Charah Solutions, Inc.
Q1 2020 Earnings Call Transcript

Published: 13 May 2020

[Operator:]

Good morning, ladies and gentlemen, and welcome to Charah Solutions' First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After today's presentation, we will conduct a question-and-answer session. [Operator Instructions]I would now like to hand the conference over to Steve Brehm, VP, Legal Affairs and Corporate Secretary for Charah Solutions. Please go ahead.

[Steve Brehm:]

Thank you, operator. Good morning everyone, and thank you for joining us today. We appreciate your participation in the first quarter 2020 earnings call and look forward to sharing our prepared remarks and answering your questions. We hope that you've had a chance to review the press release we issued yesterday after market closed. If not, you can find the press release as well as the supplemental investor presentation you may follow during our prepared remarks on the Investors Section of our website at www.charah.com or ir.charah.com.Joining me today on the call are Scott Sewell, President and Chief Executive Officer; and Roger Shannon, Chief Financial Officer and Treasurer. Following their prepared remarks, we will conduct the customary question-and-answer session.Before we begin, I would like to remind you, that our remarks regarding Charah Solutions include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those disclosed in our earnings releases and conference calls.Those risks include, among other, matters that we have described in our earnings release as well as in our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q and our annual report on Form 10-K. We disclaim any obligations to update these forward-looking statements. During this conference call, we will refer to non-GAAP financial measures. We provide reconciliations to the applicable GAAP measures in our earnings release, supplemental presentation and on our website. Again, thank you for joining us today.Now I would like to turn over the call to Scott Sewell, our President and CEO.

[Scott Sewell:]

