Visionary Holdings Inc.
Q3 2020 Earnings Call Transcript

Published: 7 Nov 2020

[Operator:]

Good day, ladies and gentlemen, and welcome to The Goldfield Corporation Third Quarter 2020 Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Kristine Walczak of Effective Corporate Communications. You may begin.

[Kristine Walczak:]

Thank you, and good morning, everyone. I'd like to welcome you to The Goldfield Corporation conference call to discuss the company's third quarter results for 2020, which were reported yesterday. Joining us on today's call are acting Co-Chief Executive Officer and Chief Financial Officer, Steve Wherry; and Acting Co-Chief Executive Officer and President of Power Corporation of America, Jason Spivey. If you did not receive yesterday's press release, please contact me at 312-898-3072, and we will send you a copy or go to Goldfield's website where a copy is available under the Investor Relations tab. A replay of today's webcast will be available on the company's website under the Investor Relations tab. Before we begin, I want to remind you this discussion may contain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as may, will, expect, anticipate, believe, estimate, plan and continue or similar words. Any forward-looking statements are based upon Goldfield's management's current expectations about future events, and Goldfield assumes no obligation to update any such forward-looking statements, except as required by law. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these forward-looking statements are no guarantee of future performance. These risks and uncertainties are discussed in the company's Form 10-Q for the quarterly period ended September 30, 2020. Also, certain non-GAAP financial information will be discussed on the call today. A reconciliation of this non-GAAP information to the most comparable GAAP measure is set forth in yesterday's press release, which can be found on the Investors section of the company's website. With that said, let me turn the call over to our Co-Chief Executive Officer and President of Power Corporation of America, Jason Spivey.

[Jason Spivey:]

Thank you, Kristine, and good morning, everyone. Thank you for joining us and for your interest in The Goldfield Corporation. On the call today, I will provide a review of our operations and then turn the call over to Steve Wherry, who will provide a review of our third quarter results. Following Steve's comments, we welcome your questions. The recent passing of our long-time CEO and good friend, John Sottile, will not deter the management team he built from executing Goldfields strategy. We remain dedicated to expanding our electrical construction operations geographically, growing and enhancing our portfolio of capabilities through service line expansion, and capitalizing on favorable industry dynamics of aging infrastructure, reliability, renewables and system hardening. Yesterday, we reported record nine month revenue. Moreover, year-over-year consolidated third quarter revenue improved over 8% despite real estate revenue decreasing 76%. Additionally, compared to our 2019, our electric construction margin improved 271 basis points in the third quarter and 255 basis points in the nine months due to broad-based execution, including continued service line expansion into distribution and substations in the Texas Southwest region and customer expansion due to successful cross-selling initiatives, particularly in the Texas Southwest and Mid-Atlantic regions. I want to sincerely thank all of our Goldfield employees for their continued commitment and resilience during these challenging health and economic times. Through our pandemic protocols in the field and office, our work-from-home policies and our continued active communication and collaborative relationships with our customers. We believe we have adapted effectively to this current unprecedented environment. We are very fortunate to be considered a critical and essential business. Throughout the third quarter, we experienced active bidding and project execution with minimal impact from COVID-19. Activity continues to center around small to medium-sized projects and ongoing work under long-term master service agreements. While industry headlines continue to reflect a positive market outlook, the magnitude of the impact from COVID-19 is still unfolding and could affect our future initiatives. We see ample opportunities for growth in the near and longer term. Demand for electric power services remains strong, with the majority of our utility customers actively deploying capital into their systems to modernize, harden, expand and adapt to current and future needs. Now I will turn the call over to Steve for a review of our financials.

[Steve Wherry:]

