Orbital Infrastructure Group, Inc. (OIG) Q3 2020 Earnings Call Transcript

Good day, everyone, and welcome to Orbital Energy Group Third Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's remarks. As a reminder, this conference call is being recorded. A replay of today's call will be available on Orbital Energy Group's website later today and will remain posted there for the next 90 days. I will now hand the call over to Mr. Eckstein of KCSA for introductions and the reading of the safe harbor statement. Please go ahead, sir.

Thank you, operator. Hello, everyone, and welcome to Orbital Energy Group's third quarter 2020 conference call. A copy of the Company's earnings press release and accompanying PowerPoint presentation are available for download on the Events and Presentations page of the Investor Relations section of the Orbital Energy Group website. With us on today's call are Jim O'Neil, Vice Chairman and Chief Executive Officer and Daniel Ford, Chief Financial Officer. Today, we will review the highlights and financial results for the third quarter as well as recent developments. Following these formal remarks, we will be prepared to answer your questions. I would also like to remind everyone that today's call will contain certain forward-looking statements made within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in forward-looking statements. The Company may experience significant fluctuations in future operating results due to a number of economic, competitive and other factors, such as the COVID-19 pandemic, including, among other things: the Company's reliance on third-party manufacturers, suppliers and service providers, government agency, budgetary and political constraints; new or increased competition; changes in the market demand and the performance or liability of its products, integrated solutions and services. These factors and others could cause operating results to vary significantly from those in prior periods and to those projected in forward-looking statements. Additional information with respect to these and other factors which could materially affect the Company and its operations are included in certain forms the Company has filed with the Securities and Exchange Commission. These forward-looking statements are based on information available to Orbital Energy Group today, and the Company assumes no obligation to update statements as circumstances change. Now, at this time, it is my pleasure to introduce Jim O'Neil, Vice Chairman and CEO of Orbital Energy. Jim, the floor is yours. Jim O'Neil: Thanks, Scott, and thank you, everyone for joining us today on our third quarter 2020 earnings conference call. During the third quarter, we continue to successfully execute on our strategy to transform Orbital Energy Group into an energy services infrastructure provider. Our electric power and solar infrastructure segment generated increased revenue growth for the quarter, and we executed on a growing number of utility scale solar projects and electric transmission and distribution engagements. We expect this momentum to continue through the fourth quarter and in the next year. At the same time, we continue to improve operating efficiencies throughout our organization moving as closer to our goal of becoming profitable, and cash flow positive on a consolidated basis as we move forward into 2021. Total revenues for the quarter were $13.6 million, a 75% sequential increase compared to $7.8 million in the second quarter, and 124% increase compared to $6.1 million in the third quarter of 2019. The year over year increase in revenues was primarily due to the cadence of business returning to pre COVID levels throughout most of our operations, as well as the addition of revenues from both Reach construction and overall power services collectively our electric power and solar infrastructure segment. The revenue from our electric power and solar infrastructure segment was offset in part by lower revenues from our Orbital Gas systems operations in Houston, which continue to experience project delays related to the pandemic as well as lower oil prices. For the most part, customers and service providers alike have adjusted to operating in the current COVID environment and have implemented appropriate standards that provide for everyone's safety while also maintaining business continuity. The net loss for the quarter was $3.2 million, compared to a net loss of $9.3 million for the second quarter of 2020 and a net loss of $312,000 for the third quarter of 2019. We had higher SG&A expenses compared to the same period last year, primarily due to the addition of overhead costs associated with supporting both Reach Construction and Orbital Power services operations, which commenced this year. However, our sequential improvement for the quarter reflects our revenues are increasing, and our electric power and solar infrastructure segment. And that's the majority of startup costs and integration expenses we incurred for this group in the first half of 2020 are now largely behind us. As we stated on our last earnings call, we expected our infrastructure services group to contribute positively to our consolidated results for the quarter as revenues increased. On a consolidated basis, we continue to believe that OEG is on track to be EBITDA and cash flow positive going into next year, as revenue momentum continues throughout the fourth quarter and into 2021 and beyond. Dan will provide additional detail on our financial performance shortly. Along with the increasing business OEGs electric power and solar infrastructure segment backlog at the end of the quarter increased $6 million to $43.5 million from $37.5 million at the end of the prior quarter. These backlog figures do not include in excess of $10 million of recent solar projects that we were awarded subsequent to the end of the quarter. Reach Construction, our utility scale engineering, procurement and Construction Company is currently in various stages of construction on multiple solar projects. During the third quarter, we experienced customer delays largely around permitting and delayed equipment deliveries, resulting in most construction activity not commencing until September. With that said we made great progress in securing and executing on solar projects in the third quarter and expect meaningful growth in the fourth quarter and beyond. We have a significant pipeline of solar opportunities that we believe will contribute financial growth to the company for several years to come. In addition to Reach construction, Orbital Power Services, our electric transmission and distribution service provider continues to gain traction securing contracts with investor owned utilities and electric cooperatives throughout the southwest