Thank you, Steve, and good morning, everyone. It's great to have you join us for our earnings call today. I'm happy to be speaking with you again in providing an update on our first quarter performance. This morning, I'll briefly review our first quarter financial results and provide an update on current business developments, and I'll update our pipeline of opportunities in recent regulatory and legislative actions. I'll then transition the call to Roger for a deeper dive into our financial performance during the quarter and an update on our 2020 guidance.But first, I'll provide an update of the impact of COVID-19 on our business and the actions we've taken to protect the safety of our employees. As the situation surrounding the COVID-19 pandemic continues to evolve, our highest priority remains the safety of our employees and customers.As shown on slide 5, if you're following along in supplemental presentation, Charah Solutions provides mission-critical services to regulated utilities that must continue operating to provide power to the country. And I'm very proud of the way we have partnered with our utility customers to maintain service continuity safely.Our ability to continue to provide essential daily operations, outage maintenance, byproduct sales and remediation services for our mission-critical utility customers during this period of high uncertainty and disruption, speaks to the resiliency of our team and the mission-critical nature of our services. I want to thank our dedicated Charah employees who are working every day to help our utility customers keep providing electricity. I also want to again thank all of the first responders, medical personnel and all others who continue working tirelessly to address the consequences of this pandemic.To date, we have not had any significant work stoppages. We believe we are well prepared to protect our staff and ensure continuity of service to our customers during this uncertain period, and we will continue to monitor the situation very closely.Charah's business was built on an unwavering commitment to safety, and we will continue to make sure we are putting the safety and the best interest of our employees and other stakeholders ahead of everything else.As I described on our recent year-end 2019 earnings call, we have taken immediate action to protect our people, our customers and our business. The mission-critical nature of our customers' operations made it imperative to quickly initiate a series of contingency plans to ensure business continuity for our customers.The vast majority of whom are regulated and must continue to operate to provide power to the country. We have implemented measures to manage through possible service interruptions, and we are maintaining real-time communication across our entire organization and with our customers.As I stated in our Q1 2020 earnings announcement yesterday, in April, we implemented a series of preemptive cost-cutting and cost savings initiatives across the company, including reductions in employee compensation, reductions in cash-based retainers to our Board of Directors, reduced hiring and significantly reducing discretionary spending.In addition, we are implementing the ample benefits of the CARES Act. To protect the health of our employees and customers, we are continuing to restrict non-essential travel. We are also continuing a work –at-home policy for corporate office employees until such time as the respective state governments seem safe to return to the work environment.However, our mission-critical operations personnel remain on-site at our customer facilities. We have not observed any significant slowdown in activity on existing job sites as a result of the COVID-19 outbreak at this time and are in constant communication with our utility customers.We have a shared commitment to partner with them and keeping all employees safe by abiding with their health and hygiene policies, aligning with their health risk mitigation procedures. Our field and office teams continue to perform exceptionally well during this challenging period, and we believe we are well prepared for these and future challenges.As we stated in our press release, we are seeing a significant increase in new award opportunities resulting from our customers' announced and expected remediation initiatives, in response to the regulatory requirements and customer motivation. The amount of business development activity is accelerating and has never been higher as we see utility companies increasingly developing and implementing their plans to address the more than 1,000 regulatory mandated service impoundment closures in the United States.We are in the process of submitting proposals for projects at three major Southeast utilities that recently announced intentions to proceed with large ash pond remediation projects. During the quarter, we announced that we have been awarded a closure by renewal project by a large southeastern utility. In this project, Charah will remove over two million tons of ash from a retired coal fired plant that will be recycled and beneficially used in the concrete industry.Over the next several years, as the closure of the pond is underway, we will also install environmental controls. And at the conclusion of the project, the former ponds will be restored as usable property. We also recently announced an award to take ownership and close ash ponds previously owned by consumers energy in Michigan and repurpose them, as Natural Wetlands.As part of a multi-year project, we will excavate the Coal Combustion Residuals that will be beneficially reused as necessary fill materials. At the conclusion of this project, we will return the natural wetlands property to the customer.We see Environmental Liability Transfer Services like this one with Consumers Energy as an innovative solution to meet the evolving and complex needs of our utility partners, as they work to retire and decommission order, unutilized or less economically viable generating assets, while also improving the environment.Our one-stop services can effectively manage the environmental aspects and safely close and enhance the site for the benefit of the community, all while substantially lowering the cost of the utility. We expect this trend to continue as, states are becoming more prescriptive, as to the means and methods of ash pond remediation and as the Environmental Protection Agency continues working with several states to establish their own recycling programs.Further, the EPA continues to work on its regulatory requirements, beneficiation guidelines and ash impoundment closure deadlines. We continue to see these movements as positive for Charah Solutions, as the only full-service provider of mission-critical, ash management operations, environmental remediation and compliance services, maintenance and outage services and byproduct sales, for the utility industry. The company is ideally situated to partner with these utilities to deliver their impoundment closure requirements and needs.We had growth in our Maintenance & Technical Services operations, as we saw an increased scope and higher