QTEK - Earnings call transcript Q2 2022

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Operator

Good morning. My name is Chantal, and I will be your conference operator today. At this time, I would like to welcome everyone to the QualTek Services Inc. Q2 2022 Earnings Release.

As a reminder, today's conference call is being recorded. you. Thank Instructions] [Operator may conference. you begin Bowen, your Michael

Michael Bowen

Thank QualTek's second and good Welcome to morning, everyone. quarter you, operator, XXXX earnings call.

otherwise to to required I the making today's subject to Hisey, a securities begin, such we us Q&A and those session, events, remarks we would from the call and statements remind the to Before disclaims in are and today, Securities forward-looking elsewhere QualTek everyone inherent revisions uncertainties. and contained to CEO; or will QualTek's during be risks The statements risk from Except These risks changes Commission, any or Scott conditions and herein remarks the obligation filings financial by Whether Exchange federal by forward-looking of to forward-looking opening call. during make have we regards X-K Scott update sections format QualTek's with our these uncertainties statements or in factors company's CFO. specifically With as in followed reflect and XX-K. review with will prepared laws, are of the like Spittler, Forms that Adam circumstances. detailed Adam. be in expectations

We go will With Scott? Q&A things these over Scott. that, following ahead updates. have a period I'll to turn and

Scott Hisey

inflationary XX restrictions, we anniversary. that we the our has decades. company will and during took seen have challenging SPAC some and the In part XXXX and public through good of went of quarter In not second the XXXX to merger country navigated year. for To the will celebrating we the our in latter and be this those results balance new an Michael, recent Thanks, COVID-XX outlook conditions QualTek our October, morning, our everyone. call, recap macroeconomic On a of of most in public environment of discuss the story, our through for XXth months, past for QX today's XXXX.

this also to have telecommunications, significant fiber-related and time. increased and backlog workforce XG during our We level highest our

increase our Fortune continue and blue-chip We with power business largest the telecommunications to XXX customers.

each and of transition from As telecommunications employees, industries. SPAC we quarter being On power in to that for viewed management a company. major solutions we believe a team player and the behalf we new of as excited our are future our the will passes,

on to quarter second results. Now our

XXXX. quarter, achieved we During second over $XXX.X revenue increase of XX% the of million, quarter record the second a quarter

markets. now XG generated related steadily XX% was and Our builds fiber growth EBITDA have to revenue in million, XG and Adjusted the projects. was largely commenced was fiber quarter XX% XXXX. over increase to for previously as all wireless in Service Agreements. of quarter attributable $XX.X Adjusted forecasted EBITDA margin the note improved a our that Master of important under It's

resources. importantly, More and by continue of inflationary segment, as EBITDA into scale achieve construction supply and adjusted and will X.X% increase move largest margins headwinds our margin XX.X% increased Telecommunications improved a utilization mode to chain period strong revenue We our full we believe of challenges. as to and in

license in As us allowing of which the many utilize C-band previously for waiting few resources to prior in were markets our These available, legacy is are spectrum availability outlined, more our now licenses Northeast markets. fully the quarters. during our

inflation pricing, quarter, our to scope we and on customers national worked increases. and fuel with cost the During scalability have mitigate

months. large successfully execute the years, next committed for now our over important all customers build are to company is of in it a that respective position place our in their the billion next to our was backlog excess schedules to As several XX $X.X

pricing, to remain our conversion improvement with delivery top our margin backlog we’ve quarter, that ensure focused priority. customers the material During initiatives strong and on

aligned long-term can as reflected and partners worked and growth fuel with have drive closely organic margin continue strong goals to in consistent of our backlog. to cash are that generate our very ensure flow QualTek our our each We to improvement that

second Telecom $X.X highlights each from will Our record year-over-year quarter record increased our million, improved margin of revenue, include I to billion backlog X.X%, $X.X to billion. QX $XXX.X now QX Telecom revenue review segments. of