Thank you, Jason, and good morning, everyone. Today, I will be reviewing our third quarter results as compared to the prior year. Consolidated revenue for the third quarter of 2020 was $48.4 million, an increase of 8.2% compared to the same period last year. The increase in total revenue was attributable to an increase in electrical construction operations revenue, partially offset by a decline in real estate development activity. Electrical construction revenue in the 2020 third quarter was $48.1 million, an increase of 11.3% from the same period in 2019. The revenue improvement was mainly attributable to improved MSA project activity across all service lines in the Mid-Atlantic region of $3.3 million, increased MSA and non MSA project volume in the Southeast region of $1.9 million and increased storm work of $591,000. Partially offsetting these improvements was lower transmission-related MSA customer project activity in the Texas Southwest region of $1.1 million. Revenue from real estate development operations decreased to $365,000 for the three months ended September 30, 2020, from $1.6 million in the same period in 2019, primarily due to the decrease in the number of units sold and the timing and completion of units available for sale. Third quarter 2020 gross margin on electrical construction operations increased to 17.5% compared to 14.8% for the same period in 2019. This improvement was mainly due to the increase in project activity in our expanded service lines and higher margins across all regions. Comparing the year-over-year third quarter results, depreciation and amortization expenses increased approximately $327,000 or 12% to $3 million. This increase was mainly due to higher capital expenditures to support revenue growth in electrical construction operations. Selling, general and administrative expenses increased to $3.6 million in the 2020 third quarter compared to $2.2 million in the same 2019 period. SG&A expenses were primarily impacted by approximately $1.4 million due to the settlement of the amounts owed, including employment agreement and debt benefits to the estate of our former Chief Executive Officer, John Sottile, who passed away in August 2020. Operating income was $1.9 million in the 2020 third quarter compared to $2.1 million in the same 2019 period. This decrease was mainly due to the higher SG&A and depreciation expenses as well as lower real estate development gross profit partially offset by higher electrical construction gross profit. In the third quarter of 2020, the provision for income taxes was $632,000 compared to $592,000 in the same period last year. The effective tax rate for the 2020 third quarter was 36.7%, compared to 33.8% in the 2019 third quarter. The 2020 third quarter effective tax rate was higher due to an increase in permanent differences in relation to expected income and the adjustment to discrete items. Net income decreased to $1.1 million or $0.04 per share basic and diluted for the 2020 third quarter from $1.2 million or $0.05 per share in the same period of 2019, mainly due to the higher SG&A and depreciation expenses as well as lower real estate development gross profit, partially offset by higher electrical construction gross profit. Cash provided by operating activities for the period ended September 30, 2020, was $1.9 million compared to $20.4 million in the same period of 2019. The decrease in operating cash flow is primarily due to the timing of electrical construction projects. EBITDA for the third quarter of 2020 improved to $5 million compared to $4.9 million for the same period of 2019, primarily due to improved electrical construction gross profit, offset by higher SG&A expense and lower real estate development gross profit. EBITDA was negatively impacted by the approximate $1.4 million settlement to the estate of our former CEO. Total backlog at September 30, 2020, increased 105% to $385.2 million from $187.5 million a year ago. This improvement is mainly due to the increase in the total amount of estimated MSA work, primarily attributable to the award of three new MSAs.. At the end of the third quarter of 2020, our 12-month total electrical construction backlog increased 57.5% to $151.2 million compared to $96 million one year ago, mainly due to the increase in estimated MSA work attributable to the award of new MSAs as well as an increase in the amount of firm MSA project activity. To further expand on backlog, I would like to highlight a trend related to our reported 12-month electrical construction backlog. The 12-month electrical construction revenue earned in each of Q4 2019 through Q3 2020 exceeded the previous 12-month backlog for each quarter by 165%, 171%, 166% and 190%, respectively. Due to the nature of work we performed, many projects are both awarded and completed within a 12-month time frame and are not included in our reported backlog. At September 30, 2020, our balance sheet remains strong with approximately $20.6 million of cash and cash equivalents, $40.3 million of funded debt and a $23 million revolving line of credit, of which $12.3 million was available for borrowing. Total capital expenditures for the nine months ended September 30, 2020, was $13 million compared to $16.2 million in the same period a year ago. This decrease was due to the mix of assets purchased versus leased in the comparable quarters for our electrical construction operations. Our CapEx projection for the full year of 2020 is $16 million. This concludes our prepared remarks. Operator, please open the call to questions.

[Operator:]

[Operator Instructions] Our first question comes from Sam Rebotsky with SER Asset Management. Please proceed with your question.

[Sam Rebotsky:]

Yes. Good morning, Jason, and Stephen, the stock market so far has reported on Goldfield, and it's down about $0.50 or so. And is this attributable to backlog, as I mentioned in the previous call, went from 473 to 417 to 385, and the June numbers went from also 171 to 151 backlog. Even though you've indicated that you've improved from the previous year, the backlogs are going down. What is the bidding you're doing? And do you expect this backlog to improve? And if not, why hasn't it improved?

[Steve Wherry:]

This is Steve. Our backlog remains strong and we’ll provide long-term value for the shareholders. Backlog it's -- the increases are dependent on the historical revenue generated with customer and the lease of MSA. So as we renew MSAs, that's when it's going up. We've been very successful with renewing our MSAs but as we earn revenue, that backlog is going to decrease until it's time to renew an MSA, and we're successful with that or we bring on a new customer. We've got 11 MSAs. We've renewed two of them since September 30, and we've renewed -- counting those, we renewed a total of five since year-end. Our non MSA bid-market -- bidding market remains strong, which is going to help us. But as I stated in my comments, revenues -- let me back up. Our projects -- most of our projects are secured after the bidding process, the work is completed, and all that's done in less than a one-year period. So we don't get the benefit of reporting a lot of that in backlog. But I did note in my earlier comments, how over the last four trailing 12 months period, revenue exceeded the previous 12-month backlog substantially 165%, 171%, 166% and 190%. And just as an added note, since 2014, Sam, revenues generally exceeded the previous 12-month backlog by about 150%. So unless we're adding new MSA backlogs or gain substantial job successfully, one and one bid. The backlog is just going to move along. And how far that due to small, medium-sized contracts in our short life cycle.

