Q2 Earnings Roundup: Mixed Results Across Diverse Sectors

Earnings call: Willdan Group Posts Record Q2 Results, Raises Full-Year Targets By Investing.com

Willdan Group , Inc. (NASDAQ:WLDN) reported a robust second quarter for fiscal year 2024, surpassing expectations with record-breaking financial performance. The company, known for its clean energy and sustainability solutions, saw an 18% organic increase in contract revenue and a significant 56% year-over-year growth in adjusted EBITDA. Both GAAP and adjusted earnings per share more than doubled from the previous year. Buoyed by these strong results, Willdan has raised its full-year financial projections, signaling confidence in its growth trajectory. In conclusion, Willdan Group's second quarter earnings call painted a picture of a company on the rise, with strong financial results and strategic moves to secure its position in the clean energy and sustainability market. The company's leadership expressed gratitude to their customers, employees, and investors for their contributions to this success. As Willdan Group continues to navigate the growing demand for clean energy solutions, it remains optimistic about its future prospects and is actively seeking opportunities to expand its influence through strategic partnerships and acquisitions. Willdan Group, Inc. (WLDN) has demonstrated remarkable financial growth in the second quarter of 2024, which is further substantiated by real-time data and insights from InvestingPro. The company's commitment to sustainability and clean energy solutions is reflected in its strong performance metrics. InvestingPro Data shows that Willdan's market capitalization stands at $517.79 million, which speaks to the company's solid presence in the market. The P/E ratio, a measure of the company's current share price relative to its per-share earnings, is 30.01, indicating that investors are willing to pay a premium for Willdan's earnings potential. This is consistent with the company's robust revenue growth of 20.94% over the last twelve months as of Q2 2024, showcasing the company's ability to increase its earnings. InvestingPro Tips highlight that net income is expected to grow this year, aligning with Willdan's raised financial projections and the optimism expressed by company leadership. Additionally, the significant return over the last week, month, and year underscores the company's strong stock performance, with a one year price total return of 51.14%. This bullish sentiment is echoed in the company's recent contract wins and aggressive investment plans. For investors looking to delve deeper, InvestingPro offers additional tips on Willdan Group, Inc., which can be found at https://www.investing.com/pro/WLDN. These insights can provide valuable context for evaluating the company's future financial health and investment potential. Operator: Greetings and welcome to the Willdan Group Second Quarter 2024 Earnings Call. At this time, all lines are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Al Kaschalk, Vice President. Al Kaschalk: Good afternoon, everyone and welcome to Willdan Group's second quarter fiscal 2024 earnings call. Joining our call today are Mike Bieber, President and Chief Executive Officer; and Kim Early, Executive Vice President and Chief Financial Officer. This call builds on our earnings release we issued after market closed today. You can find today's earnings release in the press release section of our website at ir.willdangroup.com. A copy of the slides that accompany today's call are located in the Events and Presentations section of the website. In addition, our Willdan investor report is available under Stock Information section of the website. Management will review prepared remarks and then we'll then open the call up to your questions. Statements made in the course of today's conference call, including answers to your questions which are not purely historical, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve certain risks and uncertainties and include non-GAAP measures. A more detailed Safe Harbor statement is on the cover of our first slide and our annual report on Form 10-K. I will now turn the call over to Mike Bieber, Willdan's President and CEO, who will begin on Slide 2. Mike Bieber: We had a record second quarter, exceeding consensus estimates and our own expectations. Contract revenue was up 18% organically and adjusted EBITDA was up 56% year-over-year. GAAP and adjusted EPS were up even stronger, both more than doubling year-over-year. During Q2, we had unexpectedly strong revenue across engineering and program management. We've also done a good job of converting revenue into free cash flow this year. Given our results for the first half of 2024 and our current momentum, we are raising our full year financial targets which Kim will expand on later. The electric load growth macro trends strengthened during the quarter and I'll talk more about that in a few minutes. I'm proud of our team for delivering another quarter above expectations. Slide 3 is a quick reminder of where Willdan is positioned for the newer listener. Willdan helps transition communities to clean energy and a more sustainable future. We are just under 1,700 employees, comprised mostly of scientists, engineers and other technical professionals. We have 53 offices across North America and have helped clients avoid emissions of 7.8 million metric tons of greenhouse gases. State and local government customers comprise 49% of our revenue, while utilities are 44% and commercial customers are 7%. Demand for our services with all three customer groups, is healthy. Our work for government clients is growing organically at a double-digit pace and the outlook is positive. Our work for utilities is primarily under multiyear contracts and remains robust. Our work for commercial clients is largely related to energy usage at data centers. Willdan is focused on the data center market for many years because of its energy intensiveness but the market has recently become more covered in the media due to AI load growth. We would like to expand our percentage of commercial work, both organically and through future acquisitions. Onto Slide 4; our upfront policy and data analytics work informs Willdan's strategy. In our upfront work, we are seeing particular demand for integrated resource planning and asset valuation work that is often associated with data center electricity load. In Engineering, we saw strong geographic expansion in Florida and Texas and continued demand from Southwestern City customers. In Program Management, we performed above our plan on utility programs and building energy programs for cities. I'll note that at Willdan, while revenue is skewed towards larger program management, our profit is delivered about equally from each of the three phases of work. The right side of this slide provides two examples of how this business model works. More than 10 years ago, we began consulting to a New England investor on utility. That upfront consulting work led in part to a new software license sale in 2023 and then to a large energy efficiency program management contract earlier this year. The upfront work allowed us to understand the clients' unique needs more thoroughly and craft more effective program management solutions. The City of Paramount, win in Q2 is another example of this model in practice. We had been providing consulting and engineering services to this California client continuously since 1973. We developed a thorough understanding of the city's needs in this quarter, were then awarded an $18 million program management contract to oversee the design and construction of new solar, battery and EV charging infrastructure all aligned with the city's vision for energy transition. On Slide 5, we had several notable wins this quarter. We won a study from Meta, formerly Facebook (NASDAQ:META) on the emissions related to a voluntary clean energy procurement program that they've put in place. For the state of Virginia which is the largest data center market in the U.S., we were awarded a program to study the grid impact for energy demand. This study includes the analysis of integrated 10 to 15 gigawatts of new generation and load into the Mid-Atlantic regional power grid by 2030. That's a lot of change. For Virginia, we are assessing the impacts to both the utility service providers and the rate payers, cool project [ph]. For Glendale Water and Power located in California, we won a distributed energy resources study. I already mentioned the City of Paramount win in Q2. And lastly, for a Washington state municipal utility, we won an energy design assistance contract. On Slide 6; load growth is creating exciting new opportunities for Willdan and we believe will help drive our growth for years to come. On the left side of this slide, for the first time in many decades, material electricity load growth has started to occur in the U.S. Experts are uncertain about the future speed and scale of this load growth but there is widespread consensus now that it will occur and has already begun. The main drivers for this growth include the electrification of cities, buildings and transportation, the reshoring of industrial manufacturing facilities in the U.S. and electricity consumed by data centers. The map on the right shows that AI is expected to drive more power demand from data centers in certain pockets of the U.S. The D.C. area especially, the Southeast U.S., Midwest and the West Coast are projecting far more rapid growth in average areas. Low electricity transfer capability between these regions is a key risk for reliability, particularly as electricity load shapes change. Last quarter, I talked about double digit electricity price increases in California and New York, currently Willdan's two largest markets. The compounding effect of higher electricity prices and higher electricity load provides a multiyear catalyst for Willdan solutions. We're clearly excited about the energy transition capabilities that we've assembled: planning software, energy efficiency and engineering. We plan to add even more capabilities to M&A in the quarters ahead. Kim, over to you. Kim Early: Thanks Mike and good afternoon, everyone. Our second quarter results exceeded expectations. Strong earnings, combined with efficient working capital management have reduced our debt leverage, improved liquidity, positioning us to invest more aggressively in future growth. Slide 7 shows the key metrics for our second quarter performance. Contract revenue was up 18% to $141 million and net revenue, net of subcontractors and materials increased 17% to $73 million. Adjusted EBITDA increased 56% over the prior year to $12.8 million or 17.7% of net revenue versus $8.2 million or 13.3% of net revenue a year ago. The second quarter earnings benefited from a slightly improved gross profit margin on the expanded volume and G&A expenses which increased at a slower pace than our revenue growth. With reduced net interest costs and a significantly lower tax rate than the previous year, our adjusted EPS more than doubled to $0.55 per share, $0.33 on a GAAP basis, up from $0.03 the prior year. The second quarter results were favorably impacted by growth in municipal engineering and program management revenues derived from the strong and increasing backlog of new contracts and by the acceleration of utility program management revenues compared to last year when the utility revenues were heavily back-end loaded into our fourth quarter. As a result of earlier work authorizations, much of that 2023 fourth quarter revenue surge has been brought forward into the first half of the current year and will thus reduce the kind of year-end revenue and earnings spike we experienced last year. Lower leverage and higher cash balances reduced net interest costs and the screen impacts related to stock compensation and energy efficiency building reductions aided in lowering the effective tax rate to result in the bottom line improvement for the quarter compared to last year. We expect our second half effective tax rate to also be favorably impacted by additional deductions derived from these discrete items. Slide 8 displays the key metrics for the first half of the year. Contract revenue was up 19% over 2023 to $264 million, while net revenue increased 14% to $141 million with the gross profit margin only slightly lower than last year on the expanded volume and continued operating leverage from the slower-growing G&A expenses, adjusted EBITDA increased 32% to $23.9 million or 16.9% of revenue for the 6 months compared to $18.1 million or 14.6% of net revenue for the first half of last year. The reduced net interest expense and the lower effective tax rate enabled adjusted EPS to grow by 64% to $0.95 per share, $0.54 on a GAAP basis, up from $0.10 the prior year. Again, significantly higher municipal engineering and program management revenue and a smoother acceleration of utility program revenues drove the improved results for the period compared to 2023. On Slide 9, the strong earnings and focused working capital management efforts led to continued improvement in our balance sheet ratios. Net debt is down from $75 million at year-end 2023 to $50 million at the end of June, resulting in a reduction in the net leverage ratio, total debt less cash to 1.0x adjusted EBITDA at the end of June, down from 1.6x in December. Despite the double-digit revenue growth for the year, noncash working capital declined since year-end and contributed to the $28 million in net cash provided from operations through the first half of the year, up from $19 million a year ago. Our $50 million untapped line of credit and $44 million cash balance gives us a solid platform of liquidity to finance future growth. With Slide 10, in summary, our second quarter and year-to-date results surpassed expectations, reinforcing our optimism about the future and opening doors for accelerated growth, including strategic opportunities through M&A. We're thus raising our guidance for the full year as follows, net revenue between $280 million and $290 million, adjusted EBITDA between $50 million and $52 million, adjusted diluted earnings per share of between $2 and $2.10 per share. These numbers assume an effective tax rate of 14% for the full year and 14.2 million shares outstanding. Operator, we're now ready for questions. Operator: Thank you. [Operator Instructions] Our first question is from Craig Irwin with ROTH Capital Partners. Craig Irwin: So Mike, Integral Analytics has made a material contribution, sort of lumpy contribution in the past but it looks like this year things are a little bit more even on a quarterly basis. Can you maybe update us on what's changed in the character of this business? Did we see similar revenue in the second quarter to the first quarter? Do you think that some of the volatility in earnings related to Integral Analytics might potentially be behind us and really more of a source of upside over the next number of quarters? Mike Bieber: I do think it is smoother now. We've worked consciously to do that. So it's smoother than last year. We saw early contract wins in Q1 of this year. Part of the reason that it is smoother and it will be smoother in the future, is that we're doing more add-ons and small additions to existing licenses that we've already sold. We've also partnered quite a bit with E3 on the services side to pair services with software licenses. So you're right, it is smooth. It's a conscious effort we've made and it should remain so in the future. Having said that, there will always be some lumpiness due to accounting requirements. When we sell a large license that is capitalized by the customer, we have to recognize all of that license revenue upfront. So that's what makes it lumpy, remains somewhat so but less than in the past. Craig Irwin: So you mentioned E3. I guess most of the people on the call already know that E3 consulted to essentially every zero carbon mandate program in the country, right, all these states that are adopting mandates, giving them logical paths of how they can get there and what they can support with policy. Now, I think the states have a bigger problem with some of this load growth and some of this economic growth we're seeing in different areas. Do you think that the track record that E3 has developed, looking at some of these advanced technologies [indiscernible] to handle some of the structural problems in the grid, do you think that E3 has a potential uptick in consulting activity and project proposals for really what we're going to see is reserve margins eroding quickly? Mike Bieber: You're right, Craig. I don't know that they've consulted to every state but they certainly are well known in this area, maybe the most well known in the United States for doing these types of big energy and carbon studies at the state level and for major cities and major pieces of the power grid. Virginia, the project I mentioned is another example of that. We just picked up another one. So we're well known for that. That area of business is doing exceptionally well. So I think, yes, there is some upside, especially as you look out over the next 3 years, states and utilities are going to have to grapple with the big changes in load that were not expected. Most of their enterprise wide planning that has been done over the last 5 years is being rethought now and rethought quickly. So this is a rapid change. I think there is more upside to that and it should be good the next several years, actually. Craig Irwin: So my last question before I jump back in the queue, Meta, this emission study for voluntary clean energy procurement, can you help us understand sort of the specifics of the project and the timeline for revenue and whether or not you see similar opportunities for other leaders in clean energy adoption? Mike Bieber: Yes, this is just one example project for work we're doing for big tech, largely in the Silicon Valley and up and down the West Coast. We've got several projects like this. You know, it's a study project right now and this particular project is not that large. Some of them are large. Work we do for, you know, Cisco (NASDAQ:CSCO) and Microsoft (NASDAQ:MSFT) and other big tech companies is becoming more important to us. And so this is a study that's about six months long. Good project. Operator: [Operator Instructions] Our next question is from Richard Eisenberg [ph], Private Investor. Please proceed with your question. Unidentified Analyst: Is there opportunity to do business with the big data center companies like Microsoft and Amazon (NASDAQ:AMZN) in the future since you're doing business now with Facebook? Mike Bieber: Yes, there is. And we are doing businesses with those types of customers. We actually have been for a number of years, so this is not new for us. We started out with AT&T. They were early entrants and owner of data centers around the country. And we do quite a bit of work for AT&T today. We've expanded that list to include most of the major data center, both owners and developers. We work for both sides there. There's definitely that opportunity. Some of that work is confidential, so I'm not going to walk down the list of customers. But we work for most of them. It's a rapidly expanding market for us. Unidentified Analyst: Also, are there going to be any possible acquisitions this year or more likely in 2025? Mike Bieber: Great question. And we would like for them to be this year. There's never any guarantees, you can't predict the timing of those but we've been working on this all year long. We started last year and we have some mature opportunities that we're working on right now that we're really excited about. Very cool, interesting capabilities that we hope to be adding soon. I hope that this year, we'll see. Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to Mike Bieber for any closing comments. Mike Bieber: Thanks, Paul. To our customers, employees and investors, thank you for your support. And we will talk to you again after Q3. Thank you. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Earnings call: MYR Group faces revenue dip amid project challenges By Investing.com

MYR Group Inc. (NASDAQ:MYRG) has reported a $60 million decline in revenues in its second quarter of 2024 earnings call compared to the same period last year. This was primarily due to underperformance in clean energy projects within the Transmission and Distribution (T&D) segment and issues in one Commercial and Industrial (C&I) segment project. Despite the setbacks, the company remains positive about its market position and future opportunities, particularly in the C&I segment, where they secured a significant transportation project in Canada. Challenges such as potential litigation for a C&I project and selective solar work in the T&D segment have been acknowledged, yet MYR Group is optimistic about the resolution of these issues and the overall growth prospects. MYR Group's second-quarter earnings call has outlined a mixed performance with both challenges and opportunities on the horizon. While revenue has decreased due to specific project issues, the company's strategic wins and strong market position provide a basis for future growth. As they navigate potential litigation and project completions, MYR Group remains committed to meeting customer needs and leveraging the increasing demand in their core markets. MYR Group Inc.'s (MYRG) recent earnings report has highlighted some challenges the company is facing, with a notable revenue decline. To provide a deeper understanding of the company's financial health and stock performance, let's look at some key InvestingPro data and tips. For investors looking for more in-depth analysis, there are additional InvestingPro tips available. These include insights on MYR Group's gross profit margins, debt levels, and stock performance over various timeframes. Currently, there are over 10 additional tips listed on InvestingPro that could provide further guidance on whether MYR Group represents a sound investment opportunity. Visit https://www.investing.com/pro/MYRG for a comprehensive set of tips and metrics. Operator: Good morning, everyone, and welcome to the MYR Group Second Quarter 2024 Earnings Results Conference Call. [At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to David Gutierrez of Dresner Corporate Services. Please go ahead, David. David Gutierrez: Thank you, and good morning, everyone. I'd like to welcome you to the MYR Group conference call to discuss the company's second quarter results for 2024, which were reported yesterday. Joining us on today's call are Rick Swartz, President and Chief Executive Officer; Kelly Huntington, Senior Vice President and Chief Financial Officer; Brian Stern, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment; and Don Egan, Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment. If you did not receive yesterday's press release, please contact Dresner Corporate Services at 312-780-7204, and we will send you a copy or go to the MYR Group website where a copy is available under the Investor Relations tab. Also, a webcast replay of today's call will be available for seven days on the Investor page of the MYR Group website at myrgroup.com. Before we begin, I want to remind you that this discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group's management as of this date and MYR Group assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. These risks and uncertainties are discussed in the company's annual report on Form 10-K for the year ended December 31, 2023, the company's quarterly report on Form 10-Q for the second quarter of 2024 and in yesterday's press release. Certain non-GAAP financial information will be discussed on the call today. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release. With that said, let me turn the call over to Rick Swartz. Rick Swartz: Thanks, David. Good morning, everyone. Welcome to our second quarter 2024 conference call to discuss financial and operational results. I will begin by providing a summary of the second quarter results and then we'll turn the call over to Kelly Huntington, our Chief Financial Officer, for a more detailed financial review. Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions. Our results for the quarter were negatively impacted within our T&D segment by clean energy projects that are all scheduled to reach mechanical completion by the end of the year and by one project within our C&I segment that is scheduled to reach substantial completion during the fourth quarter of this year. However, across our business segments, other project execution remains strong. Bidding activity remains healthy and we continued to strategically expand on existing partnerships as well as capture new opportunities throughout the markets we serve for continued long-term growth. The ever-growing demand for data centers fueled in part by the increasing prominence of artificial intelligence continues to offer exciting growth opportunities for our business now and into the future. Our recent Goldman Sachs (NYSE:GS) equity research report on AI data centers and the coming U.S. power demand surge released in April forecast U.S. power demand to experience growth not seen in a generation. The report predicts the utilities need $50 billion of capital investments in new power generation capacity to meet the forecasted 47 gigawatts of additional load by 2030. Thanks to our breadth of capabilities and strong customer relationships, MYR Group is well positioned to win contracts for new data center work and help build the electrical infrastructure required to power those facilities. This quarter, in our C&I segment, Western Pacific Enterprises was awarded a transportation project in Canada valued at approximately $170 million, further solidifying the long-standing working relationships in the region. Additionally, our T&D segment won several Master Service Agreements for substation, transmission and distribution work across the Midwest and in the Carolinas, Florida and Kentucky. Overall, the increased electrification and investments being made in the electrical infrastructure are encouraging and highlight why we believe our chosen markets are poised for ongoing success for years to come. Now Kelly will provide details on our second quarter 2024 financial results. Kelly Huntington: Thank you, Rick, and good morning, everyone. Our second quarter 2024 revenues were $829 million, which represents a decrease of $60 million or 6.7%, compared to the same period last year. Our second quarter T&D revenues were $458 million, a decrease of 9% compared to the same period last year. The breakdown of T&D revenues was $282 million for transmission and $176 million for distribution. T&D segment revenues decreased due to a decrease of $40 million in revenue on transmission projects and a decrease of $6 million in revenue on distribution projects. Work performed under Master Service Agreements continue to represent approximately 50% of our T&D revenues. C&I revenues were $371 million, a decrease of 4%, compared to the same period last year. The C&I segment revenues primarily decreased due to the delayed start of a few projects, which are now anticipated to start later this year, as discussed last quarter. Our gross margin was 4.9% for the second quarter of 2024 compared to 10.1% for the same period last year. The decrease in gross margin was primarily related to clean energy projects in our T&D segment, the unfavorable impact of a C&I project, as well as an increase in costs associated with labor, project inefficiencies and schedule compression on certain projects. These margin decreases were partially offset by favorable change orders, better than anticipated productivity, a favorable job close-out, favorable joint venture results and favorable materials pricing on a project. T&D operating loss margin was 1.8% for the second quarter of 2024 compared to operating income margin of 7.5% for the same period last year. The decrease was primarily related to clean energy projects and was due to contractual disputes, labor and project inefficiencies, higher labor and contract-related costs and unfavorable weather conditions. In addition, schedule extensions caused by owner-furnished panel delays led to increased costs on two clean energy projects, for which we are pursuing change orders. Combined, the gross profit changes related to clean energy projects negatively impacted operating income as a percentage of revenues by 10.5%. Many of these projects have reached mechanical completion and the remaining projects are anticipated to reach mechanical completion in the third and fourth quarters of 2024. Additionally, T&D operating income margin was negatively impacted by higher fleet depreciation and maintenance expenses and a decrease in work in progress. C&I operating income margin was 0.4% for the second quarter of 2024, compared to 3.3% for the same period last year. A single project that is anticipated to reach substantial completion during the fourth quarter of 2024 had a negative impact of 3.6% on C&I operating income margin during the second quarter. The loss on this project was primarily due to scope additions, increased labor costs related to schedule compression and lower productivity due to access and workflow issues. C&I operating income margin was also negatively impacted by an increase in costs associated with labor, project inefficiencies and schedule compression on certain projects as well as higher contingent compensation expense related to a prior acquisition. These decreases were partially