First Quarter 2021 Overview
- Consulting Fee Revenue (“CFR”) of $72.4 million compared to $77.2 million in the prior year period
- Net loss was $2.7 million, or $0.05 per diluted share, compared to net loss of $6.6 million, or $0.12 per diluted share in the prior year period
- Adjusted EBITDA (a non-GAAP measure) was $0.7 million, compared to Adjusted EBITDA of $3.2 million in the prior year period
- New contract awards totaled $91.5 million, resulting in a book-to-burn ratio of 126%
- Backlog increased $14.6 million from December 31, 2020 to $681.3 million at March 31, 2021
- Reiterates guidance for 2021
PHILADELPHIA, May 10, 2021 (GLOBE NEWSWIRE) -- Hill International, Inc. (NYSE:HIL) ("Hill" or the "Company"), the global leader in managing construction risk, announced today its financial results for the first quarter ended March 31, 2021 (“Q1 2021”).
“Although CFR in Q1 2021 reflected lingering headwinds from COVID-induced delayed project starts, we reported a strong new bookings quarter and our backlog increased from December 31, 2020," said Hill Chief Executive Officer Raouf Ghali. "Our new project awards covered multiple geographies and end markets, including infrastructure and facilities management. Procurement activity has begun to accelerate, especially in the United States. As a result, we believe that our CFR will increase as the year progresses allowing us to enhance profitability and strengthen our financial position. I remain exceptionally proud of the agility that Hill's associates have demonstrated over the past year to address the challenges associated with the pandemic. Our optimism for 2021 and beyond has not wavered. As a pure-play worldwide leader in project management services and construction consulting, we believe that we are well-positioned to capture a growing slate of global infrastructure project and program opportunities, while delivering value to our stakeholders."
"Normal seasonality and the timing of cash collections drove the cash decline during Q1 2021, which we consider a transitory event," said Todd Weintraub, Hill's Chief Financial Officer. "Additionally, the continuing effect of COVID-19 delayed the execution of documentation required for certain clients to remit payments totaling approximately $10 million. The majority of this has been subsequently collected with the remainder expected to be collected during the quarter ending June 30, 2021. Based on collection already seen in the second quarter we expect that our cash position at June 30, 2021 and the remainder of the year will show material improvement from March 31, 2021, the same trend which occurred during 2020. We are forecasting year-end unrestricted cash will exceed the $34.2 million in unrestricted cash we reported at December 31, 2020, and we expect to be cash flow positive for the year."
Q1 2021 Financial Results Overview
Hill's consulting fee revenue ("CFR") was $72.4 million in Q1 2021, as compared to $77.2 million in the first quarter of 2020 ("Q1 2020"), primarily due to delayed projects starts and certain project suspensions due to the COVID-19 pandemic. The Company expects CFR to increase from this level each quarter during the remainder of 2021 as Hill returns to full staffing on certain existing projects and mobilizes staffing on newly awarded projects.
Selling, general, and administrative ("SG&A") expenses in Q1 2021 were $27.7 million, or 38.2% of CFR, compared to $28.1 million, or 36.4% of CFR, in Q1 2020. This decline was primarily attributable to lower depreciation expense, as well as declines in certain corporate expenses due to COVID-19 stay at home orders, partially offset by higher labor, legal and insurance costs, as well as the timing of certain other expenses. The labor increases were primarily due to higher than normal severance costs which are not expected to recur. The higher legal costs were due primarily to the settlement and return of previously incurred legal expenses in 2020 which did not recur in 2021.
Operating loss for Q1 2021 narrowed to $0.2 million from an operating loss of $3.9 million in Q1 2020, driven primarily by lower SG&A expenses and favorable foreign currency impacts when compared to Q1 2020. Adjusted operating income, a non-GAAP measure (see definition and reconciliation in the table below) was $0.2 million in Q1 2021, compared to $2.2 million in Q1 2020.
Net loss attributable to Hill in Q1 2021 was $2.7 million, or $0.05 per diluted share, compared to net loss attributable to Hill of $6.6 million, or $0.12 per diluted share, in Q1 2020. Adjusted net loss, a non-GAAP measure (see definition and reconciliation in the table below), was $2.4 million in Q1 2021, compared to adjusted net loss of $0.5 million in Q1 2020.
