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NI

NOS4-1, Inc. (WLMSQ)·Q1 2023 Earnings Summary

Executive Summary

  • Revenue rose to $103.5M on outage-driven nuclear work; adjusted EBITDA improved to $3.3M, and operating income turned positive, but GAAP gross margin remained thin and net loss from continuing operations was roughly break-even at $(0.1)M .
  • Backlog fell sharply to $234.9M (from $333.2M in Q4), with 12‑month conversion expectations reduced to $100.5M (from $178.6M at year‑end), signaling a softer 2H revenue trajectory .
  • Liquidity remains constrained: total liquidity was $6.2M, with only ~$48K of unrestricted cash and $43.6M of bank debt; management noted further funding will likely be necessary amid underperforming project wind‑downs and a lower 2H revenue base .
  • Management is exiting underperforming Water, Chemical and T&D operations (incurring $3.8M of losses in Q1) and continues to review strategic alternatives with Greenhill; nuclear/fossil core outperformed forecasts, but outlook cautions that revenue is expected to fall in the second half given lower backlog and a slow bid environment .

What Went Well and What Went Wrong

  • What Went Well

    • “Greater than anticipated customer outage‑related work in the first quarter of 2023 positively impacted Williams, resulting in higher revenue and EBITDA year‑over‑year.” — Tracy Pagliara, CEO .
    • Operating income of $1.6M vs. a $(0.8)M loss in Q1’22; adjusted gross margin would have been 12.2% excluding underperforming projects; adjusted EBITDA improved to $3.3M .
    • Core nuclear and fossil businesses exceeded internal forecasts; company progressed exits of Tampa‑based T&D (completed) and Norwalk‑based T&D (targeted Q2), with ongoing wind‑downs in Chemical and Water .

  • What Went Wrong

    • Underperforming Water/Chemical/T&D weighed on profitability (Q1 losses of $3.8M in these operations); GAAP gross margin remained just 7.4% vs. 8.2% in Q1’22 despite revenue surge .
    • Liquidity remains tight (total liquidity $6.2M; unrestricted cash ~$48K; bank debt $43.6M); management expects further funding needs as 2H revenue falls and costs to complete water projects persist .
    • Backlog declined to $234.9M (from $333.2M) and 12‑month conversion guidance fell to $100.5M (from $178.6M), driven by converting large nuclear projects to revenue and exiting T&D .

Financial Results

  • Profit and loss (GAAP and non‑GAAP)
MetricQ1 2022Q3 2022Q4 2022Q1 2023
Revenue ($MM)$69.6 $56.7 $55.8 $103.5
Gross Profit ($MM)$5.7 $0.7 $(1.7) $7.7
Gross Margin (%)8.2% 1.3% (3.0)% 7.4%
Operating Income (Loss) ($MM)$(0.8) $(6.3) $(8.7) $1.6
Operating Margin (%)(1.1)% (11.1)% (15.5)% 1.5%
Net Income (Loss) from Cont. Ops ($MM)$(2.0) $3.6 $(10.4) $(0.1)
Diluted EPS (Cont. Ops)$(0.08) $0.13 $(0.40) $(0.01)
Adjusted EBITDA ($MM)$0.1 $6.2 $(7.0) $3.3
  • Balance sheet, liquidity and backlog
MetricQ3 2022Q4 2022Q1 2023
Backlog ($MM, end of period)$352.7 $333.2 $234.9
12‑mo Backlog Conversion ($MM)$168.2 $178.6 $100.5
Total Liquidity ($MM)$7.3 $3.8 $6.2
Unrestricted Cash ($MM)$1.0 $0.5 ~$0.05
Bank Debt ($MM)$37.4 $40.8 $43.6
  • Segment/end‑market revenue mix and key project exposure
MetricQ3 2022Q4 2022Q1 2023
US Nuclear (% of revenue)49% 55% 72%
Decommissioning/Fuel Storage (%)5% 2% 1%
Energy Delivery/T&D (%)16% 12% 6%
Fossil (%)14% 21% 12%
Industrial/Water/Other (%)16% 10% 9%
Vogtle Units 3 & 4 revenue ($MM)$18.4 $16.3 $18.0
  • Non‑GAAP context: Excluding underperforming Water, Chemical and T&D, adjusted gross margin would have been 12.2% in Q1; “core” adjusted EBITDA including add‑back of loss projects totaled $7.1M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FY2023 Formal GuidanceFY2023“Not providing guidance for fiscal 2023” (Q4 release) No formal guidance; management outlook: revenue expected to fall in 2H, liquidity challenges continue Maintained “no guidance”; qualitative outlook more cautious
12‑mo Backlog ConversionRolling 12‑mo$178.6M as of 12/31/22 $100.5M as of 3/31/23 Lowered
Revenue OutlookFY2023“Revenue increasing due to major customer projects” (Q4 deck) “Revenue expected to fall in second half due to lower backlog and slow bid environment” (Q1 deck) Turned negative for 2H
LiquidityFY2023“Credit amendments expected to provide necessary liquidity” (Q4 deck) Further funding likely necessary; liquidity issues likely to persist into 2024 Worsened
Portfolio ActionsOngoingExpanding T&D; Florida water projects weighed on margins (FY22) Exiting T&D (Tampa exited; Norwalk closing Q2), winding down Water and Chemical Strategic shift to exit underperformers