revenue from both our Nuclear and Fossil Maintenance Services during the first quarter. Through our Allied Power subsidiary, we are in the process of completing eight of the 12 nuclear maintenance outage scheduled for 2020, with the remainder to be performed, in the fall.Additionally, our Allied Power team was able to increase the scope of services provided and performed during the quarter, for the primary customer. We are proud of the work that our Allied Power team performs. And we congratulate them on their success. Through Allied Power operation, we are a leading provider of mission-critical, non-discretionary nuclear outage maintenance services.This steady, predictable business remains a solid source of revenue and EBITDA for us. Our ability to expand our scope of outage maintenance work with our nuclear and fossil customers as well as our ability to continue to provide essential daily operations and remediation services, or our mission-critical utility customers, during this period of high uncertainty and disruption, speaks to the resiliency, of our team and the mission-critical nature of our services. As we stated, during our earnings call, the value of $583 million of new awards won in 2019, exceeded 2018, by 450%.During the first quarter of 2020, we have won over $175 million new awards. And we're optimistic, that we will see an acceleration of new awards based on, the project activities currently underway, by utility customers all across the United States. Including three large utilities previously mentioned, as they address their federally and state-mandated closure requirements and needs.Though, we are seeing some near-term delays in the timing of new project awards, related to the COVID-19 pandemic, we expect to see our opportunities for remediation and compliance services and byproduct sales accelerate as utilities move forward with their closure plans. We also remain optimistic about, our byproduct sales opportunities, driven by expectations for greater infrastructure spend, as we continue to expand the reach of our MultiSource materials network and add new customers.We continued to see an increase in bid activity, with approximately $3 billion in pending proposals and an additional $12 billion in new near-term pipeline opportunities. The recent uncertainties related to the coronavirus and the resulting impact on the U.S. economy, may affect the timing and the revenues from these new awards in the near term. Our customer base is growing, and our geographic reach is expanding as customer motivation for these environmentally-friendly, customized solutions to recycling and remediation of ash byproducts increases across the United States.Our momentum in winning new awards, coupled with the increased liquidity and financial flexibility provided by our recent credit agreement amendment and successful capital raise, and our increased focus on cash flow improvement through expense reduction, strengthens our ability to compete and capitalize on our expanding market of opportunities.Now turning to our first quarter 2020 financial results. Revenue for the three months ended March 31, 2020, was $164.6 million, an increase of $1.4 million or 0.8% from the $163.3 million reported in the three months ended March 31, 2019. The increase in revenue compared to the same quarter last year is due to an increase in the number of planned nuclear outages in the period, partially offset by project completions within our remediation and client services component.Gross profit for the three months ended March 31, 2020, decreased $4.6 million, or 29.8% to $10.8 million from $15.4 million in the three months ended March 31, 2019, and gross margin declined to 6.6% from 9.4% a year ago, both due primarily to lower revenues in our environmental solutions segment.Looking at our balance sheet and liquidity, as we discussed during our year-end 2019 earnings call in March. We reached an agreement with our lender group to amend the company's senior secured agreement that, among other things, waived a mandatory term loan repayment, reset financial covenants through the maturity of the facility and increased our borrowing capacity under our delayed draw term loan.We also closed on a transaction to sell 26,000 shares of Series A Preferred stock for approximately $25.2 million in a private placement. On March 16, 2020, we closed the preferred stock offering and the credit agreement amendment became effective. These agreements significantly increased the company's liquidity profile and financial flexibility and deepened our customer confidence in us to deliver our customized environmental solutions.Next, I'd like to provide an update on important regulatory developments at the state at federal levels. On our last call, we spoke to several developments at the state level and highlighted activity in both North Carolina and Georgia. In North Carolina, Duke Energy has now received approval for three of their ash pond closure plans, in accordance with their agreement with the North Carolina Department of Environmental Quality, and they are continuing to work on plans for the remaining six pond impoundments.Performance of this work is expected to start by the first half of 2021, and the completion of most of these closures expected to occur over the next 15 years. EPA has approved Georgia's Coal Combustion Residual, or CCR, regulatory program, making Georgia of the second state to receive such approval. We are also monitoring state regulatory developments in Virginia, Indiana, Tennessee and Illinois.The Environmental Protection Agency recently announced its final proposal for stabilizing coal ash regulations for the electric generation companies. Among the proposed amendments of the CCR rule is an amendment that changes the method of closure for hundreds of ash impoundments that were aligned with clay soils. This change can increase closure costs when comparing closure and place methods to closure by removal methods.The EPA's pronouncement also moved up the ceasing of operation for the CCR impoundments from October 2020 to August of 2020. We believe that the timing of the closure requirements stipulated by the EPA is accelerating ash pond closure plans across the utility space, and is driving new business opportunities. In our view, the collective impact of these proposals potentially increases remediation opportunities for Charah Solutions in 2021 and beyond.In closing, we anticipate the growth in contract awards will contribute positive results in 2020 and even greater in 2021 and beyond. We remain committed to taking actions expected to preserve cash, support our balance sheet, and enhance long-term value, while positioning ourselves to take advantage of the expanding market opportunities.Importantly, we are closely aligned with our utility partners, environmental remediation and sustainability initiatives, which should provide Charah Solutions with significant growth potential for many years to come.With that, I'll turn it over to Roger, who will discuss our outlook for 2020 in more detail, and provide more clarity on our expectations in the current market environment.