offset by favorable change orders, better than anticipated productivity, a favorable job close-out, favorable joint venture results and favorable materials pricing on a project. Second quarter 2024 SG&A expenses were $62 million, an increase of $4 million compared to the same period last year. The increase was primarily due to an increase in contingent compensation expense related to a prior acquisition and an increase in employee-related expenses to support future growth, partially offset by a decrease in employee incentive compensation costs. Second quarter 2024 net loss was $15 million compared to net income of $22 million for the same period last year. Net loss per diluted share of $0.91, compared to net income per diluted share of $1.33 for the same period last year. Second quarter 2024 EBITDA was negative $5 million compared to $47 million for the same period last year. Total backlog as of June 30, 2024, was $2.54 billion, 7% lower than a year ago and a 5% increase from the first quarter of this year. Total backlog as of June 30, 2024 consisted of $831 million for our T&D segment and $1.71 billion for our C&I segment. Second quarter 2024 operating cash flow was $23 million compared to operating cash flow of negative $21 million for the same period last year. The increase in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions. Second quarter 2024 free cash flow was $3 million, compared to negative free cash flow of $43 million for the same period last year, reflecting the increase in operating cash flow and lower capital expenditures. Moving to liquidity. We had approximately $270 million of working capital, $45 million of funded debt and $427 million in borrowing availability under our credit facility as of June 30, 2024. We have continued to maintain a strong funded debt-to-EBITDA leverage ratio of 0.3 times as of June 30, 2024. We believe that our credit facility, strong balance sheet and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions and opportunistically repurchase shares. During the second quarter, we repurchased 117,000 shares at a weighted average price of $138 per share for a total expenditure of $16 million. As of June 30, 2024, we had approximately $59 million of remaining availability to repurchase shares. I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment. Brian Stern: Thanks, Kelly, and good morning, everyone. As Kelly stated, operating margins were negatively impacted by clean energy projects in our T&D segment. Operating margins within our Transmission and Distribution portfolio had solid performance in the second quarter and our focus remains on quality execution of projects, expanding long-standing customer relationships, strategically pursuing new opportunities to strengthen and grow our market presence, while overcoming near-term challenges in our clean energy portfolio. Healthy bidding activity continued in the second quarter as we monitor and selectively pursue projects of various sizes. Our team successfully completed -- competed and were awarded multiple alliance agreements this quarter. L.E. Myers won MSAs for transmission and substation work in Indiana, Kentucky, Ohio and Florida as well as overhead and underground distribution projects in Nebraska. Great Southwestern Construction was also awarded MSAs for substation, transmission and distribution work in the Midwest, Florida and the Carolinas, while High Country Line Construction won two transmission projects in California. As Rick mentioned earlier, the demand for electricity is only growing as new technologies continue to increase in everyday life. At 2024 white paper report on AI and data center energy consumption from the Electric Power Research Institute found that AI queries are estimated to require 10 times the electricity as traditional search engine queries. The report forecasts data centers alone will grow to consume as much as 9.1% of U.S. electricity generation annually by 2030 versus an estimated 4% today. MYR Group continues to serve as a knowledgeable and agile partner for our utility customers as they strive to meet this increasing electrification demand, helping build an improved infrastructure for the future. In summary, a firm dedication to our clients and a strict adherence to our operating principles positions us well for success. And I thank all of our talented employees for their commitment and effort in making the success possible. I will now turn the call over to Don Egan, who will provide an overview of our Commercial and Industrial segment. Don Egan: Thanks, Brian, and good morning, everyone. The decrease in gross margin in our C&I segment was primarily due to an unfavorable impact on a C&I project as a result of scope additions, increased labor costs related to scheduled compression and lower productivity due to access and workflow issues. As Rick mentioned earlier, we were awarded a large-scale transit project in Canada with Western Pacific Enterprises. WPE has a proven history of successful large transit project execution. This project reflects the tremendous infrastructure investments being made in both the United States and Canada, demonstrating the strength of the markets we serve and why we believe our business is poised for continued success. Our other core markets also remain active with subsidiaries across the organization, continuing to perform essential work for our valued customers. Pharmaceuticals and healthcare facilities are strong markets with CSI, electrical contractors, working projects in California and Sturgeon Electric in Colorado and Arizona. In addition, we were recently awarded projects for a new Civic Center in California, an Air Force Base in Wyoming and a new data center campus in Colorado. Data centers continue to be a growth market for our business and one that we have decades of experience working in. The electricity consumption of these facilities is unprecedented. New data center campuses are being built with capabilities ranging from 100 to 1,000 megawatts, roughly equivalent to the load consumed by 80,000 to 800,000 homes. In addition, we continue to see our existing clients retrofitting their facilities to meet the increased power density and cooling requirements of artificial intelligence. To conclude, our chosen core markets are healthy and the strength of our customer relationships continue to generate additional opportunities. This is thanks to our talented employees and their daily dedication to executing projects with a safety first mindset. By living our core values every day, our employees help us stand as an industry leader in safety and project execution that our customers have come to rely on. Thanks everyone for your time today. I will now turn the call back to Rick, who will provide us with some closing comments. Rick Swartz: Thank you for those updates, Kelly, Brian and Don. Although our second quarter performance was negatively impacted by a relatively small group of underperforming projects, we continue to successfully execute our portfolio of projects, reflecting the resiliency of our core markets and our ability to strengthen and expand our customer relationships. We will continue to focus on bidding opportunities and projects that reflect our operating principles and breadth of capabilities. We continually emphasize meeting the needs of our customers as they navigate dynamic market conditions and the changing energy landscape, while investing in and developing our team members to maintain our position as a leader in the industry. This fortifies our foundation to grow our business and provides customers and prospects with a strong and agile partner. I would like to thank our employees for their invaluable contributions and shareholders for your continued support of MYR Group. And I look forward to connecting with you in future quarters. Operator, we are now ready to open the call up for comments and questions. Operator: Thank you. [Operator Instructions] Our first question comes from the line of Sangita Jain with KeyBanc Capital Markets. Your line is open. Sangita Jain: Yes. Good morning. Thank you for taking my questions. So Rick, on the solar project that you called out this quarter that had the delays and the cost overruns, are these in the same territories where you also said that the market was getting competitive and that you would step away from bidding projects there? Rick Swartz: If they're in some of those same markets, yes. Sangita Jain: So then can I follow-up by asking that does this give you an indication that you kind of want to stay away from utility scale solar for now or do you still feel okay bidding in other markets? Rick Swartz: For us, I think we're going to continue to be selective in the environment we're in right now. It's not like we have to change this work. We talked about the activity of our other core markets. But we've been doing it for a long time and it's something at the right price and with the right customer, we'll take on additional work, but very selectively. Sangita Jain: Okay. And if I can ask a follow-up on operating margins in light of 2Q. Should we still expect that you can exit in T&D at the 7% and C&I at that 4%, which is the low-end of your long-term outlook? Rick Swartz: Well, I think our performance will be in that mid-range on the T&D side. It will be on that lower range on the C&I, barring these projects. So you have to exclude these projects and that's where we see it going for the next couple of quarters as we get these projects behind us. There can always be some additional impacts or changes on the ongoing projects we have that are troubled projects. But I think they've all been identified, but that could affect us going forward a little bit. Sangita Jain: Understood. Thank you for taking my questions. Operator: Thank you. Our next question comes from the line of Ati Modak with Goldman Sachs. Your line is open. Ati Modak: Hi. Good morning, team. So I know you've spoken about the backlog tends to be lumpy, but can you talk about the outlook that you're seeing on the T&D side in particular given it sounds like there are some market expectations for softness in the back half of the year, so I would love to get your perspective. Rick Swartz: Yes. For us, we're seeing a lot of activity, I would say, when it comes to small and mid-sized projects. I think when you're looking at longer term projects, lots of long-term opportunities, I think they've been a little slower to come to market. And any time you receive a large project, it's going to be four to six months before you start seeing any kind of revenue burn off of that. So I think there's more to come on that. As I said, lots of activity in the marketplace. So long-term, we see it as a great market. We need a few of these larger projects to roll out and happen. And I think they're scheduled to do that. So it's a good thing to see. We've got lots of bidding activity. So again, long-term good, but short-term it could be a little lumpy. Ati Modak: Got it. Thank you, Rick. And then for the clean energy projects where there were owner-related delays, I'm just wondering if there are provisions that allow you some level of protection, whether it's contractual or other ways to mitigate that? And then the change orders, how should we think about that offsetting through the remainder of the year? Rick Swartz: I think for us, these projects, any time there's delays on projects or acceleration or different things that can happen, I think there's always side for potential litigation. Though you have a contract that covers certain items, does it cover every item in there? And then how does it affect you on a project? So for us, it's weighing all that. Continuing to have discussions with the customer and then seeing where that settles up. I would say, historically, we've been pretty good at being able to settle stuff without going to litigation. But on projects like this, you never know. So again, I think we've got a good position to go to litigation if we need. Some of these items that we've talked about are well beyond anything that we could anticipate or would really solve on our own. So I think we'll continue to monitor it and see where it goes. Ati Modak: Okay. Thank you for that. Appreciate it. Operator: Thank you. Our next question comes from the line of Justin Hauke with Baird. Your line is open. Justin Hauke: Yes. Good morning. I guess, I just wanted to -- I mean, the items you called out here for the charges, I mean, these are -- in general, they're all the same issues you guys have been kind of fighting through the last several quarters and kind of in the same market and the same projects. So I guess, was there some type of triggering event this quarter that just kind of took a broader review of the gross margin assumptions on that that kind of triggered this broader write-down? I just am trying to understand the magnitude of the charges relative to the write-downs you've been having in the last several quarters. Rick Swartz: Sure. If you look at -- as we said, the T&D results were really impacted by the clean energy projects. If you look at solar revenue within that, it's about 15% of our revenue in the first half was derived from solar. It's not like it's a huge percentage of our revenue, but when you look at that, that's where our impacts were. And it was really due to a lot of different things we described them. I mean, it was -- when you get into that side, it was really do with some solar panel delays which affected us. They were supposed to come in a lot sooner than they did and that's affected us. And then you look at the other impacts that we had from weather and other things that affected us on those same projects. So a myriad of issues that affected us on those projects, but really hit us in one quarter. So it wasn't like we're seeing it across all of our business, just within that -- those projects we described. And then on the C&I side, I think the impact really had to do with one project that we're continuing to potentially go into litigation on that one. But again, we worked with this client quite a bit and we've been able to solve issues in the past. So we'll see where it goes from here. Justin Hauke: Okay. I guess, my second question is just on this -- the $170 million transportation project that you won in Canada. Just maybe when is that expected to start, kind of the duration of it? Any details on that just to kind of think about how that policy works. That is a larger project for you. Rick Swartz: Yes, that's a larger project. We've done transportation projects of similar size. So it's not something -- and it's a longer term project. So it's approximately a three and a half to four year project that will finish within that timeframe. So it's not like you have a huge turn in every year. A couple of years ago, we finished going up that we did in Colorado and it was over $100 million project and it was over the same timeframe. Operator: Thank you. Our next question comes from the line of Brian Brophy with Stifel. Your line is open. Brian Brophy: Thanks. Good morning, everybody. Just curious how you're thinking about revenue guidance for the rest of the year. Last quarter, you talked about flat for both segments. Just curious how you're thinking about it today? Rick Swartz: Yes. I think when we look at that, solar, we're going to continue to be selective on that side of the business. It's been good additive in a couple of markets, but other ones were -- again, we talked about the competitiveness in that market where prices were right now. So we continue to see our backlog burn on the solar side with not that much addition on our T&D segment. So within our T&D segment, I should say. So with that, we will see a decline in our revenue as we go forward as we're selective on that work. But I think on the other side, to offset it a little bit, will be kind of the growth that we're seeing within the T&D segment. So hopefully, those projects continue to roll out. And we talked about small and mid-size rolling out and we're very successful on receiving those right now. It's just kind of that lull in large project side. Brian Brophy: Okay. And just to be clear, that was offset by growth in C&I, correct? Rick Swartz: We do see growth in C&I, yes. Brian Brophy: Okay, thanks. And then I guess just kind of at a high level, the goalpost, if you will, has been moved out a couple of times now when these challenged projects roll off, I think we were previously expecting about midway through this year now towards the end of this year. I guess, just what gives you guys confidence that we're not going to see another push-out in terms of when these challenged projects roll? Thanks. Rick Swartz: Yes. For us, it's the one additional C&I project. If you look at the other ones, they're rolling off as planned, there really was no change in that. And we highlighted that, without that, this one project impact on the C&I side, we would have been where we set our margin profile would be or a little above that low-end of it. So I'd say, that's going as planned. So we see those rolling off. On the T&D side, there was a couple of new projects that came in to kind of the solar impact side, but it was all solar-related and we've got good visibility on what we have out there to finish. So I don't see any changes coming as far as additional projects coming into that at this time. But we do know -- we do have to get these projects behind us. So those are really the changes. Other than that, the core T&D market was right in our mid-range of where we said it should be. Brian Brophy: Okay, thanks. I'll pass it on. Operator: Thank you. [Operator Instructions] Our next question comes from the line of Jon Braatz with Kansas City Capital. Your line is open. Jon Braatz: Good morning, everyone. Rick, when you look at the projects that gave you problems in the quarter, was -- how much of that might be a -- was an onus on your part that maybe you didn't perform or execute as well as you would have thought? Can you parse that out between sort of the internal factors versus external? Rick Swartz: Really, with a couple of these going into potential litigation, I think we're always willing to what I say, pay for our own sins. And I think a portion of it, whenever you do a hindsight analysis, you always see things you could do different. So we weren't perfect within this performance, but not all of our loss was caused by things we did. That's about as deep as I can go into it knowing that there's potential litigation out there, Jon. Jon Braatz: Okay. I appreciate that. And then on the clean energy projects, other than sort of the competitive landscape that might depress margins and so on and so forth, is there anything inherently different about the clean energy project versus a T&D project that makes it a little bit riskier for you? Rick Swartz: In general, no. I would say, things can happen to you along the way that can make one project riskier or not. I would say, as we said on our C&I side, we've had very good performance. It's been accretive to our margins as we went through the year on our performance on that one. So I would say, it's regionally-based and it had to do with the book of business and they were -- it wasn't with all the same customer, but the book of business on the T&D side. And as I said, we've got good visibility in what we have left to finish. Jon Braatz: Okay. And I think I -- maybe you answered this previously, but when you look at the problem projects going forward in the second half, how comfortable are you that you have fully accounted for the costs? And is there potentially some additional risk in the second half from those projects? Rick Swartz: Yes, there is potential risk there. There always is, as you finish up projects, as you get through negotiations as you do that, any of that side when you finish up the projects, there's always additional risk. And that's why I said when I look at -- if we're giving any kind of insight into where our operating margins are going to be, I think minus those projects will be in the mid-range of our T&D margin profile that we give. With those projects, it's hard to say because there's moving parts. So it could affect us and we'll disclose that as we go forward on a quarterly basis. Jon Braatz: Yes, okay. All right. Thank you. Operator: Thank you. [Operator Instructions] I'm showing no further questions in the queue. I would now like to turn the call back over to Rick for closing remarks. Rick Swartz: To conclude, on behalf of Kelly, Brian, Don and myself, I sincerely thank you for joining us on the call today. I don't have anything further and we look forward to working with you going forward. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Earnings call: Altigen reports Q3 results with focus on shareholder value By Investing.com

Altigen Technologies (ATGN) has disclosed its third quarter financial results for fiscal year 2024, presenting a mixed performance with revenues slightly down by 2% to $3.3 million compared to the previous quarter. Despite the revenue dip, the company reported an operating income of $68,000, a significant improvement over the previous quarter's loss. This positive shift is attributed to the company's operational excellence initiatives. Altigen's new cloud-based unified communications platform, MaxCloud, has started to gain momentum after initial delays. The company's consulting services, particularly in AI and digital transformation, have seen growth. Altigen has also successfully reduced operating expenses and is nearing the completion of new enhancements for their products. In summary, while Altigen Technologies faces challenges with its legacy business, the company is making strategic moves to strengthen its position in cloud services and consulting. With a focus on operational excellence and product innovation, Altigen is working towards achieving significant revenue growth and enhancing shareholder value in the coming years. Altigen Technologies (ATGN) has been navigating through a period of transition, as evidenced by their latest quarterly report. To provide a deeper understanding of the company's financial health and investment potential, let's delve into some key metrics and insights from InvestingPro. InvestingPro Data highlights that Altigen's market capitalization stands at $16.61 million, reflecting the company's current market value. Despite recent operational gains, the company's Price/Earnings (P/E) ratio is negative at -5.0 for the last twelve months as of Q4 2023, underscoring that the company has not been profitable during this period. Additionally, the revenue growth for the same period is positive at 15.05%, indicating an increase in sales which could be a sign of potential for future profitability. InvestingPro Tips provide further context to Altigen's financial strategy and positioning. The company holds more cash than debt on its balance sheet, which suggests a strong liquidity position and the ability to cover short-term obligations, as its liquid assets exceed its short-term liabilities. However, it's important to note that Altigen has not been profitable over the last twelve months and does not pay a dividend to shareholders, which might be a consideration for income-focused investors. For investors interested in a more comprehensive analysis, InvestingPro offers additional tips on Altigen Technologies, which can be found at https://www.investing.com/pro/ATGN. These insights can provide a deeper dive into the company's financials, helping to inform investment decisions. Operator: Greetings. Welcome to Altigen Technologies Third Quarter Fiscal Year 2024 Results Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host Carolyn David, VP of Finance at Altigen Technologies. You may begin. Carolyn David: Thanks, Paul. Good afternoon, everyone and welcome to Altigen Technologies earnings call for the third quarter fiscal 2024. Joining me on the call today is Jerry Fleming, President and Chief Executive Officer; Joe Hamblin, Chief Digital & Transformation Officer; and I'm Carolyn David, Vice President of Finance. Earlier today, we issued an earnings release reporting financial results for the period ended June 30, 2024. This release can be found on our IR website at www.altigen.com. We have also arranged a replay of this call which may be accessed by phone. This replay will be available approximately one hour after the call's completion and remain in effect for 90 days. This call can also be accessed from the Investor Relations section of our website. Before we begin our formal remarks, we need to remind everyone that today's call may contain forward-looking information regarding future events and future financial performance of the company. We wish to caution you that such statements are just predictions and actual results may differ materially due to certain risks and uncertainties that may pertain to our business. We refer you to the financial disclosures filed periodically by the company with the OTCQB over-the-counter market, specifically the company's audited annual report for the fiscal year ended September 30, 2023, as well as the Safe Harbor Statement in the press release the company issued today. These documents contain important risk factors that could cause actual results to differ materially from those contained in the company's projections or forward-looking statements. Altigen assumes no obligation to revise any forward-looking information contained in today's call. In addition, during today's call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or a replacement for the comparable GAAP measures. However, we believe these measures will help investors gain a more complete understanding of results. A reconciliation of GAAP to non-GAAP measures and additional disclosures regarding these measures are included in today's press release. With that, I'll now turn the call over to Jerry for opening remarks. Jerry? Jerry Fleming: Thanks, Carolyn and good afternoon, everyone. Thank you for joining us for today's call. I'm pleased to share our third quarter fiscal results, as well as to provide you with an update on our business progress. After my overview, Joe Hamblin, our Chief Digital & Transformation Officer will expand upon our business execution strategies and operational excellence initiatives. Carolyn will then present an in-depth review of our third quarter financials. Earlier today, we announced our fiscal Q3 2024 revenue of $3.3 million, which was approximately 2% lower compared to our prior quarter, generally due to a decline in our legacy business. On a positive note, our third quarter operating income was $68,000 compared to a loss of $241,000 in our fiscal second quarter. The reduction of just over $300,000 in operating expenses is a direct result of our operational excellence initiatives. On our last call, we committed to achieving profitability by our fiscal 2024 year-end. I'm happy to report that we accomplished this objective one quarter earlier. I'll now turn to a discussion of our business transformation initiatives. First, revenues from our legacy on-premises PBX business declined quarter-over-quarter as expected, since we no longer provide enhancements to our on-premises PBX systems, as we have a new cloud-based unified communications platform. Many of these customers have therefore, chosen not to renew their software maintenance contracts. We've also had a few customers elect not to renew their contracts for the cloud version of MaxCS, also based on our legacy PBX platform, which is admittedly lacking modern unified communications functionality. These issues are resulting from the fact that our new MaxCloud UCaaS or Unified communications platform has taken longer than expected to get to full release date, due to a few nagging technical issues. Those issues have now been addressed and as a result, we are finally beginning to see some traction with MaxCloud. Although the MaxCloud revenues have not yet fully replaced, the decline we've experienced in our legacy PBX revenues, we are confident that this will soon change going forward. These same issues have also impacted the time lines for Fiserv to begin migrating their legacy MaxCS customers to the new MaxCloud UC platform. But with those issues now behind us, Fiserv has committed to begin their customer migrations from our legacy MaxCS to the new MaxCloud UC platform, which will generate additional MaxCloud incremental monthly revenues. As I mentioned on our last quarter's call, Fiserv is still on track to launch our groundbreaking new conversational AI IVR solution in October. This new solution includes significant enhancements and functionality along with higher pricing, which therefore will also begin to contribute to new incremental monthly cloud revenues. Shifting to Altigen's solutions for Microsoft (NASDAQ:MSFT) Teams. That business has been fairly flat in the last few quarters, as we have not yet been able to introduce a viable contact center solution for Microsoft Teams. However, just last month we were able to introduce our new CoreEngage for Teams' Contact Center platform. We've already signed contracts with several customers and have quite a few pilots taking place now, with new prospective customers. Early indications are that this will prove to be a very successful commercial endeavor for us. Our consulting services business has continued to grow, primarily as a result of the expansion of our business with the Connecticut Department of Transportation. In addition to that, we are gearing up to go after new customer logos, principally focused on AI and digital transformation services. I'd also want to clarify, the role our