[Sam Rebotsky:]

Okay. Steve and Jason, the team that John put together is a good team. And the only differences for whatever reason you haven't been stock market-oriented and the recent stock market awards should make you more interested in the stock? And hopefully also buying some stock in the open market. Furthermore, has there been, since the changes have taken place, has there been any interest in somebody acquiring the company because Goldfield is selling very low relative to the major players in the industry and John always would say, if anything happens in Goldfield, all the major companies would want to acquire Goldfield. Is there any companies making any offers? And have we hired investment bankers? And when do we hire investment bankers?

[Steve Wherry:]

Same good question. As you know, and you commented on John's earlier comments, this is a question which has been raised by investors for years. Goldfield is a solid operation. And as such, it's always been approached for M&A transactions. We'll continue to evaluate each opportunity on its merits with the goal of maximizing shareholder value, and we will continue our policy of not commenting on any possible future transactions.

[Sam Rebotsky:]

Well, sounds good. Hopefully, that you could build up the backlog and improve the profitability because the $1.4 million expense relative to John's contract plus the reduction in the insurance valuation of about $0.5 million, so that's a $2 million benefit that John received. And going forward, we have to tell our story and get the stock market investors to know about Goldfield and be willing to put their money where their mouth is. And hopefully, the offices will also participate. Good luck and hopefully, we could keep going in the direction we were going.

[Steve Wherry:]

Thank you, Sam. And Sam, we are in a great position to drive shareholder value. So we're pleased with the momentum and the direction we're going with the team John built.

[Operator:]

Our next question comes from Stephen Branstetter with ABL Investments. Please proceed with your question.

[Stephen Branstetter:]

Was there a key man life insurance on the former CEO?

[Steve Wherry:]

There was none.

[Stephen Branstetter:]

Okay. I've been in contact with several of the large shareholders over the past few months, I guess, including Sam, who you just had on the call. How corporation of America, that's kind of really what the company is. I know it's been called, Goldfield for years. It's no longer in the gold business. It's been listed on, I guess, on the American Stock Exchange since the early 1900s. That really isn't representative of the future of the company. Future of the company is Power Corporation of America, expanding in areas, Texas, Oklahoma, places like that. What are the thoughts on changing the name of the company and resemble to make the company more market friendly and more understandable to the investment community, changing the name to Power Corporation of America.

[Steve Wherry:]

Thank you for your question. We thought about it. We continue to address it and consider it going forward, but it's not something we're ready to act on at this time.

[Stephen Branstetter:]

Okay. The stock's down 10% today. Clearly, investors don't know or understand that, I guess, there was a $1.4 million payout that hit the expense line and basically took your earnings per share, I guess, maybe down from $0.07 or $0.08 down to $0.04 and the stock is selling off the cost of it. What are you doing to get analyst coverage for the stock so that the company can be more understood and represented to Wall Street investors.

[Steve Wherry:]

Yes. Thank you. We're reaching out to some. We're taking calls from some analysts, but we just haven't been picked up yet.

[Stephen Branstetter:]

Okay. The company seems to be being run more like a private company than a public company. There's a lot of expenses that go with being a public company. As you know, being an accountant, you have a lot of listing fees, you have a lot of extra accounting work. Are there any plans to take the company private?

[Steve Wherry:]

We don't make any -- I don't have any comment on that at this time. We just -- as a company policy, we don't comment on that.

[Stephen Branstetter:]

Okay. Usually, when companies enter the Russell 2000, they get more volume, more people understand it. Your company just missed the threshold, I guess, last May. Every year, they readjust the Russell 2000. Your market cap is just a little below of where it would take to enter, but if the stock gets up to $5.50, $6, it would enter the Russell 2000 next year in June. Clearly, the company is growing. You're showing 11% growth. Obviously, real estate will improve probably next year when the coronavirus is over. Are there any big contracts that you're bidding on that possibly could get investor interest to get the stock where it needs to be to get into the Russell 2000 and have proper exposure to wall street?

[Jason Spivey:]

Yes. We're continuing to be actively bidding large projects. Steve, we said in our comments that most of our projects are small to medium size. We are actively involved in bidding the large -- some large projects. These growth that we're trying to get to that threshold, as you're talking about the Russell index to get more institutional investors involved in our company. But there is a lot of bidding going on. COVID hasn't really affected that we've seen from our perspective.

[Stephen Branstetter:]

Okay. So are there any contract announcements that we could be looking for in the near future?

[Jason Spivey:]

At this time, we cannot disclose that.

[Stephen Branstetter:]

Okay. You mentioned -- I'm listening, sorry.

[Steve Wherry:]

Go ahead, Steve.

[Stephen Branstetter:]

No, you were about to say something. I apologize I cut you off.

[Steve Wherry:]

No, no. I mean, if it's a significant contract, we have a history of announcement, and we'll announce some of that time.

[Stephen Branstetter:]

Okay. You mentioned two renewed MSAs since September 30. Are those new? Or are they renewed?

[Steve Wherry:]

Those were renewals.

[Stephen Branstetter:]

Okay. Are there any potential future MSAs that could be increases rather than just renewals?

[Jason Spivey:]

Yes. We're working on some right now.