[Roger Shannon:]

Thanks, Scott. I'll continue with a review of our financial results, and provide an update on our balance sheet liquidity and 2020 outlook.Revenue for the first quarter increased $1.4 million or 0.8% from the year ago period to $164.6 million, primarily driven by an increase in the number of planned nuclear outages in the period, partially offset by project completions in 2019, within our remediation and compliance services component, including the completion of the Brickhaven project during the second quarter of 2019.Gross profit decreased by $4.6 million or 29.8% to $10.8 million during the quarter, while gross margin declined to 6.6% from 9.4% in the same period last year. These declines were driven primarily by project completions in 2019 in our Environmental Solutions segment.We reported a net loss attributable to Charah Solutions for the first quarter of $14.3 million as compared to $2.8 million in the year ago period. The loss was primarily attributable to higher loss and extinguishment of debt resulting from the third amendment of our credit facility, and the previously mentioned lower gross profit, partially offset by lower general and administrative expenses and interest expense net.Q1 adjusted EBITDA of $5.2 million was down $3.7 million from the year ago period, due primarily to lower gross profit.Now, I'll discuss results at our reporting segment level. In our Environmental Solutions segment, revenue decreased $21.7 million or 37.2% to $36.7 million as compared to $58.4 million for the three months ended March 31, 2019, primarily driven by project completions in 2019, within our remediation and compliance services component, including the completion of the Brickhaven project, resulting from the deemed termination.Gross profit decreased $4.4 million or 53.4% for the three months ended March 31, 2020, to $3.9 million as compared to $8.3 million for the three months ended March 31, 2019, due to project completions in 2019 within our remediation and compliance services component. Gross margin declined to 2.5% from 14.2% in the first quarter of 2019.In our Maintenance and Technical Services segment, revenue increased $23.1 million or 22% to $128 million as compared to $104.9 million for the three months ended March 31, 2019. The increase was primarily attributable to an increase in the number of planned nuclear outages in the period.Maintenance and Technical Services gross profit decreased approximately $200,000 or 2.3% to $6.9 million as compared to $7.1 million for the three months ended March 31, 2019, primarily as a result of margin improvements within our nuclear services offerings during the three months ended March 31, 2019 that did not reoccur this quarter, partially offset by an increase in gross profit from our fossil services offerings. Maintenance and Technical Services gross margins decreased to 5.4% from 6.8%, driven by the mix of services.Now turning to our balance sheet and liquidity. For the first quarter of 2020, our operating cash flow was negative $18.3 million. The use of cash in operations was driven primarily by the spring 2020 nuclear outage working capital requirements with AR collections continuing past quarter end, and an increase in contract assets, which we expect to collect in Q2 2020.CapEx for the quarter was $1.2 million, resulting in free cash flow of negative $19.5 million. At March 31, 2020, we had gross consolidated debt of $224.6 million. The increase in total debt during the first quarter is primarily due to the previously mentioned increases in working capital requirements associated with the spring nuclear outages, which will be collected during the second quarter. Our liquidity was approximately $37.3 million as of March 31, 2020, up from $23.9 million at the end of the fourth quarter of 2019.Next, I'll address our 2020 guidance. We are affirming our 2020 guidance that was previously provided during our year-end 2019 earnings call. That of revenue expectations of $560 million, a net loss of $15 million, adjusted EBITDA of $37 million and an expectation to be free cash flow positive.The guidance is based on existing contracts and our current expectations of no material worsening of the COVID-19 pandemic and specifically including, but not limited to, no material customer work stoppages, no significant employee absences and no government-mandated quarantines. Any worsening of the COVID-19 pandemic could materially affect our 2020 outlook.With that, I'll turn the call back over to Scott.

[Scott Sewell:]

Thanks, Roger. Our activities during the first quarter demonstrate the positive momentum we're gaining from our success in winning new business at a record pace. We anticipate meaningful positive contributions to revenue, EBITDA and free cash flow in 2020 from the success and our liquidity and financial flexibility have been significantly enhanced since year end.Our customers' confidence in our ability to bring, our full suite of mission-critical services to meet their specialized needs has grown, as a result of our enhanced financial position. We believe we remain the environmental and maintenance services partner of choice for the power generation industry with an exceptional quality, safety and compliance record. We have not observed any significant disruptions to our business due to the mission-critical nature of our customers' operations. We are aware of the potential macroeconomic disruptions beyond our control, and we will continue to monitor this situation very closely.We believe we are well prepared to protect our staff and ensure continuity of service to our clients during this uncertain period. We remain committed to keeping our people safe, addressing our customers' needs, and growing the business. This is predicated upon several factors that contribute to our ability to execute during the current pandemic and position ourselves for future success.One, there is a very large installed base of legacy coal ash disposal ponds or acquire mediation; two, routine nuclear reactor maintenance is non-discretionary, specialized and predictable; three, an existing customer base consisting of 80% investment grade regulated utilities that rely on our mission critical services; four, utilities increasingly focus on environmental stewardship and regulatory compliance; five, recycling waste by products is a critical component of the current and future infrastructure needs; and sixth, enhanced liquidity and financial position.And as we pursue our expanding pipeline of opportunities, we are committed to making further adjustments to improve our operating efficiency, reduce our debt levels and increase our margin potential.As stated previously, our ability to manage through the great shutdown with minimal disruption and the momentum we are gaining from increased new awards, coupled with the expanding addressable market, gives me confidence in the future of Charah Solutions. Thank you again for your interest and participation.And with that, operator, let's begin the Q&A session.

