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Edited Transcript of HIL earnings conference call or presentation 30-Mar-17 3:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Hill International Inc Earnings Call

MARLTON Mar 30, 2017 (Thomson StreetEvents) -- Edited Transcript of Hill International Inc earnings conference call or presentation Thursday, March 30, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David L. Richter

Hill International, Inc. - CEO and Director

* Devin Sullivan

The Equity Group, Inc. - SVP

* John Fanelli

Hill International, Inc. - CFO and EVP

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Conference Call Participants

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* Arnaud Ajdler

* Peter Enderlin

* Tahira Afzal

KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the Hill International, Inc. Reports 2016 Fourth Quarter and Full Year Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference to your host, Mr. Devin Sullivan. Thank you. Mr. Sullivan, you may begin.

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Devin Sullivan, The Equity Group, Inc. - SVP [2]

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Thank you. Good morning, everyone, and thank you for joining us today. Our speakers for today's call will be David Richter, Chief Executive Officer of Hill International; and John Fanelli, the company's Executive Vice President and Chief Financial Officer.

Before we begin, I'd like to remind everyone that certain statements made during this call may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and it is our intent that any such statements be protected by the safe harbor created thereby. Except for historical information, the matters set forth herein, including, but not limited to, any projections of revenues, earnings or other financial items; any statements concerning our plans, strategies and objectives for future operations; and any statements regarding future economic conditions or performance are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and assumptions and are subject to certain risks and uncertainties. Although we believe that the expectations, estimates and assumptions reflected in forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Important factors that could cause our actual results to differ materially from estimates or projections contained in our forward-looking statements are set forth in the risk factor section and elsewhere in the reports we have filed with the Securities and Exchange Commission. Including that unfavorable global economic conditions may adversely impact our business, our backlog may not be fully realized as revenue, our expenses may be higher than anticipated in the closing of the sale of our Construction Claims Group may be delayed or canceled. We do not intend and undertake no obligation to update any forward-looking statement.

With that said, I'd now like to turn the call over to David Richter. David, please go ahead.

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David L. Richter, Hill International, Inc. - CEO and Director [3]

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Thank you, Devin, and good morning, everyone joining us for today's earnings conference call. First, let's apologize for the delay of the release of our fourth quarter earnings, which occurred yesterday, and the filing of our 10-K, which will occur tomorrow. This was necessary because certain potential tax liabilities were discovered in the course of due diligence related to the sale of our Construction Claims Group. This applied that we obtain the assistance of an independent tax adviser to value our potential liability.

We couldn't complete our year-end numbers until their review was complete and accepted by our auditors. That review was just completed. And as a result, we incurred a $2.1 million noncash reserve in the fourth quarter of last year to account for those potential tax liabilities. Those are historical liabilities that relate only to the Claims Group and do not impact or effect our Project Management Group.

Second, as a result of the pending Claims Group sale, which we currently expect will close on or about April 30, for financial reporting purposes, we have cleared the Claims Group together with our existing senior credit facilities which will be paid-off and terminated upon closing as discontinued operations for all periods presented. This, of course, means the models of our financial performance, both past and future, will lead to be updated accordingly.

So let's get right into the numbers. Total revenue in the fourth quarter was $128.8 million, a 14% drop from the fourth quarter of 2015. Consulting fee revenue for the fourth quarter was $100.6 million, an 18% decline from the prior year's fourth quarter. The overall decline in our consulting fees for the quarter was driven primarily by a $22.8 million decline or 34% in our Middle East operation, and by a $3.2 million drop or 47% in our Latin America operation. This was partially offset by strong growth in our U.S. operation with consulting fees up $5.1 million or 17% during the quarter from a year earlier.

Our company's gross profit in the fourth quarter declined to $37.8 million, down 19% from the fourth quarter of the prior year. Our gross margin as a percentage of consulting fees was also down, but only slightly, by 30 basis points to 37.6%.