[Stephen Branstetter:]

Okay. And the two that were renewed, those will, I guess, be additive to the backlog now that they've been renewed? Is that how the system works?

[Steve Wherry:]

Yes, sir. But based on the experience with the customer run rate. And work that we have in hand. So those will be accretive in the future. And the length of the MSA obviously matters, too. We have 3-year, 5-year, 7-year MSAs with renewal periods.

[Stephen Branstetter:]

Yes. Clearly, investors see the backlogs shrink and they, oh, we got to get out of stock. If they see it increase, they're missing the story. So when you get renewals, backlog increases, as you were -- as you use it up each quarter, backlog drops until it's renewed again. Is that correct?

[Jason Spivey:]

We could. Right now, we can feel better about our backlog and the success rate we've had on the renewals.

[Stephen Branstetter:]

Okay. And do you see the real estate increasing next year in sales?

[Steve Wherry:]

Real estate, it's going to -- there'll be some activity next year, but we're kicking off a new project, and revenue should come in 2022.

[Stephen Branstetter:]

Okay. And there was a $1.4 million charge for the quarter. If you back that out, would that pretty much have been pure profit, have that expense not hit the SG&A?

[Steve Wherry:]

Absolutely. Yes, sir.

[Stephen Branstetter:]

Okay. So we don't expect to see that again next year or next quarter?

[Steve Wherry:]

No, sir. That was completed.

[Stephen Branstetter:]

Okay. And one final question. Going forward, is there anything you can do on the corporate expense side that can keep it tighter so that when revenues increase, we see an increase in income?

[Jason Spivey:]

We currently run a lean operation on the corporate side, but we're always looking at our expenses and seeing where we can reduce it.

[Operator:]

Our next question comes from James Devlin with Henley & Company. Please proceed with your question.

[James Devlin:]

So macroeconomically, obviously, your end customers are some of the largest electric utility corporations in the southeastern United States, right?

[Steve Wherry:]

Correct.

[James Devlin:]

So within like maybe the last 90 to 120 days, we've seen Berkshire Hathaway by Dominion Resources. There's like a story a day on my new scroll here, about Florida Power, Georgia Power, Duke Energy, acquisitions, potential acquisitions, rumorizations, but all of those companies have their CapEx, their capital expenditure budgets way up. I think they're giving 2- and 3-year CapEx kind of guidance to Wall Street, and the numbers are tilting -- the bottom line is the utilities, it looks like they're going to be spending a significant amount of money in the near future at least the next several years. And I believe Florida Power, George Power and Duke Energy are certainly clients of Power Corporation of America, right?

[Steve Wherry:]

Yes, sir.

[James Devlin:]

Okay. If they're spending more money, there's not a direct corollary, but that's certainly good for your business trends looking forward? If we follow their CapEx spending patterns, should -- is there a direct corollary to how your business will do? Kind of following where your clients are announcing large expenditures moving forward?

[Steve Wherry:]

Yes, sir. By what you're saying and read, it provides additional opportunities for us as well. So we're well aware of what their capital expenditures are.

[James Devlin:]

Okay. And then if you're following that, then obviously, you understand, I'm just trying to frame it that a large amount of the CapEx that's going to come flooding into the system is going to be aimed at both solar and wind farms. And you guys do outsourced kind of electrical contracting, civil engineering work. Solar farms are great, wind farms are great. How do you tie them to the grid? Do you guys benefit? Would they hire you guys to wire up a solar farm or a wind farm and tie it into the grid?

[Steve Wherry:]

Yes, sir. We have several projects with that same situation right now through most of our divisions across the company.

[James Devlin:]

Okay. And then on the M&A -- go ahead, I'm sorry.

[Jason Spivey:]

It should increase value.

[James Devlin:]

Okay. So you guys would be players then in solar and wind farms.

[Jason Spivey:]

Yes, sir, we are, as we speak.

[Steve Wherry:]

And we have back in 2012, we were successful bidder on a 110-mile project or CREZ in Texas. It was a $52 million project that we've successfully completed.

[James Devlin:]

Okay. And I mean, obviously, the shiny object of the day is this presidential election. We'll see, hopefully, in the next days or weeks or whatever, we can all move on. But we have zero interest rates as a nation, pretty much. And a big -- about the only thing the Democrats and the Republicans both agree upon is that kickstart the economy, the U.S. is going to need some kind of an infrastructure spending bill. And we're looking at trillions of dollars. It's probably the largest CapEx expenditure on infrastructure the U.S. has ever made potentially. Where would you guys benefit there? There's a lot of talk from the Biden camp about the smart grid. Can you explain to us how you guys would benefit there?

[Jason Spivey:]

We're exploring those opportunities as they're presented to themselves, and we'll definitely try to capitalize on any of that that's laid in front of us.

[James Devlin:]

Okay. And then I had on a call with John, Super nice guy. I know him for years. And he had talked about using Bastrop in Texas, one of your laydown yards, I guess, as an opportunity to leverage into Kentucky and some other states kind of more in the Midwest? Do you guys still pursue that? Have you won any business there? I know John said that Kentucky, he was pretty optimistic about. Are there any other states -- you've got your north, I guess, North Carolina, South Carolina, Georgia, Florida, Texas markets. Have you guys been actively looking at any other markets to expand into? Or have you been winning any business in any additional states that we may not be aware of?

