I is simple period, so years? over this new isn't towards or is pace way, and simple weighted new taking average back meet

Scott Sewell

in mean right right five- months average. have then work going It's to nature. to are that XX-plus we some six-year three now that projects to be in you're at going were be to other we Yes. that's years looking – And XX I some years.

is to our flat our you customer it's a number. think to areas diversify But drawdowns what described really time, we're going of simplest in which the looking And in that's average how couple it, I continue these some really base, ramps for. of now be other announcing to really diversify be put the way revenue couple and There'll worked to hard be We've streams business. contribution areas. a you we over very would coming it this that hopefully, overall and is a of six-year I very the six to some right take and here is hope But that's that five to from take more will to our work. a on And what of see really we're remediation predictable targeting mix guys of longer-term long-term burn-off probably years. pace what And results. really contract in soon. kind financial five-

if – pending about five- $XX the what stand next more pipeline burn-off work roughly And keeps it's right billion business. out proposals spot years, think another the – where seeing than in very in you're more we we've about think you now. you're that to two another or we're visibility the opportunities. that that We're We have six-year $X I to and ever there right the talked into about about in that But on. optimistic billion and that's two probably expanding of range. us right, we pipeline now be really, seen, pace, excited

Brian Butler

very much for Thank questions. taking you Great. my

Scott Sewell

You are welcome. Brian. Thanks,


[Operator Instructions] closing Any remark?

Scott Sewell

their everyone thank just to we here to hopefully, additional forward positive the Yes, in results out like the next quarter. look the there. everyone next today, communicating here business. again the continued some staying call attendance for their safe have is And And time interest for

we'll So end Thank call the thanks, there. you. and everyone,


concludes today's conference. This

disconnect. now may You