Company-wide, our SG&A expenses in the fourth quarter were $41.7 million, down 4% from the year-earlier quarter. Our SG&A margin as a percentage of consulting fees was up by 600 basis points to 41.5%. SG&A expenses from our Project Management Group were at $32.5 million in the fourth quarter, down 3% from a year earlier. As a percentage of consulting fees, they were 32.3%, up 490 basis points. Our corporate SG&A expenses were $9.2 million for the quarter, down 8% from the fourth quarter of 2015. As a percent of consulting fees, they were up 100 basis points from a year ago to 9.2%.

Hill's operating loss for the fourth quarter was $3.9 million versus an operating profit of $2.8 million during the fourth quarter of 2015. And net loss from continuing operations was $4.3 million, or a negative $0.08 per diluted share compared to net earnings from continuing operations of $2.1 million or $0.04 per diluted share during the fourth quarter of the prior year.

The net loss from discontinued operations was $10.5 million or $0.20 per diluted share compared to a net loss of discontinued operations of $3.1 million or $0.06 per diluted share a year earlier. On a consolidated basis, Hill's net loss for the fourth quarter was $14.9 million, or $0.28 per diluted share compared to a net loss of $1.1 million or $0.02 per diluted share in the fourth quarter of 2015.

EBITDA for the fourth quarter was a negative $2.3 million compared to positive EBITDA of $4.8 million in the fourth quarter of 2015.

Unusual expenses for the quarter totaled $5 million or $0.10 per diluted share, adversely impacting Hill's profitability. Most of these unusual expenses were included in discontinuing operations, including $2.2 million in legal and other fees in connection with the sale of our Claims Group, and a $2.1 million tax contingency, I discussed at the beginning of the call.

In addition, in continuing operations, we incurred a $700,000 loss on the sale of a long-term investment. In addition, although, we have not termed it an unusual expense, we had a very high-level of bad debt expense during the fourth quarter totaling $6 million. Of this amount, $1.9 million was from the Claims Group; and $4.2 million was from the Private Management Group. Although less than the $8.6 million in bad debt expense we incurred in the third quarter of last year, this level of reserves in a single quarter is extremely unusual. For comparison, in all of 2015, we took $9.1 million in accounts receivable reserves. For the full year 2016, we had $17.9 million in bad debt expense.

As a result of our financial results in the fourth quarter, Hill would have been full financial covenants under our senior credit facilities, but we have obtained a waiver of those defaults from our lending group.

With respect to backlog, our backlog is down 7% during the fourth quarter to $831 million. The geographic breakdown of our total backlog is 55% from the United States; 33% from the Middle East; 5% from Europe; 5% from Africa; 1% from Asia-Pacific; and 1% from Latin America. Our 12-month backlog at the end of the year was $334 million, down 6% during the quarter.

We sold new project management work during the fourth quarter of $117 million, which equates to a book-to-bill ratio of 116%, above our minimum quarterly target of 110%. But we had 2 contracts totaling $73 million of backlog, get canceled during the quarter, which is why of our backlog was down as of year-end. Large contracts we won and announced since our last earnings call include, a $35 million contract to provide project management and construction management services to the Santa Clara Valley Transportation Authority in California; a $16 million contract to provide facilities management services to the Abu Dhabi National Oil Company; an $8 million to manage the reconstruction of a 13-mile segment of the Pennsylvanian Turnpike; a $7 million contract to manage construction of a container facility at a port in Morocco; a $4 million contract to manage construction of Al Wa'ab City Qatar; $3 million contract to manage monetization of 2 buildings at the Social Security Administration campus in Maryland; a $3 million contract to manage our institute neighborhood in Abu Dhabi; several contracts totaling $3 million to provide construction engineering and inspection services to the Florida Department of Transportation; a $2 million contract to manage renovation of the Ashley Federal Courthouse in Ohio; and a major contract to manage the $1 billion Überseequartier Süd mixed-use development in Germany.

For the second guidance for this year, in our earnings release, we provided guidance of between $400 million and $425 million with respect to our expected consulting fee revenues for 2017. This guidance equates to between a 2% and 8% decrease in expected consulting fees for the year. Other than consulting fees, we are providing no further guidance for the year at this time.

