Aegion (NASDAQ:AEGN) Corporation AEGN reported first-quarter 2020 results, wherein the top and bottom lines surpassed the respective Zacks Consensus Estimate, mainly due to higher margins across Infrastructure Solutions and Energy Services segments, which successfully mitigated COVID-19 impacts.
Adjusted earnings per share of 6 cents topped the consensus mark of 4 cents by 50% but was in line with the year-ago figure.
Total revenues of $287.4 million beat the consensus mark by 6.4%. Also, the reported figure was up 4% on a year-over-year basis. Excluding exited or to-be-exited operations, revenues on a same-store basis grew 9% from the prior-year quarter, driven by revenue increases across all operating segments.
As of Mar 31, 2020, contract backlog was $648 million. Excluding the impact of exited or to-be-exited businesses, backlog grew 3% year over year in the quarter, driven by 10% growth in new orders.
Operating Highlights
Overall, adjusted gross margin of 17.5% contracted 160 basis points (bps) from the year-ago period. Also, adjusted operating margin decreased 50 bps year over year to 1.8%.
Segmental Performance
Infrastructure Solutions: Revenues in the segment declined 1% year over year to $130.2 million. Excluding exited or to-be-exited businesses, the same grew 8% from a year ago owing to growth of the North America Insituform business. Adjusted gross and operating margins rose 50 bps and 160 bps, respectively, during the reported quarter, backed by the exit of underperforming international operations.
The segment’s backlog (excluding the impact of exited or to-be-exited businesses) came in at $294.5 million as of Mar 31, 2020, up 4.2% year over year.
Corrosion Protection: The segment’s revenues improved 2.4% year over year to $66.1 million. Excluding exited or to-be-exited operations, revenues were up 6% year over year due to higher volumes in United Pipeline Systems in the United States and Middle East, offsetting declines at CoatingServices and Corrpro.
Adjusted gross margin contracted 610 bps in the quarter, which can be attributed to lower contribution from Coating Services due to international project delays, partly attributed to business loss on account of COVID-19 impacts.
Backlog (excluding the impact of exited or to-be-exited businesses) in the segment amounted to $135 million as of Mar 31, 2020, up 10% year over year. This was driven by a $6-million offshore coating project in the Middle East.
Energy Services: The segment’s revenues during the reported quarter totaled $91.1 million, up 12.6% year over year. This was primarily due to turnaround volumes that more than doubled during the quarter, offsetting the impact of reduced March activities as a result of COVID-19 disruptions.
Adjusted gross contracted 40 bps but operating margins improved 110 bps from the year-ago level.
Backlog in the said segment declined 1.5% from the year-ago quarter to $215.2 million as of Mar 31, 2020.
Financial Update
Aegion’s cash and cash equivalents as of Mar 31, 2020 were $73.2 million, up from $64.9 million at the end of 2019. Long-term debt, less current maturities, totaled $272 million compared with $243.6 million at 2019-end. The company completed a credit facility amendment that will provide expanded covenant flexibility and increase expected borrowing capacity over the next 12 months by more than $100 million.
Net cash used in operations was $8.1 million in the quarter compared with $6.6 million a year ago.
Q2 Guidance
Aegion currently expects adjusted EPS in the range of 20-30 cents for the second quarter. However, the company will provide full-year financial guidance when there is improved visibility into expected results.
Zacks Rank
Aegion — which shares space with Arcosa (NYSE:ACA), Inc. ACA, Armstrong World Industries, Inc. AWI and Gibraltar Industries (NASDAQ:ROCK), Inc. ROCK in the Zacks Building Products – Miscellaneous industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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