and southern US. And Orbital Power was awarded a multiyear electric distribution master service agreement for an Electric Cooperative in Georgia, and subsequent to quarter end our multiyear master service agreement was executed with an investor owned utility in Oklahoma. In addition to securing these agreements, which will contribute incremental recurring revenue to the company, Orbital Power also generated significant emergency response revenues during the quarter as we assisted utilities with critical infrastructure repairs caused by several hurricanes that hit both the northeast and Gulf Coast regions. Orbital Powers emergency restorations have extended into the fourth quarter as we continue to provide hurricane support in the Gulf Coast region, as well as support to assist with ice storm related power outages in the Midwest. I want to thank our employees for their tireless efforts and working safely without incident during their emergency response efforts. This works performed under extremely challenging conditions, and we very much appreciate all who participated in restoring power to affected communities this year. We continue to remain confident about Orbital Powers services and its prospects as this operation continues to gain increasing recognition in the industry. We're in discussions with a number of customers to assist with their electric transmission and distribution capital plans and anticipate significant growth for Orbital Powers in the coming year. Market trends for the electric power and solar infrastructure segment remain very favorable for growth. Many states are mandating that a significant increase in power generation must come from renewable sources of energy. As a result, more renewable projects such as utility scale solar assets are being constructed as states move away from coal and nuclear power generation. The majority of the nation's electric power transmission and distribution infrastructure is approaching the end of or is already beyond its useful life. Also, there's a significant shortage of skilled labor in the electric power industry and utility customers throughout the nation intend to add proven contractors onto their system to perform these services. We believe the positive market trends for this segment of our business will continue resulting in increasing demand for our services that will last for many years to come. Turning to our Integrated Energy Infrastructure Services Segment; backlog at the end of the third quarter was $8.5 million, compared to $8.9 million at the end of the prior quarter. Overall gas systems, our North America operations based in Houston was materially impacted by COVID in the price of oil. As a result, the vast majority of large petrochemical gas measurement or sampling integration projects have been placed on hold until 2021. Service projects where our technicians go to customer sites, such as petrochemical plants to service their equipment has resumed to some extent. We do anticipate some increase in fourth quarter activity and subsequent revenues for the quarter as we are experienced an increase in activity for request for quotations on smaller projects for petrochemical and renewable customers, but no major integration project work. With that said several customers have indicated they will begin deploying capital on larger projects starting next year although we have seen no indication of increased activity today. Are UK Orbital Gas systems operations did experience a nearly full recovery from COVID in the third quarter of this year. However, the company is currently facing new potential setbacks because of the latest government restrictions related to the resurgence of COVID in the UK. Major projects supporting the principal gas network of the UK and Ireland renewable, principally bio methane and hydrogen projects and service revenues were equally the major revenue contributors during the quarter. Market momentum has continued into the fourth quarter. However, it's too early to tell what impact the new COVID restrictions or Brexit related issues may have on this momentum as we finish out 2020. In 2021, barring any further COVID, or Brexit related setbacks, we anticipate growth opportunities in renewable projects in our UK operations. Also April of 2021 marks the start of the next five year funding cycle for the UK Gas network well over those one of only four contractors approved to perform gas quality and metering upgrades for the UK Gas transmission system operator. I'd like to point out that our business development efforts earlier this year to pursue new markets, specifically renewable gas opportunities, were able to moderate the impact of COVID-19 into a large degree. As a result, renewable project revenues comprise of approximately 20% of UK overall gas systems revenues in the first nine months of 2020, driven by revenue from integration services from mainland Europe's first bio-methane project, which we were awarded earlier this year. And finally, as we continue to execute on our energy infrastructure strategy, a critical component of this will be creating a robust environmental, social and governance platform that will be essential in reshaping the culture of our company. Specifically, our desire to provide services that contribute to reducing carbon emissions, and providing opportunities for people of color to be trained, employed, and advanced or not industry. On April 1 of this year, Orbital Energy completed its first acquisition to execute on this strategy. Reach Construction Group, a Black-Owned Businesses which provides engineering procurement and construction services to the utility scale solar market. In addition to being black led enterprise reaches also contributing to a reduction of the nation's carbon footprint. Further, Paul White, a member of Orbital Energy's Board of Directors, will be leading the company's diversity initiatives. The first initiative will be Orbital Energy working closely with Reach in the development of the Reach Training Academy to identify, test, train and develop underserved or disadvantaged people in the communities we serve to staff scale positions throughout overlay energy group and its subsidiaries. The company's primary objective is to provide opportunities for people of color, and other underserved or disadvantaged people to find good paying jobs, and the opportunity to advance their careers supporting their families, and have a full unfettered access to the American dream. At Orbital energy, we intend to be a catalyst for change in the electric power and renewable construction industry making a meaningful impact to help people improve their own lives. This concludes my opening remarks. And now I'll pass the call on to Dan who will review our financial results. Dan?