Adjusted EBITDA, a non-GAAP measure (see definition and reconciliation in the table below) was $0.7 million in Q1 2021, compared to adjusted EBITDA of $3.2 million in Q1 2020. This decline was due primarily to lower CFR driven by the COVID-19 crisis and higher SG&A, excluding depreciation expense, in 2021, as discussed above.
Financial Condition and Backlog
Net cash used in operating activities in Q1 2021 was $16.7 million compared to net cash used in operating activities of $10.9 million in Q1 2020. Free cash flow, a non-GAAP measure (see definition below) for Q1 2021 was $(17.5) million, which represents net cash used in operating activities, less $0.8 million in purchases of property and equipment during the quarter. Free cash flow during Q1 2020 was $(11.8) million, which represents net cash used in operating activities, less $0.8 million in property and equipment purchased during the quarter.
Unrestricted cash at March 31, 2021 was $18.9 million compared to unrestricted cash of $34.2 million at December 31, 2020, due primarily to seasonality and the timing of certain collections. The Company had approximately $8.4 million in available and undrawn credit facilities at March 31, 2021, compared to $11.7 million at December 31, 2020. The Company's total liquidity was $27.3 million at March 31, 2021, compared to $45.9 million at December 31, 2020.
Backlog (which is a non-GAAP measure; see definition below) improved to $681.3 million at March 31, 2021 from $666.7 million at December 31, 2020, primarily due to contract extensions in Africa and the Americas.
2021 Financial Guidance
Hill is reiterating its guidance for 2021.
CFR for 2021 is expected to range between $320 - $330 million, representing an increase of between 8% - 11% from 2020. This increase is expected to consist of both new awards and extensions of existing contracts.
SG&A for 2021 is expected to increase from $109.2 million incurred in 2020. The outlook for SG&A reflects an anticipated rebound in activity as the effects of the COVID-19 pandemic subside and the Company's activity increases. The Company will continue to manage SG&A and its association with CFR relative to the evolving effects of COVID-19.
Adjusted EBITDA (a non-GAAP measure) for 2021 is expected to range between $20 and $22 million, up from Adjusted EBITDA of $19.0 million for 2020 and representing growth of 5% - 16%.
Non-GAAP Measures
The following measures below are not measures of financial performance under U.S. generally accepted accounting principles ("GAAP") and should be considered in addition to and not as a substitute for, or superior to, the related measure of performance prepared in accordance with GAAP.
Backlog
Backlog represents the Company's estimate of the amount of uncompleted projects under contract and awards in-hand that are expected to be recognized as CFR in future periods as a component of total revenue. Hill's backlog is based upon the binding nature of the underlying contract, commitment or letter of intent, and other factors, including the economic, financial and regulatory viability of the project and the likelihood of the contract being extended, renewed or canceled. Although backlog reflects business that the Company considers to be firm, cancellations or scope adjustments may occur. It is an important indicator of future performance and is used by the Company in planning Hill's operational needs. Backlog is not a measure defined in GAAP and the Company's methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog.
Adjusted Operating Profit (Loss)
Adjusted operating profit (loss) is operating profit (loss), adjusted to exclude non-recurring items and non-cash items including unrealized foreign currency exchange losses (gains), share-based compensation and the write-off of leasehold improvements previously included in property and equipment on the Company's consolidated balance sheets. The Company believes that adjusted operating profit (loss) is useful to investors and other external users of Hill's financial statements as a measure of a company's core ongoing operations, without regard to generally non-recurring items and non-cash activity.
Adjusted Net Income (Loss) Attributable to Hill
Adjusted net income (loss) attributable to Hill is net income (loss) attributable to Hill, adjusted to exclude non-recurring and non-cash items including unrealized foreign currency exchange losses (gains), share-based compensation and the write-off of leasehold improvements previously included in property and equipment on the Company's consolidated balance sheets. The Company believes that adjusted net income (loss) attributable to Hill is useful to investors and other external users of Hill's financial statements as a measure of a company's operating performance, without regard to generally non-recurring items and non-cash activity.
EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization ("EBITDA"), in addition to operating profit, net income, and other GAAP measures, is a useful indicator of Hill's financial and operating performance. Investors should recognize that EBITDA might not be comparable to similarly titled measures of other companies. The Company believes that EBITDA is useful to investors and other external users of Hill's financial statements in evaluating its operating performance because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.
