Greetings and welcome to Hill International's First quarter 2021 Financial Results Conference Call and Webcast. [Operator Instructions] Please note this conference is being recorded. I would now like to turn the conference over to your host; Mr. Devin Sullivan, Senior Vice President at The Equity Group. Thank you. You may begin.

Thank you everyone. Good morning and thank you for joining us today for Hill International's first quarter 2021 financial results conference call. Our speakers for today's call will be; Raouf Ghali, Chief Executive Officer; and Todd Weintraub, Chief Financial Officer. Before we begin, I'd like to remind everyone that certain statements made during this call may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and it is our intent that any such statements be protected by the safe harbor created thereby. Except for historical information, the matters set forth herein including but not limited to any statements of belief or intent, any statements concerning financial projections our plans, strategies and objectives for future operations are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and assumptions and are subject to certain risks and uncertainties including, but not limited to risks and uncertainties related to the COVID-19 pandemic, the willingness and ability of governments and other clients to undertake and complete infrastructure projects and our ability to maintain and support business development activities. Although we believe that the expectations, estimates and assumptions reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Important factors that could cause our actual results to differ materially from estimates or projections contained in our forward-looking statements are set forth in the Risk Factors section and elsewhere in the reports we have filed with the Securities and Exchange Commission, including that unfavorable global economic conditions may adversely impact our business our backlog may not be fully realized as revenue and our expenses may be higher than anticipated. We do not intend and undertake no obligation to update any forward-looking statements. I will draw your attention to slides 2 and 3 which provide safe harbor information and definitions of the non-GAAP measures that we will be presenting this morning. Turning to Slide 4, I'd now like to turn things over to Raouf Ghali, Hill's Chief Executive Officer. Raouf, please go ahead.

Thanks Devin. Good morning everyone and thank you for joining us today to discuss our 2021 first quarter financial results. I'll begin with thanking Hill's 2,700 professionals around the world for their continuing hard work and dedication. Their efforts have allowed us to continue to execute against our plan, provide the highest level of client service and prepare us for what we hope will be a year of growth and evolution at Hill International. Now let's look at a quick summary of our performance for the first quarter. We produced $72.4 million of CFR which reflects several project deferments and delays due to the lingering impact of COVID in certain of our operating regions. As stated previously, we expected headwinds during the first two quarters of this year as the post pandemic recovery takes hold. However, starting in April, we have seen encouraging movements in the US and internationally in the areas of procurement awards and remobilization. As a result, we believe that the business will be picking up well within our plan. Our SG&A for the quarter was $27.7 million representing a decline both year-over-year and compared to the fourth quarter of 2020. Again, as previously stated as revenue and normality return post COVID-19, we expect that SG&A will gradually increase during 2021 and reach annual levels of approximately $120 million in future years. We reported just below breakeven results on an operating basis which included lower CFR and over $400,000 in non-cash stock comp that combined with interest and income expense to push us to a net loss of $2.7 million for the first quarter. Adjusted EBITDA was $741,000. Perhaps most importantly, the momentum we experienced in the fourth quarter of 2020 with respect to new bookings continued into the first quarter of 2021. We wrote $91.5 million of new business this past quarter, which covered multiple geographies and end markets, including infrastructure and facilities management. Procurement activity is accelerating, especially