Hill International CEO Discusses Q3 2010 Results - Earnings Call Transcript

Hill International, Inc. (HIL)

Q3 2010 Earnings Call Transcript

November 4, 2010 11:00 am ET

Executives

Devin Sullivan – IR

David Richter – President and COO

John Fanelli – SVP and CFO

Analysts

Richard Paget – Morgan Joseph

Tim McHugh – William Blair & Company

David Gold – Sidoti

Jeff Rossetti – Janney Montgomery Scott

Arnold Ursaner – CJS Securities

Mark Swaha [ph]

Presentation

Operator

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Previous Statements by HIL
» Hill International Inc. Q2 2010 Earnings Call Transcript
» Hill International Q1 2010 Earnings Call Transcript
» Hill International Q4 2008 Earnings Call Transcript

Good day, everyone, and welcome to the Hill International 2010 third quarter conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode. I will now turn the conference over to Devin Sullivan. Sir, please go ahead.

Devin Sullivan

Thank you, Tunisia. Good morning, everyone, and thank you for joining us today. Our speakers on today’s call will be David Richter, President and Chief Operating Officer of Hill International, and John Fanelli, Senior Vice President and Chief Financial Officer.

Before we get started, I’d like to remind everyone that certain statements contained in today’s 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 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 forward-looking statements.

Important factors that could cause actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in the forward-looking statements include, modifications and termination of client contracts; control and operational issues pertaining to business activities that we conduct on our own behalf or pursuant to joint ventures with other parties; difficulties incurred in implementing our acquisition strategy; the need to retain and recruit key technical and management personnel; and unexpected adjustments and cancellations related to backlog.

Additional factors that could cause actual results to differ materially from forward-looking statements are set forth in the reports filed with the Securities and Exchange Commission. We do not intend, and undertake no obligation, to update any forward-looking statement.

Having said that, now I’d like to turn the call over to David Richter, President and Chief Operating Officer of Hill. Please go ahead, David.

David Richter

Thank you, Devin. And good morning to everyone joining us this morning for our quarterly earnings conference call. Yesterday we announced our financial results for the third quarter and first nine months of 2010. First, we will review the results in detail relative to our year-over-year quarterly performance, meaning third quarter 2010 versus third quarter 2009. Then we will look more closely on our sequential performance, third quarter 2010 versus the second quarter of 2010, which is really what we focus on more closely internally, see how our business has changed over the past 90 days.

For the third quarter of 2010, Hill’s total revenue grew to a record $111 million, a 7.6% increase from the third quarter of 2009. Consulting fee revenue for the third quarter was also a record at $97.4 million, up 12.4% from last year’s quarter. This was due to 3.1% organic growth plus 9.2% growth from acquisitions.

Primary reasons for our change in CFR year-over-year included increases of $6.4 million of North African projects; $2.2 million in Asia-Pacific claims, which was primarily the result of our recent acquisition in the McLachlan Lister in Australia; $2.3 million in New York projects; and $1.8 million in Western US projects; all offset by declines of $5 million in Iraq and $1.7 million in Middle East projects.

Our work in Iraq essentially ended this past quarter after our Stanley Baker Hill JV, spent 6.5 years as the primary construction management advisor to the US Army Corps of Engineers and the Iraq Reconstruction Program, an assignment we are all very proud of.

Operating profit for the third quarter of 2010 was $6.3 million, a 22.6% decrease from the third quarter of 2009. Our operating margin as a percentage of our consulting fees was 6.5%, down from what was a very strong 9.4% in last year’s third quarter. Our overall SG&A as a percentage of consulting fees was higher in the third quarter at 38.7%, which was 36.1% a year ago.

This was primarily driven by the four acquisitions that we closed in the last year’s quarter, adding the SG&A of the acquired businesses which were mostly higher than Hill’s on a percentage basis, plus the related legal and accounting expenses for those deals, plus the higher amortization cost that resulted following the closing of those deals. Our net earnings for the third quarter were $5.1 million or $0.13 per diluted share based on 39.1 million diluted shares outstanding. That number is down 12.6% from last year number.

Looking at our financial performance sequentially, meaning versus the prior quarter, that’s a much clear picture of where our business is heading on a short-term. And the figures I just gave earlier are for year-over-year performance. From the second quarter 2010 to the third quarter, Hill’s total revenues were up 2.6% and our consulting fees were up 6.4%. Our gross profit was up by 12.6%, and even more importantly, as a percentage of consulting fees, increased 250 basis points to 44.9% in the third quarter from 42.4% in the second quarter.

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