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Edited Transcript of NRCG.A earnings conference call or presentation 7-May-19 9:00pm GMT

Q1 2019 NRC Group Holdings Corp Earnings Call

Jul 4, 2019 (Thomson StreetEvents) -- Edited Transcript of NRC Group Holdings Corp earnings conference call or presentation Tuesday, May 7, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christian T. Swinbank

NRC Group Holdings Corp. - CEO, President & Director

* Jared Filippone

* Joseph J. Peterson

NRC Group Holdings Corp. - CFO

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Conference Call Participants

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* Brian Butler

* Sean Kennedy

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Presentation

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Operator [1]

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Good afternoon, everyone, and thank you for participating in today's conference call to discuss NRC Group's financial results for the first quarter ended March 31, 2019. (Operator Instructions) Please note, this event is being recorded.

Joining us today are NRC Group's President and CEO, Chris Swinbank; CFO, Joe Peterson; and the company's External Director of Investor Relations, Jared Filippone. Following their remarks, we'll open the call for your questions.

Before we go further, I would like to turn the call over to Jared Filippone as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Jared, please go ahead.

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Jared Filippone, [2]

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Thank you, Brandon. I'd like to remind everyone that in the course of this call to give you a better understanding of our operations, we will be making certain forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, please see NRC Group Holding Corp.'s publicly available filings with the SEC, including its quarterly report on Form 10-Q for the quarter ended March 31, 2019, that it anticipates filing today. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

On today's call, we will also discuss adjusted EBITDA and free cash flow conversion, which are non-GAAP financial measures. Please refer to the earnings release we issued this morning for a definition and reconciliation to GAAP. We believe the presentation of adjusted EBITDA and free cash flow conversion is useful because it provides investors and industry analysts the same information that we use internally for purposes of assessing our liquidity and core operating performance. I would like to remind everyone that this call will be available for replay starting after the call through May 21, 2019. A webcast replay will also be available via the link provided in today's press release as well as available on the Investor Relations section of the company's website at ir.nrcg.com.

Now I would like to turn the call over to the President and CEO of NRC Group, Chris Swinbank. Chris, please go ahead.

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Christian T. Swinbank, NRC Group Holdings Corp. - CEO, President & Director [3]

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Thank you, Jared, and good afternoon, everyone. It's a pleasure to be joining you. While Joe will be providing details on our first quarter 2019 results momentarily, I'd like to start on Slide 3 with a brief review of our performance. Operating revenue in the first quarter was up 41% to $100.5 million. Net loss in the quarter was $8.5 million or $0.23 per share compared to a net loss of $0.4 million or $0.02 per share in the prior year period. Adjusted EBITDA was $17.2 million in the first quarter of 2019 compared to $17.5 million last year. And free cash flow conversion in the first quarter was 91%.

Now on to Slide 4. We had another quarter of significant accomplishments and achievements under our long-term growth strategy. As I mentioned, operating revenue increased 41% in the first quarter. This was primarily driven by contributions from acquisitions made in 2018 as well as strong organic growth across all segments and excluding acquisitions, operating revenue grew 14% in the first quarter. Specifically, organic growth was driven by better than expected performance at our Karnes County waste disposal facility and increased emergency response activity. Our Karnes County waste disposal facility posted strong results in the quarter, driven by increased volumes on the heels of continued drilling activity in the Eagle Ford basin. I will review our waste disposal expansion efforts later in the call, but the Reagan County and Pecos County facilities remain on track to open in the second quarter.

Also in the quarter, we signed 2 additional customers in our National Emergency Response Program, which effectively outsources a customer's emergency response capabilities to NRCG. We are also looking at further expansion opportunities for this program, including opening an additional 24/7 operations center in our Houston offices. We believe the National Emergency Response Program is a natural fit, given our existing global footprint, proven independent contractor network, existing 24/7 call center capabilities, and longstanding market expertise and safety record. I am encouraged by the team's continued progress and success in growing this aspect of our business, and I'm confident in the program's ability to differentiate NRCG from the competition as well as be a main contributor of our continued growth.

In our domestic environmental services segment, we had several large emergency responses begin to ramp up late in the first quarter, which are expected to contribute meaningfully in the second quarter. Specifically, this work is related to a chemical fire that occurred in the Houston Ship Channel as well as emergency response work in California. Additionally, there is seasonality in our domestic environmental services business and the first quarter is typically the lightest quarter of the year for this segment, with the majority of adjusted EBITDA generated in the remainder of the year.