[Operator:]

[Operator Instructions] Your first question comes from the line of Michael Hoffman from Stifel. Your line is open.

[Michael Hoffman:]

Thanks, Scott, Roger. Good morning. Hope everything is well with you all and your family and colleagues.

[Scott Sewell:]

We are doing well here. Hope the same with you.

[Michael Hoffman:]

Yeah, yeah. Need a hair cut, but as far as most of the country I think.

[Scott Sewell:]

Same here.

[Michael Hoffman:]

And my wife's threatening to pull out the horse clippers. Roger, the cost cuts that you alluded to, two questions around that. Are they done? So they've be taken them, and now it just rolls through for the remainder of the year? And two, could you quantify the scope?

[Roger Shannon:]

Yes, Michael, we have – we believe we implemented the bulk of the cost cuts. We talked about in previous calls, a risk that has – have been done towards the end of last year. That impact is starting to flow through. We had some additional tweaks to that at the beginning of the year. As we mentioned in the release, we have taken some preemptive steps related to COVID-19 situation, including some salary reductions spending the 401(k) match as well as other cost-saving cuts.So, I would say that the bulk of it has been related to headcount. Although, we've looked across the entire organization and there has been other cost savings that we've identified that we made toward the end of last year, and that we continue to make with the well flow through for this year.

[Michael Hoffman:]

And are we putting a number on that as far as the dollar amount?

[Roger Shannon:]

No, we haven't publicly disclosed that. I think you can see in the first quarter of this year compared to first quarter of last year -- first quarter last year, the benefit of that flowing through-- not disclose for now.

[Michael Hoffman:]

Okay. And then could you remind us, when do we anniversary the quarterly headwinds from the lack of the --there is softer work, if you will, sort of until the award stuff started to pick back up again and then lead to a renewal of actual work plus Brickhaven?

[Scott Sewell:]

Hey Michael, this is Scott. Can you ask that question again? I want to make sure we--.

[Michael Hoffman:]

Yes, probably couldn't come out very clear. So, you shared with us in 1Q, you had basically a headwind on gross margins because your anniversary and remediation work that -- so the way I think of it is the pipeline didn't get renewed and replaced with new revenues.We're working down the pipeline, Brickhaven happens. Now, it comes out, that's high-margin stuff. And it's not really until 2020, we start to see the awards turn back into revenue. So, you had this pressure on revenue that was high margin. When do I anniversary that?

[Scott Sewell:]

Yes. Okay. That's what I thought you were asking. I wasn't sure. So, I think the best way to think about that is the end of Q2. So that anniversary would be at the end of Q2. You would see kind of the -- everything related with Brickhaven to flow out of the system, and then all the new awards that were starting in 2020 and the ramp associated with them getting us back to a normalized level here at the end of Q2.

[Michael Hoffman:]

Perfect. And then last for me, could you walk us through the cadence by quarter, not so much the dollars because you're not giving on dollar, but you say you'll be free cash flow positive. But how do I follow the cadence? Like you were negative in 1Q on a relative basis, how does that look through the remainder of the year, 2Q, 3Q, 4Q to get to year-end positive?

[Scott Sewell:]

Sure, Michael. And I'll let Roger answer that one. But I think really, when you look at Q1 and I noticed a little bit of difference between where we ended the quarter versus kind of where your -- where you were guiding to where you were modeling. I think the biggest thing on our end is just the working capital build here associated with all of the nuclear added work.I mean, again, we had our strongest, largest spring outage season to-date, and that puts a strain on working capital only for a very, very short period of time and it works itself right back out. So, it just kind of got caught at the quarter end here, and that's all going to work itself out right now, and Roger, if you want to add anything else to that?

[Roger Shannon:]

No, that's right. You can see on, Michael, on the balance sheet, the increase in accounts receivable that is materially pretty much exclusively driven by the increase at Allied for the first quarter outage. It was a large outage, kind of coupled with additional scope on that. That is in the process of unwinding, so we expect cash flow to be up significantly in Q2. And as well as in Q3 and then just for normal seasonality, we're going back into the fall outage at Allied, I would expect to be some modulation in that into Q4, but…

[Michael Hoffman:]

Okay. That helps. That helps a lot. One last I have, one last question. So some of the trade journals are talking about how utilities are struggling under the stay-at-home has reduced demand dramatically. How is that sort of flowing through into your customers as you see it, this is particularly your on-site, your fossil services and then corresponding would have a correlation to a byproduct. Are you seeing any impact of that?