Thank you, Jim and good afternoon everyone. Today I'll review our third quarter 2020 GAAP financial results. I'd like to remind everyone that I will focus my remarks today on the company's continuing operations. Also, please note that with the acquisition of Reach Construction Group in April 2020, the company revised its segment structure. The electric power and solar infrastructure segment was formed during Q2, and now includes Reach Construction Group and Orbital Power services. Previously, Orbital Power services which commenced operations in the first quarter of 2020 was included as part of the former energy segments. The former energy segment is renamed as the Integrated Energy Infrastructure Solutions and Services segment includes Orbital Gas Systems Limited in the UK and Orbital Gas Systems North America. The former power electromechanical segment is presented in discontinued operations as electromechanical business was disposed of during Q3 of last year while the remainder of the domestic power business was divested during Q4. CUI Japan was divested effective September 30, 2020. Well CUI Canada previously classified as held for sale and presented here as discontinued operations. I'll speak more on this topic later in my remarks. We reported total revenues of $13.6 million for the third quarter of 2020 compared to $6.1 million for the third quarter of 2019 an increase of 124%. The year-on-year increase reflect the addition of Reach Construction and Orbital Power services, as well as increased customer activity during the quarter following COVID-19 related project delays we experienced earlier in the year. This was offset somewhat by lower revenues from the Orbital Gas systems operations during the quarter. UK market continues to face headwinds surrounding COVID-19, Brexit and the impact of the political environment on investment within the sector. While the US markets also continue to face headwinds surrounding COVID-19 and the price of oil. Gross profit was $2.4 million for the third quarter of 2020 compared to $1.4 million for the third quarter of 2019. The improvement is mainly due to increase revenues as I mentioned earlier, we expect this improvement will continue throughout the remainder of 2020 and into 2021. Gross Margin was 17.3% for the third quarter of 2020 compared to 23.4% for the third quarter of 2019. The integrated energy infrastructure solutions and services segment had gross profit margin of 29.7% during the quarter compared to 23.4% in the prior year. The margin decrease was attributed to Orbital Power and solar infrastructure segment for Reach projects, which often have lower margins than the integrated energy infrastructure solutions and service segment, but more significant project size and overall profit. We expect margins to improve during the fourth quarter as Orbital Power services momentum continues with greater operating efficiencies and new customers along with Reach projects commencing in Q4 with improved margin and increased revenue. And companies throughout our industries continue to adapt to the new operating environment created by COVID-19. Increased sales of higher margin products, a better mix of integration projects, increase service revenues throughout our energy focused operations, and a significant backlog of solar projects for Reach construction group are expected to drive continued improvement to the company's profitability. During the three months ended September 30, 2020 SG&A increased $2.4 million compared to the prior year comparative period. The increase in SG&A for the quarter was due to increased SG&A costs related to Orbital Power services and Reach Construction along with increased corporate costs, largely due to strategic initiatives, which included increased professional fees and costs associated with due diligence activities related to prospective acquisitions. These increases were partially offset by decreased SG&A cost in the integrated energy infrastructure solutions and services segment that implemented cost cutting measures. Continuing loss of operations was $6.3 million for the third quarter of 2020 compared to $3.7 million in the prior year period, due to the items previously mentioned. As Jim noted net loss for the quarter was $3.2 million, compared to a net loss of $312,000 for the third quarter of 2019; this was a sequential improvement of $6.1 million from Q2, 2020. Given Reach solar project delays into Q4 along with higher SG&A expenses during the quarter specifically attributable to Orbital Power services and Reach Construction overhead costs, the Q3 results were negatively impacted. We believe this is a short term matter with the increase in Reach and Orbital Power services activities expect in the fourth quarter based on existing backlog. The significant Reach Construction contracts and backlog are expected deliver revenue beginning in Q4 of 2020. At which point we expect to see earnings of Reach Construction begin to more positively impacted group. Orbital Power services should also continue to see increases in business and is expected to achieve profitability early next year. As Jim touched upon earlier at September 30, 2020, our backlog is increased to $52 million from $46.4 million at June 30, 2020, and up year over year due to the inclusion of Reach's backlog and growth from Orbital Power. At September 30 the $52 million backlog consists of $43.5 million from the electric power and solar infrastructure services segment, and $8.5 million from the integrated energy infrastructure solutions and services segment. We continue to see the long term benefits from the acquisition of Reach Construction despite any pandemic related challenges and expect it will