Adjusted EBITDA is EBITDA, adjusted to exclude the impact of certain items, including non-recurring, one-time costs (as presented in the table below) and non-cash items such as unrealized foreign currency exchange losses (benefit) and share-based compensation expense. The Company believes that adjusted EBITDA helps its investors and other external users of Hill’s financial statements understanding of a company’s operating performance, without regard to non-recurring and other non-cash activity.
The Company does not provide a reconciliation of its 2021 financial guidance for such non-GAAP measure to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for non-recurring, one-time costs and other charges reflected in its reconciliation of historic numbers.
Free Cash Flow
Free cash flow, a non-GAAP measure, includes net cash provided by (used in) continuing operations, less purchases of property and equipment. Free cash flow is a useful indicator that provides additional perspective on Hill's ability to generate cash that is available to the Company for taxes and other corporate purposes. Investors should recognize that free cash flow might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.
Conference Call
Management will host a conference call on Tuesday, May 11, 2021 at 9:00 am ET to discuss the results and business activities. Interested parties may participate in the call by dialing:
- (877) 407-9753 (Domestic) or
- (201) 493-6739 (International)
The call will also be accessible on the “Investor Relations” section of Hill’s website at www.hillintl.com. Click on “Financial Information” and then “Conferences and Calls”.
About Hill International
Hill International, with more than 2,700 professionals in 69 offices worldwide, provides program management, project management, construction management, facilities management, and other consulting services to clients in a variety of market sectors. Engineering News-Record magazine recently ranked Hill as one of the largest construction management firms in the United States. For more information on Hill, please visit our website at www.hillintl.com.
Forward Looking Statements
Certain statements contained herein may be 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, the matters set forth herein including, but not limited to, any statements of belief or intent, any statements concerning our plans, strategies, and objectives for future operations are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and assumptions and are subject to certain risks and uncertainties. Although we believe that the expectations, estimates, and assumptions reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Important factors that could cause our actual results to differ materially from estimates or projections contained in our forward-looking statements are set forth in the Risk Factors section and elsewhere in the reports we have filed with the Securities and Exchange Commission, including that unfavorable global economic conditions may adversely impact our business, our backlog may not be fully realized as revenue, and our expenses may be higher than anticipated. We do not intend, and undertake no obligation, to update any forward-looking statement.
| Hill International, Inc. | The Equity Group Inc. | |
| Elizabeth J. Zipf, LEED AP BD+C | Devin Sullivan | |
| Senior Vice President Hill International, Inc | Senior Vice President | |
| One Commerce Square | (212) 836-9608 | |
| 2005 Market Street, 17th Floor | dsullivan@equityny.com | |
| Philadelphia, PA 19103 | ||
| (215) 309-7707 | Lena Cati | |
| elizabethzipf@hillintl.com | Vice President | |
| (212) 836-9611 | ||
| lcati@equityny.com | ||
HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
| March 31, 2021 | December 31, 2020 | |||||||
| Assets | (Unaudited) | |||||||
| Cash and cash equivalents | $ | 18,935 | $ | 34,229 | ||||
| Cash - restricted | 4,460 | 3,752 | ||||||
| Accounts receivable, net | 106,786 | 98,186 | ||||||
| Current portion of retainage receivable | 12,189 | 11,775 | ||||||
| Accounts receivable - affiliates | 25,888 | 23,285 | ||||||
| Prepaid expenses and other current assets | 11,343 | 9,378 | ||||||
| Income tax receivable | 644 | 2,298 | ||||||
| Total current assets | 180,245 | 182,903 | ||||||