[Scott Sewell:]

We're seeing a little bit, Michael, but very, very minor. I mean, again, our -- as we stated in the remarks, as well as in the press release, we haven't seen any significant downturn to our daily operations. We're still on-site every day providing services at both the fossil and nuclear facilities. But when you think about generation, we are seeing a downward trend as it relates to power generation.I think our contract are structured for the on-site services to make sure that we make there any downward trends in a good spot. But what we are watching and monitoring closely is the supply relative to byproduct sales with a little bit less generation, that's going to impact that a little bit.However, we still have pricing mechanisms to recoup them and demand is extremely strong there. We see demand continuing to increase byproduct sales, especially with a lot of talk around infrastructure spend, everything else. So, just something that we're monitoring. We are seeing a bit of a downtick. However, impact to us right now is very minimal.

[Michael Hoffman:]

Okay. Thank you very much.

[Roger Shannon:]

Yeah.

[Operator:]

Our next question comes from the line of Toni Kaplan from Morgan Stanley. Your line is open.

[Toni Kaplan:]

Thank you. Scott, it sounds like the opportunities in remediation continue to grow. And so I was hoping you could discuss whether your current capital structure inhibits the amount of contracts that you can bid on, just given start-up costs in each job?

[Scott Sewell:]

Toni, thanks. You're right. I mean, the opportunities in front of us from a remediation standpoint as well as a byproduct sale standpoint are just really like nothing we've ever seen before. So there's not -- there has not been a slowdown. Our business development team is easier than they have ever been, and so we've been very cognizant of how we should plan for future growth. And as we think about the capital structure, and the way we contract with our utilities, I think it sets us up well for the future.It really does. I think if you look at what we've done with our balance sheet here recently, that's been very supportive of being in a firm position to take advantage of this work, and that's something that Roger and I have focused on. When we talk about reducing debt and increasing the strength of our balance sheet and liquidity, all of that has been done in effort to take advantage of the big opportunity in front of us right now.

[Roger Shannon:]

Yes, Scott, I would just add that if you look at the balance sheet and see that we've enhanced liquidity by the roughly $25 million preferred equity transaction. We're holding that as cash on the balance sheet. Our lender group has been very supportive and certainly recognizes the opportunity in front of us, increased liquidity by $10 million as part of the third amendment that we did during the first quarter.So, that really was in line and in expectation of the opportunities that you described. So we certainly recognize that. The other things that we look at is, working to be cash flow positive at the beginning of projects. We're certainly very conscious of expenses and outflows around mobilization. We've looked to kind of optimize and reduce the cash -- the initial cash strain on any sort of equipment at the startup. So, we're looking at it very holistically and kind of both from the balance sheet perspective and in terms of liquidity and capacity and certainly very much focused on cash flow.But to answer your question, I'd say no, I don't. As we're looking at these opportunities, particularly the large ones that we just mentioned, there's really nothing at the moment that kind of keeping us up at night, and how we think about being able to execute, mobilize and partner with our customers on this.

[Toni Kaplan:]

Okay. That's great. And then just for my follow-up, even that a large portion of your work is structured as time and materials or cost reimbursable. How should we think about the fixed versus variable mix of your costs?

[Scott Sewell:]

So Toni, I think that's something that we look at differently kind of segment-by-segment as we described fixed and variable type costs. And I think, one way to really view that at all kind of to us, it depends on the contract structure and which costs are considered fixed by our customers versus and reimbursable as well versus what's -- how we can track those contracts. So, I don't know, Roger, if you've got a better way to describe that?

[Roger Shannon:]

Yes. I think what you're alluding to is, right. If you look at the Maintenance & Technical Services segment, particularly the nuclear outage side, that is T&M. So there's certainly a higher percentage of variable cost around that. You can see that we ramp up pretty substantially in field personnel during those outages and ramp back down during night outage season.I see, the fixed component of that segment, although we don't report on it down to that level. If you just kind of think about it logically, it is certainly less. From the Environmental Solutions side, I had to think about a breakdown, again, it's not something I am going disclose publicly. But when we look at the projects, we look at it on a project-by-project basis, as Scott was saying, with the resources, the material, the head count built into those projects, the cost of the equipment is kind of baked into the gross profit on those. So as Scott was alluding to, we really look at it more on a project-by-project basis as opposed to on a company wide. Does that help?