[Jason Spivey:]

Yes, sir. We have an office in Kentucky. That has opened the doors up for transmission and distribution and some foundation work over there. We've expanded out of the Bastrop office in Texas up into Oklahoma, Arkansas, Louisiana and Kansas.

[James Devlin:]

Okay. And are we seeing that in the balance sheet now? Or are those more growth initiatives down the road? How should we look at those new markets?

[Jason Spivey:]

Yes, these are active projects.

[James Devlin:]

And these are one-offs? Or you guys think that you'll be able to compete in those markets for the longer term?

[Jason Spivey:]

Definitely continue to pursue those markets aggressively and continue to grow, but we're very pleased with what we're seeing right now.

[James Devlin:]

Okay. Great. And there was a previous caller that had mentioned part of explaining the investment to potential investors and investors that we have is that it's not a gold company. So if I could just throw my own two cents in, if there is any way to kind of get rid of the stigma of Goldfield being a gold company, it would certainly clear up the story and let Wall Street focus on what this company is and get you guys a better EBITDA valuation. Even some of the statistical data on the Internet discusses like company profile kind of labels this company as a gold company and tells you the story about hundreds of years of publicly traded as a gold company. And then like in the last paragraph, oh, yes, they're involved in electrical contracting. So I kind of share the thought process of the previous caller. I just thought I'd throw that in. Your gross margins are doing really, really well. And you guys seem to have the business in good stead from a margin perspective and wish you luck in these new markets and any growth opportunities. And I guess, we're all rooting for an infrastructure package. So I want to appreciate your guys time and thank you for taking my calls -- my question.

[Steve Wherry:]

Thank you so much, and we will continue to discuss that main situation with the Board.

[James Devlin:]

I think it would really clear up the story and give you guys a fresh start to get the word out and kind of looking -- the company has got a lot of lineage and certainly John's DNA is all over the company. But now it's your -- the show must go on, shall they say, and you guys are now the stewards of the ship. And sometimes, you just put a new code in and a name change on the ship and let you guys have at it.

[Jason Spivey:]

Yes, sir.

[Steve Wherry:]

Understood. Thank you.

[Operator:]

Our next question comes from George Gasper, Private Investor. Please proceed with your question.

[Unidentified Analyst:]

Just a few follow-ups here. And I could also confirms a strong feeling that the company should alter its name into identification of what the thrust of the company is. I think that would be a real smart move. The -- in terms of the payment going out from the company. Was there no insurance on John's life that was payable directly to the company?

[Steve Wherry:]

That is correct, George. As I said earlier, there was not a policy on John's life to pay to the company.

[Unidentified Analyst:]

I see. So it was a straight to what went out was a conditional understanding that was on the record that in his passing that there was a payment to be made to the Chief Executive Officer. Is that right?

[Steve Wherry:]

Yes. It was based on his employment agreement. There was a death benefit in that. And there was another policy. Okay.

[Unidentified Analyst:]

The long-term debt change out. Going forward, it looks like there's several million that may be coming due in the next year. Are you able -- do you see yourselves being able to rotate some of this long-term debt into potentially a lower interest rate?

[Steve Wherry:]

That's our plan. We look at it. And our rate is extremely low. So we're -- as it was mentioned earlier, basically, interest rate is zero nationwide. So it's a low debt. But yes, we do have one coming up. And we did, as we noted, we had a subsequent event that we paid $5 million of our working capital loan subsequent to September 30. I see that actually drove our current portion of long-term debt.

[Unidentified Analyst:]

And then in terms of some of the opportunities that can move the company forward in terms of business. How do you view the electric substation business at this point in time? Is that a -- is there opportunities? It looks like because a lot of the power companies, which were -- have already been mentioned in this question-and-answer period seem to be going toward expansion. Are there some areas of activity that you could expand into to broaden what you're doing in general right straight across the board from the Southeast into Texas?

[Jason Spivey:]

George, we have expanded, and we will continue to expand. We're using our -- if we get a new customer, it's in substation, we're trying to leverage that relationship we build them to open the door for cross-selling our different service lines in the transmission distribution. We're seeing strong results in Texas and in the Mid-Atlantic regions.

[Unidentified Analyst:]

Okay. All right. Well, that's good to hear. And this -- I was encouraged to hear that you're kind of back stepping in the move to Texas that you're -- and into Kentucky that you sound like you're back stepping so that you can get into the Oklahoma area, possibly Nebraska, or wherever. That Oklahoma area looks like it needs -- it seems like it would offer an excellent opportunity for you all to try to capture more business there. I hope that you're able to do that.

[Jason Spivey:]

Yes, sir. We actually have an active project that spans between Oklahoma and Arkansas right now. So we're pleased with how it's going, and we're seeing continued bidding activity in those areas as well.