| Property and equipment, net | 9,593 | 9,443 | ||||||
| Cash - restricted, net of current portion | 3,321 | 3,432 | ||||||
| Operating lease right-of-use assets | 19,575 | 13,116 | ||||||
| Financing lease right-of-use assets | 354 | 288 | ||||||
| Retainage receivable | 5,835 | 6,044 | ||||||
| Acquired intangibles, net | 2,793 | 2,253 | ||||||
| Goodwill | 45,178 | 46,397 | ||||||
| Investments | 3,352 | 2,805 | ||||||
| Deferred income tax assets | 3,612 | 3,698 | ||||||
| Other assets | 2,358 | 1,620 | ||||||
| Total assets | $ | 276,216 | $ | 271,999 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current maturities of notes payable and long-term debt | $ | 2,165 | $ | 987 | ||||
| Accounts payable and accrued expenses | 63,350 | 67,797 | ||||||
| Income taxes payable | 2,253 | 2,219 | ||||||
| Current portion of deferred revenue | 3,436 | 3,305 | ||||||
| Current portion of operating lease liabilities | 5,111 | 4,797 | ||||||
| Current portion of financing lease liabilities | 101 | 70 | ||||||
| Other current liabilities | 7,723 | 5,796 | ||||||
| Total current liabilities | 84,139 | 84,971 | ||||||
| Notes payable and long-term debt, net of current maturities | 50,348 | 48,294 | ||||||
| Retainage payable | 69 | 600 | ||||||
| Deferred income taxes | 1,309 | 1,210 | ||||||
| Deferred revenue | 8,194 | 7,488 | ||||||
| Non-current operating lease liabilities | 19,542 | 13,184 | ||||||
| Non-current financing lease liabilities | 258 | 186 | ||||||
| Other liabilities | 6,794 | 6,778 | ||||||
| Total liabilities | 170,653 | 162,711 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.0001 par value; 1,000 shares authorized, none issued | — | — | ||||||
| Common stock, $0.0001 par value; 100,000 shares authorized, 63,204 shares and 62,920 shares issued at March 31, 2021 and December 31, 2020, respectively | 6 | 6 | ||||||
| Additional paid-in capital | 215,502 | 215,010 | ||||||
| Accumulated deficit | (82,233 | ) | (79,542 | ) | ||||
| Accumulated other comprehensive income | 840 | 1,318 | ||||||
| Less treasury stock of 6,807 at March 31, 2021 and December 31, 2020 | (29,056 | ) | (29,056 | ) | ||||
| Hill International, Inc. share of equity | 105,059 | 107,736 | ||||||
| Noncontrolling interests | 504 | 1,552 | ||||||
| Total equity | 105,563 | 109,288 | ||||||
| Total liabilities and stockholders’ equity | $ | 276,216 | $ | 271,999 | ||||
HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Consulting fee revenue | $ | 72,409 | $ | 77,150 | ||||
| Reimbursable expenses | 14,677 | 16,158 | ||||||
| Total revenue | $ | 87,086 | $ | 93,308 | ||||
| Direct expenses | 59,855 | 65,048 | ||||||
| Gross profit | 27,231 | 28,260 | ||||||
| Selling, general and administrative expenses | 27,686 | 28,098 | ||||||
| Foreign currency exchange loss | 287 | 4,051 | ||||||
| Plus: Share of profit of equity method affiliates | 588 | 24 | ||||||
| Operating loss | $ | (154 | ) | $ | (3,865 | ) | ||
| Less: Interest and related financing fees, net | 1,347 | 1,299 | ||||||
| Plus: Other income, net | 2 | 345 | ||||||
| Loss before income taxes | $ | (1,499 | ) | $ | (4,819 | ) | ||
| Income tax expense | 1,076 | 1,603 | ||||||
| Net loss | $ | (2,575 | ) | $ | (6,422 | ) | ||
| Less: net earnings - noncontrolling interests | 116 | 159 | ||||||
| Net loss attributable to Hill International, Inc. | $ | (2,691 | ) | $ | (6,581 | ) | ||
| Basic loss per common share - Hill International, Inc. | $ | (0.05 | ) | $ | (0.12 | ) | ||
| Basic weighted average common shares outstanding | 56,978 | 56,543 | ||||||
| Diluted loss per common share - Hill International, Inc. | $ | (0.05 | ) | $ | (0.12 | ) | ||
| Diluted weighted average common shares outstanding | 56,978 | 56,543 | ||||||
HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | (2,575 | ) | (6,422 | ) | ||||
| Adjustments to reconcile net loss to net cash used in: | ||||||||
| Depreciation and amortization | 694 | 2,424 | ||||||
| Recovery of bad debts | (231 | ) | (479 | ) | ||||
| Amortization of deferred loan fees | 220 | 175 | ||||||
| Deferred tax expense | 170 | 490 | ||||||
| Share-based compensation | 449 | 399 | ||||||
| Operating lease right-of-use assets | 1,319 | 1,575 | ||||||
| Foreign currency remeasurement losses | 287 | 4,376 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (9,835 | ) | (4,203 | ) | ||||