in the United States and we believe that this bodes well for a higher CFR as 2021 progresses. Please turn to slide 5. As you can see, our revenue profile in the first quarter reflected varied, geographic, end market and client exposure. The US continued to lead our operation in the first quarter driven in large by infrastructure work that included strong mobilization in California at our I-5 and Gold Line metro projects in New York at our MTA program as well as a renewal of the Ohio Department of Resources assignment. We're also engaged in infrastructure in Arizona, Washington State, Pennsylvania and Delaware just to name a few. We also continue to have a healthy exposure in the Middle East, Europe and Africa where we maintain a dominant industry position. Moving on to slide 6. This slide highlights some of our recent wins including three contracts awarded by the GSA to execute modernization, consolidation and repairs on the federal buildings in Ohio, Maryland and Indianapolis. An award to manage the modernization of the Federal Reserve's Eccles Building originally built in 1937. A third task order to provide owners representative services for the completion of the clinical activation of Essentia Health's medical campus in downtown Duluth, Minnesota. A facility management award under which we will serve as the managing agent for the Tatweer Building Company, which represents the Saudi Ministry of Education. We are pleased with the progress at our facility management business, which generated $4.1 million of CFR during the 2021 first quarter, up 21% from $3.4 million in Q1 the previous year. Finally, we are providing construction oversight inspection and coordination services for several municipal projects in the city of New Brownfield Texas including two new fire stations, a new police station and veterans' memorial. Moving on to slide 7. Every four years America's civil engineers provide a comprehensive assessment of the nation's 17 major infrastructure categories. The ASCE infrastructure report card shown here examines current infrastructure conditions and needs assigning grades and making recommendations to raise them. According to this report card, the overall grade of our nation's infrastructure is a C minus and you'll see where various categories ranked this year. We believe that we are at an inflection point with respect to US infrastructure. It is impeding our ability to compete in the global economy and improvements are necessary to ensure our country is built for the future. It will also if properly executed, help us lift out of the economy or economic hardship created by the COVID-19 pandemic. We have created a committee focused on identifying US domestic infrastructure opportunities to capitalize on the significant potential growth engine for Hill. In 2020, we secured over $190 million in infrastructure bookings in the United States, Middle East North Africa and Europe. In Q1 of this year, approximately 44% of our new business awards consisted of infrastructure projects. The EU appears to be active in its pursuit of infrastructure projects to emerge stronger from the COVID-19 pandemic. We continue to monitor progress on these fronts and remain well-positioned to capture the associated opportunities. Moving on to slide 8. We are delighted to announce several promotions and appointments. You'll note that each one of these individuals brings more than two decades of experience to their new roles at Hill. Our new President of Hill's Americas region, Mike Smith previously served as our Senior Vice President and Western Regional Manager. The Western region was Hill's largest and most successful U.S. profit center in 2020 and is home to many of our largest and most complex long-term assignments. Greg Heinz, current Vice President and Operations Manager will assume Smith's previous position. In addition, Hill welcomes current Southeast Regional Manager, Luis Lugo to the role of Senior Vice President, Business Development, Americas. Current Vice President, Eladio Castrodad will rise to the role of first Vice President for the Florida and the Caribbean region. In Southern California, the company's JP Villamizar has also been promoted to First Vice President for operations. Congratulations to each of these individuals. Thank you for your attention, and I will now turn things over to Todd Weintraub, Hill's Chief Financial Officer. Todd, please go ahead.

