Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by nearly 19% to $98.3 million.
- Normalized EBITDA up by 51.7% to $10.1 million.
- EBITDA margins improved from 8.1% to 10.3%.
- Strong guidance for next year with an expected 25% increase in revenue.
- 50% of revenue is now recurring from service and maintenance jobs.
Negative Points
- Tax rate was high at 35% due to timing issues and R&D costs.
- Operating cash flow was $4.2 million, impacted by $2.8 million in working capital for a recent acquisition.
- Revenue from the Clean Air division was flat year-on-year, with EBITDA down slightly.
- Lithium market slowdown affected project growth in the Clean Air division.
- Integration costs for the Air Tight Solutions acquisition impacted financial results.
Q & A Highlights
Q: Can you provide a revenue outlook for each segment?
A: Jason Dixon, CEO: High demand in EGL Energy due to the non-viability of electric power from a transmission and operating cost perspective. Strong top-line growth expected in both Energy and Baltec segments. Recent client wins include major OEMs like Siemens, General Electric, and Mitsubishi Heavy Industries.
Q: What is the impact of rare earth and lithium client delays on the business pipeline?
A: Jason Dixon, CEO: Rare earth and lithium projects are a small part of our business, contributing around 5-6% of current revenue. While the number of projects has decreased, there are still significant contracts in the pipeline that will keep the business busy through 2027.
Q: How significant is the Fulton agreement for EGL Energy?
A: Jason Dixon, CEO: The Fulton agreement is one of the most important strategic moves, bringing world-leading products into a market segment where EGL was not previously active. Expected to generate $6-8 million in sales by 2026-2027.
Q: What supports the FY25 guidance?
A: Jason Dixon, CEO: The guidance includes strong market demand and an increasing product suite. Tender awards and ongoing projects are progressing well, with two major waste awards expected soon.
Q: Can you talk about the pipeline and contract work for Baltec?
A: Jason Dixon, CEO: Baltec has about $14 million in work in hand, with a significant level of RFQs coming in. This will help underwrite the business for FY25.
Q: What are the plans to market EGL's world-leading technology internationally?
A: Jason Dixon, CEO: Gas turbine technology is already marketed internationally, with 90% of work offshore. Talks are ongoing with potential representatives in the US and Europe for PFAS technology.
Q: What is the impact of the $2.8 million working capital adjustment for Air Tight Solutions?
A: Andrew Bush, CFO: The reduction in purchase price due to a shortfall in working capital has flowed through operational cash flow in FY24. The net impact is zero outside of working capital adjustments.
Q: What are the expected margins for Air Tight Solutions?
A: Jason Dixon, CEO: Margins are expected to reach 10% as the business integrates into EGL's systems and processes.
Q: Is it possible for the overall business to improve gross margins to exceed 30%?
A: Jason Dixon, CEO: While not directly answered, the focus is on leveraging IP and increasing service revenues to drive margins higher over time.
Q: What is the budget for the ERP investment?
A: Jason Dixon, CEO: The budget is not finalized but is expected to be around $300,000 to $500,000.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
