Visionary Holdings, Inc. Q1 FY2020 earnings call

• Entered 2020 with a record backlog and strong balance sheet. - Electrical construction revenue and margin improved compared to 2019 despite a slow start with certain MSA contracts, with work on those contracts now underway and expected to boost second quarter and beyond results. - As of now, not significantly impacted by COVID-19 other than some additional time requirements for personnel, with proactive measures taken to mitigate spread. - Texas-Southwest region showed striking improvement from Q1 2019, due to expansion into substation and distribution services, new customer relationships, and securing profitable projects. - Total backlog at March 31, 2020, increased $265 million or 127% to $473 million, driven by increase in estimated MSA work including award of 4 new MSAs.

Electrical Construction: In the first quarter of 2020, electrical construction revenue was $43 million, an increase of $2 million or 4% from $41 million in the same period of 2019. This improvement was due to increases in MSA project activity, including service line expansion in the Texas-Southwest region, partially offset by decreases in non-MSA project activity in the mid-Atlantic region. Gross margin on electrical construction operations increased to 15.3% compared to 14.7% in the same period of 2019. Real Estate Development: Revenue from real estate development operations decreased to $2 million for the three months ended March 30, 2020, from $6 million in the same period in 2019 due to the decrease in the number of units available for sale. The current economic uncertainty is expected to impact real estate development operations by delaying the start of certain projects.

• Believe electrical construction revenue and net income will show strong improvements in the second quarter. - Anticipate current economic uncertainty will delay start of several real estate development projects. - CapEx projection for full year 2020 is $14 million.

• COVID-19 could impact projects, including potential delays and effects on customers' productivity in handing out work. - Economic uncertainty may delay start of real estate development projects.

Q: Based on our backlog, should we assume that the MSAs that the revenue will increase proportionately and the profitability will follow?

A: Not necessarily. These are multiyear MSAs, revenue and income will occur over 3 to 7 years, not proportionately overnight. The 4 MSAs signed hurt Q1 revenue as projects couldn't be underway immediately but are now being worked on.

Q: Now these four MSAs, which district are they?

A: Generally across Florida, Texas, Mid-Atlantic, etc., all across the board.

Q: And at this point in time, the Texas area, we have improved our profitability, and everything is working pretty good as far as because in this first quarter, the sales improved pretty decently. So I assume you have straightened out, more or less, the profitability of the Texas operation?

A: Texas has improved with contributors like transmission, service lines in distribution contributing to revenue and profit. It took time to get new service lines going, and COVID-19 affects customers' productivity in handing out work.

Q: And as far as the COVID-19, as far as our contracts are concerned, is there any possibility, if there's any delays that because of the excess costs were reimbursed relative to that, I mean, the way we bid those jobs?

A: Under current contracts, generally no. Under future contracts, need to assess impact of COVID-19 on projects, getting into subcontracts, penalties, etc.

Q: Just a little bit more on the Texas situation. It was a struggle getting started, and you really put a lot of effort in and getting it straightened out, and it looks to be moving ahead here. Can you describe a little bit more about the area in Texas that you are working and what your opportunities are for expansion there in branching out?

A: Operate throughout Texas and into Oklahoma, Colorado, Arkansas and Missouri. Have yards in Fort Worth, Dallas-Fort Worth area, and Bastrop. Opportunities in substation activity as every power line needs substations, with work in building new, repairing, and upgrading substations.

Q: And going back, coming out of that region, moving back to more South Central. You indicated in the past calls that you are breaking into Kentucky. How is that going along?

A: Have several contracts in Kentucky in transmission and distribution, working on improving profitability and continuity of work, with excellent opportunities but still maturing compared to Texas.

Q: Just a general question about your view of trying to expand your overall business. Are there areas of product offerings that you can expand on generally looking forward to broaden your revenue stream capabilities?

A: Goal is to continue filling in utilities not currently worked for in areas from Virginia to West Texas, either by creating new yards, acquiring new companies, or organic growth.

Q: One specific question about a product line. About the 5G install environment, has that encouraged you to try to branch into that?

A: Install fiber optic cable for 5G, as it's about electricity carried through wires regardless of generation method, and work for a number of communications companies on 5G.

Q: Wondering about -- with guys working at home that you are probably dealing with as far as getting business, has bidding activity slowed at all? Do you think that through the quarter with things opening up that could increase? Or what's the current and maybe your outlook on bidding activity and size of opportunities, projects, that kind of thing?

A: Not as adversely affected as some might think, but real estate project delayed about 5-6 months. Difficult to say productivity at home is as good as in office, but hope for improvement in summer and fall.

Q: On the margin front, gross margin front, fourth quarter was clearly quite a pop, and then we pulled back with the start-up cost, a slow start to Q1 this year. Do you see upper teens kind of a bridge in between through the rest of the year? What is -- kind of just some general thoughts on gross margins Q2 and kind of the rest of the year?

A: Still shooting for 16% to 19% range, with opportunities to exceed. Q1 margins affected by delays in signing MSAs, but now seeing results from new MSAs and expecting continued improvement in revenue and margins.

Q: Just a follow-up for my first question. So are there larger opportunities such as last fall, where you were able to announce, 'Hey we secured a couple of big deals' in the next quarter, let's say. Are you working -- how's the outlook on that? Is there anything that in the next quarter we might see, 'Hey, we just secured something here or there that's worthy of a note, worthy of a release' or something?

A: Always working on larger projects, some very large ones being bid on now, but can't guarantee one next week.

Q: On the real estate front, are we going to assume the second half of the year is going to be pretty slow on both?

A: Real estate is a small division, with larger oceanfront projects taking 2-2.5 years to complete, so likely flat in second half.

Q: Are you looking at any opportunities to purchase land?

A: Yes, have several land purchase opportunities.

Q: On the real estate front, are we going to assume the second half of the year is going to be pretty slow on both?

A: Yes, real estate is small, with larger projects taking time, so likely flat.

Q: This is a difficult time but you have demonstrated the -- acquiring these projects and the profitability, which will improve, and it would appear the story is appropriate to come out and the helping coming out, unfortunately, you can't make a presentation at a conference. But to the extent there are virtual conferences, I believe it would be a good idea to seek them out and tell the story so that there could be a greater valuation put on Goldfield. Is there any thought on seeking out any of these virtual conferences and telling the story?

A: Absolutely. Want to target right group and use proper methods to tell the story at virtual conferences.