add substantial revenues and positive earnings to Orbital Energy group. While some of Reach's projects have pushed into the fourth quarter and next year as mentioned previously, we are already seeing some other projects coming back online that's because Reach's project pipeline is based on its proven repeatable processes provide its customers with safe, high quality, predictable results in a cost effective manner. Lastly, at the end of the third quarter, we have cash and cash equivalents of $4.1 million and restricted cash of $3.6 million. From a cash utilization standpoint, the company has continued to reduce its cash outflows on both a sequential and year-on-year basis. In Q3 cash used in operating activities was approximately $951,000, compared with $1.3 million in Q2, and $7.7 million during the first quarter. Cash used in investing activities during Q3 was $303,000, compared with 186,000 in Q2, and $7.4 million in Q1, which included the $3 million note receivable, with Reach Construction and that acquisition was allocated to the purchase. Financing activities provided $939,000 during the quarter compared with $1.6 million in Q2, and Q1 use of $429,000. Please note the Q2 amount was primarily the result of PPP funding received during the quarter offset by payment of notes payable. Some notable items pertaining to cash usage during the nine month period include the reconstruction, acquisition, and working capital adjustment payment on the 2019 sale of the power business, purchases of power and equipment, deposits and changes in working capital. The company continues to work to improve cash flow and manage its working capital as it works through COVID-19 related delays, and other project related delays for the Reach backlog of contracts that pushed into Q4. Longer term, we expect to generate positive cash flow based on the backlog of orders to be delivered, both from Reach Construction and Orbital Power services. We continue to take steps to bolster our short term liquidity including disciplined management of both working capital and expenses. In the first half of the year, the company and its subsidiaries entered into unsecured loans in the aggregate principal amount of approximately $1.9 million pursuant to the Paycheck Protection Program. The loan and interest accrued thereon is forgivable, partially or in full, if certain conditions are met. We also filed a shelf registration in July for up to $50 million. Well, we have no plans at this time to go back to the markets. We felt this was a prudent at the time to keep our options open as we explore all potential avenues. Before I turn it back over to Jim, I'd like to provide an update on CUI, Canada and CUI Japan. Both of which were previously classified as assets held for sale. As I noted earlier, on September 30, 2020, the company sold the CUI Japan operations to Back Porch International for approximately $163,000 of seller financing for a small gain over its book value. At September 30, 2020, the assets and liabilities of the company CUI Canada subsidiary are still included held for sale with the expectation that the sale of these assets will be completed in 2020 and the company will have fully exited its previous power and electromechanical operations. I'll now turn the call back over to Jim for closing remarks. Jim O'Neil: Thank you, Dan. In summary, we believe Orbital Energy Group is well positioned for future growth and success. Throughout this pandemic, our team has continued to transform the company into a diversified infrastructure services provider and to position OEG to benefit from the economy's eventual recovery. This has been accomplished through the acquisition or Reach Construction Group to pursue utility scale and community solar projects, the development of Orbital Power services to provide transmission and distribution services and the business development activities at Orbital Gas systems targeted at renewable project revenues. With the progress we've made to date, we believe Orbital Energy Group is at an inflection point. And we intend to capitalize on this momentum moving forward. We expect to continue a transformation as we keep expanding our infrastructure capabilities and service scope both organically and through targeted acquisition opportunities, which we are constantly exploring. The outlook for the energy infrastructure markets that we serve is extremely positive as capital deployment for building new utility scale solar capacity and replacing and reconfiguring existing transmission and distribution infrastructure is expected to be robust for several years to come. At the same time, we have taken the necessary steps to ensure the health and safety of our customers and employees. I want to take an opportunity to thank all of our employees for their commitment to deliver exceptional products and services, while executing our safety protocols. I also want to thank our customers and business partners for their continued support. Last but not least, building a strong environmental, social and governance, or ESG platform, is a priority for the leaders of this company and this will be integrated into our culture as we continue to grow our energy infrastructure services platform. The services we provide will contribute to a cleaner, healthier environment. In terms of social responsibility, we intend to serve as an agent of change for our industry, providing employment opportunities for people of color and other underserved or disadvantaged people. We take this commitment very seriously and we look to be an industry leader in our ESG efforts. That concludes our prepared remarks. Now, I would like to open the call for questions. Operator, please go ahead.