[Unidentified Analyst:]

And then finally, in terms of the look ahead here, just in this quarter that we're now in, which we're you're just through one month of the quarter. But can you give us any sense on how you see the business opportunity for this quarter versus, say, the third quarter?

[Jason Spivey:]

The Texas is a lot of focus. We're pleased with the results there. It's going well. Comparison to Q4 of '20, it will be difficult for '19 because they've just had some very strong project closeouts. But right now, we're not expected in Q4 of '20, but we are happy with the results we are seeing, and we continue to make tweaks as we go along. So we're very pleased with and you can see it in the filings that we're -- we've turned the corner, and we're going in the right direction now in Texas.

[Unidentified Analyst:]

Okay. If I could just squeeze in one more, too. On the real estate side, Florida continues to have a pretty good real estate market in general with more people moving south out of New York and wherever, it would seem like there's still some real opportunity for you. Have you changed your strategy on what your build in terms of real estate or, let's say, grow the area that you are willing to get in terms of Florida?

[Steve Wherry:]

No, we're not changing our strategy at this time. I mean, we have invested in some properties that we believe will drive value for shareholders, and we have some projects planned. And we'd like to drive additional growth in that area. And we have a new project coming out of the ground. So if you're looking for some real estate in Florida, come see us.

[Unidentified Analyst:]

And just in a summation comment, I wish you guys a lot of success. You have a tremendous following in terms of shareholder interest. And I think they're enthusiastic. They want Goldfield to be a very successful company. A lot of us have been in it for a long time. And I'm sure you are very much aware of that, and we're behind you 100%, and hope you're going to be very successful going forward. Thank you.

[Operator:]

Our next question comes from Bud Leedom, a private investor. Please proceed with your question.

[Unidentified Analyst:]

As you kind of looking at the long-range gross margin trending back several years. You guys were touching in the 30% range. And just to try to understand the business today, even though your margins are improving, they're still down pretty significantly from where they were. Is it -- have contracts just become more competitive out there? Or is it a scope of work issue? And based on that question, where do you believe gross margins can trend back to in the future here?

[Steve Wherry:]

Yes. Thank you, Bud. We kind of aim for, as we've been saying for the last year, so mid- to-high teens. Yes, we had some margins a couple of years ago, but sometimes you just -- how do you say it, hit one out of the park, you hit one well. So that sometimes what pushes those margins higher, but I'm going to let Jason jump in.

[Jason Spivey:]

Bud, the market is very competitive. It varies from region to region. You've got a lot of mom-and-pops that don't have the overhead to safety on some of these smaller co-ops. But that we have test most of our customers or some of the largest in the country. But in the smaller aspect of things, it is very competitive across -- the worst area, I would say, would be Texas compared to the Mid-Atlantic or the Southeast region.

[Unidentified Analyst:]

And I think part of the confusion maybe or at least looking at the story and trying to reconcile a pretty significant increase in backlog versus the revenue growth you've experienced? I know some of these are 3- to 7-year MSAs. But perhaps you can kind of discuss the gives and takes around seeing a 100% jump in backlog versus revenue growth that's in the 7% to 8% range, albeit if you strip out real estate, we're somewhere in the 11% to 12% range. But is there any way to look at backlog and translate that into the future in terms of how we might be able to extrapolate out revenue growth based on your increases in backlog?

[Steve Wherry:]

It's hard to extrapolate about on the full backlog. Because of that backlog, as I said, it can go out many years. So when you get that new MSA, it's a 7 year MSA that adds substantial backlog that's not coming into revenue for a period of time. I guess, I could say it's maybe better to focus on the 12-month upcoming backlog that's going to -- what's be coming into play in revenue in the next 12 months, and I made some comments on that in my opening remarks, how we see -- we usually see that. And that's due to that short-term nature of the jobs from bidding to award execution completion it's just a short period of time but

[Unidentified Analyst:]

And then just concerning the role of CEO, do you both plan to continue being Co-CEOs? Or is there a search in place to name a new CEO going forward? Maybe you can just articulate what the plans are around that.

[Steve Wherry:]

Well, it's Steve, thank you. I mean, the Board -- I can say the Board has had a very active dialogue on the structure of the firm's permanent leadership. We understand that's a question to many of our stakeholders. Our investors, our customers even our employees. So we've tried to be as transparent as possible, but we can't comment on specifics at this point, but we can assure you they recognize the importance of this matter.

[Operator:]

Our next question comes from Kurt Caramanidis with Carl M. Hennig Inc. Please proceed with your question.

[Kurt Caramanidis:]

I'm getting a little more specific on the backlog. So I totally get what you're saying on the 12-month backlog and usually you significantly exceed that, so we're running at a $200 million clip or slightly under. Backlog at $151 million, it was at $178 million. So that would indicate that if we're going to continue to be significantly above the 12-month backlog, we should be looking forward to quite a bit more in the quarters ahead in excess of $50 million or something is not adding up with this amount that you say we're going to do over the one year, and we're slightly over the one year on a pace, but not to the extent that you had been in the past.