Before turning the call over to Joe, I think it's important to reiterate that we are solidly on track to achieve our previously communicated 2019 outlook. We generated strong operating revenue growth across all segments in the first quarter with contributions from several of our key growth drivers. Despite some incremental expenses incurred in the quarter, a portion of which will benefit our emergency response business in the remainder of 2019, there is positive momentum across our businesses and end markets.

With that, I will now turn the call over to Joe to speak about our first quarter financial results in more detail. Joe?

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Joseph J. Peterson, NRC Group Holdings Corp. - CFO [4]

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Thank you, Chris, and good afternoon, everyone. Moving to our financial results for the first quarter on Slide 6. Operating revenue increased 41% to $100.5 million compared to $71.2 million in the first quarter of 2018. The increase was largely driven by acquisitions completed in 2018, organic growth across all segments, and better than expected waste disposal results at our Karnes County facility and an increase in emergency response activity. Excluding the impact of acquisitions, organic operating revenue growth was 14% in the first quarter.

Next, operating expenses, which include cost of revenue or exclusive of depreciation and amortization, in the first quarter were $71.3 million compared to $48.4 million in the prior year period. The increase is primarily due to increase in operating expenses related to the acquisitions completed in 2018. Additionally, we experienced higher levels of emergency response work that require the use of subcontractors, which drove increased variable costs compared to the prior year quarter. Lastly, we also incurred some initial start-up costs in the quarter related to larger domestic environmental service project-based work in Southern California and Texas, which has now commenced in the second quarter of 2019.

General and administrative expenses in the first quarter were $16.9 million compared to $10.4 million in the prior year period. Approximately $4.2 million of this increase was related to acquisitions completed in 2018 with the remaining increase primarily due to increase in public company costs and one-time nonoperational charges from prior periods.

Net loss, excluding dividends from Series A preferred stock, in the first quarter of 2019 was $8.5 million or a loss of $0.23 per share compared to a net loss of $0.4 million or $0.02 per share in the prior year period. The decline was primarily result of higher interest expense, increased depreciation and amortization, and a change in fair value contingent consideration related to Quail Run and the Clean Line acquisitions. Adjusted EBITDA calculated consistent with our senior credit facility was $17.2 million in the first quarter of 2019 compared to $17.5 million in the prior year period.

Next I'd like to briefly review our segment results, starting on Slide 7. The Sprint segment grew operating revenues 27% in the first quarter to $21.1 million, driven by expanded environmental service operations, the acquisition of Quail Run in October 2018 and better than expected results at our Karnes County waste disposal facility. Operating profit increased 31% to $8.5 million with growth in higher margin waste disposal operating revenue, driving the increase in operating profit and margins for the quarter.

Slide 8 outlines the performance of our domestic environmental service segment, which grew operating revenue 49% in the first quarter to $60.9 million. The increase was largely due to the acquisition of SWS in May of 2018 as well as increased emergency response activity across several regions.

Operating profit in the first quarter was $2.4 million compared to $2.5 million in the year ago quarter. The slight decline was largely due to project mix, specifically Alaska and Southern California, as a few larger high margin jobs from the first quarter of 2018 did not reoccur the same way in the first quarter of 2019. Additionally, we incurred some initial start-up costs related to emergency response project-based work and now projects have commenced in the second quarter of 2019.

Next, on Slide 9, details of Standby segment performance. In the first quarter, operating revenue increased 16% to $10.4 million compared to $9 million in the year ago quarter primarily due to retainer growth and increase in emergency response activity. Operating profit in the first quarter was $4.2 million compared to $4.5 million in the year ago quarter. The slight decline was due to lower emergency response project-based work requiring utilization of more subcontractors in the first quarter of 2018. Additionally, within the Standby segment, our Mexico operations are beginning to ramp as several production campaigns have kicked off, which Chris will cover a little bit later.

Lastly, Slide 10 outlines the performance of our International segment, which grew operating revenue 70% in the first quarter to $8.1 million. The increase is primarily due to the acquisition of Clean Line as well as increased emergency response operating revenue in Turkey, partially offset by lower operating revenues in the North Sea region. Operating profit in the first quarter increased 75% to $1.3 million due to continued focus on higher margin land-based service offerings.