For and Telecommunications spite was material builds the particularly where workforce for XG extremely licenses of an strong as business the quarter spectrum QX wage the we inflation, levels workflow In returning to commenced quarter. and from we throughout now available. Northeast, to headwinds our improve are now the continue segment, utilization Telecom of margins shipping have are pre-COVID as cost, strong fuel in

scope with worked we builds quarter, business our short fiber as pricing, and both are now the XG meet and second ways stride full our on needs work country. and entire customers the of across hitting During to to scale long-term

encouraged for performance XG by services. are our commitment to the QualTek's continued fiber demand our We and outs, long-term customers' the and build

continue strong our QX ability and the will point, As and indicated this this demand we the and the strong deliver, the has and XXXX our $XXX to anticipated increased of into on of backlog growth believe million continued More fiber several our call, specifically services towards as we our we XG backlog. year end last organic balance through materialized, years for during for with with expected quarter. increased the to the by the next

and segment. Renewable Now for Recovery our

offerings see our expand the resources of the continued Southeast. portion within advance We strong recovery and of During for our our that in the service in in business quarter, workforce modernization for base grid logistics We contract segment. to demand season. storm we grew

firmly in long-term initiatives Service Agreements opportunity there and this recent capitalize infrastructure. As evidenced upgrade necessity activity segment. macro in their Master QualTek major for these companies that the and impacted on grid positioned federal to by we as power by mandates growth company is to the space, have is strong are the with utility power modernization, this commitments M&A

softness we issues energy confident excited creating the sizable regulatory will bookings in quarter backlog other in will call that relative QX discussed our we in closing, scheduled We impacted performance. financial Adam completion more first the out chain industry that time. In current renewable will are got optimistic of who call, are for detail Adam? Financial remain schedules. the as been items and As now itself increased the turn about delays with execution, and These to greatly overall our over our opportunities revenue, on challenges renewable QualTek Spittler, give pushed out. impacted supply by on record I extremely future had build Officer, QX and we has Chief work also our performance.

Adam Spittler

quarter cover Thank you, and second good XXXX results. our everyone. I will Today, financial morning,

results the Reconciliation and EBITDA. found discussion of non-GAAP financial earnings indicated As adjusted release. Michael non-GAAP at will our include beginning the of can details be measures call, our of in

overall as are Scott reported This really shows estimated to business on the business we Telecom, As the segment, backlog. mentioned, as in we execute both and growth at year-over-year revenue of the our our QX record scalability on both we largest very our fronts XXXX. pleased billion in continue $X.X

to Now I financials. our move will QX

revenue to the quarter $XXX.X compared XXXX million XXXX. to XX% quarter million second for $XXX.X Second increased

under As mentioned, Scott for our Service generated of XX% revenue Master the Agreements. quarter, was

were quarter and in compared $XX.X both adjusted in revenue adjusted driven the Second XG EBITDA to primarily second fiber of the was million EBITDA volume XXXX. growth by increased of rollouts. $X.X million The quarter and XXXX

we in telecom in arrive, growth our seeing are we have play industry tailwinds significant indicated As that strong have year-over-year. past, the out begun and to

is million in middle half a turning segment. our net quarter back revenue capital to and our We related as increase compared our one-time level period. growth a now quarter the and of positive public operating out million expect to share-based the XX.X% The of Telecom Telecom continued a $XXX.X compensation Net ago $XX.X cost was capital the in second to From business $XX.X working perspective, XXXX. public second from in the of third primarily flow the expect for loss build million net company, in the of compared Transitioning in cash trajectory quarter loss quarter working million to a for to to we in of to expense year. readiness loss segment a the the second XXXX. increased company operations record results. $XXX year expenses not due XXXX

in XX% growing across to In from Both EBITDA $XX volumes To we XXXX. in accelerating reported first continued to arrived, out rollout more impact sequential increase and within to strong in previously of the a Second twofold has of The the growth attributable versus revenues Sequentially, compared margin typical of the revenue to adjusted massive the XXXX. our build our increased quarter quarter, our period our XX.X% X.X% programs primarily Telecom in XX% from $XX our experience XXXX platform. we adjusted scalability of in the quarter million XG of business Telecom same in EBITDA segment which period state and quarter were sequential million XG are deployment, Telecom our resulted well-positioned are customer due second of the EBITDA QX sequentially XG EBITDA and XXXX an quarter sequential increases infrastructure excess segment. From discussed. perspective, increased to our adjusted again, believe the reflecting over our first the seasonality. improved Telecom adjusted EBITDA X.X%, the adjusted versus Telecom year-on-year compared than second to both to threefold increase same over year, XXXX. reported the increased

of $XXX,XXX, adjusted was revenue and respectively. renewable revenue a $X year decreases due from projects. period the million both Renewable in loss with supply last to related within an The quarter decrease and to EBITDA chain Second were $X.X certain primarily EBITDA segment delays challenges of adjusted Recovery $X.X million, million same and

including operate public million in by was public in finance risk Second $X.X cost and head year the increase corporate functions, $X.X services a expenses, increased entity. new professional and quarter count period. of corporate management driven prior company primarily costs corporate expenses costs to required our were to governance million in compared The

percentage corporate cost decrease from scale increased X.X% prior X.X% was As the revenue, reflecting a the in period, within business. a revenue, of year of our