Thank you Raouf. I'll pick things up from slide 9. This slide provides an overview of our GAAP results for the first quarter of 2021. CFR for the first quarter was $72.4 million, a decline from the same period last year and reflecting delayed project starts due in large part to uncertainties driven by COVID-19. It's important to note that we believe that we lost approximately $5.7 million of projects in Q1 2021 due to COVID related delays. We expect that many of these projects will commence during 2021 and we expect CFR to increase each quarter over the remainder of the year. Selling, general and administrative expenses were $27.7 million or 38.2% of CFR as compared to $28.1 million or 36.4% of CFR in Q1 2020. This decline was primarily attributable to lower depreciation expense as well as declines in certain corporate expenses due to COVID-19 stay-at-home orders, partially offset by higher labor, legal and insurance costs as well as the timing of certain other expenses. The labor increases were primarily due to higher than normal severance costs, which we do not expect to recur. The higher legal costs were due primarily to the settlement return of previously incurred legal expenses in 2020, which did not recur in 2021. We had an operating loss of $154,000 in Q1 primarily reflecting lower CFR due to the effects of COVID-19 and non-cash stock compensation. The 2021 result was an improvement over 2020 due primarily to favorable foreign currency impacts when compared to Q1 2020, partially offset by the lower CFR. The same factors drove a net loss of $2.7 million in the quarter compared to a loss of $6.6 million in last year's first quarter. Now let's briefly take a look at our results on an adjusted basis on slide 10. On an adjusted basis and taking into account the items that we've just discussed, we operated profitably and we reported positive EBITDA for the quarter. Turning to slide 11. As you know, we maintain a very strong focus on liquidity. In Q1 2021, our cash used in operations was $16.7 million. We consider this to be a transitory event, driven primarily by seasonality and the timing of cash collections and compares to cash used in operations of $10.9 million in the 2020 first quarter. Just as we improved our liquidity significantly over the remainder of 2020, we expect to do the same in 2021. In particular, approximately $10 million we expected to receive in Q1 2021 was deferred due to COVID-related delays in executing documentation necessary to collect the payment. $7.5 million of that has now been received in the project JV account and will be remitted to Hill shortly with the remaining $2.5 million expected to be received during Q2 2021. Based on this and the collection already seen in the second quarter to-date, we expect that our cash position at June 30th, 2021 and the remainder of the year will show a material improvement from March 31st, 2021 which is the same trend that occurred in 2020. We're forecasting year-end unrestricted cash will exceed the $34.2 million in unrestricted cash we reported at December 31st, 2020. To add some insight, our primary cash obligations are at payroll and are project subcontractors. Our primary source of cash receipts is from clients. We generally pay our employees semi monthly in arrears and invoice our clients monthly in arrears. Our clients generally remit payment approximately three months on average after the invoice date. This creates a lag between the time we pay our employees and the time we receive payment from our clients. We bill our clients for any subcontractors used and we pay those subcontractors after receiving payment from our clients. So no such timing lag exists for the payments that we make to subcontractors. We utilized our cash on hand and our revolving credit facilities to fund the working capital requirement caused by the lag discussed above and other operating needs. We believe our expected cash receipts from clients together with the current cash on hand and revolving credit facilities are sufficient to support the reasonably anticipated cash needs of our operations for the foreseeable future. A number of our public sector clients funded their projects through annual calendar year budget allocations. The budget approval allocation and funding process results in delayed collections from certain of these clients negatively impacting our cash flow for the first quarter. This negative cash flow each year is generally reversed during the subsequent quarters during the year and we expect that to be the case again in 2021 just as it was last year. Moving to slide 12 and as just mentioned, you'll see that our cash flow declined during the first quarter of both 2020 and 2021. During both periods, cash used in operating activities was primarily due to increases in accounts receivable related to the normal first quarter lower collections as many of our public sector clients await new funding to become available in the New Year as well as the timing of payments to vendors and subcontractors. Additionally in 2021 and as mentioned before, the continuing effect of COVID-19 delayed the execution of documentation required for certain clients to remit payments totaling approximately $10 million. The majority of this has subsequently been collected with the remainder expected to be collected during the quarter ended June 30th, 2021. Again, we believe that Q1 2021 represents the low point of free cash flow and liquidity for the year and that we will be cash flow positive in each of the remaining quarters of 2021. Total liquidity at March 31st, 2021 including access to our lines of credit was $27.3 million as compared to $45.9 million at December 31st, 2020. Moving on to slide 13. Our backlog increased from December 31st, 2020 and was the highest level over the last four quarters. From a geographic perspective, our backlog remained consistent and concentrated in the US. We showed backlog increases in the Americas and Africa compared to December 31st, 2020 with slight declines in Europe and the Middle East. With respect to our facilities management business these contracts comprised 11% of our total Middle East and North Africa backlog at March 31st, 2021. Thanks very much for your time and I'll now turn the conversation back to Raouf.