[Toni Kaplan:]

That’s perfect. Thank you.

[Operator:]

[Operator Instructions] Your next question comes from the line of Michael Feniger from Bank of America. Your line is open.

[Michael Feniger:]

Hey, guys. Thanks for taking my question.

[Scott Sewell:]

Yeah. Good morning, Michael.

[Michael Feniger:]

Good morning. You guys are now -- we're now in May, you reported your last quarter at the end of March. You reaffirmed your outlook. Is there anything we should be aware of that could be slightly different from when you last gave your original guide, is that free cash flow, which is supposed to be positive and still -- expect to be positive is less positive than your original guide? Does EBITDA feel like based on where you sit now, and what you've seen through April and May, does it feel easier to obtained? Is there still some -- does it feel a little bit more out of reach? I'm just curious with what you've gone through and the fact that COVID is supposed to be hitting most of the companies most in April. And you guys reaffirmed just any confidence you have from you guys reported at the end of March till now on those areas of your guide?

[Scott Sewell:]

Yes. Thanks, Michael. And I think -- yes, I'll touch on a couple of things related to your question, I think some of them tie back to what Michael Hoffman was asking as well. But -- specific to COVID and since we last spoke and just thinking about the last 60 days, it really highlights who we are, not just the strength and resilience of our workforce, but also the strength and resilience of our business model.We highlighted some of the strong things that our M&TS group did in Q1. Like you said in April, they continued to perform their audit work. Our byproduct sales as well as our ash remediation continue to perform, and our teams performing daily ash management at the fossil plants, all continue to go to work every day.I think that just really highlights why we were able to reaffirm guidance. We really have not seen a significant slowdown since we last spoke. I think when you think about the numbers or anything else, we -- obviously, cash flow looks a little bit different than I have seen some of the models out there. That all kind of -- it's kind of more of a modeling exercise, probably from an analyst perspective.We expected a negative cash flow coming into Q1 just because of where we stood with the outages. So as Roger pointed to earlier in the conversation, that all will work itself out here in Q2 and over the balance of the year. So really we were -- we are pleased to be able to come out and reaffirm what we know a lot of other companies out there pulling guidance or changing guidance. And I think the approach that we took when we spoke to you guys last quarter of just speaking very directly around what we have in hand, and how we can perform it.And then, again, taking a look at as we reaffirmed it, we sat down as a team and saw what our -- how our teams were able to make it through April. And you said that was supposed to be a tough month for everyone, and we continue to move through it at good pace. So we're optimistic about the balance of the year, and we're definitely happy to be able to reaffirm our guidance.

[Michael Feniger:]

And Scott, you mentioned through the call, obviously, there's a lot of opportunity and the acceleration even with some awards. But then you also mentioned how COVID is delaying some new awards. I'm just curious, is the delay you're seeing the ability for these awards -- the bidding on these awards? Are these projects to be awarded into your backlog?Or is there a concern, could we see a delay of a project is supposed to be starting in the back half of this year. It's already been awarded. It's in your backlog yet. Because of COVID, utility has decided they wanted to push it out a few months or so.

[Scott Sewell:]

So two things, if you think about the timing of the new awards, that is continuing as expected. So the record year of new awards that we had in 2019 in that pace that we saw coming into Q1 of 2020. Those startups are generally in line with where we expect it to be.When I -- in the remarks, when we speak to timing of, I would say, newer awards or new awards from Q2, Q3, Q4, what we're expecting right now. We're seeing that little bit of delay right now is more administratively. If you think about all of our customers, everybody is working remotely and maybe a little bit less productive. So it's more of an administrative perspective of why there's some delays there, and not any kind of a timing perspective related to, hey, we are going to do this project or we're not going to do this product. It's just kind of more of a hiccup in the system or kind of a little speed bump here.But we fully expect to see the rest of those awards come out balance of the year. And like I've stated a couple of times here, I mean it's just amazed and how productive our business development team is being right now, and the amount of opportunities in front of us in size and scope associated with them. It just is very exciting time for us, really.