Now with that, John and I are happy to take any your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Tahira Afzal of KeyBanc Capital Markets.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [2]

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David, first question is in regards to the bad debt you saw in the fourth quarter. What was that? We have been seeing a lot of scrubbing on your receivables, which obviously improves the quality of your balance sheet. But would love to get a sense of when this will all end? And what you assess as the risk for the scrubbing going forward?

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David L. Richter, Hill International, Inc. - CEO and Director [3]

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Yes, Tahira. Thanks for the question. Obviously, a lot of these receivables -- in fact a majority of them relate to the clients in the Middle East. And the economic situation over there is no secret, it has been pretty poor for the last several years. That's why we saw a shrinkage in our business last year, revenue-wise in the Middle East, and we expect another one, again, this year. Low oil prices have caused a lot of difficulties with a lot of our clients, public and private, in their construction activity, it's impacted their cash flow, the cash availability, and it's made the situation more difficult for us. The biggest markdown, more than 1/3 of it in the fourth quarter related to the contract -- one of the contracts that was canceled. In the third quarter, it related -- the biggest number -- about half of it related to us writing off all receivables in Iraq, because of the political situation there and so. Yes, but unfortunately, this is a difficult time to have a major presence in the Middle East which we do. But as I said earlier in the call, we'll be getting work in the Middle East. We're expecting that to improve, as oil prices have headed up. So Middle East is a little more robust than others. But certainly we are not the only firm that's doing business in the Middle East and seeing some challenges there.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [4]

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Got it. And David, how much in receivables do you still have on your balance sheets from these particular regions? And -- not the Middle East and -- as a whole, because clearly, there is some portions that have a better liquidity right now than some of the others. So really the ones that you are seeing some write-downs, if you can quantify that for us?

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David L. Richter, Hill International, Inc. - CEO and Director [5]

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Well, we have about $200 million in net receivables throughout the company. Rather John or I have the geographic breakdown of those receivables. But if you look at the number, for the whole year, it's about 2%, which is a -- an extraordinarily high number for us, historically. Even last year, at $9 million, which was about 1.25%. We very rarely historically have seen that number go over 1% of our revenues.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [6]

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Could we kind of see something similar you think this year as well? I guess, I'm just trying to see when -- what the risks are to further write-downs this year?

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David L. Richter, Hill International, Inc. - CEO and Director [7]

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You've got to first of all, I'll try to give you any kind of estimate. We were expecting that the situation in the Middle East has sort of bottomed down. We're expecting 2017 is going to be better year with respect to new work. Work we're doing this year will help us a lot more in 2018. And as I said, we are expecting our Middle East business to shrink this year, and we are planning for that and reacted to it.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [8]

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Could you still see your free cash flow net-net? Do we expect it to be positive this year, David? So -- are the rest of the businesses at this point really offsetting some of the pressures you are seeing there?

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David L. Richter, Hill International, Inc. - CEO and Director [9]

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Yes. We expect operating cash flow to be positive this year. It was positive last year. We gave some guidance during the year about $20 million to $25 million of free -- of operating cash flow, and we saw that $10 million. We also had one of our anticipated expenses, sale of the Claims Group, the proxy fight and some other issues related to some of these Middle East projects that impacted there, but we expect to see even better cash flow this year.

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Operator [10]

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Our next question comes from the line of Pete Enderlin of MAZ Partners.

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Peter Enderlin, [11]

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David, I didn't get the number that you mentioned on the project cancellations from backlog in the first quarter. What was that number?

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David L. Richter, Hill International, Inc. - CEO and Director [12]

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Yes. That was $73 million related to 2 projects: 1 in Africa, 1 in the Middle East.

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Peter Enderlin, [13]

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Right. Okay. And just broadly speaking, do you think in the Middle East, specifically, that you -- in terms of new contracts, new business wins, are you losing market share or holding market share? In other words, we know the overall economy in the market is bad, but are you doing any as poorly or worse than the overall environment in that particular geographical region?