Thank you, ladies and gentlemen. [Operator Instructions] Our first question comes from Rob Brown with Lake Street Capital. Your line is open.

I just want to get a little bit on the Reach pipeline of solar projects. You said there are a number of projects you're bidding on and maybe you could just characterize the pipeline at this point? And how long you have visibility on price of the [ph] projects? And how long those projects would be continuing? Jim O'Neil: Rob, we see several hundred million dollars' worth of opportunities to be executed on, between now and the end of 2021. And we expect more opportunities to come out as we move into next year. And we're talking about opportunities that we believe that we can secure. So the only challenge is when these projects go to construction, their permitting issues and so forth and so on, just very much commonplace in this business. But that canter of activity, the pace of opportunities will continue to increase and we will continue to generate more solar revenue over time.

Okay. And then, maybe just in terms of the electrical business -- power business, the -- how much of your business was storm work, how much was the T&D [ph] infrastructure? And how do you see that mix playing out over time? Jim O'Neil: You want to take that, Dan, on the mix of how much…

Sure. Yes, the mix was about 40% to 60% during the quarter, is what I would say, I don't have the numbers exactly in front of me. But I would say it was about 40% to 60%, 40% storm and the rest schedule. Going forward, I think is a better question for Jim to address and how that works. Jim O'Neil: Yes. I think storm work is going to be something that you don't necessarily put in your forecast, but when it comes it can be meaningful. We did generate more storm -- are generating more storm revenue in the fourth quarter too, it won't be anywhere near where we were in the third. But at the same time, we've increased the number of crews through this MSA work which is recurring. So all in all, we should see growth in that business over the long haul as well, with storm being an incremental positive when it does happen. Typically in the second, third, we see most of that in the third quarter, most of the storm revenue and -- the second would probably be the second highest storm quarter.