Blattner was Power at & year largest recovery quarter wireless, to was XXXX: was XX%; the provide and Now X%. the Verizon overview customers of X%. second logistics at Comcast was prior and to and at services includes will five AT&T, XX%, XX%; which AT&T in Light This of revenue Florida X% at XX%; was T-Mobile for Comcast I respect T-Mobile XX%, X%; XX%, Verizon an our at wireline compares

three for period, XX.X% customers versus our in our same prior customer top diversification. accounted reflecting further XX.X% in improvement the of revenue Our year

a now end I Scott. XXXX, turn we of As the at the billion, XXXX. it QX relates an from $X.X rolling backlog was to a $X.X increase quarterly the basis. on end quarter X-year to report will the back At of second total the backlog backlog, call billion reported estimated

Scott Hisey

remain closing, about we prospects for the of the future In and Adam. industry Thanks, energized this QualTek.

playing is critical helping them With QualTek customers have pass I'll that, role Operator? Q&A. and a committed building back Our unprecedented to for demand. to this infrastructure, it meet this in operator the

Operator

[Operator Brent Instructions] first D.A. Our with question from Thielman comes Davidson.

open. line is Your

Brent Thielman

Good thanks. this Good progress Telecom the business quarter. morning. in here Hey,

Scott Hisey

Brent. Thanks,

Brent Thielman

Scott gone business? sequential seem second the or Adam, I bit guess, Telecom quarter. the about through really half second you a it was you're nice in now, a for expecting increase what sort the Can talk that in of side more the business seasonal having in July of

Scott Hisey

for are Right the thanks on focused Brent, people. Yes, hiring we now question.

As focusing about execution. backlog, our we talked organic on really

and about adding Our meet blocking to tackling and people And have and us, business to it's needs. right we've largest customers our really discussions. had now, growing these come numerous and

Brent Thielman

in Scott, else is more context I more everyone I the from you that? support spending EBITDA half? installation mean, experiencing even in as that's procurement the activities, second cycle the I then the in of there you it here activities of going the double-digit guess to And margins see on. with inflationary Okay. that well, And can move guess, and so Is as kind second too headwinds just thoughts half, your early to in here all

Scott Hisey

Sure.

our From our last had we've to starting we're to existing leverage scalability, volume platform. how build met our business really and discussions this continue And we're a and meaningful went our So quarter locations. the with as standpoint expectation. of organically around going about by, customers that's to all

coupled should our improve us mode in the now with construction right So actually piece scalability physical being margins.

Brent Thielman

looks it weaker little And Okay. the Renewables this quarter. piece like a was

of year? line side You talked going second be think lower any in of we the half of that about to the this Do there. the through go it's you as improved some factors I mean of business? sight

Scott Hisey

that we we dedicate have really sort There are finish with projects we of we rebalancing the half we that but as the backlog some a for us, excited little we to of until in make bit for QualTek. power that in look sense remain gets the watch to and space a in just of of customers. and back have space, us Right for our to going in renewable for executing priorities delays mode. but actually this the now that resources XXXX could within play And projects take very the sort bullish it the the that about segment, year, it some projects power we're see work that XXXX, full of and

Brent Thielman

Yes, understood.

capital Just Just Telecom last the you see logistics? Is one. business? comment mentioned should the of a half. flow third recovery the out to that that there. you the level for build thoughts upon quarter; in Is working your back Adam, cash don't workloads contingent in positive, see or curious middle just

Adam Spittler

Yes.

kind we I mentioned, as working are of now. capital peak seeing So

of in if business. flow business year, did in as performs back the of independent generation it's half So we as the the recovery really the kind to the of to it supercharge free back and last do cash year, year. we our obviously, just the going flow recovery of cash And anticipate positive expected half

Brent Thielman

Yes.