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David L. Richter, Hill International, Inc. - CEO and Director [14]

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Market share (inaudible) we talk about. It's given out huge market is and how many players there are, but I think, we're in the same boat as everybody else over there.

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Peter Enderlin, [15]

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I mean, do you think that your win rate is still holding up fairly well given the reduced level of activity?

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David L. Richter, Hill International, Inc. - CEO and Director [16]

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Yes, I think it is.

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Peter Enderlin, [17]

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Okay. And...

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David L. Richter, Hill International, Inc. - CEO and Director [18]

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We are still bringing work in the door. We're seeing fewer project opportunities out there. We're seeing delays in existing projects. We also had a major project end last year, because we completed it. We could go on with such projects, actually finishing the project up. That was a major revenue generator for us and that completed in the third quarter. And we've also seen -- we've begun the process of demobilizing slowly on the Oman airport project, which still has about a -- I'd say, 1.5 years to go, and we are currently negotiating 1 year extension of our contract. But as the project gets closer to completion, we've been winding down our staff to some degree, so we're seeing lower revenues on that project as well and that's the biggest project we have in the whole company.

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Peter Enderlin, [19]

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Right. And then same kinds of questions relating to Brazil. Is it really just the overall market weakness? Or do you think you have an issue with your subsidiary there in terms of the ability to generate new business?

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David L. Richter, Hill International, Inc. - CEO and Director [20]

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I think that we have a very good team in Brazil. But I think, we have a market and an economic and a political environment in Brazil, which is an absolute collapse. And I don't know any better way to describe it on that, but there's very little activity there. The business has been shrinking for a while. I think, we had a -- some significant work on the Olympics last year, I think Rio, but work directly on the Olympics and work related to it, and now that work is all completed. And probably I could say positive about the environment down there or our expectations for future work. But we're anticipating that business is likely to continue to shrink until there's a major economic change in that market.

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Peter Enderlin, [21]

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Right. Okay. And then, I know you're not giving any specific EBITDA guidance. But you're -- but how should we think about the factors that are going to influence that just sort of directional pretty well, and you're taking a more aggressive approach to cost, but you have to wait a little while to get over the support of the Construction Claims business. So what do we think of is going to be general trend of EBITDA margin for the year?

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David L. Richter, Hill International, Inc. - CEO and Director [22]

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We are not going to give any specific guidance on that. There's a lot of moving parts to this. The situation we're in is that, we've got now that Claims Group being treated as a discontinued operation on our financials, but we've got the corporate overhead to continue to run both the PM and the Claims Group. In fact, they're quite busier than they've ever been with the transition to sale, the things that we're doing to get to closing and then we're going to have to continue for several months after closing to support that company as it becomes an independent firm. Once that's complete, and we expect it will be complete in varying stages over the course this summer, then we're going to be taking a real strong look at being able to cut our overhead structure, costs. As a result, once the Claims Group is fully spun off, we're anticipating that we're going to spend -- once that transaction is closed, the remainder of the year looking at rightsizing our overhead.

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Operator [23]

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(Operator Instructions) We have a follow-up question from the line of Tahira Afzal of KeyBanc Capital Markets.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [24]

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David, first follow-up is in terms of setting the top line guidance, I kind of see it sort of in line with your year-on-year backlog decline which has been a pretty good correlation in the past. But would love to get a sense on how you have approached setting your revenue guidance given the last couple of 2 years have been -- last couple of years have been tough. Have you guys take a more conservative approach or change anything?

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David L. Richter, Hill International, Inc. - CEO and Director [25]

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Well, the guidance is based upon a couple of different things. One is our budget for the year and we don't disclose our budget, but our budget is within that range. It factors in the fact that we are expecting shrinkage in Latin America and the Middle East. We're expecting that to continue. Claims Group typically provides a lot of variability, and expectations regarding revenues, although, lately they've been sort of right in the middle of their range. And I wouldn't say more conservative or less conservative than in the past, but certainly we had a lot of factors impacting us in 2016 that led us to missing our original targets. And I expect that to -- the financial group expects that in 2017, we'll be able to deliver consulting fees within this range (inaudible).