And then, on the gas infrastructure side; it sounds like the visibility there is pretty low at this point. Is that you're saying really sometime next year that can pick up again in the US when you get good visibility there, or is it still too early to tell and is it more back half loaded type activity? Jim O'Neil: I hope it's not back half loaded activity, I mean, we hopefully will start seeing more visibility about what's going to happen in our North American operations by the end of the year, because engineering needs to be done, which is a six week to eight week lead time before construction happens. So, I think customers are waiting to use budgets for 2021 on these larger capital projects. And hopefully, we'll have visibility here and by the end of the year, but the visibility right now is not good in Houston, and it's not that much better right now in the UK, other than we do see a path opportunities in the UK with the gas network rebidding their five-year plan and some of the renewable gas opportunities that we see.

Next question comes from Eric Stine with Craig-Hallum. Your line is open.

So you mentioned on Reach what the pipeline's looking like, but I was wondering if you can maybe provide a little color around the type of uptick that you expect in fourth quarter, knowing that there still is some timing uncertainty there. But then also, the step up you might expect in 2021? Jim O'Neil: Yes, back when we had our second quarter call, I expected to see more solar growth in the back half of this year. We've had a couple of projects, the bigger projects had been delayed due to permitting. But we do expect the fourth quarter -- for the solar revenues in the fourth quarter to be better than what we experienced in the third quarter. But, at some point, this is going to ramp significantly, in my opinion, to where we're going to be moving in order of magnitude from $30 million to $60 million a quarter. I mean, this is a revenue store for us; that's what's going to take us to profitability -- to execute profitably in the infrastructure segment of -- the solar and electric power infrastructure segment both have significant growth trajectories that we're going to experience here, as we move into next year. So I think, in the fourth quarter we probably we'll see some gain, but not meaningful or significant gains in revenues. But as we get into the next year, I expect those numbers to ramp a lot more as a percentage of growth each quarter.

Okay, got it. Maybe to turn to the acquisition plan. I think last quarter you said that potentially you may -- I mean, you're looking, you got some potentials that you may close one by the end of the year. So curious if that's still the case? But then also, just what that is, what that outlook is longer term? And is the balance sheet a bit of a hindrance until you get the cash flow positive and start building that cash balance? Jim O'Neil: Yes, that's a great question. We've got several acquisition targets teed up. And we did decide because of the significant amount of growth that we're experiencing in our electric power and solar segment that some of these opportunities that we were looking to potentially close this year, we'll move into next year. So it's likely that we won't make another acquisition this year. But we certainly have candidates teed up to bring on board when the time is right.

And high level, I think you've said in the past two to three -- two to three a year. I mean, is that still the way that people should think about it? Jim O'Neil: Yes, two to three a year is a good number and people should think of it that way. I mean, we want to make acquisitions. We want to grow through acquisition, we want to bring on companies that add to our portfolio and infrastructure, either geographically or expand to service lines that we would provide today, and better cash flow positive and have opportunities for profitable growth. So it's definitely part of our story, and two to three a year is definitely the target for us.

Got it. And then lastly, just to confirm, so EBITDA and cash flow positive by -- is there a time? I mean, maybe not by the end of this year, I guess, predicated on how much the step up is. But is that something -- just thoughts, is that something you think is early in 2021, or more of an annual number for 2021? Jim O'Neil: We expect to be there in the first quarter of next year, early in 2021. And that'll be dependent upon the growth in the electric power and solar infrastructure segment. And we continue to see some significant growth in both, our Electric Power T&D Group, Orbital Power Services and Reach construction.

Sorry, Eric, were you asking timing on the two to three acquisitions a year…

No, timing on that cash flow positive target.

Our next question comes from Liam Burke with B. Riley. Your line is open.

Jim or Dan, you saw significant step up sequentially in your gross margins from second quarter. How much of that was the ramp up in the project business and how much contribution or improved margin contribution did you get from the storm recovery and restoration?

We saw considerable margin coming out of the T&D group overall, and especially the storm work. Storm work, as you know, is very high-margin with crews out working long days, long hours and getting paid essentially from the time they leave the yard driving to whatever state or region they're going to be in its billable time. So very -- that certainly contributed positively to the margin. But the T&D project, as a whole, performed really well during the quarter. So it was a bit of a mix there. But definitely the storm work provided a nice boost into that group and in that segment.