Okay, great. Thanks, it guys. will on. I pass

Operator

comes of next question with Oppenheimer. from the Tim Our Horan line

open. is Your line

Tim Horan

Thanks, guys.

you are we long cleared at take, build out? Like very further Do you this maximum build out the are have Is spectrum Telecom the on this there out, -- any So will out at equipment? how And are the build you think? basically bottlenecks? point?

Scott Hisey

and build. long say thing years industry, the is time and calls go. The in resources, training the I Hey, top experienced to hockey this folks who demand. I've we're pent-up other speaking This there on a question. with. any now that relationships Tim, know in-house about of from unlike are There's here. stick vendor folks And have biggest anywhere partners thanks of near we focusing is several the I is the of for with There on this. wouldn't we're such terms the are demand our both that a some way

upgraded going is be XXXX. wrap thousands a to to to This you So number cycle. of markets, of innings. lot we deployed. now, literally needs hundreds isn't to a it or focused in in our and the just a when of can XXXX carriers it has going to really this there's released take lot fiber hey, there's going are do. very think the everyone's adding that -- that put I meet while. about up early to still and And upgrading cell be across probably that we're in couldn't you can amount The a, of the so do. spectrum of to a people need we long the on a It's And There's people sites of just could be four of just now on we tell was that right doing the customers. of five much a I lot hire as as

people this build as continues. as we're great many So execution going can continue we out focus on to hiring and and just as

Tim Horan

weather-related and we I could would quarter throughout historically? quarter than -- work seasonality. we've other more here? dampened kind mean that be and a that fourth in of could we level maybe Maybe of communications, elevated So lot first seasonality have seen the

Scott Hisey

Tim. Yes,

So with Northeast QualTek, is Midwest. considerable of that a our done amount and remember business in

So it in just in we up start And projects, seasonality. they April is. finish and November have as normal weather

have then huge markets we every these demands on that us of throw that, build too. top that for climb seasonal the now, have both there's So year. right And all

of amplified April November. build. say, where always to with March, now situations better to October, going one is But this So we're that's do those from, this

Tim Horan

Or still other is the technically seasons, we in will -- equipment just January, guess it feasible? can I not December, unlike question hang maybe is, we February? Well,

Scott Hisey

more work the division last the focused will Southeast. rebalance on Western of we're a be on It year, really type we we've thing do. of And then QualTek, of over other And the this year. for our focusing the building

business. the of So seasonality we balance out to to have numerous the try opportunities

Tim Horan

take Got give million year what about little talk Are lot a takes, contributed component EBITDA. of out of or Recovery it. the I guidance? will kind think you you of I very very, important on Got had is just the a us And can puts it. can hit that? you -- a business you $XXX last EBITDA guidance guess, really, color And Adam, the of to that, there.

you're maybe for expecting that what from just So the remainder the year? of

Adam Spittler

Tim. Thanks, Yes.

in we So I last mean we've performed so did that the business the X XXXX. on Recovery modeled in basically with the how average what years from par for business, really and

Tim Horan

hit where can year? in think are this was about Got you number? I And number it. are you Or the million, of yet? it EBITDA you we that guide Do thinking different now overall for think a $XXX

Scott Hisey

this Tim, I one. take will Scott. is that Yes,

perspective, during going everyone, know to So very operate new credibility real the we a with go and guidance out from to this going QX when that QX that with And get and to public that after call, we first through with right we give after It's went it our everyone nail structure. February make guidance establish that public we we let sure that we're I and in QX. important want number. down

right So feel we're comfortable QX. issue is through point we to at will QX full And QX. guidance we guidance. some our during running after midrange, now, plan issue But if

Tim Horan

the you And and it. are maybe on to cash where just Got business? with operate liquidity lastly, Thanks. hand

Adam Spittler

Tim. Yes,

credit. drawn mentioned, So right as I we quarter the we're with as on capital reported, our at ended we now. $XX of working line And million peak

start level of that we cash to half capital as QX. in, back in we'll of some out, be the come working things So And to expect year, the positive. flow

Tim Horan

you need if Got draw of to? on much credit, line that how it. you that, down And can

Adam Spittler

Yes.

full if balance need what the balance. the the you greater sheet, at to we are assets far million. than the So Obviously, facility look collateralize $XXX.X is

have we did ability. to have would that flex, if we So

Tim Horan

lastly, you then next that? what's to your do, time the major on frame And need financing

Adam Spittler

is So July facility our and ABL XXXX. our term XXXX, the convert expire and then

Tim Horan

Thanks right, a Great. Good luck. million. All guys.