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [26]

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Got it. Okay. And David, is there a reason you haven't given some sort of parameters around your EBITDA outlook for 2017? Are you -- is it because your cost-cutting plans are still pretty nascent? Would love to get any color on that.

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David L. Richter, Hill International, Inc. - CEO and Director [27]

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Like I said, Tahira, it's -- a lot of this is up in the air at this point of time. We've been doing a lot of cost-cutting over the last 6 months in response to 3 principal things: One is, we knew the Claims Group is going to be spun off, and we're taking a hard look at our corporate structure and overhead costs. The business has been shrinking over the last year. This is the first year in 22 years I've been with the company, that we shrank revenues, and it looks like 2017 will be the second year, and we're planning for that. So we've got to bring our overhead costs in line with that. And we have a new board in place that is going to be aggressive in forcing me and the rest of the management team to improve profitability, cut overhead costs and other indirect cost and deliver more and more consistent profitability for our shareholders. We'll have a better ability to take cost out once the Claims Group is formally spun off, and we no longer have to provide corporate support for them. Given a lot of this itself is in (inaudible), it's really difficult for us to give EBITDA guidance what we've done in the last couple of years.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [28]

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All right, David. And last quarter you did kind of hint in a sense at what could corporate cost could be and where you could take them. Do those sort of guidance factors still -- I would say guidance, but indicators, would those still hold? Or -- as what you said, over the last quarter or so, is that not provided anymore?

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David L. Richter, Hill International, Inc. - CEO and Director [29]

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I would say that once we get through this process, if I am through I mean, probably by Labor Day, we'll have a -- sort of a normalized I expect third quarter and fourth quarter. And we'll be able to probably use that as the benchmark for establishing guidelines on SG&A expenses, on EBITDA margins going forward. But as until the Claims Group is spun off, until our cost-cutting is fully complete, it's really difficult for us to do any of that.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [30]

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Got it. Okay.

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David L. Richter, Hill International, Inc. - CEO and Director [31]

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With any degree of accuracy which is what you want, of course.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [32]

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Right. Well, and I guess, what I am trying to see is, can you strive to get back? If I look at 2013, and granted you don't have a Claims business, you have a smaller business in general, but I mean, are we still looking at sort of 9%, 10% EBITDA margin -- adjusted EBITDA margins as being possible? Or given all the headwinds you're facing on the macro side and all the adjustments, it's tough to really see those in your near- to medium-term?

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David L. Richter, Hill International, Inc. - CEO and Director [33]

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Well, the biggest challenge we're facing is that, historically, we had 2 operating groups that were profitable supporting the corporate cost of a public company. Going forward, we're going to have 1 group, and that group is going to be smaller than it was over the last couple of years, smaller and less profitable. The Middle East has really been our profit engine, and last year, and this year, we're expecting that -- while still profitable and while still contributing a lot to the companies overall profitability, that could be what it was 2 or 3 years. So to answer your question specifically, I think 10% EBITDA margins in the short term or -- are not realistic.

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Tahira Afzal, KeyBanc Capital Markets Inc., Research Division - Associate Director of Equity Research, MD and Equity Research Analyst [34]

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Okay. And -- I guess if I asked you what would be possible, I'm cornering you into something you don't want to give, right? So I mean, if you look over -- let's to the next couple of years, are we looking at potentially sort of 6%-type of EBITDA margins than in the sense? And I know I'm not cornering you for really what you're seeing in '17, but once you adjusted all your EBITDA cost -- sorry, your corporate costs out, just so that we can -- we are not setting numbers that are too aggressive?

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David L. Richter, Hill International, Inc. - CEO and Director [35]

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I really can't give you any numbers. I can't say if 6% is reasonable or unreasonable. We simply don't want to give any guidance or pick a number out of thin air. I think, once we get through this process and we can have a clean quarter and without any unusual expenses, without severance, without the cost of us carrying a business that's being treated as discontinued on our financial statements, I think, we'll be in a better shape to say what is going to look like coming out of this. So I think, once we have our third quarter in the books, add some any other major changes in our market environment or our cost structure, then I think, that's we were going to be in the short term.