consulting services business has in our overall business strategic planning. I'll start with a brief background. We initially acquired ZAACT Consulting in May 2022 to increase our Microsoft technical expertise to extend our capabilities to deliver custom communications solutions and to drive Altigen software sales into ZAACT's customer base. While the acquisition certainly improved our Microsoft technical expertise, it had also set us back as many of the companies ZAACT represented as ongoing customers that either ceased doing business or were in the process of doing so, at the time of the acquisition. The result was as reported in prior quarters, a much lower-than-anticipated contribution from the ZAACT Services Group. However, when we brought in Sharique Shaikh to run the ZAACT Consulting division in November of 2023, along with the signing of a major contract extension with the Connecticut Department of Transportation in December of 2023, that situation began to change. Today, our consulting services business is not only thriving under Sharique's leadership, but we are also now converging the technical resources on the consulting services team, with the Altigen software solutions team. This is particularly evident in our AI initiatives, in which companies first want customer solutions built for their unique needs, then want Altigen to enhance and maintain those solutions in a monthly recurring managed services revenue model. And we're set up to do just that. With that, I'll now hand the call to Joe Hamblin to provide additional color on both our software solutions and consulting services, lines of business. Joe? Joe Hamblin: Thank you, Jerry. Good afternoon, everyone. A quick recap. During our second quarter earnings call, I outlined three key operational initiatives that we were going to be focused on that it helped enable our company to scale and compete in years to come. Those are operational efficiencies, financial stewardship and product delivery. So in the operational efficiencies area, we made significant progress to enhance that area. We completed our back-end automation for our legacy products. Allowing our existing customers and partners to streamline their account management access. Additionally, we rolled out an enterprise billing center that enables these customers to access their online billing information, much or easily and readily available to them. The team has also laid the foundation for the first phase of our solutions delivery portal by updating our product catalog, and mapping out our end-to-end business processes so we can begin the automation process that allows us to scale rapidly. This will allow us to automate product ordering in Phase 1, which we will release at the end of August and then we will quickly move into Phase 2, which will focus on the product provisioning piece allowing customers to come in and access our site with a very wizard simple-to-use friendly user interface that allows them to provision themselves. On the financial stewardship front, we continue to drive costs out of our business. As I mentioned last earnings call, we reduced our operating expense by $250,000 on an annualized basis through headcount, data center and associated licensing consolidations and the migration to the lower -- and migrations to a lower-cost underlying SIP carrier. As Jerry noted earlier, we actually realized $300,000 from those efforts. During our fiscal third quarter performance, we achieved an estimated annualized savings of another $590,000. These savings stemmed from the completion of our hosted data center modernization and consolidation effort and the migration of SIP services over to our new provider's platform. Keep in mind, we've only one-third complete on that. We'll finish up the other two-third of that migration by the end of this fiscal first quarter -- by the end of our first fiscal quarter. And I want to just note having a strong financial stewardship will remain as a core part of our company DNA as we continue to transform our business and we start to grow. Now, let's talk about product delivery. The third pillar is a key pillar in the product delivery space. As both Jerry and I have discussed on previous calls, improving the delivery of new products and services essential for us achieving our financial performance goals and driving new incremental revenue streams. This begins with growing our customers and revenue with our MaxCloud UC platform. Well, MaxCloud is GA for both Altigen and Fiserv customers, we needed to enhance our UC client with some critical modern workplace capabilities before we could scale out to the market, with a true launch. These enhancements are nearing completion and will complete and clear our quality assurance process in time for the fiscal New Year. Additionally, we are targeting the introduction of a new MaxCloud, CCaaS platform enabling customers to add omni-channel capabilities to support their business needs. More details on this will be shared soon. In parallel, we will launch CoreEngage for Teams Contact Center. As Jerry mentioned, we already have signed contracts with several customers and have numerous pilots underway. CoreEngage for Teams Contact Center will support our customers throughout the entire team's journey from PBX migration services to Teams direct trunk routing, using our best-in-class SIP services to Microsoft Teams call queues, and finally to our full omnichannel contact center solution including reporting and call recording. Let's talk about Fiserv's progress real quick. Again as Jerry mentioned, MaxCloud UC migrations are starting this quarter. We've already have our user ID validation and biometrics fraud detection currently in preview, with our initial POC customers. IVR our natural speech recognition tool will be delivered in October as promised. And also in the first quarter of the fiscal New Year we will deliver IVR text to speech during the first quarter. And then finally, let's touch briefly on the Altigen Technologies consulting services. I really this team has really performed well and continues to grow. Again thanks to Sharique's leadership and that whole team coming together. High level this team works directly with customer business units to design develop and deliver business process and system solutions. We continue to see quarter-over-quarter revenue growth. And our goal as Jerry stated, will be over the next two quarters is to attract new customers and enter into new engagements. So to summarize, our transformation process is well underway. We continue to improve our performance every day. From my vantage point the headwinds, we have faced are beginning to fade. However, we still have a lot of work to do. The team is motivated. We're engaged and we're very focused. So glad to take any questions you might have after we're done here. But with that, I'm going to turn it over to Carolyn for the financial review. Carolyn? Carolyn David: Great. Thank you, Joe. I will now present the key financial highlights for Q3 FY 2024. Keeping in mind, these comparisons are on a year-over-year basis unless otherwise noted. For our fiscal third quarter results, we reported total revenue of $3.3 million compared to $3.4 million for Q3 2023. Total cloud services revenue for Q3 was approximately $1.7 million down 13% from $2 million in the same period last year. Meanwhile, our services revenue increased by roughly 25% to $1.2 million from $1 million in the prior year quarter. Gross margin for the quarter was 61% compared to 63% in the same period last year, reflecting a decrease of approximately 200 basis points year-over-year. This decline was mainly due to a shift in our revenue mix towards higher professional services. On both a GAAP and a non-GAAP basis we reduced our operating expenses in Q3 to $1.9 million, an improvement of roughly 15% year-over-year. This decrease was mostly due to lower headcount-related expenses. GAAP net income for Q3 was $62,000 or $0.00 per diluted share. This compares to GAAP net loss of $183,000 or negative $0.01 per diluted share a year ago. On a non-GAAP basis net income was approximately $200,000 or $0.01 per diluted share compared to non-GAAP net income of $40,000 or breakeven EPS in the same quarter last year. As noted, this increase in net income was primarily due to the aforementioned reduction in our OpEx. Moving to liquidity. We ended Q3 with approximately $2 million in cash and cash equivalents up 23% compared to the preceding quarter. Our working capital increased to $2 million from $1.8 million in the previous quarter representing an 11% increase. In closing we are pleased with our Q3 results which are in line with our expectations and we look forward to updating you on our progress in our next call. Now let me turn the call over back to Jerry for closing remarks. Jerry? Joe Hamblin: And Jerry's line is still connected. Jerry, please check your mute button? Jerry Fleming: Okay. Thank you. Thanks Carolyn. Sorry for the delay. To summarize we are making progress with sustainable business initiatives. We first showed up and are now growing our consulting services business. We've also made great strides toward achieving our operational excellence objectives with demonstrated tangible financial results. Our next major milestone which we've been working on for some time is to improve our ability to monetize our software. Achieving this objective has actually proven to be a difficult task primarily due to the fact that Altigen had to go through our own digital transformation process. This process involved not only transforming our legacy on-premises hardware and software products to modern cloud-native all software solutions, but also required us to transform the entire company from business systems to infrastructure to personnel. And as you've heard from Joe Hamblin this has been his number one objective and he's made great progress in that regard. Today we are on the cusp of realizing the returns from the investments we've made in our key business initiatives and fully expect the financial results to follow soon. So with that I'll ask the operator to open the call up for questions. Operator: Certainly. [Operator Instructions] The first question is coming from Mark Gomes from Pipeline. Mark, your line is live. Mark Gomes: Congratulations on reattaining profitability. Do you expect to maintain profitability? One question. The other is when do you think we can expect to start seeing the top-line resume sequential growth? Thanks. Jerry Fleming: Yes. Thanks, Mark. Yes, we do expect those impact -- expect the savings to continue as we're actually doing a much better job of streamlining operational expenses. Yes, the top-line as you know I've been actually promising we're going to be growing top-line for a little while now and I think we've overcome. And I really think we've overcome these various hurdles and challenges and just one more thing objection so we can start kicking in some real business here. One of the keys obviously as Fiserv with some of the new products that they're going to be launching, but it's not -- we're not just a Fiserv company. It's also my commentary about having a team's contact center product that we can count on that people like and will pay for is also going to be very significant. So Mark I expect here pretty soon this quarter next quarter we're going to start seeing -- I can't say how big it's going to get but I do expect to start seeing tangible incremental revenue increases on a quarter-over-quarter basis very soon. Mark Gomes: Okay. And then just kind of looking at you guys have made substantial investments in R&D for a company our size over the last few years. So as you go into monetization kind of what kind of scale of revenues do you think you might be able to achieve with the products that you have kind of ready or near ready to go? Are we still in some of the -- somewhat you presented in the investor presentation several months back? Jerry Fleming: Right. Okay. Yes, thanks for referencing that Mark because it's a tough one without giving a forecast, but those numbers stand with us. And what we talked about was at the Planet MicroCap Conference. We expect it to be within five years between $40 million and $60 million with $50 million at our midpoint. We showed the various categories we expect to generate that revenue and it's Fiserv is a chunk of that. We didn't really count on a whole lot from our UCaaS platform because it's a very crowded market and the remainder made up was made up with our team solutions which we feel darn good about now as well as our AI solutions. So right at this point yes, I think hard to say we're on track because it's just a couple of months later but we think we're going to achieve those numbers. Mark Gomes: Thanks, Jerry. Operator: Thank you. [Operator Instructions] The next question is coming from Maj Soueidan from Geoinvesting. Maj, your line is live. Maj Soueidan: Thanks. I just have one question. You've talked about this switch to a new SIP provider. Can you give us an idea how much you're going to save on that? And has that even kicked in yet? Is that part of the your kind of operational excellence numbers you've given in terms of how much money you're going to be saving moving forward? Jerry Fleming: Yes. Good question Maj. Joe can you tackle that one? Yes Maj. Yes. So Maj some of those numbers are baked in. We're only about 1/3 way through that migration. And it's a two-pronged play. One is it is a cost-cutting effort for me. But in addition it's also a wholesale SIP trunk play for me. So it will help us on top line growth but it also helps me on the bottom line expenses. And again we've I can give you some ballpark numbers here, but roughly we've probably taken out -- if you look at my run rates I'm going to be somewhere in the neighborhood of $64,000 is what it was costing me in January and now I've gotten that down to $29,000 and I'm about one-third of the way through so. Maj Soueidan: Thanks. Operator: And there were no other questions from the lines at this time. I would now like to hand the call over to Jerry Fleming for closing remarks. Jerry Fleming: Yes. Thank you and thank you everyone for participating. And I can tell you guys short term we've been focused on let's get our house in order, right? Long term yes we're absolutely focused on top-line revenue growth that has been happening. While we're working on the short-term initiatives that have made improvements in our financial results but we are 100% focused on increasing this top line revenue and driving shareholder value and look forward to reporting on our next call our progress in that area. Thank you very much. Carolyn David: Thank you, everyone. Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Earnings call: Black Hills Corp on track with $800M capital plan By Investing.com

During the second quarter of 2024 earnings conference call, Black Hills Corporation (NYSE: NYSE:BKH) President and CEO Linn Evans provided an update on the company's financial and operational performance. Evans highlighted the company's commitment to delivering excellent service and advancing strategic growth initiatives, including a significant capital plan and clean energy projects. Black Hills is progressing on its $800 million capital investment for the year and expects to meet its earnings guidance range of $3.80 to $4 per share. The company also announced its involvement in powering Meta (NASDAQ:META)'s first data center in Cheyenne, Wyoming, with service beginning in 2026. Black Hills Corporation's strategic initiatives appear to be well underway, with a focus on both operational excellence and forward-looking growth opportunities. The company's capital investments and regulatory advancements suggest a strong commitment to meeting the future energy needs of its customers, while also maintaining a robust financial standing for its shareholders. As Black Hills Corporation (NYSE: BKH) continues to execute its strategic growth initiatives and capital investment plans, the company's financial health and stock performance indicators offer insights into its market position and potential investor sentiment. InvestingPro data shows that Black Hills Corporation has a market capitalization of $4.11 billion, reflecting its size and stability in the utility sector. The company's P/E ratio stands at 14.57, and when adjusted for the last twelve months as of Q2 2024, it slightly increases to 14.91. This valuation metric suggests that the stock is trading at a multiple that is relatively in line with its earnings, indicating that investors may find the current pricing to be fair given the company's profitability. Furthermore, Black Hills has demonstrated a commitment to returning value to shareholders with a notable dividend yield of 4.41%. This is particularly impressive given that the company has raised its dividend for 53 consecutive years, as highlighted by one of the InvestingPro Tips. Such a track record of consistent dividend growth is a strong signal of financial resilience and management's confidence in the company's future cash flows. In terms of stock performance, Black Hills is trading near its 52-week high, with the price at 98.5% of this peak. This could be attributed to investor optimism about the company's future prospects, including its clean energy initiatives and the significant contract to power Meta's data center. Investors looking for additional insights can find more InvestingPro Tips on the company, including analysis on its low price volatility and predictions for profitability this year. There are currently six additional tips listed on InvestingPro for Black Hills Corporation at https://www.investing.com/pro/BKH, offering a deeper dive into the company's performance metrics and expert projections. Black Hills Corporation's strong dividend history, coupled with its strategic investments in clean energy and infrastructure, positions it as a potentially attractive option for investors seeking stability and growth in the utility sector. Operator: Good day, and thank you for standing by. Welcome to the Q2 2024 Black Hills Corporation Earnings Conference Call. At this time all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jerome Nichols, Director of Investor Relations. Jerome Nichols: Thank you. Good morning, and welcome to Black Hills Corporation's second quarter 2024 earnings conference call. You can find our earnings release and materials for our call this morning on our website at www.blackhillscorp.com under the Investor Relations heading. Leading our quarterly earnings discussion today are Linn Evans, President and Chief Executive Officer; Kimberly Nooney, Senior Vice President and Chief Financial Officer; and Marne Jones, Senior Vice President, Utilities. During our earnings discussion today, comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission, and there are a number of uncertainties inherent in such comments. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially. We direct you to our earnings release, Slide 2 of the investor presentation on our website and our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations. I will now turn the call over to Linn Evans. Linn Evans: Thank you, Jerome. Good morning, and thank you all for joining us today. Before we share our comments about our quarter, on behalf of the Black Hills team, I would like to thank Jerome for his 20 years of service to our company with the last 13 years as our Director of Investor Relations. Many of you know Jerome well, and I ask that you join us in wishing him all the best as he enjoys his well-deserved retirement. And as we say thank you to Jerome, we're pleased to welcome Sal Diaz to our team as our new Director of Investor Relations. Congratulations, Jerome, and Sal, welcome to the team. I'll begin my comments with a brief overview of the quarter. Kimberly will provide our financial update, and Marne will provide more detail on our team's operational performance and our strategic progress. Turning to Slide 3. We continue to execute our customer-focused strategy during the second quarter. Once again, I'm pleased to share that our team delivered excellent service to our customers, continued to execute on our financial targets and advanced our regulatory and growth initiatives. I'm very proud of our team as we continue to dependably serve our customers, living out our Ready to Serve commitment. Our thoughts are certainly with our customers who faced severe storms and flooding in recent months across several of our communities. Marne and I witnessed firsthand the impact on neighborhoods and businesses. And we appreciate the admirable response and service of our team, who quickly responded to the needs of our customers and are supporting the restoration efforts in our impacted communities. As we continue to support those impacted, I'd like to say a huge thank you to our colleagues listening in today across our service territory for exemplifying our values and our mission of improving life with energy. Well done. Our ongoing capital investment plan is critical to the commitments we've made to serve our customers and communities safely, reliably and cost effectively and we remain on track with our $800 million capital plan for 2024. This includes our Ready Wyoming electric transmission project, which strategically interconnects our Wyoming and South Dakota transmission systems, enhancing the resiliency and capacity of our regional energy infrastructure. Notably, this will benefit our customers with cost stability and expanded energy market access. We also continue to make progress on our regulatory plan for the year with three active rate reviews moving along as expected. Looking forward, we expect a normal cadence of approximately three to four rate reviews per year to seek recovery of our investments and reduce lag. We're diligently executing our financial plan as we continue to improve our credit quality and advance our growth initiatives. To meet the growing energy needs of our customers and communities, we are in the final stages for delivering on our long-term electric resource plans for Colorado Electric and South Dakota Electric. In Colorado, we're seeking approval of selected bids for 400 megawatts of new renewable resources, including 250 megawatts that would be utility owned. In South Dakota, we're planning to add 100 megawatts of cost effective utility-owned resources by 2026. We remain confident in our financial outlook listed on Slide 4, which is consistent with the first quarter. Based on solid year-to-date results, including new margins and our team's continued disciplined expense management, we're on track to deliver on our earnings guidance range of $3.80 to $4 per share. Our strong growth opportunities and continued execution of our initiatives gives us confidence in achieving our long-term EPS growth target of 4% to 6%. Slide 5 provides a summary of our hyperscale data center and blockchain growth opportunities. We recently announced our plan to power Meta's first data center in Cheyenne, Wyoming. I am proud of our track record of reliability and innovative energy solutions, which helped drive Meta's decision to build their $800 million, 715,000 square-foot AI data center within our Cheyenne community. We're excited to support their new project, which will benefit all our Wyoming customers with greater infrastructure investment, our communities with new jobs and tax revenues and our shareholders through our innovative energy procurement model. We expect to begin serving Meta's initial demand in 2026. Earlier this year, we said that we anticipate future earnings from this type of customer will exceed 10% of total EPS by the end of our five-year plan through 2028. This new data center is included in that expectation. I'll also note that Wyoming's tax policies provide a favorable environment for data center and blockchain growth within the state. Moving to Slide 6. We remain confident in our long-term growth trajectory, supported by our base capital investment plan, ongoing organic growth, including data centers and other incremental investments. Over our five-year plan period, we expect to invest an average of more than $800 million per year. Our $1.3 billion in capital investment in 2026 includes the majority of generation investments resulting from our electric resource plans, which Marne will cover in her business update. In 2027 and 2028, we anticipate incremental opportunities to be added to our plan as we gain more clarity around timing and costs as indicated by the green arrows above the chart. And before I turn the call over to Kimberly, I'd like to remind you that we recently published our new 2023 Corporate Sustainability Report, highlighting our progress on our environmental, social and governance goals. We remain on track to cost effectively achieve our emissions reduction goals. With that, I'll turn it over to Kimberly for our financial update. Kimberly? Kimberly Nooney: Thank you, Linn, and good morning, everyone. We delivered a solid second quarter. We remain focused on our objective to carefully manage our expenses and improve credit quality and we achieved those goals for the first half of the year. Slide 9 shows second quarter EPS drivers compared to the same period last year. We reported $0.33 per share compared to $0.35 per share in Q2 2023. Quarterly earnings were primarily driven by new margins and expense management by our team, which largely offset the impacts of weather and a prior year income tax benefit. We realized $0.13 of higher margins from new rates in rider recovery, including data center margins, and $0.03 of customer growth and usage. These positive results were partially offset by impacts to revenue due to unplanned generation outages. Through continued cost management, we delivered lower O&M of $0.04 per share compared to Q2 2023 primarily due to lower labor costs. We continue to experience the impacts of inflation within our business, including additional expenses associated with increasing insurance premiums. Given these factors, coupled with the mild weather we experienced during the first half of the year, we will continue to manage our O&M to an increase of approximately 3.5% for the full year to achieve our 2024 financial targets. As a reminder, our earnings guidance assumes normal weather. For the quarter, compared to normal, weather negatively impacted EPS by $0.07 per share. Compared to Q2 2023, weather negatively impacted earnings by $0.04 per share. Income taxes increased due to a $0.12 prior year benefit, resulting from a reduction in Nebraska's state income tax rate. Slide 10 displays the earnings drivers through the first half of 2024. We are on track to achieve our 2024 financial targets despite unfavorable weather of $0.14 per share compared to 2023. Year-to-date, earnings per share increased 6% year-over-year as new margins and expense management more than offset the impact of weather, financing, depreciation and prior year onetime benefits. Further details on year-over-year changes in operating income can be found in our earnings release and 10-Q to be filed with the SEC later today. Moving to Slide 11, which depicts our solid financial position through the lens of credit quality, capital structure and liquidity, we continue to reduce our debt to total capitalization ratio and improve other key credit metrics in our commitment to maintain BBB+ credit quality. We issued $42 million of new shares under our ATM during the quarter for a total of $74 million through the first half of the year. As previously disclosed, we are expecting $170 million to $190 million in equity issuances for the year. Our liquidity remained strong at quarter end with full availability under our $750 million revolving credit facility and $625 million in cash, following the issuance of $450 million of notes in May. We will repay our $600 million notes maturing later this month. Our next debt maturity occurs in 2026. And we are evaluating timing and options for refinancing that maturity. Slide 12 illustrates our industry-leading dividend track record of 54 consecutive years. We anticipate growing our dividend at a rate comparable to earnings growth. A dependable and increasing dividend is an important component of our strategy for delivering long-term value for our shareholders. I will now turn the call over to Marne for a business update. Marne Jones: Thank you, Kimberly. We had another strong quarter of serving our 1.3 million families and businesses across our footprint. Through windstorms, tornadoes and flooding, our team of operational experts proactively managed our systems to keep our customers safe with system reliability and resiliency top of mind. I will start my comments on Slide 14 with a regulatory update. We have demonstrated our ability to reach constructive results with three or more rate reviews annually in recent years. We are in the final stages for our Arkansas Gas rate review and continue to anticipate new rates in the fourth quarter. Our Iowa Gas rate review continues as planned with interim rates in place since May 11 and final rates expected in early 2025. In June, we filed a rate review for Colorado Electric, our first since 2016. Over the past eight years, we have kept base rates unchanged while incurring increased costs and necessary system investments of approximately $470 million, which support a safe, reliable, resilient and clean energy system. Nearly one third of that capital is currently recovered through our transmission rider. Our request includes $36.7 million in new annual revenue, a capital structure of 53% equity and a 10.5% return on equity. We are