Thank you, Todd. If you could turn to slide 14. We reiterate our guidance for 2021, based on our current business conditions. And considering previously announced project deferrals and cancellations that occurred earlier this year, we expect CFR to range between $320 million and $330 million, consisting of both new awards and extensions of existing contracts. Adjusted EBITDA for 2021 is forecast to be between $20 million to $22 million. Thank you for your time today and I'll now ask the operator to open the call to questions.

At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Bill Dezellem with Tieton Capital. Please proceed with your question.

Thank you. That's Tieton Capital. I have a couple of questions. First of all, relative to the backlog, it has been improving as you showed on slide 13. But given what you're talking about with some things loosening up relative to COVID, etcetera. Would you expect that there could be an acceleration in the rate of growth of the backlog trend line?

This is Raouf. I'll take the question. We are expecting our backlog to continue getting stronger. The rate of acceleration, it's very hard to predict, because not -- there's not a lot of control that we have over it. But I believe that there is a very high demand for our services, particularly in the US. As procurement accelerates, we can anticipate that the growth of our backlog in the US is going to continue growing.

Great. Thank you. And then, Libya, would you talk a little bit about what you're seeing there in terms of potential collection, the potential restart of work, given that the government is showing some signs of stability relative to where it's been in the last couple of years?

Sure. Very good questions and I'll answer that one as well. And if Todd wants to add something on this after I'm done, he'll jump just right in. We're seeing a lot more stability. We are talking to our client in Libya. They have asked us to come to work and be patience. Right now, we're waiting for the budget and the country's budget to be approved formally, by the parliament for them to be able to start paying down their debts. One of their priorities is the education sector, which is the project that we used to have. We were in the higher education. The campus -- Tripoli University campus where we were supervising and managing is a top priority for the government. They want to reinstate and restart the whole program. They have already -- we haven't made -- because it didn't warrant, they owed us -- as part of the AR, they owed us local currency money as well. They have made that payment to us probably last week, or sorry, two or three weeks ago. It was small in nature so, it didn't warrant a press release, but we're expecting, as things normalize, that we would collect our fees. And once we do that, we would be looking positively at potentially going in very carefully into Tripoli for potential new work and continuing the existing work and the existing projects that we have.

Thank you.

So let me just add to that Raouf. Just to remind everybody that, when the accrual in first happened and the amount that was owed to Hill was approximately US$60 million. And over the years we have received sporadic payments but we've kept up our efforts and our relationships with the -- within Libya. And the remaining balance is approximately half of that right now. So, notwithstanding all of the political upheaval in the country over the last few years, we have managed to collect about half of that. And as Raouf said we did receive a small local payment. The significance of that is less about the dollars and more of that we continue to work with them and receive payments as we go along.

Thank you both. And so taking kind of what you know today and I suspect it's rather dynamic, but what would be your expectation on when you would restart work on that education system just given the cards as you see them today?

Libya is a difficult end to predict and putting time lines on Libya is very hard because it's a political situation not a financial situation. I think we've said that before. Given the stability if the stability continues on, we believe that before the end of the year if we are -- if we collect all our previous debts there and we have an advanced payment, we would be going in before the year ends. I believe it could be sooner. But again Libya is unpredictable and as long as there's peace there, I think within the timeframe that I'm talking about is pretty realistic.

Great. Thank you. And then my last question is relative to the facilities management business. I don't -- I didn't hear anything in your opening remarks relative to that segment of your business. Would you please talk to kind of the update for facilities management please?

Sure. Facility management which we really have introduced and are growing in both North Africa and the Middle East continues to grow very nicely. I believe I commented in some of it in the case. And I believe right now the backlog for facility management in both those regions combined would be about 11% of the backlog is facility management. We continue to grow that business. We're starting to see a lot of stability from it as well as fairly decent margins not much lower than what we usually get on the PM side because most of our facility management assignments are really as agents -- service agents for facility management which demands a higher rate than the usual facility management that some other people may be familiar with. We see this as a good reinforced investment that we've made for a continuous and repeat income for a long-term on the profit and loss statement as well as it's a great growth potential with cross -- being able to cross-sell between the PM services and the facility management services. So, it makes a lot of sense for us to continue growing that business. An additional advantage to it it's not sensitive to any of the oil pricing for initial and CapEx projects that we usually get involved in in particular in the Middle East. So, we're looking at it as a stabling force for both the income level as well as long-term on the economies as they go up and down with the oil prices.

And just to put some numbers around that. For the first quarter the -- our CFR from the facilities management was up 21% over the comparable prior year period.

Great. Thank you very much. That's fantastic growth.

[Operator Instructions] Our next question comes from the line of Pete Enderlin with MAZ Partners. Please proceed with your question.

Good morning. Thank you. I'd like to clarify the statement you made about the, CFR trend over the rest of the year, going up each quarter. Does that mean, up versus the year earlier or up sequentially from quarter-to-quarter?

I believe, it's both, go ahead, Todd. Please go ahead.

Yeah. So I believe that -- yeah that's correct. I believe it will be both. What I would say is that's certainly true for the third and fourth quarters. The second quarter it will be true sequentially. Whether it's true year-over-year, we'll see exactly when we're able to mobilize during the quarter and how much of that we're able to get. So that will certainly be the trend. I think it will be somewhere between, relatively level year-over-year in the second quarter versus maybe up a little bit in the second quarter.