Operator

next Christian Instructions] Group. comes from Craig-Hallum question Our Capital [Operator Schwab with

is open. line Your

Christian Schwab

execution between at in tell business quarter. can wireline Great wireless the the and us of Scott, mix AT&T currently? you

Scott Hisey

It's about wireless. XX%

Christian Schwab

Okay.

Scott Hisey

services. wireline and is balance The

Christian Schwab

much have And us Agreements do just in what much that then Service currently, the kind X much is and looks Midwest, idea weather-related Great. is Southeast, or the from how that share standpoint? a geographical over roughly, et in is the your on in can next How rough work, have like with not? Master you that Northeast the years, you follow-up a of Of you cetera. how West a is

Scott Hisey

a the we’ve or of the from and companies Florida tip through power major and across MSAs vast majority So Jersey significant utility New portion areas. those with the the to Gulf

So other then other all to nationwide tornadoes from that whether have nature. And generally service, that would companies just or things storms the about, affected it's that we come about be storms. major contracts of floods,

Christian Schwab

we the be into when people. And margins expect great. needed will go current the I top I wasn't in greater you business Okay, on me And X.X%. this, second QX. as the clear to in But to revenue necessarily in assume improve at it talking, we it add it then Telco we you were here -- wasn't most then the also line, said EBITDA guess to from in level would QX was half than

putting Or Telco we have people the the QX on So are or business process the as or sequential we well? line do resources people -- together here the still in materials the the do QX? top for and we in of and improvement in

Adam Spittler

Yes. Thanks, Christian.

to Telecommunications. anticipate to Telecom. as EBITDA obviously, As year-over-year perspective, resources to mentioned, revenue we through be quarter. obviously, exceeding Scott we XX% we QX what from expect overall are we QX as do possible, in our is seeing our improved the And and go the but for similar add are quickly And an hitting growth target then increases, as as service margin we trying

Christian Schwab

then my last And question … Great.

Scott Hisey

has to Christian, that Hey, at our hiring I hiring and our just add just heroes veterans. key one -- that, been QualTek Chris going was of focuses on

out So we to reach military programs our all we and to have organizations add numerous where train and continue different people. within

impact two people the programs from great so the are expect going really that a now, course of veterans And shape, see to are year to of really field started our on grow adding really to we people. we organization. make some and focused really we quarter So as to the continue an the this hitting or take during

Christian Schwab

T-Mobile the in any top is Great. potential there those new XX that we to meaningful for -- that the X have, the continue could there fruition would is customer $X.X backlog customers billion revenue And outside historical and to as share to Or a initiatives? on go months? forward -- AT&T, expect have of any spending over you disproportionate tied your to Verizon of come next you X

Scott Hisey

So there's there, couple of things Christian. a

inception some fiber the diversify think so for scope there's build mix. Telecom the to fiber that out there's of first original we we're and builds about most the years we was exploring obviously, that wireless. so the builds last from in we've where continue But of our builds fiber in way excited because our all, and for cases, pretty team of builds improving. of pricing the looking fiber. opportunities we're in the FiOS back the Telecom, all of fiber our construction much of wireless management with to background companies, growth opportunity First focus our a We think will couple in And and seeing. sit on lot our the it bigger And of was. underground and part fiber numerous work of a dating of we're a us revenue to focused But that we're was on of so piece to opportunities our lot be probably historically, business, new that to the some because cable so better is the that's out

Christian Schwab

with? Are be telco -- from demand we working seems the seeing question last -- to are Or tremendous big or what Right. RDOF you one is guys three And that guess you companies yet? on opportunities are then. from focused you're and any I satisfying

Scott Hisey

XX really that have. existing we we're locations leverage on focus existing -- looking the to Well, office and

here there, that's because So a generate we're from starting off to RDOF margin to really resources have the opportunities way think that there improve are leverage best profile. our pick and that we the we and cash and scalability standpoint,

Christian Schwab

Okay, great. guys. [indiscernible] questions. Thanks,

Scott Hisey

Christian. Thanks,

Operator

We This conference session. question-and-answer the call. reached concludes end have of today's the

You may now disconnect.

QualTek Services (QTEKQ) 13 Aug 222022 Q2 Earnings call transcript