Hill International, Inc. (HIL)

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Hill International, Inc. (HIL)

Q1 2019 Results Earnings Conference Call

May 09, 2019 08:30 AM ET

Company Participants

John Grau - InvestorCom

Raouf Ghali - CEO

Todd Weintraub - CFO



Welcome to Hill International, Inc. First Quarter Earnings for Fiscal Year 2019 Investor Call. On this call, John Grau of InvestorCom will provide some introductory remarks on the content of the call. John will be followed by Hill International's CEO, Raouf Ghali; and Senior Vice President and Chief Financial Officer, Todd Weintraub. Mr. Ghali will discuss the status of the company and expectations for Hill's immediate and long-term future. Mr. Weintraub will detail Hill's first quarter results for 2019. As a reminder, this call is being recorded.

John, please begin.

John Grau

Thank you. To everyone on this call, please note the following. Certain statements made on this call are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and it is our intent that any such statements be protected by the safe harbor created thereby. Except for historical information, any matters set forth herein, including any statements of belief or intent and any statements concerning our future plans and strategies are forward-looking statements. These forward-looking statements are based on our current expectations and assumptions and are subject to risks and uncertainties. We do not intend and undertake no obligation to update any forward-looking statement.

With that, let me turn the call over to Raouf Ghali, Hill International's CEO.

Raouf Ghali

Thank you, John, and thank you to everyone on the call. First, we are happy to report that our backlog and consulting fee revenue have increased by 12% and 5%, respectively, from last quarter. We are also pleased to report improved profitability.

Today, we will start the call with updates since our last earnings call in March, then Todd, our CFO, will provide details on the financial performance for the quarter. Thereafter, I will go through the recent wins and our expectation for the remainder of the year. Then we will open the call for questions and finally, some closing remarks.

We started this quarter with strong sales that are quickly turning into consulting fee revenue, or CFR. The Middle East is leading this initial growth while all other regions continue on a steady path according to plan.

Some noteworthy accomplishments for this quarter: We have added $91 million in backlog after deducting the revenue burn for the first quarter, and we expect this upward trend in our backlog to continue into the next quarters. We closed the first quarter with an adjusted EBITDA of $2.4 million. We anticipate revenue and EBITDA to be stronger in the second quarter.

The first quarter is traditionally slow due to weather conditions on the East Coast that impact our infrastructure business in the U.S., January holidays and February being a short month for billable days. Our ability to burn the new bookings has been very strong during the first quarter. This is due to the quick mobilization needs on our projects and our ability to meet client expectations.

Our SG&A has remained at the expected levels. This has aligned profitability to grow as new sales convert into higher CFR.

I will now pass on to Todd to detail our first quarter 2019 performance.

Todd Weintraub

Thank you, Raouf, and thank you to everyone on the call. I know everyone is anxious to hear about the progress we've made against the agenda we laid out on our last quarter in March. I'm thrilled to share that we are on track and executing that plan in several respects.

One, our backlog has grown by 12% since year-end to $831 million at March 31; two, our adjusted EBITDA was a positive $2.4 million for the quarter; three, we have positive free cash flow of approximately $7 million for the quarter; four, consulting fee revenue was $79 million for the quarter, up from $75 million last quarter and reversing a multi-quarter negative trend; and five, SG&A was $31 million for the quarter.

Adjusting for some onetime expenses, our SG&A was $30 million, in line with our guidance for approximately $120 million for 2019 full year. I'm really happy to say my remarks this quarter will be much shorter than last because I don't have to take much time explaining a huge amount of nonrecurring costs and other adjustments.

While we did incur some costs related to the prior restructuring and restatement, they were very minor compared to 2017 and 2018, totaling just over $1 million. We fully expect all of these costs to be completely done during the second quarter. We also adjusted EBITDA up for noncash stock compensation and down from an unrealized FX gain each for about $200,000, pretty much offsetting each other.

I want to provide you now with more detail on the results for the quarter. Given all the noise in the 2018 results that renders year-over-year comparisons not very meaningful at this point, I think it makes sense to talk about this quarter's results as a trend from last quarter and relative to our plan.

We had indicated our belief that Q4 2018 was a trough and we would turn the corner in 2019. We are now seeing evidence of this in our Q1 2019 results.

Our consulting fee revenue trended up by about 5% from $75 million last quarter to $79 million this quarter. We expect our CFR will continue to increase quarter-over-quarter during the year. Our gross margin on that consulting fee revenue was 39.8% in the first quarter, up slightly from 39.3% in Q4 2018.

Read the rest of this transcript on seekingalpha.com