Okay. Thank you. And actually another clarification, how do you define infrastructure? I mean, would it be basically everything except buildings? I mean, if you build a hotel or a college campus or something like that that's not infrastructure but everything else is infrastructure. And the reason I ask that is, because, in slide number five, most of the awards look like they were buildings, not infrastructure.

So that's correct but …

How do you define infrastructure?

Yeah. The infrastructure is really vertical construction mainly within transportation, as well as utilities, whether that be electric power generation or power distribution, purely infrastructure basically vertical construction, rather than horizontal.

You mean, literally physically and vertical.

Sorry, I mean, horizontal versus vertical. Infrastructure is horizontal versus vertical construction being buildings. I apologize.

Oh, okay, all right. That helps a lot. And talking about, your Hill International inspection services,…

Services…

…that's, fairly new business that you got it through an acquisition. Can you comment on the potential for that, as a pipeline builder, also as you indicated you see facilities management being a help? What about HITS, as a pipeline development tool? And I have a follow-up question to that, but that's the first part of it.

Sure. Great question and thanks for asking it. Engineering inspection services is a service that we actually perform in many places, around the United States as well as overseas. In New York in particular, and in some other states but for us -- for our discussion right now in New York, we could not perform these construction management inspection services, unless we had an engineering license. So by obtaining the engineering license through the recent acquisition that we did late last year, which now we have changed the names to HITS. We are now can provide our current and new clients within the Northeast region and in Europe, particularly services that we actually have the -- both, credibility experience and resources to actually perform, that we could not perform before. As far as what the growth potential for that is, well, for us, it would be a new market, and we could probably close to over the next five years double our size in the Northeast region just from providing these services.

Well, I guess, part of that also would be -- can you expand it organically, or would it be, likely that you would do other similar type acquisitions to get bodies, to get people?

We have -- I mean, we'd probably do it organically. We wouldn't need to acquire anybody to get the bodies. I think a lot of the people that we currently have that capabilities within the region. We just could not provide these services. We could not sign the contracts physically to be able to do that.

Can you give us an idea of what the percentage of your total backlog is infrastructure at this point approximately? I think you said it was..

Todd, do we have it broken down?

I'd have to get back to you. I don't want to give a bad number. So that's not something that's in front of us right now.

Okay. And then one more for me which is well, sort of, two parts. Your SG&A wasn't down very much not as much as revenues year-over-year. And you mentioned that you have some severance costs in there. So if CFR is starting to build why are you still laying people off? If that's in fact what's happening.

I don't think that was a matter of laying people off as it was just what I would call normal course turnover. However, we did lose a couple of people who had been with the company for a long period of time. So I don't think that that turnover in total has really increased but the mix of that was some longer tenured people who had red built up quite a bit of severance as well as vacation PTO time off that had to be paid out. So that was a factor, but we don't expect that to recur.

Okay. And then you said that SG&A is likely to go up to about $120 million and then one would hope stay fairly level at that amount for the next several years. Is that something that would be the main source of margin leverage for the company, or is there also some potential margin leverage within the direct costs themselves?

No I think that you're absolutely correct that the main source of our leverage will be in maintaining that $120 million cost base as we continue to grow the CFR and see that drop-through to the bottom-line.

And so would that $120 million level be the way to look at 2022 basically and beyond?

It's hard to say right now. We very intentionally did not give specific SG&A guidance for this year because as we continue to recover from COVID and we see things getting back to normal, we'll manage SG&A in line with the rate at what that happens and with which things get back to normal. So I would say that if we are fully back to normal by the beginning of 2022 then I think that we would approach that $120 million number. We might still have savings we can execute and not be all the way there but to the extent that this continues to linger a little bit more I think we still don't know exactly what's going to happen after the summer and into the fall. And if -- and what the vaccination rate globally is going to be. So I think that overtime, we will get there, but we'll probably manage 2022 in a similar fashion that we will see how everything is coming back to normal, how the CFR is going and we'll continue to manage our SG&A to essentially protect the bottom-line.

Okay. Well that’s all very helpful. Thank you very much.

And with that we have reached the end of our question-and-answer session. And I would like to turn the call back over to Mr. Raouf Ghali for any closing remarks.

Thank you. We will be presenting at the upcoming Sidoti Conference later this month and hope to speak with some of you there. Thank you all very much for your time. On behalf of Hill's 2,700 employees around the world, I thank you for your continuing support of Hill International. Have a wonderful day.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.