| Accounts receivable - affiliate | (2,602 | ) | (6,143 | ) | ||||
| Prepaid expenses and other current assets | (1,772 | ) | (2,608 | ) | ||||
| Income taxes receivable | 1,651 | (45 | ) | |||||
| Retainage receivable | 203 | (755 | ) | |||||
| Other assets | (2,346 | ) | 1,231 | |||||
| Accounts payable and accrued expenses | (3,919 | ) | 1,964 | |||||
| Income taxes payable | 46 | 431 | ||||||
| Deferred revenue | 1,195 | (2,994 | ) | |||||
| Operating lease liabilities | (1,063 | ) | (1,323 | ) | ||||
| Other current liabilities | 1,914 | 696 | ||||||
| Retainage payable | (530 | ) | 29 | |||||
| Other liabilities | (1 | ) | 250 | |||||
| Net cash used in operating activities | (16,726 | ) | (10,932 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (812 | ) | (833 | ) | ||||
| Net cash used in investing activities | (812 | ) | (833 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repayment of term loans | (257 | ) | (217 | ) | ||||
| Proceeds from revolving loans | 5,405 | 18,792 | ||||||
| Repayment of revolving loans | (1,777 | ) | (7,836 | ) | ||||
| Proceeds from stock issued under employee stock purchase plan | 11 | 50 | ||||||
| Net cash provided by financing activities | 3,382 | 10,789 | ||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (541 | ) | (513 | ) | ||||
| Net decrease in cash, cash equivalents and restricted cash | (14,697 | ) | (1,489 | ) | ||||
| Cash, cash equivalents and restricted cash — beginning of period | 41,413 | 24,982 | ||||||
| Cash, cash equivalents and restricted cash — end of period | $ | 26,716 | $ | 23,493 | ||||
| Three Months Ended March 31, | ||||||||
| Supplemental disclosures of cash flow information: | 2021 | 2020 | ||||||
| Interest and related financing fees paid | $ | 1,140 | $ | 1,150 | ||||
| Income taxes paid | 133 | 87 | ||||||
| Transfer of proceeds from shares pledged as collateral to treasury stock | — | 825 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | 1,535 | 1,910 | ||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | 7,906 | — | ||||||
| Right-of-use assets obtained in exchange for finance lease liabilities | 125 | — | ||||||
HILL INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(In thousands)
The following table includes a reconciliation of these non-GAAP measures to its most directly comparable GAAP measure:
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating loss | $ | (154 | ) | $ | (3,865 | ) | ||
| Adjustments to operating loss | ||||||||
| Share-based compensation | 449 | 399 | ||||||
| Unrealized foreign currency exchange (benefit) loss | (134 | ) | 4,103 | |||||
| Write-off of leasehold improvement (1) | — | 1,582 | ||||||
| Adjusted operating profit | $ | 161 | $ | 2,219 | ||||
| Net loss | (2,575 | ) | (6,422 | ) | ||||
| Less: net earnings - noncontrolling interests | 116 | 159 | ||||||
| Net loss attributable to Hill International, Inc. | $ | (2,691 | ) | $ | (6,581 | ) | ||
| Adjustments to net (loss) earnings attributable to Hill International, Inc. | ||||||||
| Less: Interest and related financing fees, net | 1,347 | 1,299 | ||||||
| Income tax expense | 1,076 | 1,603 | ||||||
| Depreciation and amortization expense (1) | 694 | 2,424 | ||||||
| EBITDA | 426 | (1,255 | ) | |||||
| Adjustments to EBITDA: | ||||||||
| Share-based compensation | 449 | 399 | ||||||
| Unrealized foreign currency exchange (benefit) loss | (134 | ) | 4,103 | |||||
| Adjusted EBITDA | $ | 741 | $ | 3,247 | ||||
| Net loss attributable to Hill International, Inc. | $ | (2,691 | ) | $ | (6,581 | ) | ||
| Adjustments to net (loss) earnings attributable to Hill International, Inc. | ||||||||
| Share-based compensation | 449 | 399 | ||||||
| Unrealized foreign currency exchange (benefit) loss | (134 | ) | 4,103 | |||||
| Write-off of leasehold improvement (1) | — | 1,582 | ||||||
| Adjusted net income | $ | (2,376 | ) | $ | (497 | ) | ||
(1) The write-off of leasehold improvements that was incurred during the quarter ended March 31, 2020 as a result of the sublease of the Company's corporate headquarters as part of its cost reduction initiatives was included in depreciation and amortization expense and is reflected in SG&A in the Company's consolidated statements of operations.
(HIL-G)