Turning to our balance sheet, as of March 31, 2019, we had $17.9 million of cash and cash equivalents and $361 million of total debt, gross of issuance fees compared to $18.4 million of cash and equivalents and $352.2 million of total debt, gross of issuance fees, at December 31, 2018.

Moving to our financial outlook on Slide 11, we remain on track to achieve our previously communicated 2019 financial guidance as described in the last earnings call. To reiterate, we still expect operating revenues in 2019 to range between $420 million to $460 million compared to revenue pro forma for acquisitions of $389 million in 2018, an increase of 8% to 18%. Adjusted EBITDA for 2019 remains consistent with our previously provided guidance range of $105 million to $115 million compared to $91 million in 2018, an increase of 15% to 26%.

Capital expenditures in 2019 are still expected to be in the range between $55 million to $60 million compared to $25 million in 2018. Additionally, approximately 55% of the anticipated capital expenditures for 2019 is related to the initial waste disposal build-outs, which are accretive to EBITDA margins and generate quick payback periods, typically of about a year. Free cash flow conversion, defined as adjusted EBITDA less total capital expenditures excluding the one-time investment in the waste disposal facilities, in 2019 is still expected to be between 70% to 80% compared to 81% in 2018.

Now, let's turn to Slide 12 to quickly review some -- a few recent developments. On April 26, 2019, we closed on the previously announced acquisition of the assets and business of the OIT, Inc., a provider of thermal treatment of nonhazardous petroleum contaminated soils, absorbent pads and sludges, and the treatment of PFAS. The acquisition of OIT further strengthens our operations in Alaska, providing a differentiated service offering and the opportunity to significantly grow adjusted EBITDA over the next few years due to the high demand for PFAS treatment. I'd also like to note that the financial contributions from the OIT acquisition were included in the previously communicated outlook for 2019.

Additionally, on May 1, we received a commitment from HSBC to provide an incremental revolving credit commitment of $15 million under the existing credit facility. If consummated, this would increase our aggregate revolving credit commitment to $60 million. Once closed, this increase available can aid our ability to successfully execute on our capital allocation issues and drive our long-term strategic growth plans forward.

Before handing the call back to Chris, I'd like to quickly mention that we are constantly evaluating our capital allocation strategy to determine the best use of capital to drive long-term shareholder value. Currently, we believe the best use of our capital is on continued build-out of our waste disposal facilities in the Permian Basin as it drives strong returns on invested capital, generate relatively quick payback periods, and once operational, are quickly accretive to adjusted EBITDA and free cash flow.

With that, I'll turn it back to Chris.

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Christian T. Swinbank, NRC Group Holdings Corp. - CEO, President & Director [5]

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Thanks, Joe. Turning to Slide 13, I would now like to provide a few updates on our strategic priorities for the remainder of 2019. First is the build-out of new landfill and wastewater disposal facilities. We are on track to begin operating the Reagan and Pecos county waste disposal landfills in the second quarter of 2019. These facilities, combined with our facility in Karnes County will allow us to continue to execute on our waste disposal expansion strategy in our core markets and continue to grow our share. We also still expect to receive the permit for our Andrews County facility in the second quarter of 2019. As we have been focusing our efforts on the successful opening and ramp and operations of the Reagan and Pecos county facilities, we now expect to begin construction on the Andrews facility in late 2019 or early 2020 with operations commencing in Q2 of 2020.

Drilling activity in the Permian Basin remains robust and our outlook on the growth potential of the area as well as the strong unit economics that our waste disposal facilities can achieve remains unchanged. We believe the investments being made in waste disposal expansion will drive strong returns on invested capital, generate relatively rapid payback periods and will quickly be accretive to adjusted EBITDA margins as evidenced by the outstanding results for our Karnes County facility. In addition, our acquisition of Quail Run back in October, helps us expand into new waste streams, which are outside of our existing waste disposal facilities and offers new avenues of growth opportunities at very attractive margins.

Secondly, within our Standby segment, we have been extremely successful with our growth strategy in Mexico to-date. In late April, we signed an additional retainer contract which brings the total amount of contracts won to 7, a 100% win rate on contracts bid to-date. As one of the only global retainer-based emergency response providers capable of meeting the needs of the larger international energy customers, we believe that we are uniquely positioned to continue to expand our market-leading position in the region, as we still anticipate securing additional contracts throughout the year and expect to announce more soon.