[Steve Wherry:]

Yes. Good question, Kurt. I -- the main thing I want to say is I'm talking about history, I'm referring to the back numbers and where they turned out, but we have a mix of projects and backlog that can cause fluctuations. We have some longer projects in backlog currently. As Jason and I have both said that most of the jobs are shorter in nature, but we do have some longer projects.

[Jason Spivey:]

Some of the -- Kurt, some of the projects that we have, they're not related to MSA. Their non-MSA, it's bid work that is we're -- as far as the revenue goes, is awarded, started and completed within a 12-month time frame. And again, we feel very strong about our backlog and the opportunities that will provide.

[Kurt Caramanidis:]

Right. But I mean, should we -- based on history, should we expect to start seeing $50-plus million per quarter with the backlog going forward?

[Steve Wherry:]

We're trying to get there, but I'm not going to make that projection. I'm sorry.

[Kurt Caramanidis:]

Okay. And then the one thing I was pleased to see was smaller projects. So back in the day, when you had higher margins, it was due to smaller projects, bigger projects, I assume, we have lower margin. And you're saying you're seeing a lot of activity in the small -- maybe small to medium sized. Is that still true that, that could help your margins with small to medium-sized projects?

[Jason Spivey:]

Those -- the bigger margins are on the large projects in the past. With the competitive market that we're see -- are seeing out there in different regions of our business. Some of those margins have declined, but we expect the number of smaller and medium-sized projects to be net out going forward. And with our margins to be constantly in the mid- to high teens is what we're seeing for right now.

[Kurt Caramanidis:]

Okay. And then Texas, did you have a hiccup in Q3 that's resolved for Q4? Or how can you elaborate on that?

[Jason Spivey:]

That was a shift in revenue to storm work that's classified another in the queue. So as we've moved crews for storm work from Texas over to Louisiana during the first quarter.

[Kurt Caramanidis:]

So fourth quarter, they'll be at back to normal?

[Steve Wherry:]

As Jason said earlier

[Jason Spivey:]

Whether they need it. We've been called. It's just how long a duration of the customer needs for the stone work.

[Steve Wherry:]

But your question was that are we back to normal. I mean, just -- we just do want to point out that we had some significant closeouts in the fourth quarter 2019, so it's probably going to be hard to match those numbers.

[Kurt Caramanidis:]

That was mainly margins, right? Yes, I get that. But as far as workflow, your so somewhat normal, I think you had kind of a onetime margin bump last year in Q4. But as far as volume, is that still back to normal?

[Jason Spivey:]

We feel good about the volume we're seeing up in front of us right now.

[Operator:]

Our next question comes from Sam Rebotsky with SER Asset Management. Please proceed with your question.

[Sam Rebotsky:]

Yes. Tell me, the relationships with the bank has that changed? Are you taking a stronger involvement? Is there any more need for funding with the changes of John gone?

[Steve Wherry:]

No, Sam. I've always maintained a strong relationship with the bank. I mean, John was involved, but that was -- I was a significant part of that relationship and continue to be -- work with the same banker for many years. BB&T now Truist, as they say.

[Sam Rebotsky:]

Yes. Well, that's good. And the 1 thing I didn't hear Kurt's question about the storm damage. Was there less work or more work? Or did we bid for more work on the storm damage because there seems to be so many storms, I thought there would have been more money for that. Did you just answer the question? I wasn't sure whether that was dealt with.

[Jason Spivey:]

We saw more storm work in the comparable quarter. We still have some storm crews out there. That's going on, but it depends on the need and the material and how long the duration that we're there, the customer needs it. So -- but we are still active on it right now. And we're pleased with the relationships we're building through the storm work to hopefully open doors up for us there as well.

[Sam Rebotsky:]

Look, Steve and Jason, I'd like to continue the conversation later or when you're available off-line. I think you you've done a wonderful job. The company doesn't deal just with one person, although John was always the name and the face that everybody saw and that's why the market reacted the way it did. And hopefully, we could do something that -- to continue in improvement and understand what Goldfield really is. So good luck. Look forward to talking to you later or at another time.

[Operator:]

Our next question comes from Stephen Branstetter with ABL Investments. Please proceed with your question.

[Stephen Branstetter:]

Could you tell us anything about the length and size of the 2 MSAs you resigned after September 30?

[Steve Wherry:]

Yes, give me just a second on that one.

[Jason Spivey:]

They're two years in length. Both of them are two years. And we're pleased with the renewals of those and actually working on pursuing others.

[Stephen Branstetter:]

Okay. So I guess, is there any chance of renewing or signing any additional MSAs between now and the end of the year?

[Jason Spivey:]

We don't comment, but we're working on some.

[Stephen Branstetter:]

Okay. And I -- the way the questions were asked was hard to understand. So are you currently doing any storm restoration work from the hurricanes that hit Louisiana?

[Jason Spivey:]

Yes. Yes, we have -- they've been moving from Louisiana to Alabama, to Mississippi due to the recent storm. But overall, not a significant impact.

[Stephen Branstetter:]

Okay. And starting in -- go ahead.

