NOS4-1, Inc. (WLMSQ)·Q3 2022 Earnings Summary

Executive Summary

• Q3 2022 revenue fell 22.8% year over year to $56.7M and declined modestly sequentially; gross margin contracted sharply to 1.3% on loss projects in Florida water and start-up costs in transmission & distribution; adjusted EBITDA rose to $6.2M driven by $10.8M litigation settlements .
• Guidance cut again: FY22 revenue lowered to $245–$255M, gross margin to 5.50%–5.75%, SG&A to 10.5%–11.0% of revenue, and adjusted EBITDA to $2.5–$3.5M (includes ~$11M recoveries); prior (Aug 4) guidance was meaningfully higher across all metrics .
• Backlog jumped >$100M sequentially to $352.7M on a multi‑year southern utility extension (~$120M over four years) and expanded Eversource MSA; ~$168.2M expected to convert in the next 12 months, improving forward visibility .
• Liquidity remained tight at $7.3M with $1.0M cash and $37.4M bank debt; management is executing a liquidity plan to cut expenses and exit unprofitable projects—near‑term margin and cash flow risk persists despite backlog strength .

What Went Well and What Went Wrong

• What Went Well

  • “Williams’ guidance is being adjusted to reflect near-term challenges… we are pleased by other recent events that have a positive impact on our outlook,” highlighting $10.8M net litigation receipts used to repay ~$8.1M of term loan and backlog expansion via utility awards .
  • Adjusted EBITDA improved to $6.2M vs. $3.8M YoY, helped by settlements; operating leverage will improve as litigation and start-up costs subside .
  • Multi‑year extension with a large southern utility (~$120M revenue over four years) and expanded Eversource MSA diversified the book and underpinned backlog growth to $352.7M .

• What Went Wrong

  • Revenue fell to $56.7M from $73.4M driven by reduced decommissioning and nuclear activity; gross margin compressed to 1.3% on Florida lump‑sum water losses and T&D start‑up costs .
  • SG&A rose to $7.0M from $4.6M, largely from professional fees tied to legal actions and reversal of 2021 incentive compensation; operating margin fell to -11.1% .
  • Liquidity deteriorated versus year‑start as operating cash flow remained negative, reflecting losses on fixed‑price Florida contracts, T&D start‑up costs, delayed award conversion, and slower collections; bank debt increased vs. YE21 .

Financial Results

• Adjusted gross margin excluding T&D start‑up and Florida water losses: 9.7% in Q3 2022 vs. 10.0% in Q2 2022 (non‑GAAP reconciliation provided) .
• Revenue bridge (Q3 2022): declines in Decommissioning (-$13.5M), Canada Nuclear (-$9.0M), U.S. Nuclear (-$4.0M) offset by Energy Delivery (+$4.1M), Chemical (+$2.1M), Water (+$2.1M) and Other (+$1.5M) .

Segment/end‑market revenue mix (% of Q):

KPIs and balance sheet:

Guidance Changes

Notes:

• Without litigation recoveries, adjusted EBITDA range would be ($8.0)–($7.0)M .
• No explicit tax rate, OI&E or dividend guidance provided in these filings .

Earnings Call Themes & Trends

Management Commentary

• “Williams’ guidance is being adjusted to reflect near-term challenges… we are pleased by other recent events that have a positive impact on our outlook… Settling two ongoing litigation issues brought in net cash receipts of $10.8 million that was used to pay down debt… awarded a multi-year Master Service Agreement with Eversource Energy… and secured a multi-year extension… estimated to be worth approximately $120 million of revenue over the next four years” — Tracy Pagliara, President & CEO .
• “Our second quarter revenues were lower than expected as nuclear work was pushed out… non-recurring items, including start-up costs in our transmission and distribution business, margin pressure from certain Florida water projects, and litigation expenses… negatively impacted bottom line results” .
• “We added $38 million in new orders during the quarter… prospects for nuclear power are being enhanced by the clean energy mandate… and the IIJA… We are reiterating our 2022 financial guidance” (Q1) .

Q&A Highlights

• The database does not contain a Q3 2022 earnings call transcript for WLMSQ; the company provided an investor slide deck alongside its press release. No Q&A transcript is available to extract highlights .

Estimates Context

• S&P Global/Capital IQ consensus estimates for WLMSQ Q3 2022 were unavailable via our data source, so we cannot provide a formal beat/miss analysis relative to Wall Street consensus. Values retrieved from S&P Global were unavailable; please note that estimate comparisons are not provided due to missing mapping in SPGI’s CIQ company table.

Key Takeaways for Investors

• Near‑term earnings quality is poor: gross margin at 1.3% and operating margin at -11.1% reflect legacy fixed‑price losses and start‑up costs; focus remains on exiting loss projects and normalizing margins as Florida/T&D headwinds abate .
• Backlog expansion and contract wins (southern utility extension, Eversource MSA) are meaningful; ~$168M of backlog is slated to convert within 12 months, supporting a revenue base recovery in 2023 once execution stabilizes .
• Liquidity is tight (cash $1.0M; liquidity $7.3M), and debt remains elevated; legal settlements temporarily bolstered adjusted EBITDA and enabled debt paydown—monitor working capital and covenant flexibility (amendments executed Aug 3) .
• FY22 guidance reset lower across revenue, margins, and EBITDA; expect continued pressure in Q4 with improvement contingent on project mix (less Florida) and reduced T&D investment .
• Segment mix is shifting toward Energy Delivery (16% of Q3 revenue) and steady Vogtle contribution ($18.4M in Q3), partially offsetting nuclear/decommissioning declines; execution and margin discipline on new work are critical .
• Actionable: avoid extrapolating Q3 EBITDA strength (settlement-driven) into run-rate; watch for updated 2023 awards/backlog composition, Florida project completion milestones, and cash conversion trajectory; price risk remains tied to liquidity and margin normalization .