[Roger Shannon:]

Yes. I think this -- speaks to our guidance it, when we talk about that $560 million in revenue and $37 million EBITDA number that we wanted to be confident that we have a feel for the startup, that there's less chance of disruption for that, and I would just reiterate through -- today through -- having gotten through April, almost halfway through May, things are continuing to progress as we expected and hoped.

[Michael Feniger:]

Thank you. That's helpful, gentlemen. And any big maturities? I know you guys did a lot of the credit amendments and the like. I'm just curious if you could remind us on any big maturities or the next big tranche to be aware of?

[Roger Shannon:]

Yes. So we've -- when you think about the different tranches of the increased liquidity, we increased liquidity through the bank group of about $10 million. We're scheduled to pay that down quarterly over the next four quarters, starting at the end of the second quarter, so Q2 through Q1 of 2021, so that would be $10 million over the course of the next 12 months, starting at 12.30. The remainder of the term loan with the lender group, I think the amount of amortization is not change through the course of this year. So to monthly amortization from quarterly, but the amount of that didn't change. And then the bulk of the pay downs that you see in our current portion relates to equipment type facilities that are just kind of paying down as per the terms of those agreements. So net-net, we are projecting to pay down an additional $30-plus million over the course of this year.

[Michael Feniger:]

Okay. That was helpful. And just like lastly, just to sneak one in. You mentioned these three major Southeast utilities. You submitted some bids. And then you also talked about, I think, an award you have, where you're moving over 200 million tons of ash. I'm just curious who are you guys kind of bidding against for these awards? Is it similar type of players that your -- you guys have seen in the past? Is a different type of contractors, waste companies or engineering companies that are coming in to try to look at this market as an opportunity? And with the content you talked about Scott, removing over 200 million tons of ash, I mean, it's a multiyear deal.Is there anything different with this contract structure that we should be aware of that we haven't seen Charah have in the past? Is it more complicated? It seems like you guys are installing some environmental controls. And we can this form upon, be able to be reused again? I'm just curious if these bigger contracts and some that you aware. If they're drastically different from components you guys have done in the past. Thanks everyone.

[Scott Sewell:]

Thanks, Michael, and I need to hire you to be my PR guy because 200 million tons of ash would be a great phenomenal project for us. I'm just kidding, it's actually a two million-ton front, but nonetheless, very exciting for us. And to your point on size and scope there, if it's right in our wheelhouse of what we've done. We've done much bigger projects in the past and much smaller ones as well. If it tighten our wheelhouse of just excavating and remediating upon, and then also bundling that with our ability to use our MultiSource network to sell the ash for beneficiation and recycling.So, yes, nothing out of the ordinary as it relates to that project, but again, one that we're extremely proud of. And then as it relates to the competition, we're not seeing anything different than we've seen over the years. There have been different times. We've had like you mentioned, E&C guys or waste folks or ash-specific companies or civil contractors. I mean from time to time, people attempt to compete in this market and then they decide to get out for whatever reason because they just don't have that same sense of or focus on customer quality and safety, like we have. And that's really -- we haven't seen any changes there, on the competitive side.

[Roger Shannon:]

And I would just add, Michael, on that, when you think about these large three that we mentioned, they know our capabilities well. We have good relationships there. And they know what we can do. And I think, if you think about us, as these services that we bring, we believe that, there's no other company that can bring the combination of the remediation work, byproduct sales, the daily ash operations, where we're already on site, performing this work.So that's kind of unique in the industry to be able to bring that full suite. And you're seeing that in these two projects that we talked about, to be able to combined remediation work and beneficial reuse of the product. We do seek fantastic opportunities, in byproduct sales.There's certainly recognition and the benefit of fly ash as a substitute for cement. Of course, we're keeping a close eye on, potential infrastructure projects that could be announced across the U.S. that's being discussed more, as a possible outcome of the impact of COVID to get the economy moving again. So we think the customers see the value in that kind of full suite that we bring, that we become unique in the industry.

[Operator:]

There are no further questions, at this time. I'll turn the call back to presenters for closing comments.

[Steve Brehm:]

Thank you. And we appreciate everyone's time today. And interest in our story. And interest in the quarter. I look forward to speaking to everybody again here, after the Q2 call. Just hope everyone listening and families are safe. Stay safe and everything that you do. So, thank you. And we'll end the call. Thank you.

[Operator:]

That concludes today's conference call. You may now disconnect.