So if I look into fourth quarter, just on the same thought process, even without the storm contribution, the ramp up in projects, as you convert from backlog to revenue, should translate to continued trends and gross margin improvement?

In gross profit improvement, certainly, in gross margin. The solar projects, which are larger scale, are lower margin as a whole. The EPC contracts are generally in the teens, overall, but have much more significant profit profiles as a whole. So it'll be a mix. It's not exactly, I would say, as a split, the T&D group we continue to expect that to perform and provide that positive impact to it. But I think as we see growing revenues from the solar group, that margin will be that growth and the T&D, as it pertains to its impact on margin will be offset by the growth in revenue and the lower margin value of the solar projects; so, a mix there.

And then on to just one more on T&D. You have two nice MSA agreement signed, how does the visibility or pipeline look on that business? Jim O'Neil: That visibility is really good. I mean, when you get a multi-year MSA like that, your crews basically become almost like an employee of the customer. And they've got work to do every day. And it's pretty secure. In fact, the industry typically will count that revenue and backlog. They estimate what the revenues would be in the MSA over that that multi-year period. That's how confident the industry is, and I am, that that work is recurring revenue that's very predictable. And it's not seeing very often where those contracts will be terminated. I think it happened back in 2008 when we went into the recession, where utilities cut back distribution crews, that were all MSAs, but other than that, in my history of in the industry, those MSAs just continue to roll and the crews continue to work on that system and they don't leave.

I'm sorry, Jim. On the MSA, I meant, if there is any pipeline visibility on new agreements? Jim O'Neil: On new agreements; sorry -- we are -- we're in discussions with customers, and it's more of a function of us being able to secure proves that we're competent at work safely, that we have a history of good execution. And before we take on some of these opportunities -- but there are other utilities that would like us to participate under an MSA agreement with them. I would guess that we'll probably add one or two more MSA agreements with investor owned utilities or co-ops within the next quarter, or two going into next year.

Great. Thank you, Jim.

Our next question comes from Jeffrey Bernstein with Cowen. Your line is open.

Sounds like you have been very busy. Thank you for all the hard work. A couple of questions just on the historic relationships with Snam and UK grid and ENGIE. Is any of that still potentially going to come forward at some point, or has the statute of limitations ran out on those? Jim O'Neil: That's a good question, Jeffrey. I mean, we have hope that those opportunities will play out. But we've been waiting for that for a long time, and there just continue to be delays. So, for Snam, we've got a significant amount of meters that are deployed there already. And I believe there's been some discussion about ordering some more, but that hasn't happened yet. But yes, it's just a very fluid situation.

Got it. And then on the gas PT, all the utilities now -- I think the message has gotten out post-COVID that we're seeing peak hydrocarbon energy and everyone is now planning to move to renewables, etc. So obviously, a great backdrop for you. The guys who have tons of infrastructure in the gas market are trying to figure out how they participate in this world, and it's mostly through hydrogen. How does calorific value measurement apply there, if it does at all, when they start to want to put hydrogen into these Nat [ph] gas utility systems? Jim O'Neil: I'll tell you that that many of the opportunities that we have going forward, especially in the UK, in building and in our integration group are hydrogen-related. The gas PT device, the one of the bigger opportunities that we have for it is in renewable gas. And that is bringing some integration opportunities to us when those projects get released to go to bed. So that's a differentiator for us, but those projects seem to have been slowed down somewhat coming to market. But that's where the big opportunities are, in both the US and in the UK in renewable gas for our company.

Thank you, Jim.

I'm showing no further questions in the queue. At this time, I'd like to turn the call back over to Mr. Jim O'Neill, Vice Chairman and CEO for closing remarks. Jim O'Neill: Well, thank you all for your participation in our call today and for your continued interest in Orbital Energy Group. And we look forward to having follow-up conversations with many of you and update you on our progress. So thank you again, and have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, you may now disconnect. Have a good day.