requesting new rates by the first quarter of next year. Slide 15 provides an update on our enhanced disclosures and engagement on wildfire management and risk mitigation, a key safety and reliability priority of ours for more than a decade. Operationally, we use a layered approach to wildfire mitigation, which can be summarized into three broad categories: asset programs, integrity programs and operational response. In June, we disclosed our comprehensive Wildfire Mitigation Plan, which provides deeper insight into the practices, policies and procedures we carry out every day. We continue to engage broad stakeholder groups, including community and local agencies, regulators, legislative bodies and our industry peers, to review and advance our wildfire management and mitigation plans. In that spirit, we are working with these stakeholders to formalize our Public Safety Power Shutoff program or PSPS, and expect to implement it in the first half of next year. Moving on to Slide 16, I would like to share our progress on our ongoing strategic initiatives. Our largest active capital project is our Ready Wyoming transmission project. The 260-mile line is being constructed in segments and remains on target to be in service by year-end 2025 with our first segment expected to be in service later this year. When complete, Ready Wyoming will provide additional capacity, expanded access to energy markets and renewable energy and is expected to stabilize long-term cost for customers. The investment for this project will be recovered through our Wyoming transmission rider as segments are placed in service. Slide 17 provides an update on our clean energy plan in Colorado. In July, the Colorado Public Utilities Commission reviewed our preferred portfolio, which includes a 200-megawatt build transfer solar project, a 50-megawatt build transfer battery project and 150 megawatts of wind energy through a power purchase agreement. In their decision, they asked us to submit additional details on generation and transmission costs. In response, earlier this week, we provided the additional information and proposed 100-megawatt solar PPA to replace the 150-megawatt wind PPA with the remaining portfolio unchanged. We are awaiting a final decision by the commission, which we expect later this year. Slide 18 outlines our South Dakota Electric resource plan. We continue to pursue 100 megawatts of utility-owned generation that will cost effectively and reliably serve our customers. We are targeting an in-service date of mid-2026 for 100 megawatts of natural gas fire generation. We plan to file a pre-application notice with the South Dakota Public Utilities Commission and request a certificate of public convenience and necessity from the Wyoming Public Service Commission in the second half of 2024. With that, I will now turn the call back to Linn. Linn Evans: Thank you, Marne. I'll summarize our quarter by expressing my thanks to our team for how they continued strong progress on our strategic initiatives as we invest in and maintain our systems for our customers, successfully execute our regulatory plan, tirelessly develop and execute our strategic growth opportunities and creatively serve our expanding data center and blockchain load growth. And with that, we'll take your questions. Operator: Thank you. [Operator Instructions] Our first question comes from Julien Dumoulin-Smith with Jefferies. You may proceed. Julian, your line is now open. If you're on mute, please unmute. Julien Dumoulin-Smith: All right, I'm picking up the handset here. Let's make sure it works. Hey, good morning, team. How you guys doing? Linn Evans: Good, Julian, good. Welcome back to the game. Julien Dumoulin-Smith: Hey, thank you so much. Congrats, Jerome, on your retirement. It's been a great line. It's been a real pleasure. Jerome Nichols: Thank you very much. Appreciate that. Julien Dumoulin-Smith: Absolutely. Look, guys, nice updates and continued success here. And I give you guys kudos for being early in adapting to data centers in this conversation early on with these novel tariffs. To that end, this 10% number by the end of the five year plan, can you talk a little bit about the parameters that are reflected versus perhaps maybe not necessarily reflected in the capital budget here? I know this is a fluid conversation, but what's in, what's not in, in terms of how you get there? And then also related to that, focusing on a tariff conversation, how do you think about the rate case cadence and how that gets reflected in earnings vis-a-vis some of the novel tariffs that you guys have had in place? Linn Evans: Yes. Thank you for that question, Julien, and we appreciate being able to focus on our data center successes. As you know, we've had this LPCS, a Large Power Contract Service tariff in place since about 2016. So it's been an important part of our growth model and our strategy for the last several years especially as we had the good fortune of serving Microsoft (NASDAQ:MSFT) and some other blockchain customers. We're very excited to have announced Meta here very recently in June, and that's a project we have been working on for some time with them. And so the Meta and the Microsoft loads and other loads that we anticipate are reflected in that 10% - or perhaps greater 10% of our EPS towards the outer part of the year - of the plan in around 2028. We're very fortunate to serve a great service territory for data centers, starting with the weather that we have there, the elevation, the fiber. There's lots of things that attract people or customers to that region. And then we have a very innovative tariff that I just mentioned that allows us to serve customers relatively rapidly. It provides protection for customers or normal customers, if you will. It allows us to serve these growing data center loads as rapidly - fairly rapidly, if you will, so they can come to us pretty quickly. And we're excited about that service. And we called these in the past, and we still call them capital-light kind of projects. Yes, we invest some capital for them in terms of substations, things of that nature, but they're relatively capital-light. But if you look at our Slide 6, we got the green carets. There is potential, and there's lots of moving parts, if you will. We'll see what happens with capacity in the West. But our innovative tariff allows us to go out and get market energy for these customers, and they'll need other energy we know along the way. So we see opportunities for investment with transmission. Our Ready Wyoming transmission line, while it serves all of our customers, will also help us with ensuring that we have the load capabilities or serving that load capabilities for our data centers. But we see further opportunity for transmission investment because of data centers and because of our growing customer load within the region. And then potentially out and towards the outer part of the plan period, yes, we may have potential for generation to support that growth. So those green carets that we put on Slide 6 includes some of those, but we've got lots to learn. These are very sophisticated customers. They know what they need with respect to energy. So we're constantly talking to them about their energy needs and how we will effectively meet those energy needs that works for all of our customers and especially our shareholders, too. And there was another question, I think, Julien, about the maybe rate reviews with respect to this. We file integrated resource plans that include these loads and exclude these loads so that we understand what's happening within our service territory beyond the data centers. So we look at our normal customers, if you will, our residential, our commercial and our industrial customers. And then we also look at these data centers independently, if you will, and how we manage that system cohesively for all interested parties. Julien Dumoulin-Smith: Got it. Excellent. Thank you guys very much. Appreciate it. And actually, just to elaborate on what you just said a second ago when you were talking about other opportunities, energy capacity, et cetera, I mean, you guys have done previously sort of contracted capacity outside of the traditional vertically integrated utility construct. Is that another avenue here that when you think about serving your evolving loads in novel ways, is that something you could be looking to do is to have long-term contracts with them directly? Or it would be... Linn Evans: Yes, it could be - it's kind of all the above approach, yes, and that would be one of them. Julien Dumoulin-Smith: Got it. Yep. Awesome. All right, I'll leave it there. Speak to you guys soon. Operator: Thank you. [Operator Instructions] And I'm not showing any further questions. I would now like to turn the call back over to Linn Evans for any closing remarks. Linn Evans: Well, thank you, Josh. Appreciate your help this morning. I just want to pause for a moment and really thank our team. Marne's comments about the storms, the flooding, the tornadoes that our customers have endured, our hearts certainly go out to those communities. And I really just thank our team and how well they represented our values, represented our culture and came to the rescue, if you will, to make sure we have safe, reliable and resilient energy and energy for our customers. So thank you for that. I want to emphasize our positive results for the Q2 and for the first half of the year. We're off to a great start for 2024. Again, thank you to our team. I'm excited about our growth initiatives. Our Ready Wyoming project, our largest capital project in our company's history, is on track. Our customer growth continues. We're very excited, as you can tell, about continuing to serve data centers and blockchain loads. And then our capital plan across our gas utilities, electric utilities being executed very, very well. You may be able to hear a little thunder in the background. We have the Sturgis Motorcycle Rally that officially starts tomorrow. So if any of you happen to be in Sturgis, riding your motorcycles or otherwise over the next week, please stop by and say hello. And with that, again, thank you to our team, and enjoy a Black Hills Energy safe day. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Earnings call: Elme Communities Q2 2024 - steady growth amid market stability By Investing.com

Elme Communities (ticker symbol not provided) reported a solid second quarter in 2024, emphasizing strong performance in the Washington Metro area and improving trends in Atlanta. CEO Paul McDermott and COO Tiffany Butcher discussed operational achievements, including successful renovations and the launch of Elme Resident Services. CFO Steve Freishtat outlined the company's financial health, noting tightened guidance for core Funds From Operations (FFO) per share and same-store Net Operating Income (NOI) growth. The company's focus on affordability and value, alongside a robust balance sheet and liquidity position, underscores a positive outlook despite the broader economic backdrop. Elme Communities' second-quarter earnings call conveyed a message of cautious optimism as the company navigates a stable yet dynamic real estate market. The company's strategic focus on operational efficiency and financial prudence positions it well for the challenges and opportunities ahead. With a solid performance in key markets and a clear vision for future growth, Elme Communities remains committed to enhancing shareholder value and maintaining its competitive edge in the industry. Elme Communities' second-quarter earnings have painted a picture of a company with a strategic focus on operational efficiency and financial prudence. To further understand the company's financial health and market position, InvestingPro data and tips provide additional context. InvestingPro Data highlights a market capitalization of $1.49 billion, reflecting the company's size and presence in the industry. Despite the positive operational achievements, the company's P/E ratio stands at -27.35, indicating that the market currently does not expect earnings to cover the share price. This is further emphasized by an adjusted P/E ratio for the last twelve months as of Q2 2024 at -134.9, suggesting that profitability has been a challenge. Revenue growth, however, has been modest, with a 5.62% increase over the last twelve months as of Q2 2024, which aligns with the company's reported revenue growth projections in the article. The gross profit margin during the same period stands at a healthy 60.74%, indicating that Elme Communities is effectively controlling its cost of goods sold and maintaining profitability at the gross level. InvestingPro Tips bring to light that while net income is expected to grow this year, analysts do not anticipate the company will be profitable within the year. This provides a nuanced view of the company's financial trajectory, balancing optimism with realism. Additionally, the company's commitment to shareholder returns is evident with a history of maintaining dividend payments for 54 consecutive years, offering a dividend yield of 4.25% as of the latest data, which could appeal to income-focused investors. For investors seeking deeper analysis and more comprehensive insights, there are additional InvestingPro Tips available on the platform, which can be accessed at https://www.investing.com/pro/ELME. These tips can further guide investment decisions by providing a detailed understanding of Elme Communities' financial and market position. Operator: Greetings, and welcome to the Elme Communities Second Quarter 2024 Earnings Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Amy Hopkins, Vice President, Investor Relations. Amy, please go ahead. Amy Hopkins: Good morning, and thank you for joining our second quarter earnings call. Today's event is being webcast with a slide presentation that is available on the Investors section of our website and will be available on our webcast replay. Statements made during this call may constitute forward-looking statements that involve known and unknown risks and uncertainties which may cause actual results to differ materially, and we undertake no duty to update them as actual events unfold. We refer to certain of these risks in our SEC filings. Reconciliations of the GAAP and non-GAAP financial measures discussed on this call are available in our most recent earnings press release and financial supplement, which was distributed yesterday and can be found on the Investors page of our website. And with that, I'll turn the call over to our President and CEO, Paul McDermott. Paul McDermott: Thanks, Amy, and good morning, everyone. Presenting on the call with me today are Tiffany Butcher, our Chief Operating Officer; and Steve Freishtat, our Chief Financial Officer. Tiffany will provide an update on our operating trends and initiatives, and Steve will cover our balance sheet and outlook. Grant Montgomery, our Head of Research, is here to answer market-level questions during Q&A. I'll start today's call with a brief market-level overview. The Washington Metro is a top-performing apartment market this year, and the region remains one of the best-positioned apartment markets nationally. Across our submarkets, deliveries have peaked and net inventory ratios have normalized in the low single digits. Our Washington Metro portfolio, which comprises over 75% of our homes, is benefiting from strong, stable demand, allowing us to drive occupancy above our targeted level for the year. We believe we are positioned to capture growth in the second half of the year that will set us up well heading into 2025. Turning to Atlanta. Absorption rates are accelerating and the supply overhang continues to decline. In Elme submarkets, absorption is now nearly 60% higher than the pre-pandemic period. Our operating fundamentals are showing stability with modest improvement supported by strong retention and renewal rates. Tiffany will provide more details in her remarks. While supply remains elevated, it is not expected to increase materially above the current levels in any of our submarkets, and we expect the overall level of demand relative to supply to continue to improve through 2025. Moreover, units under construction and new starts have declined significantly, pointing to better conditions in 2025 and highly favorable supply/demand dynamics forecasted for 2026 and 2027. Our residents' financial health also remains solid. The rent-to-income ratio for new leases was 23% on average in the second quarter compared to 24% a year ago, reflecting a positive credit trend relative to rental rate growth. Employment trends remain stronger for middle-income wage earners relative to high-wage earners, and the composition of job growth is shifting in favor of non-cyclical industries, which are two favorable trends for Elme. As of the second quarter, government was our largest industry exposure in the Washington Metro and healthcare was our largest industry exposure in the Atlanta Metro. Affordability and relative value remain critical to our strategy and our rent levels are several hundred dollars below both Class A rents and the cost to own a home in our markets. Move-outs to purchase homes comprised just 8% of second quarter move-outs, well below the historical level in the mid-teens. Additionally, our retention rates remained historically high, averaging 65% year-to-date as our value-oriented resident base tends to be stickier with an average tenure of about 2.7 years. As we move forward, our focus on maintaining rent levels that are affordable for the largest and most underserved segments of the rental market, combined with our efforts to enhance the Class B living experience, should continue to attract strong and steady demand from value-conscious renters. And with that, I'll turn it to Tiffany to discuss our operating trends and growth initiatives. Tiffany Butcher: Thanks, Paul. The positive momentum we began to experience in April has continued and blended lease rate growth and occupancy improved sequentially during the second quarter across both the Washington and Atlanta metros. Effective blended lease rate growth increased to 3.2% for our same-store portfolio during the second quarter, comprised of renewal lease rate growth of 5.4% and new lease rate growth of 0.2%. New lease rate growth increased to 0.4% in July, showing continued improvement. Renewal lease rate growth was 4.6% in July and we're signing renewals at an average rate of 4% for August and September lease expirations, reflecting gradual moderation in renewal rates through year-end, which is in line with our expectations. Same-store resident retention remains very strong at 65% during the quarter, highlighting the longer-term nature of our resident base and our heightened focus on customer service excellence as part of our 2024 platform initiatives. Moving on to occupancy. Same-store average occupancy increased sequentially to 94.6% and ending occupancy increased to 95.5% in the second quarter, driven by strong demand in the Washington Metro, offset in part by the impact of new supply and the timing of evictions in our Atlanta portfolio. Through July, same-store occupancy has averaged 95.3%, representing a 70 basis point increase relative to second quarter. The demand patterns that we're seeing in Northern Virginia, where the majority of our Washington Metro communities are located, are exceptional, and occupancy averaged 96.1% for our Washington Metro communities during the quarter, increasing to an average level of 96.6% in June and 96.7% in July, which is above the upper end of our targeted range, allowing us to continue to push rents during the busiest leasing months. In Atlanta, while the market is experiencing an unprecedented level of new supply, market demand is improving and Atlanta occupancy averaged 89.5% during the quarter, increasing to 90.6% in July. Additionally, we have 24 homes, or just over 1% of our Atlanta portfolio, that are temporarily out of service due to a fire which detracted from our occupancy improvement. Although the timing of evictions could continue to pressure occupancy, we're seeing stable demand patterns and we're focused on driving higher occupancy over the second half of the year. Turning to bad debt. Reducing bad debt is a top priority and the proactive steps that we have taken are delivering better credit performance overall. We expect to benefit from lower year-over-year bad debt in the second half of this year and even more so into 2025 as higher credit standards and credit protections at the front end of the leasing process and normalizing eviction delays at the back end drive credit performance to a more normalized level. Turning to renovations. During the second quarter, we generated an average ROI of approximately 17% on 150 home renovations. We now expect to complete approximately 475 full renovations and over 100 home upgrades this year. Looking forward, renovations continue to be a key growth driver for Elme. Our identified renovation pipeline of nearly 3,300 homes represents over 35% of our portfolio, which is more than enough runway to deliver renovation-led value creation for the foreseeable future. Our operational initiatives remain on track as we elevate our platform to new levels of success. We're pleased to report that in June, we successfully launched our shared services department known as Elme Resident Services, focused on streamlining community operations and enhancing process efficiencies across resident account management, collections, and renewals. We're excited to welcome our shared services team into their new roles within Elme. This launch was supported by the successful rollout of several new technologies, including an AI platform that saves team members time by managing electronic communication with current residents, automating payment and collection efforts, and entering service requests. We're already beginning to see an increase in resident engagement with this new tool. We're also implementing new software to manage balances after move-out, reducing the amount of time our team spends attempting to collect and track payments from former residents. Lastly, we've partnered with a provider of flexible payment options to give our residents the ability to choose when they pay during the month while we receive cash from the provider when rent is due. With all of these tools as part of our program and a strong team in place, we are confident in our ability to achieve our multi-year goals related to this effort. This successful launch of Elme Resident Services is a key milestone to achieving the $1.7 million to $1.9 million of additional NOI and FFO from operational initiatives in 2024, which aligns with our 2023 to 2025 upside target of $4.25 million to $4.75 million. Beyond the initiatives that comprise our 2023 to 2025 upside target, we're also rolling out managed Wi-Fi across our portfolio in phases, starting with approximately 2,000 homes in Phase I, which are scheduled for installation during the fourth quarter. And with that, I'll turn it over to Steve to cover our 2024 outlook and balance sheet. Steven Freishtat: Thanks, Tiffany. Starting with guidance. We are tightening our 2024 core FFO per share guidance range to $0.91 to $0.95, maintaining our midpoint of $0.93. We are tightening the range and raising the midpoint of our same-store multifamily NOI growth assumption, which is now expected to range from 0.75% to 1.75% in 2024, due to stronger-than-expected performance in our Washington Metro portfolio. We now expect interest expense for the year to range from $37.5 million to $38.25 million. While we expect fewer rate cuts in 2024 than our outlook going into the year, our continued focus on managing our cash and debt balance as well as successful execution of our new revolving credit facility has helped us stay within our initial range, though, at a slightly higher midpoint. Turning to our balance sheet. Annualized net debt to adjusted EBITDA was 5.6 times at quarter end, in line with our targeted range, and we continue to expect our leverage ratio to finish this year in the mid-5 times range. As previously discussed, subsequent to quarter end, we entered into a new four-year $500 million revolving credit facility to replace the prior facility, which had been due to mature in August 2025. The new facility has two six-month extension options and an accordion feature that allows us to increase the aggregate facility to $1 billion. Our liquidity position remains strong with over $320 million available on our new revolving credit facility as of August 1. With no secured debt and the only maturity prior to 2028 being the $125 million term loan, our balance sheet remains in excellent shape. To conclude, our second quarter performance reflects continued strength in the Washington Metro and improving trends in our Atlanta portfolio. Our renovations continue to yield very strong returns with plenty of runway ahead. Additionally, our operational initiatives are on track and the successful launch of our shared services department represents our latest platform enhancement. Looking forward, we are still in the early innings with our operational initiatives and we are setting the stage for further ROI-driven initiatives in 2025. And with that, I will open it up to Q&A. Operator: Thank you. At this time, we will be conducting our question-and-answer session. [Operator Instructions] Thank you. Our first question is coming from Cooper Clark with Wells Fargo (NYSE:WFC). Your line is live. Cooper Clark: Great. Thank you for taking the question. Wondering if you could walk through bad debt in the quarter for the whole portfolio in Atlanta specifically. I'm wondering if you still think Atlanta bad debt could get to that 3% to 4% range by the end of the fourth quarter and that full-year '24 average of 5% to 6%. Tiffany Butcher: Cooper, this is Tiffany Butcher. Sure. Happy to answer that question. I would start off by saying in the second quarter, we saw improvement in our bad debt across both of our markets, both here in the Washington, D.C. area as well as in our Atlanta portfolio. We are now -- in the DMV or in the Washington Metro portfolio, we are now below 1% of bad debt. So we are definitely in the normalized range for bad debt here in the Washington Metro area. In our Atlanta portfolio, we've continued to see improvement over where we were for the full-year of 2023, an improvement over where we were in the first quarter of '24. So in terms of our bad debt as a percentage of revenue, we are currently in the second quarter about 6.6% in our Atlanta portfolio, which is obviously -- continues to be above historical norms. But we have seen stability in that number. What I would say is the most recent trend that is impacting our bad debt is that we are now starting to see positive momentum in some of our Atlanta communities and counties for implementing House Bill 1203, which is the bill in Georgia that allows landlords to hire off-duty officers to execute evictions. And that's going to be a significant improvement in Atlanta over the back half of the year because it has continued to be a challenge to gain possessions of homes, given the level of backlog there is in the sheriff's offices in many of the Atlanta counties. So we look forward to being able to take possession of those units and then be able to turn them and ultimately release them to rent-paying tenants. And that's going to be very helpful in terms of getting us to that reduced level of bad debt by year-end. So I think with the implementation of House Bill 1203 along with additional efforts that we're making internally in terms of streamlining the collections process and improving our credit screening with the implementation of our new ERS team, those are the major factors that are going to help us get to that lower level of bad debt by year-end. Cooper Clark: Okay. Thank you. That's super helpful. And I guess just switching over to the updated NOI guidance. It seems that it's mostly expense-driven. Wondering how same-store revenue shaping up relative to expectations assumed in guidance. Clearly, some D.C. strength year-to-date on the top-line. Paul McDermott: Yeah, Cooper. So, I mean, if we look at it, so -- right, the NOI, we tightened -- slightly raised at the midpoint -- to the midpoint at about 1.25%. Looking at the expense growth, we do see expense growth in the 5% to 6% range for this year. That is lower than what we initially forecasted coming into the year. And that's helped out by a couple of things. One is taxes, where we've just seen assessments not come in as high as we initially thought. And the second one is lower payroll. We're really starting to see the effects of the operational initiatives and the operational upside that we have out there really start to take effect. And so we're starting to see that savings take place. On the revenue side, we're seeing and we're expecting revenue to be in the 2.5% to 3% range for '24. And that's really driven, I think, by the bad debt in Atlanta that Tiffany was just talking about that we're seeing that trend in the right direction. We're just not seeing it move as quickly as we initially had thought when we came into the year. Cooper Clark: Okay. Thank you very much. Operator: Thank you. [Operator Instructions] Our next question is coming from Anthony Paolone with JPMorgan (NYSE:JPM). Your line is live. Anthony Paolone: Thanks. Good morning. In Atlanta, where do you think occupancy finishes off the year in terms of how you're seeing things now? Tiffany Butcher: Hi, Tony. It's Tiffany again. In Atlanta, we're seeing occupancy