Earlier in the call, I covered the progress we made in our National Emergency Response program in the first quarter with the signing of 2 additional clients. Additionally, we are looking at further expansion opportunities for this program, including opening an additional 24/7 operations center in our Houston offices to support the growth of the initiative. We see further room for sustained expansion of the National Emergency Response program and its ability to efficiently utilize our experience, institutional knowledge and diversified asset base across a wide range of emergency response services. We also continue to execute our growth strategy in core markets, which was evident in the strong organic growth across all our segments in the first quarter. Specifically, within the International segment, our continued focus on land-based service offerings, which was bolstered with our acquisition of Clean Line, drove increased higher margin revenue in the quarter.

Finally, we will seek to drive margin gains through an increased focus on higher-margin services, improving operational efficiencies and excellence, and further driving synergies through our recent acquisitions. On top of this, we anticipate that our end markets will remain robust throughout 2019 and we will capitalize on any incremental growth or margin-enhancing opportunities. After our first full quarter as a public company, I am encouraged by our Company's progress on driving our strategic growth plan forward and implementing operational improvements to make us a more efficient and nimble organization. I am confident that continued execution and progress under our initiatives have the power to drive strong organic revenue and adjusted EBITDA growth.

With that, I'd now like to turn the call back over to the operator for Q&A before my closing remarks. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Sean Kennedy with Nomura.

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Sean Kennedy, [2]

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I had a question regarding Sprint. It seems by my math, if you take the Quail Run contribution as about $2.5 million, organic growth was approximately 12%, which is a significant step-down from last quarter. So I was wondering if you could comment on the specific drivers of that growth and then the organic growth outlook for the year with the 2 landfills coming online in Q2?

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Joseph J. Peterson, NRC Group Holdings Corp. - CFO [3]

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This is Joe. I will let Chris talk about that as well. But we still remain confident in the growth contributions from the 2 new landfills. Once again they are coming online on schedule in Q2. I think in the previously provided information we've estimated that it would be about $15 million of EBITDA contribution in the year. So that's the contribution of the new facilities. I'd say the -- obviously Quail Run is contributing from an acquisition perspective incrementally, and the rest of the business is growing as anticipated from an organic growth perspective, not growing quite at the rate of the new landfills at Quail Run, because they are obviously adding brand new incremental nonorganic growth. But I don't know, Chris, if you want to say anything specifically about services or the base business.

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Christian T. Swinbank, NRC Group Holdings Corp. - CEO, President & Director [4]

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Yes. I think when -- just to go back to our disposal functionality, Quail Run has been a great acquisition. We've got some new facilities coming online there in areas that are just the right spot to be. We continue to be aspirational about our landfills in the Permian Basin. We also think those are in the right place to be and we are aspirational about the rest of the business. So the services segment continues to grow, albeit at a slower pace than the disposal functionality, but it's well worth being in and we're happy to have it.

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Sean Kennedy, [5]

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Got it. And then a quick follow-up, I guess, I mean you commented that the drilling environment is still robust in the Permian, but, I think, is there anything I guess incremental from this quarter versus last year? Is there any difference in terms of the current climate for waste demand?

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Christian T. Swinbank, NRC Group Holdings Corp. - CEO, President & Director [6]

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I think the -- really what drives waste demand is the amount of drilling permits that have been filed. It's not really rig count, it's how many permitted drill holes are they going to do. And so we've seen no downturn in the first quarter of 2019 as far as activity that's coming. We're excited about it.

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Operator [7]

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(Operator Instructions) Our next question comes from Brian Butler with Stifel.

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Brian Butler, [8]

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Just first one starting out, when you think about reiterating the previous 2019 guidance, did that already -- was that assuming the 2 new National Emergency Response customers were going to be added in at the New Mexico contract when it was going to occur or is that again kind of pushing you towards above the midpoint with those wins?

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Joseph J. Peterson, NRC Group Holdings Corp. - CFO [9]

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We assume that we would get some traction on those initiatives, but obviously it's very hard to plan the exact contribution. So I think they indirectly include some contribution, but I would say, to the extent that we continue to move forward the way we have, there potentially could be some opportunity, but it is too early to tell.

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Brian Butler, [10]

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Okay. So you're still within the range, but you're incrementally moving towards the higher end. Is that a fair way to look at it?

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Joseph J. Peterson, NRC Group Holdings Corp. - CFO [11]

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Well, I wouldn't say at the higher end, I'd say we're feeling comfortable about our execution so far.