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Operator [36]

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Our next question comes from the line of Arnaud Ajdler of Engine Capital.

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Arnaud Ajdler, [37]

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Couple of question. I guess, one on the cost-cutting that Tahira was talking about, I guess, and you were talking about. Is there any intention to use consultants to look at that?

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David L. Richter, Hill International, Inc. - CEO and Director [38]

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That is one thing the Board's been discussing. They haven't made a final determination, but I think, it's probably more likely than not, we may bring in somebody from outside to help guide us through this process as we sell out the Claims Group.

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Arnaud Ajdler, [39]

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Okay. For what it's worth, I think that will be a good thing to have outside eyes taking a look at the cost structure. You referred -- you talked about a $25 million of operating cash flow earlier during the call. Was that some -- was that -- can you remind me again the context of when that number was given?

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David L. Richter, Hill International, Inc. - CEO and Director [40]

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Yes, I'd be happy to. Exactly a year ago, we gave a forecast for 2016 of $20 million to $25 million of operating cash flow. We did about $10 million, but we also had a lot of unexpected things occur.

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Arnaud Ajdler, [41]

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Right. So...

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David L. Richter, Hill International, Inc. - CEO and Director [42]

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Keep going Arnaud.

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Arnaud Ajdler, [43]

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And so I think after that comment, you said that you expected the operating cash flow to be higher. And you -- did you refer to 2017? Did you refer long term? But you made the comment that operating cash flow was going to be higher than that.

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David L. Richter, Hill International, Inc. - CEO and Director [44]

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Yes, but -- and that was in 2017, we expect operating cash flow to be significantly higher than $10 million.

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Arnaud Ajdler, [45]

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Oh, then $10 million, but compared to the $20 million, $25 million?

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David L. Richter, Hill International, Inc. - CEO and Director [46]

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I'm not sure, I'm prepared to give a target.

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Arnaud Ajdler, [47]

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Okay. And I would think that -- since you had so much working capital tied to the Middle East, as the Middle East shrinks, I would think that it's going to become a very significant source of cash. Is that a fair assumption?

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David L. Richter, Hill International, Inc. - CEO and Director [48]

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Yes. Our experience has been that a business like ours that carries a lot of receivables when a business is growing quickly, it's consuming cash, when it's shrinking, it's throwing off cash. And a good example of that is the Oman Airport. As I said, we think about 18 months late in the conclusion of that. We have a significant amount of money tied out in retainage and what's called the DLP, the Defect and Liability Period. That's money held by the client until about 18 -- 12, 18 months after the project is completed. We're expecting all that money to be returned to us in addition to the receivables that we're owed. So once that project completes and we have no more cost related to it, we see it a significant withdrawal of cash coming our way just from that one project.

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Arnaud Ajdler, [49]

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Right. And so you said, you would get that money 18 months after completion, which is in 18 months or is that 2 years from now? Or now you expecting the cash to come in 18 months?

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David L. Richter, Hill International, Inc. - CEO and Director [50]

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No. It's the final payment. It is -- the 2 have various payment periods. The cash will come in over the course of 12 to 18 months, from the end -- from the completion of the project. So over the next -- roughly 2 years to 3 years.

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Arnaud Ajdler, [51]

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Okay. Can you give us directional -- directionally can you give us any indication of how big the number is?

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David L. Richter, Hill International, Inc. - CEO and Director [52]

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John, what's the total retainage in DLP?

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John Fanelli, Hill International, Inc. - CFO and EVP [53]

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Around $16 million.

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David L. Richter, Hill International, Inc. - CEO and Director [54]

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Around $16 million. That's separate from the receivables that we're owed and that we're collecting.

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John Fanelli, Hill International, Inc. - CFO and EVP [55]

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As of year-end.

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David L. Richter, Hill International, Inc. - CEO and Director [56]

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As of December 31.