trends into the low 90%. And our guidance assumes that occupancy remains at that, kind of low 90s% range through year-end, as we continue to see kind of gradual improvement in the supply/demand dynamics in the Atlanta market. We've continued to see solid retention, which is also helping that occupancy trend, but it's just going to be a gradual improvement. And we are continuing to adjust our pricing revenue strategy to maintain occupancy in that range through year-end. Anthony Paolone: Okay. Thanks. And then just shifting to maybe investments in capital markets. Can you talk about -- maybe just update us on how much you're spending in the returns you're getting on full renovations and also just maybe some discussion about, where you're seeing sort of Class B cap rates in your markets? Tiffany Butcher: I can start off by talking about the renovations and I can turn it over to Paul to talk about the capital markets. So to say in terms of renovation, we have increased the number of renovations that we're doing for the year. We're now projecting over 475 full home renovations and over 100 partial renovations or home upgrades through the remainder of the year. We're continuing to see, upper teens returns. So, we averaged a 17% ROI on our renovations for the quarter and year-to-date. So that continues to remain a very good investment source for us, as well as we're investing in our managed Wi-Fi. I mentioned in my prepared remarks that we are launching a Phase I of over, 2,000 units of managed Wi-Fi that will be installed in the fourth quarter, which also have very strong returns. And Paul, I'll turn it over to you to talk about capital markets. Paul McDermott: Thanks, Tiffany. Tony, just in terms of, what we're seeing out there looking at the transactions market, I mean, first off, from a macro standpoint year-over-year, it's been pretty flat. And when we look at potential sellers right now that we've talked to approach, they're facing rate cut prospects plus an election. And a lot of them are being advised, in many cases, just a hold and they're probably questioning why go to the market. The real sellers that we are seeing, remain folks with debt maturities, redemptions, or operators with some type of profit left in the promote. But that has not really helped, really accelerate and expand the volume. We talked to a lot of investment sales folks over the last quarter. They're expecting -- they say their pipelines are up for the second half of the year, but it's all -- I think it's fraught with a lot of contingencies. From a buying standpoint, institutional capital, PE shops, family offices are all in the fray. I think the only people we're really seeing on the sidelines are the Odysseys. I think the thesis right now for a lot of the new LP capital coming in is that they're buying below replacement cost. And they're underwriting flat to negative residual in the first two years with a recovery in, years three through five. And that's very consistent with what, from an institutional perspective, we're seeing, even our own observations on our portfolio, the improvement runway of years '26, '27 to '28. But particularly in the value-add space, we're seeing that work, that renovation work, on new acquisitions being pushed to years two and three, and that's really contingent on the supply and demand dynamics in the respective markets. I'd say what we've seen in terms of cap rates, the core cap rate, folks that are really, really pushing -- we're seeing those cap rates in the 4.5% to 5% range. The core plus cap rates in the 5% to 5.5% range. And obviously, that can vary by submarket to submarket. And then the value-add space, we're seeing those cap rates probably trade between 5.5% and 6%, Tony. And just from a lending standpoint, on who's out there, the really top quality that 40% to 50% LTV, we're still seeing the insurance companies be aggressive there. But Fannie and Freddie, we know, I believe, are behind their goals as of 2Q, and they're probably going to get a little bit more aggressive on some of the rate buy-downs. We're seeing spreads at probably 150 over, and you can buy that down to the 120s, and you can end up, on, let's say, a five-year deal and a 5.25% with a full-term IO. So if we do see product coming to the market, we do expect the agencies to be a bit more aggressive in the second half, but it's really just about getting deals back to the table, given the potential for, obviously, the September rate cuts and an election coming in November. Anthony Paolone: Great rundown. Thank you both. Operator: [Operator Instructions] Thank you. We have a question from Michael Gorman with BTIG. Your line is live. Michael Gorman: Yeah. Thanks. Good morning. Maybe just a bit more of a strategic question as we tie together what you're seeing in the markets and fundamentally. And then just, Paul, some of your commentary there about the investment market and transaction markets. Are you seeing anything in some of your potential target markets as you track them, not only from a deal perspective, but from an operating perspective that maybe has caused you to change how you're thinking about potential expansion markets just due to how they've behaved in the current cycle or how they're managing to go through the current supply cycle that we're seeing now? Paul McDermott: Michael, I would say that it's really just -- from an underwriting standpoint, we obviously are applying just based on our portfolio experience. We're applying a lot more scrutiny on the going in rental rates. How much diminution we would probably see in that year one? I think most of the markets we're looking at that second year is probably flat. And then we are looking at positive spreads in that, that third year. And what that's done strategically, as I said earlier, Michael, is really probably might have pushed back the timing of some of the renovations in our portfolio. I think as you know, we have over 3,000 units to renovate. We're obviously monitoring those. And then any new acquisitions that would all be part of our going in strategy in terms of when we feel like we can get in there operationally and create future value. Operator: Thank you. Our next question is coming from Ann Chan with Green Street. Your line is live. Ann Chan: Hi, good morning. Thanks for your time. Going to your guidance, could you share what kind of changes to supply and demand assumptions are baked into the new guidance, if any? Tiffany Butcher: Yeah. So I would say in terms of what we're seeing that is driving our guidance is stronger-than-expected performance in the Washington, D.C. market, and Grant can talk a little bit about the supply/demand dynamics that are impacting that. But just kind of from an operating perspective, we have continued to see, strength in our new leasing both in the second quarter as new lease rate growth slipped from negative in the first quarter to positive in the second quarter, and we have continued to see increasing strength in that in the month of July as we're in our peak leasing season. We've also continued to see occupancy increase significantly as there is a strong and robust demand for our product here in the Washington, D.C. area, and Grant can talk a little bit more about the demand drivers for that. But we have continued to see from first quarter to second quarter to the month of July, the occupancy continued to improve in our portfolio. And as we mentioned in our prepared remarks, the DMV had same-store occupancy at 96.1% in the second quarter and 96.7%. So incredibly strong occupancy, driven by the high demand and lower supply environment here in Washington. Grant, do you want to comment a little bit on that? Grant Montgomery: Sure. Ann, this is Grant. When we look at -- from a supply standpoint, our submarkets are performing really well and actually are set to moving in a better direction even over the next quarters than where they are currently. Over the first quarter -- second quarter, the net inventory ratio of deliveries is about 2.5%, which is well below the U.S. level and the Sunbelt. And over the next four quarters, that's expected to decline even further to just 2.3% on average. But we are in markets where that is significantly even lower than that. So for example, in Northern Virginia, where over 60% of our homes are located, net inventory ratio is down to about 1.7% over the next four quarters. So that's really driving the tightness on the supply side. From the demand side, we continue to see solid job growth across both markets, particularly again in our Northern Virginia market, where we have 1.6% employment growth, and even further detail there, we're really seeing strong demand in industries that particularly drive demand for our communities. We're seeing job growth, in particular strength in education and health, construction, and local government, all of which are up over anywhere from 2% to 6% year-over-year growth. So we really see it on both sides, a tight supply in our core market tightening across our entire portfolio and continued strong job growth, in particular growth in industries that create demand for the types of homes that we provide our residents. Ann Chan: Great. Thank you. And just wondering if you could also give a breakdown of the 1.3% blended rate expected for the rest of this year -- for this year? Tiffany Butcher: Sure. We can absolutely walk through that. So in terms of where we're expecting for the full-year to be in terms of blended lease rate growth, we're expecting kind of new rate to be in the negative 1% to positive 1% range for the full-year. We're expecting renewal rates to be in the 3.5% to 4.5% range for the full-year. And we're expecting, therefore, the blends to be in the 1.5% to 2.5% for the full-year. Ann Chan: Great. Thank you. Operator: Thank you. Our next question is coming from Cooper Clark with Wells Fargo. Your line is live. Cooper Clark: Hey, thanks for taking the follow-up. I just wanted to circle back on, Paul, some of your comments around pricing. Given your implied cap rate today and some of the pricing commentary, wondering if you thought about picking up capital recycling, specifically out of your Maryland portfolio or maybe some of your district assets. Wondering if that's something you're looking at as we kind of move through the rest of the year here? Paul McDermott: Cooper, we always are looking at our portfolio, and we're looking at recycling. I think, as you know, we have the Watergate, which is definitely a recycling candidate. And we're watching the D.C. market slowly but steadily improve. And I think we've -- we'll have some positive things to talk about the Watergate going forward. We are -- have at our disposal, I believe -- outside of a, a good balance sheet with optionality and liquidity, we do have the assets that you mentioned to look at as recycling candidates. And I wouldn't say that that is, at the top of our list right now. I think we've got a lot of very proactive initiatives to drive value for the shareholders. But we will -- as we progress throughout the balance of the year, we will look at those assets. That's really going to depend on market conditions right now. And we don't have plans to actually do any recycling from now through December. But in terms of just preserving optionality, we would probably move forward with the guidance that we've provided to you, Cooper. Cooper Clark: Okay. Great. And then I guess just one for Steve. You've talked about potentially doing something on the unsecured side if pricing gets closer to 6%. Wondering where you're seeing pricing today in the unsecured market and thoughts around raising any incremental debt for the right acquisition opportunity as opposed to using the capacity on your LLC? Steven Freishtat: Yeah. So, Cooper, thanks for the question. Yeah, very timely, given the movements in the 10-year. So I'd say, given a lot of the movements in the last week or so, if we were to do new unsecured debt, it would probably be in the high-5s% and then secured debt maybe a little bit inside of that. So we're definitely -- rates are much more attractive than they were when we were coming into the year. We certainly have -- we just redid our credit facility, of course, so that pushed out our maturity until '28, but we do have a balance there that we could certainly look to term out, at the right time. And as far as acquisitions go, we feel like we've created a balance sheet that creates a lot of optionality. So there are a lot of different ways we could go with that. I would say that from a leverage perspective, again we're right where we want to be right in line with our, our leverage governors. And so if we do find an opportunity out there, I'd say it's probably on what Paul just spoke about a moment ago. Capital recycling and recycling assets is probably our top choice right now of being able to finance an opportunity if we were to find something. Cooper Clark: Okay. Thank you. Operator: Thank you. If there are no further questions, I'd like to turn the floor back over to management for any closing comments. Paul McDermott: Thank you. Again, I'd like to thank everyone for your time and interest today. And I look forward to keeping you updated on our progress and speaking with many of you again in the very near future. Thank you. Operator: Thank you. This does conclude today's call. You may disconnect your lines at this time, and have a wonderful day, and we thank you for your participation.

Earnings call: Ensign Energy Services reports mixed Q2 2024 results By Investing.com

Ensign Energy Services Inc. (ticker: ESI), a leader in the oilfield services sector, has announced its financial results for the second quarter of 2024. The company reported a year-over-year increase in demand for its Canadian rigs, particularly high-spec singles, doubles, and triples, which rose by 15%. In contrast, the U.S. operations saw a decrease in activity, attributed to mergers and acquisitions within the industry. Despite a 9% decrease in revenue to $391.8 million, Ensign Energy Services has made significant strides in debt reduction, addressing $80 million in the quarter with a goal to reduce $600 million by 2025. Adjusted EBITDA also saw a decline to $100.2 million, down 14% from the previous year. The company is investing in maintenance and selective growth projects, with a gross capital expenditure target of approximately $147 million for the year. Ensign Energy Services' second-quarter performance paints a picture of resilience amid industry challenges. While facing headwinds in the U.S. market, the company's Canadian and international operations continue to show strength. With a clear plan for debt reduction and capital investment, Ensign is positioning itself to navigate the evolving landscape of the oilfield services sector. The company's commitment to technology and efficiency, as well as its strategic approach to market presence, suggests a focus on long-term stability and growth. As the U.S. election looms, Ensign's leadership has expressed confidence that the company's operations will remain unaffected, relying on the underlying demand for energy to drive its business forward. Ensign Energy Services Inc. (ticker: ESVIF) has been navigating a complex market environment, as reflected in its recent financial performance. The InvestingPro data and tips provide additional insights into the company's current valuation and future prospects. InvestingPro Data shows the company with a market capitalization of $312.45 million and a Price / Book ratio of 0.32, indicating that the stock is trading at a low multiple of its book value as of Q2 2024. This could suggest that the market is undervaluing the company's assets relative to its share price. Additionally, the P/E Ratio stands at 21.44, which aligns with the industry average, reflecting the market's view on the company's earnings potential. However, the company's revenue has seen a decline of 6.56% over the last twelve months as of Q2 2024, with a quarterly drop of 9.47% in Q2 2024. This is consistent with the article's note on the decrease in U.S. operations and the overall 9% drop in revenue. Despite this, Ensign Energy Services remains profitable, with a Gross Profit Margin of 30.82%, which is a strong indicator of the company's ability to maintain profitability in challenging market conditions. InvestingPro Tips highlight that Ensign Energy Services is expected to be profitable this year, which is corroborated by the company's reported profitability over the last twelve months. However, analysts predict a drop in net income for the year, which investors should consider when evaluating the company's earnings outlook. Another tip to note is that the stock price movements are quite volatile, which may be of interest to investors looking for short-term trading opportunities or those concerned about market fluctuations. For readers interested in a more in-depth analysis, there are additional InvestingPro Tips available for Ensign Energy Services Inc. at https://www.investing.com/pro/ESVIF, which can provide further guidance on investment decisions. Operator: Good afternoon, ladies and gentlemen, and welcome to the Ensign Energy Services Second Quarter 2024 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Nicole Romanow, Investor Relations. Please go ahead. Nicole Romanow: Thank you, Jenny. Good morning, and welcome to Ensign Energy Services second quarter conference call and webcast. On our call today, Bob Geddes, President and COO; and Mike Gray, Chief Financial Officer, will review Ensign's second quarter highlights and financial results followed by our operational update and outlook. We'll then open the call for questions. Our discussion today may include forward-looking statements based upon current expectations that involve several business risks and uncertainties. The factors that could cause results to differ materially include, but are not limited to, political, economic and market conditions; crude oil and natural gas prices; foreign currency fluctuations; weather conditions; the company's defense of lawsuits; the ability of oil and gas companies to pay accounts receivable balances; or other unforeseen conditions which could impact the demand for the services supplied by the company. Additionally, our discussion today may refer to non-GAAP financial measures such as adjusted EBITDA. Please see our second quarter earnings release and SEDAR+ filings for more information on forward-looking statements and the company's use of non-GAAP financial measures. With that, I'll pass it on to Bob. Bob Geddes: Thanks, Nicole. Good morning, everyone. I'll provide some introductory commentary. The second quarter was one of the strongest quarters in Ensign's history buoyed by strong and increasing demand for our Canadian rigs, especially our high-spec singles, doubles, and triples, which provided a 15% increase year-over-year for the quarter. We also saw a year-over-year increase in our highly active international business unit, where we operate in 6 different countries and where we saw marginal year-over-year increases in activity. In contrast, our U.S. business unit is seeing reduced activity across the board as M&A activity sorts itself out through the rest of 2024. With steady margins and solid activity levels generally around the globe, we have been able to address another $80 million of debt reduction in the quarter and stay on the path to reduce $600 million of debt over the next 3 years with a solid cash flow stream into a building book and increasing margin construct. I'll pass over to Mike to expand on that. Mike Gray: Thanks, Bob. Customer consolidation in the U.S. has impacted Ensign's operating and financial results over the short term. However, despite this short-term headwind, the outlook for oilfield services is constructive, and the operating environment for the oil and natural gas industry continue to support relatively steady demand for services. Overall, operating days declined in the second quarter of 2024 due to a 32% decrease in the United States to 2,912 operating days. Partially offsetting this decrease, Canadian operations recorded 2,451 operating days, an increase of 15%. And international operations recorded 1,255 days, a 1% increase compared to the second quarter of 2023. For the first 6 months ended June 30, 2024, overall operating days declined with the United States recording a 32% decrease, offsetting by a 5% increase in Canada and a 9% increase in international when compared to the same period in 2023. The company generated revenue of $391.8 million in the second quarter of 2024, a 9% decrease compared to revenue of $432.8 million generated in the second quarter of the prior year. For the first 6 months ended June 30, 2024, the company generated revenue of $823.1 million, a 10% decrease compared to revenue of $916.8 million generated in the same period of 2023. Adjusted EBITDA for the second quarter of 2024 was $100.2 million, 14% lower than adjusted EBITDA of $116.6 million in the second quarter of 2023. Adjusted EBITDA for the 6 months ended June 30, 2024, totaled $217.7 million, 11% lower than adjusted EBITDA of $243.9 million generated in the same period in 2023. The decrease in 2024 is due to year-over-year declines in drilling activity. Depreciation expense for the first 6 months of 2024 was $170.8 million, an increase of 12% compared to $152.7 million in the first 6 months of 2023. General and administrative expenses in the second quarter of 2024 was $15.5 million, up from $14.6 million in the second quarter of 2023. G&A expenses increased primarily as a result of the annual wage increases. Interest expense decreased by 19% to $25.5 million from $31.6 million. The decrease is a result of lower debt levels and reduced effective interest rates. During the second quarter of 2024, $78.9 million of debt was repaid, and a total of $90.3 million was repaid for the first half of 2024. From January 1, 2023 to June 30, 2024, a total of $307.9 million of debt has been repaid, leaving $292.1 million of the $600 million debt reduction target expected to be achieved by the end of 2025. Net purchase of the property and equipment for the second quarter of 2024 totaled $40.3 million, consisting of $2.4 million in upgrade capital, $46.1 million in maintenance capital, offset by disposition proceeds of $8.1 million. Gross capital expenditures for 2024 are targeted to be approximately $147 million primarily related to maintenance expenditures and selected growth projects. On that note, I'll turn the call back to Bob. Bob Geddes: Thanks, Mike. So let's start with Canada operational update. First off, we're seeing a nice macro construct building in our Canadian business unit. The combination of expanded pipeline capacity, both for oil and natural gas, the tightening differential and with the low Canadian dollar, the net effect is that more drilling will occur in the Western Canadian Sedimentary Basin moving forward. It's safe to say that the demand for our high-spec singles and high-spec triples is at the highest it has been in quite some time, at least a decade. This has also helped drive the high-spec double market to enjoy utilization of about 60%. 60% is a typical threshold where contractors are able to raise pricing and have it stick. Almost a third of Ensign's Canadian fleet is high-spec doubles so we have lots of product to feed into this construct. Our fleet of high-spec singles and high-spec triples, are essentially booked well into 2025, and we have some discussions going on with operators to mobilize some underutilized and fungible assets out of the U.S. where the operator will cover the full ride and any costs required to get onto their first location. We are currently already back to the same peak level we saw last winter, which really occurs in the Canadian market so soon after breakup. We expect to also add a few more rigs between now and year-end. As mentioned, we have almost 90% of the current active fleet contracted until the end of the first quarter of 2025. And in most cases, we have ratcheting rate increases compounding as we move through the fall season and into the winter drilling season. Our well servicing business in Canada has a strong schedule ahead for its rigs in the heavy oil area and in the back half of the year is expected to pick up as we capture more of the OWA work. Our rental fleet of tubulars, tanks, and other high-margin ancillary equipment continues to grow as more and more specialty equipment is called for, usually high-torque tubulars to attach to our high-spec ADR drill rigs. With accelerated wear, an issue on tubulars as a result of a high penetration rates, it is becoming the norm for tubulars to be charged separate from the rig rate. Moving on to our international business unit. Lots of exciting news in this area. We have a fleet of 30-plus drill rigs that operate in six different countries around the globe. In the Middle East, we have 100% of our high-spec ADR fleet actively working on long-term contracts. And with half of them on performance-based contracts, we're able to get paid for the performance our high-performance drilling team provides when coupled with our Edge Autopilot drill rig control systems. In Argentina, we're running at 100% utilization with both our 2,000-horsepower high-spec ADRs operating under long-term contracts. We have one of our drill rigs working in Venezuela, with another ready to start up in the next month. There are obviously some daily developments in Venezuela which are captivating the world, but so far, we have seen no impact on the operation in the field. Australia is staying steady with little change. Moving to the United States. We have a fleet of 77 high-spec ADRs in the U.S. stretching from the California market up into the Rockies and with a main focus on the Permian. We operate roughly 37 rigs today and expect a little change through the rest of 2024. The challenge in the U.S. is that in addition to the depressed natural gas prices, we saw $0.5 trillion of M&A activity in the last 18 months occur, which has manifested itself into less work in the short-term. The natural gas story may take a bit longer to correct itself. The good news is that we have mainly been an oil-focused driller in the U.S. market. Coming back to the effects of M&A. Until the combined entities get through a budget cycle and start addressing decline rates, we don't expect solid improvements in the U.S. market until early to mid-2025. Our U.S. business unit continues to expand its PVI contract base and now has over half the fleet on a PVI contract that builds off our performance driller team coupled with our Edge Autopilot drill rig control technology. Not only do we get a rate for our Edge Autopilot technology, we capture the upside value generated to the operator through performance metrics. Our wellsite - I'm sorry, our well service business unit, which is focused primarily on the Rockies and California well servicing market, continues to enjoy high utilization in the upper 80s. Our directional drilling business, which is essentially a mud motor rental business, continues to provide some of the best motors with high-quality rebuilds in the Rockies. Moving on to our Edge Autopilot drilling rig control systems. We continue to deploy Edge Autopilot, which employs algorithms and AI on new rigs and continue to expand the Edge Autopilot platform on each of the rigs that already have our Edge Autopilot drilling rig control technology. This part of our business continues to grow at a rapid pace year-over-year and delivers results with reduced well times and increased P rates with reduced tortuosity. So with that, I'll move to questions. Operator: Thank you. [Operator Instructions] Your first question is from Aaron MacNeil from TD Cowen. Please ask your question. Aaron MacNeil: Hey, good morning. Thanks for taking my questions. Bob, the debt repayment commitments don't leave a kind of wiggle room for growth capital. I think you've spent maybe $4 million to date. In your view, are you having to turn down organic capital opportunities or good returns that your customers are asking for? Or do you think you're generally keeping pace with what your customers need? Bob Geddes: Yes. No, for sure, we're keeping pace in any conversations we have. Because we are drilling wells faster, the operator is willing to help invest in any upgrades in that growth CapEx side. So the market continues to absorb that conversation well. Aaron MacNeil: Okay. Sort of switching gears here, we've seen H&P do a big international deal and sort of indicate they may move rigs to international markets. I guess what's your appetite to engage in that, given that you already have some international presence? Bob Geddes: Yes, yes. Well, as you know, we started that movement 20 years ago with the acquisition and have expanded that running 30-plus rigs. It is - and we operate in six different countries outside of North America. It is a challenging business for sure. International comes with its own interesting challenges. I would say that we've been feeding rigs out of North America. For instance, our Argentinian rigs are rigs that we bought through the Rowan acquisition that were upgraded by the client and shipped to Argentina. So we've been quietly doing this for some time. We shipped 10 ADR, smaller ADRs out of Canada when the coal seam gas fell apart and we shipped them to Australia. So I'm glad to see another contractor. I understand that you need to get outside of North America. H&P is a strong well-run company so I'm sure they'll do well. Aaron MacNeil: Again, I guess, maybe the better question to ask is like