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Brian Butler, [12]

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How about your visibility on the pipeline of bids for the Mexico type business. Can you give a little color what you're seeing now and how that's shaping up?

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Joseph J. Peterson, NRC Group Holdings Corp. - CFO [13]

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How about that, Chris?

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Christian T. Swinbank, NRC Group Holdings Corp. - CEO, President & Director [14]

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Yes. Well, activity in the Southern Gulf continues to ramp up. We've got quite a few bids in the pipeline and we don't have any reason to think that we wouldn't be as successful in winning those as we have been on the first 7. So that has certainly not -- that activity has not receded, in fact it's increased.

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Joseph J. Peterson, NRC Group Holdings Corp. - CFO [15]

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Yes. I mean just to add to what Chris said, I mean we're executing as we intended at the beginning of the year. So things are moving along as planned. With some of the Mexico contracts, once you win them, sometimes there is a little bit of uncertainty as to when they start to drill and come online. So there could be some lumpiness upfront. It's not as if you win the contract, in the next month, you're generating consistent visible revenue streams. There is a little bit of lumpiness in that, but you can't control that. What we can control is, going out there and winning each and every day and so far we're comfortable and happy with our track record.

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Brian Butler, [16]

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Okay. And then you also talked about the potential to open a new call center in your headquarters. Can you give little color on what's the -- what will be a typical cost for something like that and what would be potentially kind of the contribution if you think about growth? Is that -- how much does it move the needle?

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Christian T. Swinbank, NRC Group Holdings Corp. - CEO, President & Director [17]

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Yes. We estimate it's going to cost a couple hundred thousand dollars to get that implemented and if the facility existing itself does not actually add incremental revenue, it just aides us in our ability to go out and sell the value proposition to the customer, which is National ER. It's an infrastructure that you have to have before you can go confidently sell the ability to do that.

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Joseph J. Peterson, NRC Group Holdings Corp. - CFO [18]

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Yes. To Chris' point, I mean I think that the National ER could be something that not just contributes later this year as we're building the infrastructure and adding new customers, but obviously gives us more of a pathway going forward for years to come in terms of how we can systematically and differentiate ourselves and grow the business at pretty decent margins going forward. So we're happy about it not just this year, but we're happy about what it can become and how we differentiate ourselves in this space for many years to come. We think it's an investment worth making.

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Brian Butler, [19]

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Okay. And that runs through the domestic ES, and that business had margins kind of down in the 3.9%, which was I think little bit lower than we were looking for, but how do we think about that going forward in the domestic ES kind of with margins? Does it come back to a higher level? I mean I know this is a slower period, but just kind of walk through kind of the seasonality, I guess, through the rest of the 2019?

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Joseph J. Peterson, NRC Group Holdings Corp. - CFO [20]

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Yes. Well, Q1, as you mentioned, it is slower than it's predominantly due to our domestic ES operations in Alaska. I mean Alaska, quite frankly, makes the vast majority of their money when it's a little bit warmer. They basically shut down and sometimes they are able to get a unique project or 2 that holds them over the winter months and sometimes they don't. This year, they did not. In addition, obviously in New York and New England, it's a slower time for those regions as well. You obviously have less seasonality impact in the Gulf and California.

But what I'll say is, from a National ER, back to the point of National ER, that's an initiative that is really just ramping up now. There was no real significant incremental contributions from our National ER program and our pricing, other than the stuff we have been doing for the last few years for ourselves. Differentiating a point here is that we're just not going to do National ER events for our customers. We are now becoming the call center and the third party provider of that service for other companies. The margins on that business will be higher, substantially higher than the margins we get in a normal remediation job, waste collection job, or industrial service type of job. It's a different level of margin because we're providing a different level of differentiated service and a different level of expertise. So it has the potential to significantly change what we do and how we do it in the domestic environmental Services business, which is the reason obviously we are pursuing it.

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Brian Butler, [21]

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Okay. And then just last one for me. When you think about the subcontractor kind of additional costs that kind of moves the margins, how do we think about the size of that swing quarter to quarter? I mean is that 200 basis points, 300 basis points potentially depending upon how much you need them or I'm just trying to put a box around how big it can be?