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’22 and Q4’22)Current Period (Q1’23)Trend
Liquidity & Strategic AlternativesLiquidity plan, negative cash flows; evaluating strategic alternatives; legal settlements bolstered cash in Q3’22 . FY22: total liquidity $3.8M; going‑concern emphasis; exploring options incl. potential sale (3/31/23) .Liquidity $6.2M with ~$48K cash; further funding likely; strategic review with Greenhill continues .Persistent constraints; optionality under review
Exit of Underperforming Ops (Water, Chemical, T&D)Florida water losses and T&D start‑up costs pressured margins in Q3’22 and Q4’22 .Tampa T&D exited; Norwalk T&D closure targeted for Q2; Water/Chemical wind‑down ongoing; $3.8M Q1 losses in these ops .Execution ongoing; losses diminishing over time (per plan)
Nuclear Exposure & VogtleNuclear/decommissioning softness in late 2022; Vogtle revenue $18.4M (Q3’22), $16.3M (Q4’22) .Outage work drove Q1 strength; Vogtle revenue $18.0M; US Nuclear 72% of Q1 revenue .Positive near‑term tailwind; concentration risk increasing
Backlog & BidsBacklog rose to $352.7M in Q3’22; fell to $333.2M in Q4’22; 12‑mo conversion $178.6M (YE) .Backlog declined to $234.9M; 12‑mo conversion to $100.5M; bids slower than expected .Weaker backlog/visibility
Credit Facilities & CovenantsAmendments and covenant relief; Wynnefield loans; higher interest costs; weekly cash flow reporting (Jan 2023) .Liquidity commentary highlights prospective funding needs; borrowing base expected to contract in 2H .Elevated financing risk persists

Management Commentary

  • “Greater than anticipated customer outage‑related work in the first quarter of 2023 positively impacted Williams… While our core nuclear and fossil business exceeded our forecast for this quarter, the underperforming operations negatively impacted results. Given our reduced expectations for the second half of the year and corresponding liquidity challenges, we continue to evaluate further strategic alternatives for the Company.” — Tracy Pagliara, President & CEO .
  • FY2023 tone in Q1 deck: “Revenue expected to fall in second half due to lower backlog and slow bid environment,” and “Liquidity challenges continue” .
  • Prior context (Jan 11, 2023): “Nuclear power is at an inflection point… Infrastructure Act… and Inflation Reduction Act…” underpinning end‑market demand, while Florida water write‑downs drove FY22 underperformance .

Q&A Highlights

  • The Q1’23 earnings call was scheduled for May 18, 2023; a replay/transcript was referenced but the full transcript was not available in our document corpus. As a result, Q&A details and clarifications cannot be verified here .

Estimates Context

  • S&P Global consensus for Q1 2023 EPS and revenue was unavailable in our system due to a missing CIQ mapping for WLMSQ; therefore, we cannot assess beat/miss vs. Street for this quarter [SpgiEstimatesError shown in tool].

Key Takeaways for Investors

  • Outage‑driven nuclear strength delivered a step‑change in revenue and a return to operating profitability, but GAAP margins remain thin and reliant on excluding loss‑making exits to show healthier “core” economics .
  • Backlog and 12‑month conversion fell materially, pointing to a weaker second half; investors should model a sequential revenue decline post‑outage without offsetting awards .
  • Liquidity is the key near‑term risk: total liquidity of $6.2M, minimal cash, and rising bank debt elevate financing/covenant risk and potential dilution; management explicitly noted further funding will likely be necessary .
  • Portfolio repair is progressing (exiting Water/Chemical/T&D), but it remains a near‑term drag ($3.8M Q1 losses); timing of full wind‑down and associated cash costs will drive cash runway .
  • Strategic alternatives (with Greenhill) and any financing solution are critical stock catalysts; disclosures include broad options, including potentially obtaining relief under the U.S. Bankruptcy Code, underscoring downside risk if liquidity plans fall short .
  • Concentration in nuclear projects (72% of Q1 revenue; Vogtle exposure) supports utilization near‑term but raises mix risk if outage work normalizes and bid timelines remain slow .

Appendix: Additional Context and Prior Quarters

  • Q4 2022: Revenue $55.8M, gross margin (3.0)%, adjusted EBITDA $(7.0)M; backlog $333.2M; company did not provide FY2023 guidance (observed better early‑2023 performance) .

  • Q3 2022: Revenue $56.7M, gross margin 1.3%, adjusted EBITDA $6.2M (boosted by legal settlements); backlog rose to $352.7M .

  • Other Q1 2023 press releases: None beyond the 8‑K Exhibit 99.1 in our corpus; the investor deck (Ex. 99.2) reiterated outlook and non‑GAAP reconciliations .