what's sort of a checklist that you'd have to go - wish list you'd have to go through to maybe move a rig in your fleet to an international market? And then where do you think it would represent the best opportunities for the fleet? Bob Geddes: Well, that's a good question because it's a dynamic process. We look at Australia as being a pretty static business with small and steady growth as they develop natural gas in their utility grid. The Middle East is steady. Bahrain, we have two rigs. Those are well contracted. Same with Kuwait. Oman, we've got three ADRs there. One is coming down here for a short period of time. We already have another operator saying they'd like to pick it up plus add a few more to it. So I'm not worried about - when you perform, you always find work. So those rigs will continue to work. But we're not interested in going into new countries. We are always interested in expanding our footprint in the countries we're in. That makes most sense for us. Operator: Your next question is from Waqar Syed from ATB Capital Markets. Please ask your question. Waqar Syed: Thank you for taking my question. Bob, so you mentioned that you have 37 rigs running in the U.S. right now. How does that number compare to the average in Q2? Bob Geddes: You mean in historical Q2? Is that what your question is, Waqar? Waqar Syed: Yes, that's correct. Like this Q2 '24, what was the average number of rigs running? Bob Geddes: Yes, we're hanging on to about 7% market share. We're down year-over-year for the quarter by about, 10 rigs year-over-year for the quarter in the U.S. Waqar Syed: Yes. Now your revenues quarter-over-quarter in the U.S. were flat at around $208 million. Your rig count was down. So what's the gap? Is it all well service, hours were up 35%? Did that kind of help the quarter-over-quarter revenue comparison or there was something else as while the rates - the risk went up or what was the cause of flat revenues? Mike Gray: We saw the increase in well servicing. There was also the increase, as Bob was talking about, of drill pipe being outside the contract now. So some ancillary add-ons and then well servicing would be the largest contributor to that gap. Waqar Syed: And is that sustainable into the subsequent quarters as well in Q3 and Q4 outside of contract day rates that you're seeing revenue pick up as well, as well servicing hours in Q3? Bob Geddes: For sure. Things like the drill pipe, for example, Waqar, have manifested itself from the accelerated penetration rates and the use of flat water versus oil-based mud systems. In a lot of these cases, it tears a drill pipe apart pretty quickly. We used to get 6 to 7 years out of a drill pipe. We get maybe 2 to 3 years max out of a drill pipe, in some case, less than that. And every contractor is feeling that same push. Everyone's drill pipe costs are up about 3x what they were 5 years ago, and that's why the move to put it outside the contract to get a rate for it. In some cases, we have the operator provide the pipe and we just manage it for them. And then we've got the other end of the extreme. We will give them a rate as high as $8,000 a day for managing the pipe, handling the destruction and the replacement of the pipe through the process. So, it's somewhere in between. But it will continue to be a charge as we continue to have these high penetration rates in these 3-mile and 4-mile laterals. Not going away. Waqar Syed: That makes sense. And then could you talk about asset sales? So, Mike, there was a $40 million real estate portfolio that you were interested in selling. We saw $8 million of asset sales in Q2, $3 million in Q1. What should we be expecting for the second half? Mike Gray: We are working through it. We have two properties up in Nisku that are actively marketed right now, and we are working through a process in the U.S. So, I would expect movement of that in Q4. Not the whole balance, but a portion of the balance, I believe will be closed in Q4. Waqar Syed: Okay. That makes sense. And then the $147 million CapEx number, that remains unchanged. Do you see anything in the horizon that could move it up or down? Mike Gray: I think there is - I mean, with the U.S. muted activity, that will probably put, I think a gap on some of the CapEx that was required for the U.S. But also I mean there are some international opportunities here and there. So, for the most part, that should be fairly steady. If anything, if it does increase, it's usually tied to an EBITDA event, so a net positive to the balance sheet and the income statement. So, once again, if it's a positive impact, then we will definitely look at stuff, but it should be really steady around there. Bob Geddes: Yes, we won't invest in any CapEx if it doesn't pay for itself in less than a 1-year period. Waqar Syed: Right. And then just one final question on the pricing side in the U.S., like just the drilling environment, what do you see right now? Bob Geddes: Well, it seems like it's bottomed. It depends on the area and the type of rig. But I would say that it's - it feels like its hit bottom. We have been catching a falling knife in the last quarter as the markets have moved. The Permian is still running 304, but it's not going up, but it isn't going down. So, as operators merge together, of course the first thing they do is they remove a few rigs, get to the end of the year, put together a new pro forma budget on the consolidated business and then walk into 2025. So, we kind of expected that all this M&A activity would provide that result, so it's not a surprise. But I would say rates have stabilized at the bottom end. And with drill pipe outside now and part of the total gross rig rate, we are still in the low-30s on a gross basis. Waqar Syed: Okay. And all of these M&As, like we have seen a number of these big mega mergers. Now, where do you stand with respect to your exposure to the acquirers versus the target company? Bob Geddes: Well, we are on the right side of that equation on probably 80% of our portfolio, which is a nice place to be. The other nice place to be is to have industry reports showing Ensign as the highest penetration rate driller of the top six in the U.S. So, we are in conversations with companies that are the acquirer, where the acquiree, we did a lot of work for and they are going, hey, we want to hang on to those rigs. Operator: Thank you. Your next question is from Keith MacKey from RBC Capital Markets. Please ask your question. Keith MacKey: Yes. Thanks and just a question about your debt repayment target, maintain the $600 million to 2025. And of course, you always note that industry conditions could move that up or down. But based on prevailing industry conditions we see now, with rig counts where they are, if that stays flat from here, do you see any risk to that $600 million debt repayment target? Mike Gray: No, when we look at the interest savings year-over-year, that's starting to decrease quite a bit. I mean it was down almost 20% year-over-year. So, you have some buffer being built in on the P&L from interest savings. If activity remains sort of steady as it is, your CapEx is going to remain kind of in that $150 million range. So, consensus for '24 is $450 million-ish. '25, I mean who knows where that's going to be, plus or minus. But when you look at that with $150 million in CapEx, $90 million or less in interest expense, there is about $210 million of free cash flow to go towards repayments. And then we do have some non-operational stuff like asset sales and some working capital movements to kind of aid in that. So, yes, when we look at it, I mean if everything kind of remains steady, we foresee this being quite easily to be achievable. Keith MacKey: Yes. Okay. It sounds good. And just a question on your - you mentioned the free cash flow number. There is also some mandatory debt repayments and liquidity reductions forthcoming. At the end of the year and into Q1 next year, if the Street consensus is right, what kind of breathing room do you foresee having in terms of liquidity? Mike Gray: We have never given some specifics. I mean we will have ample liquidity to continue to run the business as we have had in the past, so. Keith MacKey: Fair enough. And just one more question on your maintenance CapEx per rig in the U.S. What approximately is that running these days? Bob Geddes: Good question. We like to think of an operating rig on an annual basis requiring about $1 million to $1.25 million depending on the type of rig it is. Operator: [Operator Instructions] Your next question is from Josef Schachter from Schachter Energy. Please ask your question. Josef Schachter: Good morning Bob, Mike and Nicole, a challenging day to have your conference call, given what's going on in the market. I wanted to ask a macro question. November 5th is a big day in the States. And energy industry could have 180 difference in terms of go-forward strategy based on what happens that day - that night. Are you getting any commentary from companies saying that, we will keep what's going on into Q4, but Q1 is up in the year depending upon the results of November 5th? Bob Geddes: That's a good question, Josef. I think that what we are seeing is the macro fundamentals of demand play out. Not to get into too much of the politics, but we saw one of the contestants suggest that they have changed their platform on fracking and they are okay with fracking now. So, we are not getting any feedback from our operators. A lot of them are saying, we are certainly not going to accelerate drilling into the fourth quarter. And I think that's driven more so not by the election, but by, I guess the - staying with their plan to deliver shareholder return, not to accelerate CapEx and just staying disciplined. So, I don't think the election has much impact is what we are seeing. Josef Schachter: Thanks for that. That's it for me. Operator: Thank you. There are no further questions at this time. Please proceed. Bob Geddes: Alright. Thank you, operator. Closing statement, looking forward, it's an exciting time for Ensign with robust Canadian and international market fundamentals and improving long-term outlook in all of our U.S. markets and excellent visibility for sustained free cash flow with growing margins to continue executing on our debt reduction plan. With the application of EDGE Autopilot combined with an expanding performance-based contract base, backed up with our superior performance drilling teams in the field, Ensign is delivering value to operators, which supports rate increases moving forward. Again, the focus continues to be accelerating debt reduction into a steadily improving construct for the drilling and well servicing businesses globally. I would like to thank our professional crews and our employees, along with our customers for helping Ensign achieve the performance and industry-leading milestones that we - that the industry does recognize us for. I look forward to our next call in three months time. Stay safe. Thank you. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.

Earnings call: MPS surpasses Q2 expectations with record revenue By Investing.com

Monolithic Power (NASDAQ:MPWR) Systems (MPS) has reported a record second-quarter revenue of $507.4 million for 2024, surpassing market expectations. The increase was driven by heightened demand for AI power solutions, improving order trends across various markets, and the fruition of past design wins. As MPS transitions from a chip supplier to a full solutions provider, the company is focusing on expanding its global supply chain and diversifying its offerings to sustain future growth. MPS, under the ticker MPS, continues to demonstrate robust performance in the semiconductor industry. The company's strategic shift towards being a full solutions provider, coupled with its leading position in vertical power delivery, sets a positive tone for its future prospects. MPS's next earnings call is slated for late October, where further developments and financial results will be discussed. Monolithic Power Systems (MPS) has not only delivered impressive revenue figures but also exhibits a strong financial posture as reflected in several key metrics and InvestingPro Tips. The company's market capitalization stands at a robust $38.79 billion, highlighting its significant presence in the semiconductor industry. With a high price-to-earnings (P/E) ratio of 94.74, MPS is trading at a premium, which could be indicative of the market's high expectations for its future earnings growth. One of the InvestingPro Tips that stands out for MPS is the company's consistent track record of raising its dividend, which it has done for 6 consecutive years, showcasing a commitment to returning value to shareholders. Additionally, 6 analysts have revised their earnings estimates upwards for the upcoming period, suggesting that the company's financial performance may continue to outperform expectations. InvestingPro Data further underscores the company's financial health. MPS has maintained a gross profit margin of 55.31% over the last twelve months as of Q2 2024, which is a testament to its operational efficiency. Moreover, the company's operating income margin during the same period stands at 24.15%, reinforcing its ability to translate revenues into profits effectively. For readers interested in further insights and analysis, InvestingPro offers additional tips on MPS's financial performance and outlook. As of the latest update, there are 15 additional InvestingPro Tips available, which can provide investors with a more comprehensive understanding of the company's valuation and potential investment opportunities. To explore these insights in detail, visit the dedicated MPS page on InvestingPro: https://www.investing.com/pro/MPWR. Genevieve Cunningham: Welcome everyone to the MPS Second Quarter 2024 Earnings Webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO; and Tony Balow, VP of Finance. Earlier today, along with our earnings announcement, MPS released a written commentary on the results of our operations. Both of these documents can be found on our website. Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainty. Risks, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the Safe Harbor statements contained in the Q2 earnings release, and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now, I'd like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Gen. Good afternoon, and a big welcome to all of you. Let me open by saying MPS reported yet another record quarter with Q2, 2024 revenue of $507.4 million, exceeding the high end of our guidance. Our strong revenue growth was attributed to three factors, increased demand for AI power solutions, improving order trends in several of our end markets. And lastly, initial revenue ramps associated with design wins secured in past years. Separately, we continue to expand and diversify our global supply chain, to ensure supply stability and capture future growth. As we have emphasized for many years, our results reflect continued success of our proven long-term growth strategy, and our transformation from being only a chip supplier, to a full solutions provider. I will now open the webinar up for questions. Gen, could you please ask the first caller? A - Genevieve Cunningham: Our first question is from Matt Ramsay of Cowen. Matt, your line is now open. Matt Ramsay: Thank you very much, everybody. Good afternoon. Michael, Bernie, congratulations on, I'll just say, it's nice to have a calm part in the storm relative to what's been - all of us have been dealing with over the last two weeks, so congrats. I wanted to ask a couple of questions that I imagine the enterprise data segment is going to be a huge focus on this call. So maybe I'll just start with the first question. Bernie, if you could maybe give us some directional color by end market in your guidance for September, I'd appreciate it. And secondly, Michael, if you could talk a little bit about what you're seeing in some of the non-enterprise data segments, like things like consumer, comms, auto. The model's been driven by this big growth in enterprise data, but from what I can tell, your company's had a lot of design win success in some of these other areas where the macro has really been challenging. And I'm wondering if you're starting to see any green shoots there yet, for recovery in some of those other segments? Thanks, guys. Bernie Blegen: Sure, I'll keep my comments fairly short as far as the Q3 outlook by end market. Essentially, the bookings trend that we carried into Q3 has improved quite a bit over the last few quarters, and has been fairly broad as far as the end market participation. If you look specifically at enterprise data, you'll see that we took a fairly large step up in each of the last two quarters. And then in the third quarter outlook, we see continued growth in communications, storage and computing with incremental improvements and also in our other groups. Michael Hsing: Yes, your second question, as Bernie said it, we do see some of our - other business would not relate to AI. And now it is difficult to separate AI, non-AI. Other business we designed in which we - let's say that, okay we ship these products to the half a year ago. A year before we see the market start to wakening up. But that's whatever it is, whatever it is, okay. And we do see a lot of new design, new requirement, which is much higher power, for especially for communications. And well, as a matter of fact, as across the board. And these designs are much higher power than the previous versions. And these are all relate to the new design, relate to AI - and AI requirements. And these design wings, we'll probably triggered downs in a game of two [ph] or three years, and change of revenues. Matt Ramsay: Thank you very much, guys. I appreciate it. I asked two questions. So I'll get back in the queue. Thanks. Genevieve Cunningham: Our next question is from Dustin Fowler of Oppenheimer. Dustin, your line is now open. Dustin Fowler: Hi guys, I just have couple of quick questions. So for power isolation, I believe you ramp later this year in auto followed by data center next year. I think both markets could be Greenfield opportunities in the hundreds of millions each. Could you just give us a sense of the ramp in both markets, the competitive landscape and maybe any market sizing if you can? Bernie Blegen: Dustin, I apologize. This is Bernie. I didn't hear which two markets. Dustin Fowler: Oh, sorry. That was auto and data center for power isolation? Michael Hsing: Okay. Yes. We do start to ship in the gate [ph] and the product for the higher powers and for data centers. And this is only the beginning. And would you say that that's very true? Auto is being known and we, when ADAS and became more, more and more the cars converged into the ADAS, okay. And which we believe in being a two or three years, all the cars will have that features. And we, so far we provide all the, we have design wing in all these car makers, especially in the EVs. Dustin Fowler: Okay. And I guess as we think about kind of auto this year, I think street has auto model flat. I guess how realistic is that given 70% content gains you have with your largest auto customer before power isolation plus the wins with Chinese OEMs? I guess maybe for Bernie, are you modeling auto flat this year? And how should we kind of think about share gains? Michael Hsing: Well, we cannot pick the, you want to pick the models and gave me, and you want to pick them, I can't give you a model. My accuracy is a plus minus 12 months. And going forward, we are very confident. Bernie Blegen: Yes, I think the near term outlook for automotive remains a little bit fuzzy. And for example, in Q2, we were expecting a nice uplift, which did not occur. And so Michael's correct is that positioning within the next two, three quarters, is hard to predict for auto more broadly and EV specifically, but our long-term positioning is only getting better with additional design wins. Dustin Fowler: All right, thanks guys. Genevieve Cunningham: Our next question is from William Stein of Truist. William, your line is now open. William Stein: Great, thanks for taking my question. Michael, I'm hoping you can linger on that comment you made about solution selling. I think might've been the term used. I think in the past, we've been conditioned to hear about modules versus semis. Can you linger as to what your, maybe spend a minute explaining what sorts of products and what end markets, and what growth you see coming from that activity? Michael Hsing: I like that question. Yes, okay. As we said, we started that journey long time ago, okay. And at the beginning, maybe I didn't know, we didn't know what the hell we were talking about. And okay, but that's the directions. And that's including a part of e-commerce. And we sell plug and play solutions. So the effort is that the journey will be, we are, we known to be a semiconductor company. And yes, we do. We do all that we provide. And when we sell a silicon, we're selling, actually we're selling a solutions. We know all the technical details in terms of how we implement the solutions. So my effort is we want to monetize all our knowledges. MPS in the end, doesn't make any things. And we all making the money from our knowledge. While we capitalize all the entire our capabilities. And so the journey we started, now we're selling the solutions. It's probably 20%, 25% of a total MPS total revenue. Every piece of a silicon used to be selling somewhere between $1 and $0.50 to $1. Some of them are a lot of them even lower for the mass market. And which we kind of vary little now, especially in consumer business. And now, we're turning to a solution company is still a semiconductor based solutions. We sell those solutions. Now particularly as you call it, as a modules. And like I don't know what the appropriate word for that. And so today is 25%, 20% to 25% of a total revenues. MPS module business excluding AI. We're running a couple hundred, close to $200 million. And we're growing every year by more than company's percentage growth. And if you look at this, this way, every chip we sell, all the solution is more than a chip price. And you generally $4, $5, $6, $10 of a content that we can sell. So that's the result of today. And we will commit on the journeys. And again, we're transforming a company to a silicon only, to silicon based solution providers. Bernie Blegen: And Will, if I could just add two comments quickly. The first is, and this is specific to your question, that it's across all of our markets. It primarily focuses on those that have longer design cycles, where we can add expertise in design solution. And the second point is again, while we are driving a lot, a higher percentage of our business to the modules, or to the more complete solutions. We have the ability, like no other company to be able to deliver the type of solution our customer wants, whether it's a die, a chip or some package in between. Michael Hsing: Yes, and many -- maybe traditional semiconductor companies and they are hard to distinguish, whether they're solution providers or selling modules, selling solutions or selling semiconductor only. And that's especially the case and apply for AI powers. And there's a very few company using a silicon based, the module solution to power up this AI solution or data centers. William Stein: If I can add a follow-up please. Can you talk about what you're doing in vertical power delivery? I know there's a lot of companies that are claiming to have it, or be ramping it. And I know you guys are one of those companies that are I think more clearly delivering, but maybe you can talk about what your efforts are yielding in that area? Thank you. Michael Hsing: We are - in the leading positions. Okay, I said it - and there's maybe one, I will say the one or two company. Maybe one company have the capability have - and similar to MPS, the market is huge and it's growing. And MPS is, what the leading position, is because not by one day, like one-or-one an AI happened, we developed that years ago for that. And there's not many semiconductor companies that are based at the semiconductor company have that kind of a capability. William Stein: Thanks guys, good job on the quarter. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hi guys, let me offer my congratulations. Maybe just first Bernie, a quick follow-up on Matt Ramsay's question on the drivers of sequential growth in the third quarter. I think you mentioned comms and storage and computing, but I didn't hear you specifically say enterprise data. I just wanted to confirm enterprise data is still one of the big growth drivers in the third quarter. And then I'll get to the two questions? Bernie Blegen: On the enterprise data, the way I tried to tee that up, first off, yes, it is expected to grow, but we have grown significantly each of the four prior quarters to this. So the rate of growth is slowing down. And the biggest for this quarter only. And I offer that because there's a lot of opportunities that have yet to begin to ramp with a number of the different companies that we're currently working on designs with. But I was calling out in particular that both storage and computing and communications will be good drivers in Q3. Michael Hsing: Quinn, you know VR 13.5 and we start to have a significant revenues. And that was the beginning, you know that. And VR 14, which hasn't really ramped up yet. And we have a lot of design, we increase it. VR 13.5 is like a MPS -- MPS is a test case. And so when during the shortage, okay, a lot of revenues, a lot of volumes shifted to MPS. And our competitors couldn't deliver, we delivered and we delivered. And now the benefit it is - for VR 14, where will be a significant players in the market segment? Bernie Blegen: And particularly in the second half of this year, it looks like that segment is starting to take off. Quinn Bolton: Great, that was going to be served. I guess my first question was just, could you talk within the enterprise data about some of the opportunities, whether it's on the CPU power side or just broadening out of your AI portfolio? And then I'll have another question on vertical power if I could squeeze in that second question? Michael Hsing: Go ahead. Quinn Bolton: So the question on vertical power, I mean, just some different competitors, may mean different things when they're talking about vertical power. And I just wanted to kind of get your guys' view on the market. When you guys talk about vertical power, is that true vertical power where the voltage regulator is sitting underneath the processor substrate and supplying current vertically into the processor? Or do you guys consider sort of stacked packages, where you've got one or more voltage regulators, or phases in a module with the power inductors and capacitors, and other things that might be stacked vertically, but still delivering current laterally into the processor? What's your definition of vertical? Because I think there's some confusion in the market of what may be vertical and what might look vertical, but actually still supply current laterally? Michael Hsing: Yes, you're right. There's one is some customers so Quinn and using the top surface lateral power supply, which is like a very similar to server, the server CPU power supply. And other ones turning into the backside, still lateral powers. And more advanced one is directly under the CPU. And so to answer the question, is MPS supply currently we're running all three solutions? Chip, all modules, we have everything there. Bernie Blegen: And Quinn, if I could also add to this that, the necessity for the different deliveries of power, is as you get into increasingly higher current and in addition to either lateral or vertical power, we also have liquid cooled that, we believe that we have a position on. Michael Hsing: Yes, to Quinn, to answer your question is that the most efficient and difficult to do, is you're making a module directly under the CPU. And that's the highest efficiency power delivery. There's a lot of a problem, and a lot of technical issues associated with that type of approach. So many companies take a conservative approach, okay? And some companies just do only like servers and top surface lateral power delivery. And for those very high powers, well over 1000 watt, all these powers, the power modules directly under the CPUs. And these are the highest efficiency. Quinn Bolton: Got it. Thank you, Michael. Thank you, Bernie. Genevieve Cunningham: Our next question is from Chris Caso of Wolfe. Chris, your line is now open. Chris Caso: All right, sorry, thank you. The first question is on seasonality, and how that may be changing for you. In the past, the December quarter typically was a seasonally down quarter, but your business mix has changed quite a bit, since those days and the revenue is now coming from segments that are not as seasonally, not a seasonal December quarter. With that, how should we look at December seasonality going forward, or is the old model no longer appropriate, as we look forward? And if there's anything you want to comment on with respect to December? Michael Hsing: Yes, we're seeking advice from you. What's our seasonality? With a new business, with all these inventory oscillation from our customers, and we don't know so came in - you have a huge shortage, then it comes up the huge over supplies, and okay now, the main, I assume, and our customers consumes all these excessive inventory. Now the market is waking up. And is there another shortage? I don't know. And it's difficult to forecast. And - the lead time is still very short. Chris Caso: All right. That's fair enough. As my follow-up question, I wanted to follow-up with vertical power as well. And what we know, particularly within the enterprise segment AI, we've got some higher wattage processors coming. Can you talk about what you expect for content on that, and what in particular you expect for vertical power next year? Because I know there's some debate, certainly doesn't seem to be debate over whether you're ready for vertical power, whether the ecosystem is ready for vertical power. And does that make a difference with regard to your content, as you go into the next generation of processors, because the wattage is certainly going higher? Michael Hsing: Yes, I can tell you this. Our customers will not be appreciated in talking about how many - dollar per their unit, or GPU unit, okay? And so, then they don't want us to talk about it. And second, I don't know, I don't want to know about it. Chris Caso: Okay. Understand, but I mean, in just in terms of the opportunity, maybe you could speak in more general terms about the opportunity that's available to you? Michael Hsing: Oh, sure, yes. And now you look at our revenues, right? Okay, for a couple of companies, okay, and from last year, was like a what, it's a 1% or 2%, or maybe last year's, okay, couple of percentage our total revenue. Well, today, so like we're running like a what, 20%? And 20%, so that's a full $500 million, okay? And we were told this is at the beginning. And there's a lot of other companies, like where our opportunities and our design wing hasn't really ramped up in company like Google (NASDAQ:GOOGL)'s and AWS and Meta (NASDAQ:META). And those coming later. So I see the huge opportunities and I do see, okay, this is not MPS only, but the market's way too big. We don't want to turn into an AI company only. Chris Caso: Yes, I think the only thing I'd probably had on top of that besides for the direct AI opportunity, I think you've heard us talk about the AI trickle-down effect, whether that can be memory, it can be optical, it can be pulled through of networking. I think there's a lot of opportunity for MPS, beyond even the direct AI business? Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes, thank you, Michael, Bernie. And congrats again on another stellar quarter. I wanted to follow-up on enterprise data, but I'm going to move away from the processor power management, and ask you more about opportunities elsewhere in the data center, especially power supply. I know historically you haven't talked a whole lot about GAN, silicon carbide, but I'm pretty sure you have some activities there. So can you elaborate a little bit on what you're doing on the power supply side of data centers? Michael Hsing: Yes, I like that one. Okay, I like that one. But I can't tell you the revenue yet, but it's a small, okay? And we, in the since 2016, and again, we start to develop our own silicon carbide. We're not selling expense. It will be a part of our solutions. I said very, very early, so we're not intending to sell a fit [ph] as a power device only. So now, we designed those three kilowatt, six kilowatt, 12 kilowatt power supply. And you guess what? It's a data center. It's a data evaluating, so we have a very little revenues, but the biggest is the MPS only, owned. All our test plot, we're using a huge amount of power supply, and MPS is our own customers. All these testing equipment that we have to design, we have to invent it, how to test these modules particularly, and also as well as burning. And MPS supply these power modules to our vendors, and our vendors are in problem went into these systems and it became our test equipment. And so, that's the revenues we start to generating. And but for 4G and for data centers, and these are still in the, well, we engage them a year ago or so, couple years ago. And so, the revenues small, but we're looking for the big revenues from that segment, because MPS provides the highest efficiency and the smaller size. Tore Svanberg: Yes, that's great perspective. As my follow-up, I recall, because we've gone through a few cycles together, I recall usually you use downturns to gain a lot of share. I know everyone's excited about data centers today, but what are some of the areas, where you're starting to see more meaningful share gains from a designer perspective, now that we're sort of navigating here at the bottom of the cycle? Bernie Blegen: Sure, so I think that we've been very clear about the positioning that we have an automotive, and how that's continuing to grow across multitude of different platforms with a multitude of different Tier 1 suppliers and OEMs. I think the most recent area for improvement where somebody's Greenfield opportunities, are becoming more visible in market, would be in particular with communications. We're seeing that in the wireless and 5G, and I think that we've seen some early indications of continuing investment in that segment. So I'd say that's probably the area that will be most visible, but obviously I don't want to forget industrial, which even though right now, is a relatively modest part of our business. And it's not shown a lot of momentum towards growth, probably is the next area, where we have a lot of Greenfield opportunities that will materialize in the next four quarters. Michael Hsing: Yes, go ahead. Tore Svanberg: Yes, I was just going to ask, and the RV market, is that going to be under auto or industrial? Michael Hsing: RV? Tore Svanberg: The RV market, the Kemppi car market, I know you've talked about that? Michael Hsing: Oh yes. No, no. Yes, okay. That's one of my favorite ones. Okay, yes, okay. And I think it's going to be in industrial market. Because share - all these products share the same signatures as we do for data centers for our own test plot and for test equipment, okay? We'll be very much shared the same characteristics and also for robotics. And especially for those moving, not stationary robot. And these robots move around, and they all need that type of a power supply and the charging and the battery management. And these all share very much the same characteristics as RVs, okay RVs happen. Tore Svanberg: Yes, those could be industrial or consumer or even the humanoid stuff too. So I don't think I want to just put those...? Michael Hsing: I think it's a - we're probably in the industrial side. Yes, okay, yes. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hi guys, just wanted to add a quick follow-up question. There have been a few semiconductor companies this earnings season that have sort of mentioned having licenses to - Huawei being revoked in the quarter. And it's raised some questions from investors. I just wondering if you guys could address do you have a license to ship to Huawei? If you did, has it been revoked? Is that, is there any real exposure at MPS to that customer? It's obviously not impacting your near-term outlook, but I figured I just asked, because we've gotten a number of questions on potential Huawei exposure, across the semi coverage? Thank you. Bernie Blegen: Quinn, I can make this pretty simple. We don't have any licensing or contractual arrangements with Huawei that are at all. So they can't be canceled. Any business we have with them has always just done on a PO basis, and we have no indication of a change in their relationship. Quinn Bolton: So Bernie, I guess there was more that export license question. Do you need an export license to ship to them? I think that's what's sort of price? Michael Hsing: Yes, our product is not, not like in the 20, below 24 nanometer or whatever, that we are not, as far as I know. Bernie Blegen: Yes, you're right. Michael Hsing: And as far as I know, we're not subjected to the export limit, have any limitations. And, but we will talk to our, to answer your question precisely, I will consult our legal counsels. Quinn Bolton: Yes, okay. Okay. Thank you. Genevieve Cunningham: [Operator Instructions] As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: Great. I'd like to thank you all for joining us for this conference call, and look forward to talking to you again during our third quarter conference call, which will likely be in late October. Thank you, have a nice day.

Earnings call: IRadimed posts 12th record quarter, eyes future growth By Investing.com

IRadimed Corporation (IRMD), a leader in the development of innovative magnetic resonance imaging (MRI) medical devices, has announced its financial results for the second quarter of 2024, continuing its streak of record-breaking performance with its 12th consecutive quarter of record earnings. The company reported a robust revenue of over $17.9 million, a notable gross profit margin of 78%, and a 19% increase in GAAP diluted earnings per share compared to the first quarter of the same year. With a strong focus on future growth, IRadimed is preparing to file a 510(k) for its new pump in August and expects FDA clearance by mid-2025. Meanwhile, the company is working on increasing sales for its Monitor business and is seeing a steady adoption rate for its FMD device. A new headquarters is under construction, and the company has provided guidance for Q3 2024 revenue between $18 million and $18.2 million, reaffirming its full-year revenue projection of $72 million to $74 million. IRadimed Corporation's second quarter of 2024 results demonstrate the company's continued strength in the MRI medical device market. With strategic plans in place for product development, market expansion, and operational growth, IRadimed is poised to maintain its momentum and capitalize on future opportunities. Investors and stakeholders can look forward to the company's progress as it moves towards the anticipated launch of its new pump and further expansion of its product portfolio. IRadimed Corporation's (IRMD) financial performance in the second quarter of 2024 has been impressive, with the company continuing to break its own records. To provide further context to these results, let's delve into some key metrics and insights from InvestingPro. The company's market capitalization stands at a substantial $562.54 million, reflecting investor confidence in its market position and future prospects. With a Price/Earnings (P/E) ratio of 30.42, IRadimed is trading at a premium, which can be indicative of market expectations for continued growth and profitability. This is further supported by a solid gross profit margin of 77.21% in the last twelve months as of Q2 2024, showcasing the company's efficiency in managing its production costs and maintaining profitability. InvestingPro Tips highlight that IRadimed holds more cash than debt on its balance sheet, which is a strong indicator of financial stability and provides the company with the flexibility to invest in growth opportunities, such as the development of its new pump. Additionally, analysts have revised their earnings upwards for the upcoming period, signaling optimism about the company's financial outlook and potential for continued earnings growth. It's worth noting that with a high P/E ratio relative to near-term earnings growth and a high Price/Book multiple of 7.06, investors may want to keep an eye on the company's ability to sustain high valuation multiples. However, the company's track record of profitability over the last twelve months and strong return over the last five years suggest a robust business model that has historically delivered value to shareholders. For those interested in a deeper analysis, there are 11 additional InvestingPro Tips available at https://www.investing.com/pro/IRMD, which can provide further insights into IRadimed's financial health and investment potential. Operator: Welcome to the IRadimed Corporation Second Quarter of 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, August 1, 2024, and contains time-sensitive accurate information only today. Earlier, IRadimed released its financial results for the second quarter of 2024. A copy of this press release announcing the company's earnings is available under the heading News on our website at iradimed.com. A copy of the press release was also furnished to the Securities and Exchange Commission on Form 8-K and can be found at sec.gov. This call is being broadcast live over the Internet and on the company's website at iradimed.com, and a replay will be available on the website for the next 30 days. Some of the information in today's session will constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are focused on future performance, results, plans and events that may include the company's expected future results. IRadimed reminds you that the future results may differ materially from those forward-looking statements due to several risk factors. For a description of the relevant risks and uncertainties that may affect the company's business, please see the Risk Factors section of the company's most recent reports filed with the Securities and Exchange Commission, which may be obtained free from the SEC's website at sec.gov. I would now like to turn the call over to Roger Susi, President and Chief Executive Officer of IRadimed Corporation. Mr. Susi? Roger Susi: Thank you, operator, and good morning, and thank you all for joining us on today's call. I'm very happy to report yet another record quarter. In fact, our 12th consecutive record quarter. Driving this record quarter was revenue at over $17.9 million. In addition, gross profit was up, reaching 78% and earnings came in very strong as well, with GAAP diluted earnings per share increasing 19% from Q1 of this year. Recall that the pump order intake rate in Q1 was very strong. And Q2 now reflects the revenue generated as we move to keep the pump backlog in check. Plus this pump backlog being mostly domestic results in the sizable gross margin. Once again, our team is executing very well, and product demand remains strong, actually extraordinary in the case of the current 3860 model IV pumps. We are on target to have the strong year that we have planned, even though the new 3870 IV pump is still not on the menu. I'll defer to Matt, who's standing in for our CFO, Jack Glenn, this morning, for more details regarding the revenue and earnings comps. So let me move on to the new pump progress. It's all about getting that clearance that we've been working so hard to achieve. Of course, key to this is having a clear, concise complete 510(k) filed an soon. My recent commitment for 510(k) delivery was in August, and we are very confident that it will be in the FDA's hands in these next few weeks of August. Again, FDA will ask questions in some time -- sometimes we'll transpire during the review and additional question period. We will have a better indication of the time required for final clearance of the 510(k) after receiving that first response and list of questions that we fully expect from FDA, which we expect to see in late October. At this point, as I have stated in the past, the 3870 will be a 2026 story revenue-wise. Clearance in mid-2025 means that we would expect only light revenues from this new device in Q4 '25 as well as the cell and shipment cycles are measured in months, not days. Due to strong increases in sales of the existing pump, helped by order or replacement of these older pumps that are 7 years and beyond, which we started seeing strongly in January 1, and -- we have now stepped up efforts on the Monitor business via new sales strategies and incentives. Though the Monitor business has been steady and strong, we believe these new incentives and methods will drive Monitor growth to get a new level. There's also been a steady adoption of our -- the FMD device. This relatively new offering is gaining in the market, though there is an inertia due to the placement of many of these units tied to construction of new MR suites. Construction being rather drawn out process and subject to delay, places a limit on the speed of delivery and revenue for the FMD line, dissimilar to the pump and Monitor. Still, as you will hear from Matt, revenue for the FMD is growing. Finally, a bit about our new headquarters. Construction is well underway, and the weather has not been overly cooled to the schedule. The walls and roof should be up and nearly dried in by the time of my next report. With the exception of moving -- with our expectation, excuse me, of moving just before next summer, right in time to begin production of the newly cleared 3870 MR pump. Now before Matt steps in for Jack comes online, I'd like to finish with a report of what we see in Q3. For the third quarter 2024 financial guidance, we expect revenue of $18 million to $18.2 million, with GAAP diluted earnings per share of $0.34 to $0.37 and non-GAAP diluted earnings per share, $0.38 to $0.41. Accordingly, we reiterate our guidance for the full year '24, and we expect to report revenues of $72 million to $74 million, with GAAP diluted earnings per share annually of $1.37 to $1.47 and non-GAAP diluted earnings per share of $1.52 to $1.62. Now I'd like to turn the call over to Matt Garner, who as I said, is going to stand in for Jack, who's up on the leave this morning. Matt? Matt Garner: Thank you, Roger, and good morning, everyone. As in the past, our results are reported on a GAAP basis and a non-GAAP basis. You can find a description of our non-GAAP operating measures in this morning's earnings release and a reconciliation of these non-GAAP measures to the GAAP measures on the last page of today's release. As we reported earlier this morning, revenue in the second quarter of 2024 was $17.9 million, an increase of 11% compared to the second quarter of 2023. We -- this increase was due to strong bookings and resulting backlog for our pump in the first quarter. This strength in bookings for the pump continued into the second quarter. Domestic sales increased 19% to $15.5 million, and international sales decreased 23% to $2.4 million. Overall, domestic revenue accounted for approximately 86% of total revenue for Q2 2024 compared to 80% for Q2 of 2023. The -- Device revenue increased 17% to $12.7 million. This was driven by a 52% increase in pump revenue. Revenue from disposables and services decreased 3% and -- to $4.7 million for the second quarter of 2024, while our maintenance contracts remain stable at $600,000. As Roger mentioned, the gross margin was 78.1% for the second quarter of 2024 compared to 75.5% for the 2023 quarter. This increase in gross margin is primarily due to favorable geographic sales mix of domestic revenue, a decrease in raw material costs and direct labor efficiencies. Operating expenses were $8.4 million or 46% of revenue compared to $7.2 million or 44% of revenue for the second quarter of 2023. We -- on a dollar basis, this increase is primarily due to higher sales and marketing expenses for higher sales commissions and sales activity expenses along with higher regulatory and payroll and benefit expenses. The noted strength in the gross margin resulted in income from operations growing 13.4% to $5.6 million for 2024 second quarter. We recognized a tax expense of approximately $1.4 million during the second quarter of 2024, resulting in an effective tax rate of 21.8% for the quarter, which is in line with the effective tax rate of 21.1% in 2023. On a GAAP basis, net income was $0.38 per diluted share, an increase of 15% and -- as compared to $0.33 for the 2023 quarter. On a non-GAAP basis, adjusted income was $0.42 per diluted share for the second quarter of 2024 compared to $0.36 for the second quarter of 2023. The -- Cash from operations was $6.6 million for the 3 months ended June 30, 2024, which is up $3.5 million for the same period in 2023. We -- for the 3 months ended June 30, 2024, our free cash flow, a non-GAAP measure, was $5.4 million, up from $3.1 million for the same period in 2023. And with that, I will turn the call over for questions. Operator? Operator: [Operator Instructions] And our first question will come from Frank Takkinen of Lake Street Capital Markets. Frank Takkinen: Congrats on all the progress. I wanted to start with 1 maybe on the revenue growth expectations line item. Obviously, pumps is growing very well as of recently, given the 7-plus year old warranty force conversion. Should we expect that continues through the end of the year? Or is that normalized down a little bit lower than the 52% growth rate this year and then monitors comes back? Or maybe just talk a little bit about growth expectations by pumps and monitors for the back half of the year? Roger Susi: Yes. Frank, good to talk to you. Roger here. So yes, we we'll see revenue from this uptick in the 3860, the original -- the existing, the old IV pump, which, as you know, we kicked off with this notice to our customers that we weren't going to do the service contracts on 7-plus year old pumps. So that is coming in fairly steadily. So your question was, is it going to grow? Well, it was, as I mentioned, it's surprisingly large, frankly, to us what happened. And no, I don't think it's going to grow more, but I do see it carrying us through the rest of these final 2 quarters of '24 and even into '25. So if you will, we've stepped up to quite a nice plateau. It's some 35%, 40% boost to this 3860 product line. And we feel that's going to stay there. Now it's not going to grow to 45% or 50%. No. But it's going to be very healthy and very much unexpected from what we were looking at 2 quarters ago when we first launched this program. So it will remain a healthy booster to our revenues, as I said, into 2025. So given that, this is why I mentioned that we're incentifying and doing some marketing things with the sales force to do the same thing. I don't expect it to be 40% with the Monitor. But to boost that Monitor growth from what it's been. It's been nice, but we hope to boost it a little bit more, not 30%, 40% like we got out of this pump, but healthily. And so, this is why we'll look forward in 2025, if you want to get a little out over our skis. And we expect '25, even though the -- as I mentioned, the new pump revenue won't be much of an impact til late in '25 and probably only a small amount. We're seeing '25 as another year in which we can grow again based upon the continued plaque oil business from the oil pump, and pulling off some incentive and marketing ideas that we're putting behind the Monitor line. Frank Takkinen: Okay. That's good color. I appreciate that. Maybe just a broader question. I don't know if it's been brought up in the last couple of calls. In the past, you've been able to push through ASP increases, what's the latest status with ASP? Do you think there's still more room to expand those ASPs, keep them where they are? Or how does that look over the next 12 months? Roger Susi: Yes. So we're still doing that. I mean, we're -- basically our biggest contracts have already happened in the U.S. market. There's a few smaller ones, which we'll see some price increases, both for -- mostly with the Monitor, but also comp a little bit. But we're also doing this internationally. Internationally, every time we have these calls, we point out that when the revenue mix is made up more heavily from international, it shows in the gross margins and in the bottom line. So we think there's got to be some increases yet in a number of countries internationally. So yes, I guess, to your point. But in the domestic side, the big -- the big agreements have already been boosted and we, by contract, we won't have -- we won't be able to move those again for another 1.5 years or 2. Frank Takkinen: Okay. That's helpful. And then maybe just last one for me on the backlog. Typically, you've carried a fair amount of backlog that's help you execute to expectations. Does that continue to be the case? Do you continue to carry a backlog? And maybe if you can kind of parse out between disposables as well as equipment, that would be helpful. Roger Susi: Yes. Maybe I'll let Matt help you out with that one. Matt Garner: Yes. I mean, related to our backlog, it continues to be strong. We don't really get too deep into what it's comprised of. But we do -- we continue to have growth, our sales force. We've got a 4 territories now. So the backlog is remaining consistent as it has in the past. Roger Susi: Yes. That's the takeaway. It's pretty consistent. So if you were looking yes, this is one reason why we're bullish on where we can get through the rest of this year and even into next year. Backlog has been very steady. Frank Takkinen: Perfect. Operator: One moment for our next question. Our next question will be coming from Jason Wittes of ROTH. Jason Wittes: Congrats on a nice quarter. So in terms of -- what are the timing for the new pump. Could you just walk us through kind of the milestones in terms of when you expect approval? And how long the manufacturing is going to take before and how long it will take to basically fill orders? Because I think you mentioned it's going to have only a modest impact on Q4 of next year. So I'm just curious in terms of what are the assumptions behind that? Roger Susi: Yes. Yes, let me give you some depth there, right? So as I mentioned, so we'll get the 510(k) in this month, really to make a prediction on how we expect it to come out until we see this first round of additional information requested by the FDA. I could -- it's anyone's guess. So it's very crucial what we'll see with that first AI ramp. That I can predict pretty well when that will happen. They're pretty steady once they get a 510(k) to get AI questions back to the applicants in 60, 65 days. They've been -- they've been pretty well able to do that. Even during the COVID period with -- they were able to get us questions back in 65, 70 days. So that would put us some time, let's say, latter part of October, early November. That's about when we'll have our -- it will be getting close to when we'll have our next earnings call. So really by next earnings call, depending on the scope and depth of these AI questions, I'll be able to tell you we got a longer slog or it's looking like we're on a faster track, from -- at this point, having no benefit of that and just making a filing in August, it's -- it's -- it's very difficult to predict. So got to give me about 65, 70 days if you to hear something back or started from us we should get it in later in this month. to get really any real color on that. So after that, right, I'm hopeful that we get a handful -- we get no more than a few handfuls of questions, certainly not 100 or 200, but less than that. And if that's the case, then I think we're on a pretty good track to have this in cleared in the latter part of Q1 or early part of Q2. So that will fit in fairly well if that happens. If we have clearance towards the middle of next year, certainly, it will be fine. That's the time we'll be moving into our new building, as I mentioned. And that's where we really plan to start up the production of the pump is with that increased capacity in the new pump. And so given that we get clearance in that early part of 2025 and we have new capacity online right in the middle of 2025, that's when we'll start building our demo equipment and getting the sales teams all amplified up and really hit the ground and start to talk about the new pump and take orders. So it won't be really a question of making pumps because by the time we actually get orders to fill, the initial few orders, this is why I said Q4 will show some revenue we anticipate from 3870, but probably not huge amounts, those would just be the initial orders coming in. And it takes -- there's a sales cycle here. So given that we start showing the product in Q3, No. We won't have tons of orders to ship in Q4, but we expect to have something that will be on the board. The real story, as I said, is probably getting into 2026. That's when the revenue will really start to be significant from a new product. Jason Wittes: Okay. That's -- I appreciate all the color on that. That's very helpful. And then in terms of -- I know you characterized the backlog, but if I think about your pump sales, it sounds like they're nicely above our expectations. I think that was -- I'm guessing a lot of it to do with acceleration of the backlog to some degree. At the same time, it seemed like the monitors were a little lighter than at least our expectations. Was that also backlog driven? Or what were the dynamics between those 2 businesses and what you saw this quarter and what the outlook might be? Roger Susi: Well, like I said, we started getting these orders in from that new program with 3860 pump in Q1. And we just didn't want that backlog from that product to get too long in the tooth and too far out of hand. So yes, we shipped heavily -- we shipped heavily to bring -- keep that under control, old pumps, 3860s in Q2. We didn't -- we didn't hold back much on the Monitor, but maybe a little bit to get these pumps out ahead of it. So backlog in general, that's your question that you're driving at is very healthy and it still has a good mix, still a little heavy maybe on 3860s, but that will start to balance out as we get towards Q4. I think we'll have Q3 still be a little heavy on the old pump. Roger Susi: Okay. Again, it's been a great pleasure, once again, that we can report our Q2 '24 excellent results. And it's also with great pride that we can guide that we expect strong performance and are on the right track as the year progresses. With that, I look forward to reporting our future successes as 2024 progresses, and thank you all for joining us. Operator: Thank you. This concludes the call. You may now disconnect.