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Arnaud Ajdler, [57]

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Okay. All right. Because pro forma of the sale -- I mean, if I get the number right, pro forma of the sale of the Claim, the enterprise value of year-to-date is around $200 million. So I mean, you're talking about almost close to 10% of the enterprise value. And you say that's not receivables, that's like retainage you said?

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David L. Richter, Hill International, Inc. - CEO and Director [58]

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It's a combination of retainage and what's called the DLP, where for a certain period of time, after the project is completed, the client holds a money in case there are any major problems. We don't at this point anticipate any of that money being withheld by the client. And you're right, it's about 10% of our market cap, money that we hold and we will see that after the completion of the project once we have no more cost related to running our services.

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Arnaud Ajdler, [59]

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Okay. Can you give us an update on the -- I mean, you have talked about the timing for the sale of the Claims division. Can you just talk about what's holding it up? And any updates there?

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David L. Richter, Hill International, Inc. - CEO and Director [60]

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Yes. We were originally targeting the end of February which got pushed in end of March. As in over the last couple of weeks, it became apparent that Bridgepoint wasn't in a position to close, and we weren't in a position to satisfy all the closing conditions out of the stock purchase agreement. So we pushed it to April 30 and they are insisting at closing month-end. So this necessitated a 1-month delay. And we're working hard to complete all the things that we need to complete. Those involve assignments and consents from some of the largest clients and landlords. It involves completing all the corporate restructuring that we've done, and making sure all the new entities in certain places are licensed to do business and have the appropriate approvals. And then Bridgepoint getting their final internal approvals, and the consent of their lenders to fund the deal and having it closed. So we worked hard to get it done, March 31, but that just didn't happen. So the current time we're expecting that April 30 is going to be the day.

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Arnaud Ajdler, [61]

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Understood. I guess, a more bigger picture question. Given the size of the corporate overhead in relation to, I guess, (inaudible) overhead. At what point, does it make sense to consider strategic alternatives in thinking about whether more value could be realized from shareholders by looking at a different owner that potentially does not need to carry this big corporate overhead?

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David L. Richter, Hill International, Inc. - CEO and Director [62]

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That's up to our Board to decide. We haven't had any conversations regarding doing exactly that. But that's always a possibility. We're a public company, we're for sale everyday to the right buyer at the right price. So we are focused on running the business, improving our margins, getting our corporate overhead down, winning work and continue to execute. And we've got a lot of headwinds as you well know, as we well know at the moment, but I think right things right now to position the shareholders to make more money going forward.

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Arnaud Ajdler, [63]

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Right, right.

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David L. Richter, Hill International, Inc. - CEO and Director [64]

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(inaudible)

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Arnaud Ajdler, [65]

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So you're talking about $10 million free cash flow you expect this year to be better, so against pretty significant free cash flow you compared to the enterprise value, plus you talked about the stuff on Oman. So -- for what it's worth, the stock seem really cheap here?

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David L. Richter, Hill International, Inc. - CEO and Director [66]

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Thank you. We agree.

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Arnaud Ajdler, [67]

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Okay. Well, maybe, hopefully we're going to see some insider buying after the transaction -- after the transaction close, I would love to see some insider buying, so maybe you can share that visible.

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David L. Richter, Hill International, Inc. - CEO and Director [68]

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Yes, I will. And keep in mind, we have been restricted from trading effectively for the last 15 months with the Claims sale pending.

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Arnaud Ajdler, [69]

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Understood. So I'm sure there is this pent-up demand from the board that I expect to see.

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David L. Richter, Hill International, Inc. - CEO and Director [70]

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I will pass that message along.

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Operator [71]

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There are no further questions over the audio portion of the conference. I would now like to turn the conference back over to management for closing remarks.

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David L. Richter, Hill International, Inc. - CEO and Director [72]

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Great. Thank you, everyone, for your interest in our company and for participating in our call this morning. We're looking forward to our next earnings call in early May. Take care.

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Operator [73]

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This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful rest of your day.