[Steve Wherry:]

As we said before, we're not storm chasers. I'll just remind you that it's -- we've got to be released from our current customers, but we capitalize on it when we can.

[Stephen Branstetter:]

Okay. And looking into 2021 over 2020. When the new MSAs are signed, how long before they go into effect or how long before you start generating revenues from them?

[Jason Spivey:]

Basically, immediately.

[Steve Wherry:]

I mean, if it's donw to renewals, it's just a continuation.

[Jason Spivey:]

We don't stop. And on the new ones, it's really immediately.

[Steve Wherry:]

What we said last quarter call, we said in the last couple of quarters call, when we renewed 1 up in the Carolinas, there was a slow start to it in the first quarter, but it's been kicking off pretty well. And I think we've had three sequential quarters of increasing revenues from that renewal from earlier in the year.

[Stephen Branstetter:]

Okay. And you signed a big contract last year for like $50 million, and I think John mentioned it might start, I guess, second quarter of 2020. And where is the status of the big contract that you signed, you saw something like a $50 million contract?

[Jason Spivey:]

Yes. Both of those projects are currently ongoing. We sent out a press release, I believe late 2019, December. If you go back to that press release, you can probably get a lot more information but both of those are actively ongoing and roll and continue on into '21.

[Steve Wherry:]

Now Jason, those under the major project program?

[Jason Spivey:]

Yes, a major project program.

[Operator:]

Our next question comes from Steve Emerson with Emerson Investment Group. Please proceed with your question.

[Steve Emerson:]

When might we see a number of shareholder-friendly actions that are easy in expense of and obvious to everybody on this call. And specifically, sell off real estate project, perhaps back to the family. Main change, which has already been referred to a corporate PowerPoint presentation, which is quite usual. And other of public relations effort to potential investors.

[Steve Wherry:]

Thank you, Steve. First -- your first question, we just -- I mean, we don't have any plans to sell our real estate business. As we've said before, we believe we're in a good position to capitalize on those investments, and they've been profitable in past. They are -- real estate has been lumpy, as we all know, because we just haven't gone into it in such a large manner that we have a large project inventory rolling off all the time. So that's where we're at on that. So -- and we'll take under consideration your other comments. Thank you.

[Steve Emerson:]

Are we waiting till year-end or until the Board completes its -- shall we say CEO review? What has to happen before we start getting these fairly low-hanging fruit shareholder-friendly actions.

[Steve Wherry:]

I mean, we're working on it. And my team is working on it, and we will continue to pursue those opportunities.

[Jason Spivey:]

And we continue to engage with our shareholders through these calls, participate in individual calls when requested. We'll evaluate opportunities and to participate in investor conferences in the near future.

[Steve Emerson:]

Okay. And at this point, are you looking at potential acquisitions to expand your footprint? And what kind of dry powder or excess cash you have, excess bank lines at this point to pursue acquisitions.

[Jason Spivey:]

Well, we evaluate opportunities all the time. But on the construction side, safety is the top key consideration. We believe our leverage is conservative and be able to leverage to acquiring acquisitions for a strategic move to grow our company.

[Steve Emerson:]

How much dry powder do you have?

[Steve Wherry:]

We have some capacity. We got some powder and we've got reserves in our working capital line of credit. So -- and the bank would make and financing opportunities would be available to us.

[Operator:]

Our next question comes from Ryan Parker, a private investor. Doesn't seem to be with us. I'll move on to the next call here, Mr. George Gasper, a private investor.

[Unidentified Analyst:]

Yes. Just two quick additions to ask you about. The property buildings and equipment at cash net on the balance sheet is up about for a little over $4 million since December 31, 2019. Is that represented in terms of new trucking equipment, can you explain the increase is? Or is there some real estate in there or not? Can you give us a picture on that?

[Steve Wherry:]

So are you on the regular property buildings and equipment? Or are you talking about direct?

[Unidentified Analyst:]

I'm talking about property, buildings and equipment. It's 59 point -- near $59.2 million.

[Steve Wherry:]

The majority of it is electrical construction equipment, and we're also expanding in Spartanburg, South Carolina. We're building a new facility there to handle our expansion. So that's added some costs there.

[Unidentified Analyst:]

I see. Okay. And could you give us an idea of what your total crew count is and maybe how that's changed during the first 9 months of the year here?

[Steve Wherry:]

Yes, sir. We're at approximately 520 employees, and we're up a small percent.

[Unidentified Analyst:]

Okay, small percent. I see it. So -- but it's pretty steady?

[Steve Wherry:]

It's steady.

[Unidentified Analyst:]

I see. Okay. And if you were to just break that down, how many of those employees would be in, say, the Texas area relative to the rest of your operations?

[Steve Wherry:]

We just don't disclose crew counts by division. So for competitive reasons.

[Operator:]

There are no further questions at this time. I'd like to turn the call back over to Steve Wherry for any closing remarks.

[Steve Wherry:]

Yes. So I'd like to thank everyone for joining us on our conference call today. Also, I would like to express my sincere thanks to our shareholders for their continued support.

[Operator:]

Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you for your participation, and have a great day.