AMG Critical Materials N.V. (AMVMF) Q2 2024 Earnings Call Transcript

Michele Fischer - Senior Vice President of Communications Heinz Schimmelbusch - Chairman and Chief Executive Officer Michael Connor - Chief Corporate Development Officer Jackson Dunckel - Chief Financial Officer Eric Jackson - Chief Operating Officer Good day, everyone. And welcome to today's AMG Q2 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. Please note that this call may be recorded and I will be standing by should you need any assistance. It is now my pleasure to turn today's call over to Head of Communications, Michele Fischer. Please go ahead. Michele Fischer Welcome to AMG's second quarter 2024 earnings call. Joining me on this call are Dr. Heinz Schimmelbusch, the Chairman of the Management Board and Chief Executive Officer; Mr. Jackson Dunckel, the Chief Financial Officer; Mr. Eric Jackson, the Chief Operating Officer; and Mr. Michael Connor, the Chief Corporate Development Officer. AMG's second quarter 2024 earnings press release issued yesterday is on AMG's website. Today's call will begin with a review of the second quarter 2024 business highlights by Dr. Schimmelbusch. Mr. Connor will comment on strategy. Mr. Dunckel will comment on AMG's financial results. And Mr. Jackson will discuss operations. At the completion of Mr. Jackson's remarks, Dr. Schimmelbusch will comment on outlook. We will then open the call to take your questions. Before I pass the call to Dr. Schimmelbusch, I would like to expressly refer you to our statement on forward-looking statements and the meaning thereof, as we have used at all previous occasions and we will use at this earnings call and which explanatory statement has been published as part of our financial presentation and on our website all in connection with this earnings call. I will now pass the floor to Dr. Schimmelbusch, AMG's Chairman of the Management Board and Chief Executive Officer. Heinz Schimmelbusch Thank you, Michelle. The second quarter of 2024 adjusted EBITDA of $39 million reflects the success of our strategic positioning and the diversified critical materials business model, enabling us to navigate market volatility effectively. Aerospace continues to be a source of growth, with AMG Engineering securing $90 million order intake in the second quarter and a June 30th order backlog of $310 million. Additionally, AMG Chrome, AMG Graphite and AMG Antimony all performed well compared to the second quarter last year, and it is noteworthy that every operating unit at AMG was profitable in the second quarter of 2024. I now come to growth opportunities and to speak about our growth initiatives, I have the pleasure to introduce our newest management board member, Mike Connor, who was voted in our annual general meeting in May with a nearly unanimous approval for appointment. He is AMG's Chief Corporate Development Officer, managing all the AMG strategic approaches, and he will speak on corporate strategy going forward. Mike? Michael Connor Thank you, Heinz. The highlight of the second quarter of 2024 was our acquisition of strategic interest in Savannah Resources, which made AMG the company's largest shareholder. Savannah is the sole owner of the Barroso Lithium Project in northern Portugal, which is Europe's most significant resource of hard rocks [Technical Difficulty]. In this partnership, AMG looks to contribute its expertise in sustainable mining practices and mineral extraction technologies, bringing to the table a wealth of experience in operational efficiency and environmental stewardship. At current world price levels, AMG has been able to increase its access to lithium resources with minimal capital outlays. We believe that this collaboration marks a significant milestone in the development of the [indiscernible] lithium industry. Our strategic growth investments are progressing as planned [Technical Difficulty]. In Brazil, the expansion of our lithium concentrate plant from 90,000 tons to 130,000 tons is rampant and we expect to reach full nameplate capacity of 130,000 tons in the fourth quarter this year. In Bitterfeld, Germany, the qualification process for our lithium hydroxide refinery's first 20,000 ton module is underway. And the production batches are expected to hit in the third quarter of 2024. Both of these projects strengthen our position in the lithium market. With the successful ramp-up of our Zanesville, Ohio plant, we have not only expanded our production capacity, but also reinforced our position as a leader in the vanadium industry. Looking ahead, we remain focused on innovation and sustainability, as we believe that vanadium is positioned to play a major role in the future of renewable energy. On this note, our vanadium electrolyte plant in Nuremberg, Germany is in the final stages of completion. We expect to have nameplate capacity available by the fourth quarter of this year as part of our vertical integration into LIVA batteries. Our Vanadium business demonstrated strong volume growth, 23% in the second quarter of 2024 versus the second quarter of last year, helping to offset a 29% decline in growth. Our operations in Ohio continue to be the low cost global producer of carbonates, significantly outperforming primary mining operations. We believe the future of energy storage systems will be driven by ongoing innovation, in the increasing efficiency, reducing cost, and expanding storage capacity. Advancements in battery technology, such as solid-state batteries and flow batteries, hold promise for ever higher energy densities and longer life spans. Moreover, artificial intelligence and advanced control systems are being integrated to optimize energy storage operations to maximize grid flexibility. AMG LIVA is at the forefront of this day trend and is currently engaged in the execution of several battery projects to optimize the energy management of industrial plants and incorporate renewable energy sources. AMG LIVA recently placed into service a hybrid energy storage system with 4.5 megawatt hours of capacity, shipping wind and solar energy for our major industrial plant, enabling 80% self-sufficiency. We believe there's massive potential in this space and we are well positioned to capitalize on the rapidly growing business. I'm also pleased to report that we have significant liquidity and support our many growth opportunities. Cash on hand is $308 million. AMG has over $500 million in total liquidity. I will now pass the floor to Jackson Dunckel, AMG's Chief Financial Officer. Jackson? Jackson Dunckel Thank you, Mike. I'll be referring to the second quarter 2024 investor presentation posted yesterday on our website. Starting on page 5 of the presentation, I'd like to reiterate Heinz's comments about the strength of the EBITDA performance this quarter. With very low lithium and vanadium prices, the rest of AMG's portfolio demonstrated significant strength and delivered excellent results. Net loss attributable to shareholders for Q2 2024 was $11 million, but this was strongly affected by our strategic project costs, which represent the ongoing investment into our battery grade lithium hydroxide business and our LIVA battery growth plans. Combined with an inventory cost adjustment and restructuring charge, these three items accounted for a $14 million earning deduction. Moving on to page 6, you can see the price and volume movements for our main key products represented by arrows, which I'll go into in more detail as we review the segmental slides. On page 7, you'll notice that we've added a new slide displaying our leverage and valuation figures for the current quarter as compared to year-end 2023. It's important to note that we've invested $650 million over the last four years for our lithium and vanadium expansion projects, which has impacted the return on capital metrics displayed here. Nevertheless, we have significant liquidity to support our future growth opportunities. Now I'm going to review our three segments and I'll start with AMG Lithium, which is shown on page 8 of the presentation. On the top left, you can see that Q2 2024 revenues decreased 71% versus Q2 2023. This decrease was driven by a 59% decline in lithium prices as well as by lower lithium concentrate volumes which are impacted by the ongoing ramp of our spodumene expansion currently underway. Q2 2024 gross profit decreased to $4 million from $90 million in the second quarter of 2023 due mainly to the aforementioned decline in lithium prices. EBITDA for the second quarter 2024 came in at $2 million. The quarterly CapEx, shown on the bottom left, of $16 million was driven by our two expansion projects in Bitterfeld, Germany, and Brazil. Turning now to page 9 of our presentation, which shows the AMG Vanadium segment. AMG Vanadium's revenue for the quarter decreased 7% to $168 million compared to Q2 2023. Due to lower sales prices across the segment, which were partially offset by increased volumes in vanadium and chrome metal. Q2 2024 gross profit increased by 15% compared to Q2 2023, due mainly to the higher sales volumes in vanadium and chrome metal. Q2 2024 adjusted EBITDA increased 27% compared to Q2 2023 to $20 million due to increased volumes in vanadium and chrome metal as well as the ongoing benefit of Section 45X production credit for which AMG Vanadium has qualified. This benefit is currently running at $10 million annually, but we continue to discuss with our advisors as the IRS finalizes the regulations. Given the uncertainty, we are aiming for conservatism around our estimates. Moving on to AMG Technologies on page 10, starting on the top left, you can see that Q2 2024 revenue increased by $33 million or 26% versus Q2 2023. This improvement was driven by strong revenues in our engineering unit as well as higher sales volumes of silicon, graphite, and antimony and higher sales prices of antimony. Adjusted EBITDA of $18 million during the quarter was more than three times the $5 million in the prior year. The increase was primarily due to higher profitability in our engineering business, as well as strong performances from our graphite and antimony units. AMG Silicon began operating two of its four furnaces in March of 2024. As we plan to run two of four furnaces for the remainder of the year, the results of AMG Silicon remain excluded from EBITDA. Turning now to page 11 of the presentation, on the top left, you can see the AMG's Q2 2024 SG&A expenses were $45 million versus $49 million in Q2 2023. The decrease was largely attributable to a one-time pension expense related to employee benefit plans in Q2 2023, partially offset by the increase in headcount in our lithium, engineering, and LIVA business. AMG's net finance cost in Q2 2024 of $8 million was 3% higher than in Q2 2023. AMG recorded an income tax expense of $11 million in the second quarter of 2024 compared to $27 million in the second quarter of 2023. This variance was mainly due to lower profitability in the current quarter, but also due to a $7 million increased deferred tax expense related to the depreciation of the Brazilian reais versus the US dollar. Fluctuations in the Brazilian reais exchange rate impact the valuation of the company's deferred tax positions in Brazil. AMG paid taxes of $4 million in Q2 2024 compared to tax payments of $35 million in Q2 2023. The reduced cash payments in the current period were largely a result of the decrease in profitability year-over-year. Turning to page 12 of the presentation, you can see on the top left, the cash used in operating activities was $9 million in Q2 2024 compared to cash from operating activities of $60 million in the same period of 2023. This was due to lower profitability in the current quarter, as well as ongoing working capital investment into our lithium businesses. AMG ended the quarter with $453 million of net debt, and as of June 30th, 2024, we had $308 million in unrestricted cash and $200 million available on revolving credit. As such, we had $508 million of total liquidity at the end of the quarter. That concludes my remarks. Eric? Eric Jackson Thank you, Jackson. Although falling prices for lithium and vanadium products negatively impacted our financial performance in the quarter, all operating units are performing on or better than planned. We continued our cost reduction and efficiency programs in the second quarter. And as Mike mentioned, the execution of our strategic growth projects remain on schedule. Our Brazil lithium operation delivered 17,092 metric tons of lithium concentrate in the second quarter. The average realized sales price was $891 per ton, except China. And the average cost was $543 per ton, except China. Both total production volumes and the net cost of production better than planned and underscore the strong execution and low cost position of our lithium concentrate operation in Brazil. Our lithium concentrate plant expansion from 90,000 tons to 130,000 tons ramp is ramping up and we expect to produce at 110,000 ton annualized capacity in the third quarter and at full 130,000 ton annualized capacity in the fourth quarter. AMG Lithium's battery-grade lithium hydroxide refinery's first 20,000 ton module in Germany is on schedule. The plant will set new industry standards on quality management, safety, and product handling for lithium hydroxide. We have completed commissioning of the utilities, the fully automatic warehouse, and the feedstock product transportation system and we're in the process of cold commissioning. We expect to ship production batches in the third quarter of 2024. AMG Vanadium's operations in Ohio continue to perform exceptionally well and exceeded target production volumes in the first half of 2024. The production from the roasting operation achieved record high production in June. Our operational and financial performance continues to exceed the performance of our publicly listed competitors, as today's market prices are below many of their operating costs. It's important to note that the EBITDA of our Vanadium segment increased by 27% in the second quarter of 2024 over the prior-year period, while at the same time ferrovanadium prices fell 29%. This is indicative of our team's operational focus and further validates the value and economics of our recycling business model. In May 2024, AMG Titanium signed a multi-year contract extension with SAFRAN to supply titanium aluminides for production in the CFM International LEAP engine. AMG's titanium aluminide materials are used to produce low-pressure turbine blades for the LEAP engine used in the single-aisle aircraft. Titanium aluminide blades are resistant to temperatures in excess of 750 degrees Celsius and reduce the mass and weight of the blades, contributing to the improved performance in reducing fuel consumption by 15% compared to prior engine models. AMG Titanium has supplied titanium aluminide to SAFRAN since 2014 for the LEAP engines in the Boeing 737 MAX and the Airbus A320 Thales. AMG titanium was able to leverage synergies with ALD Vacuum Technologies, our engineering business, to jointly develop the technology and equipment to produce this. In terms of our technology segment, AMG Engineering signed $90 million in new orders during the quarter, driven by strong orders for re-melt and turbine blade coating processes. As mentioned, we have an order backlog of $310 million at the end of the quarter, driven by the strong aerospace market. Our other operating units under the AMG Technologies umbrella, Antimony and Graphite, also performed exceptionally well in the quarter and made a significant contribution to the $12.4 million quarter-over-quarter increase in AMG Technologies EBITDA. I am repetitive when I say this, but throughout our organization, our overriding operational objectives are to be the low cost, highest quality, and most environmentally responsible producer of our products. I would now like to pass it forward to Dr. Schimmelbusch, AMG's Chief Executive Officer. Heinz Schimmelbusch Thank you, Eric. AMG Lithium B.V., the parent of all of AMG's lithium activities, will commission the first European lithium refinery on September 18, 2024 at the site in Bitterfeld in Saxony-Anhalt. AMG Lithium will produce lithium hydroxide battery grade with an annual capacity of 20,000 tons per year, enough for the batteries of around 500,000 electric cars. With the refinery, we are making a decisive contribution to securing the supply of the critical raw material for the industry in Germany and Europe. The establishment of our own complete lithium value chain also contributes to the European Critical Materials Act and offers greater independence for our materials and critical materials. The development of the battery industry in Europe is in full swing, despite the many discussions surrounding e-mobility. Lithium hydroxide is one of the most important critical materials and we are ready for the ramp up with this lithium refinery. In addition to the reliable supply of lithium we source particularly well, we score particularly well on our technological expertise. Our team has a large number of years of experience in the production of battery-grade lithium salts of the highest quality. Now, looking ahead, we remain focused on our lithium projects and anticipate improved market conditions. We expect our adjusted EBITDA to exceed $130 million for 2024. Operator, we would now like to open up for questions. [Operator Instructions]. We will take our first question from Ephrem Ravi with Citigroup. Ephrem Ravi A few questions, firstly, Savannah's scoping study estimated a CapEx for the project of about $280 million and they have also said you can offtake up to 90 kilotons per annum for 10 years if you provide them with a funding solution. Given the market cap of around $100 million, isn't buying out Savannah preferable to providing the funding for another $45,000 offtake. And again, just if you can give us a context why we just kind of took an 18% stake and not a bigger chunk of the company. Heinz Schimmelbusch Talking about the financing of Savannah is a little early because the project is under development. But let me mention one particular item. We are operating in Germany and we have an off-take agreement with Savannah. And all of that leads ultimately to a project financing which is a major element of it, is the German government institution which provides government guaranteed long-term financing for critical material import contracts. And that's a significant synergy between Savannah and AMG. Ephrem Ravi Also on your new term loan of $100 million, you've said that you will use it for lithium resource development. Just to clarify that it means upstream resource development rather than downstream processing capacity if I'm interpreting it correctly. And last one. As you ramp up to 130,000 tons of lithium concentrate, could you give us an indication if you're expecting any improvement in unit cost at Nidra [ph] (00:22:35)? Minor improvement. Minor improvement, actually. And of course, the Brazilian reais has weakened recently. That may also help us on the reduction of our costs. Heinz Schimmelbusch And just be reminded that our cost is 550 deliver [ph] China, which is a very, very low mark. [Operator Instructions]. We will take our next question from Tom van Ravenhorst with ABN AMRO. Tom van Ravenhorst One question from my side. I saw the strong operational performance in the vanadium sector and I was planning if you can give any guidance on the margins going forward, if this is sustainable. Eric Jackson I believe it's sustainable. The vanadium segment includes our vanadium operations in Germany as well as Ohio and chrome businesses. And as we mentioned, our vanadium recycling business model is exceptionally strong. Our production costs are, as we mentioned, lower than our competition. Other than any one-time adjustments, I think the profitability is sustainable. Heinz Schimmelbusch You refer maybe in particular to the vanadium business. And our vanadium business is, contrary to the primary vanadium mining business, is benefiting from fees which we collect for recycling, for extracting vanadium and other metals from the spent catalysts which we use as feed material. And the metals extracted are vanadium, but also molybdenum nickel. So we have three metals in a way. The fourth income stream is cash. So we, in a way, have negative mining costs in a sloppy definition. So that is an intrinsic competitive advantage vis-à-vis primary mines, which I think is very important in phases of low vanadium prices. So that's, I think, a reason for the stability of our vanadium business. So we are still increasing production. And [indiscernible] receive fees to do what we do. We will take our next question from Jesus Molinos with ING. Jesus Molinos First question, what's driving the strong earnings recovery in engineering? And do you see this improvement as sustainable? Heinz Schimmelbusch Engineering is benefiting from a strong demand of high performance steel related furnace generations. And that, in our interpretation, is a function of growth in that sector, aerospace related. And also, in renewed capacity drives. So the plants globally, the plants in high-performance steel-related furnaces are pretty old and they are undergoing renewal, renewing, both in America and in China. And that is, I think, the beginning of a longer-term development, which benefits us as we have very high market shares in the furnaces related to that material, high performance steel. Now the other trend in this business is that every year, the percentage of secondary raw material in all of our customers' plants is increasing. Remelting, recycling, perfection of the use of re-melt and re-scrap, scrap melting, and that is a trend which is ongoing and won't stop in the foreseeable future, to the contrary. Jesus Molinos In your public statement, you mentioned that you anticipate improved market conditions. Is this tied to lithium? And can you provide some context as pricing still seems very subdued? Heinz Schimmelbusch I think it's a wide ranging comment. If you look at the cost curve of, for example, lithium, then there are, at the present prices, there's a certain significant percentage of producers which are below cash costs, operating below cash costs, prices below cash costs. Now you can have predictions of how long that is sustainable, but it is reasonable to assume that there will be a reduction of capacity. We secondly believe that the demand, as I mentioned, as against more pessimistic statements moves to be globally rather stable. Meaning, the growth rates are rather stable. And if those two things meet, then it is reasonable to expect the price correction. Now the prices are of course artificially, in our interpretation, discounted because of particular raw materials in China called [indiscernible], which are high cost mines, high cost and high environmentally cumbersome mines, which are operated as vertically integration of parts of the Chinese production. So that is, I think, also not necessarily sustainable. That's lithium. Vanadium, two of the western - and I think there are not more, the two of the western primary producers are operating below cash costs, so prices below cash costs. And that is, of course, an unsustainable situation. So as prices are low, and in our interpretation, partly artificially low, given the strategic orientation of some of these industries, this will correct itself. Jesus Molinos My last question is, what is your view on the current new battery supply chain where some players are backtracking on their EV growth plan or switching to LFP over NMC? Heinz Schimmelbusch Well, we believe, when we analyze the demand statistics, there is not much of a change. When you look from the forward line to 2030, there are only minor corrections - insignificant corrections of the estimated total demand of e-cars in 2030 vis-a-vis now. So the demand seems to be rather resilient. And so, that's all we can say. We have our statistics analysis, and that is the result. So we believe that the demand will be developing rather strong. [Operator Instructions]. And it does appear that we have no further questions at this time. I'll turn the call back over to Michelle Fisher for any closing remarks. Michele Fischer This concludes our second quarter 2024 earnings call. Thank you everyone for joining. Thank you. This does conclude today's program. 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