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Joseph J. Peterson, NRC Group Holdings Corp. - CFO [22]

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I mean it's obviously the -- it's sometimes difficult to control or predict. And an example could be, if an event happens or we have to in, say, the Northeast or Gulf with our acquisition of SWS, first and foremost, we always respond with our own resources if we can. Obviously, we control our own resources and the margins are a little bit different than if we had to tap into a subcontractor. So first and foremost, it's a matter of where the event happens. If it happens in the Midwest, we have less physical presence there than it would happen on the coast. So where the event happens and sometimes the nature of the event can happen. And it really matters what segment we're talking about, right.

Internationally, does it really impact? Sprint is not a factor. We're not talking about that. First and foremost, it's in the Standby business, right, and we have to respond to an event with subcontractors. It can obviously impact the 20% of its revenue that is ER related. Once again, 80% of Standby's revenue was this retainer contract that's very reoccurring, very, very visible. In domestic ES, yes, it can also have an impact there if we have to respond with third-party contractors. It can move the needle. I think if we think about margins overall for the quarter, there were 3 primary areas and issues that impacted margins, which we don't expect at the same level to go forward into Q2 or Q3. First, we kind of touched upon a little bit in terms of mix, right? So I would estimate roughly $3 million of operating profit was impacted due to mix, specifically $2 million or so in domestic ES, specifically in Southern California and Alaska.

Southern California had a very large job in Q1 of 2018 at unusually high margins. That did not repeat this year around. So that was a mix issue year-over-year and also Alaska, I mentioned before, how Alaska last year they were able to get some unique projects to tie them over, over the winter months to better utilize your equipment and people because we know we're going to using them as soon as April, May and June comes around because that's when Alaska, which we are kind of a more of a market leader in Alaska, really gets a lot of traction. In addition, there was about $1 million of mix impact in Standby. And that was what I mentioned before where, on one side, it's great because we had higher ER activity and higher revenue because of that, but obviously that revenue is not going to be -- if it's ER related, it's not going to be at the same 50% plus margins as you get if it was retainer revenue.

So you got to remember, that fluctuates and really can change the needle. So about $3 million, I'd say, year-over-year was probably due to mix. There was an additional roughly $2 million, I would say, due to public company costs and other one-time nonoperational charges. Obviously, we were not a public company in Q1 of last year. We are a public company now in terms of Investor Relations, in terms of audit fees, in terms of some infrastructure. There is some costs related to that roughly $1 million-ish was incurred. In addition, we talked about some nonoperational charges. So one example of that is, as we are working as a public company, trying to realign and change our accounting policy, so you'll notice in the balance sheet, there was an increase of roughly $1 million for bad debt. This is moving from more of a kind of internal expertise opinion as to when we will collect something or when we won't.

We basically have really good strong collection histories. Our customers usually always pay. Sometimes when you're dealing with governments and municipalities, they might not pay as quickly as you'd like them to, but they usually pay. In partnering with Grant Thornton, we are trying to move and evolve to more of a systematic or formulaic approach to bad debt. So if something is outstanding, say, 180 days or 360 days, regardless x amount is reserved, right. So as a result of moving to that type of methodology, we incur a charge of $1 million, right, in Q1 that did not necessarily relate to the revenues incurred in Q1.

And lastly, we mentioned, Chris mentioned and I mentioned, a little bit of startup costs. So in addition to the National ER, there are some start-up costs we're doing right now in Southern California, getting ready, hiring 3 to 4 dedicated crews and training them up. These are noncapitalized costs related to a very large remediation job that we're about to kick off in Q2 in Southern California, which we believe could last a year or 2 in terms of its duration. And then to a lesser extent some of the initial ramp-up costs in March, mid-March related to the Houston Ship Channel fire that Chris had mentioned as well, once again, we got about -- maybe about a 1 week worth of contribution from that initiative in Q1 at the very end of March.

It is really a Q2 event all through April and we're hopefully -- and should be wrapping that large job up, let's say, here in middle of May. So those 3 things really drove the Q1 March deterioration. Obviously, I would not expect that the -- some of these mix issues continue into Q2. I still feel comfortable with what we previously communicated, which was, overall, our corporate nonoperating segment would increase anywhere from $3 million to $4 million to cover the incremental public company costs and we still believe that is the right number.

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Operator [23]

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(Operator Instructions) At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Swinbank for closing remarks.

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Christian T. Swinbank, NRC Group Holdings Corp. - CEO, President & Director [24]

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Thank you, Brandon. We'd like to thank everyone for listening to today's call and we look forward to speaking with you when we report our second quarter results. Thanks again for joining us.

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Operator [25]

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Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.