Aegion Corporation (NASDAQ:AEGN) Q3 2019 Earnings Conference Call Transcript

Oct 31, 2019 • 09:30 am ET

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Aegion Corporation (NASDAQ:AEGN) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, and welcome to Aegion Corporation Third Quarter 2019 Earnings Conference Call. [Operator Instructions] Later there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions]

It is my pleasure to turn the call over to your host, Katie Cason, Senior Vice President of Strategy and Communications. Katie, you may proceed.

Executive
Katie Cason

Good morning, and thank you for joining us today. On the line with me are Chuck Gordon, Aegion's President and Chief Executive Officer and David Morris, Aegion's Executive Vice President and Chief Financial Officer. We issued a press release yesterday that will be referenced during the prepared remarks on this call.

You can find a copy of our press release and our Safe Harbor statement on the Investors section of Aegion's website at www.aegion.com. During this call, the Company will make forward-looking statements, which are inherently subject to risk and uncertainty. The Company does not assume the duty to update forward-looking statements.

With that, I'm pleased to turn the call over to Chuck Gordon.

Executive
Charles Gordon

Thank you, Katie and good morning to everyone joining us on the call today, I'm pleased with Aegion's third quarter results with adjusted EPS of $0.40 coming at the high end of the range we provided in September. Results were driven by exceptional performance from our core North America CIPP operation, as well as strong gross margins across all of our segments that offset temporary revenue softness in a few parts of the business. We have been successful executing on a number of key initiatives to drive results this year. And we continue to reaffirm our 2019 outlook to achieve modest growth in adjusted EPS compared to last year.

Backlog and orders were also a highlight for the quarter. On a comparable basis, excluding exited or to be exited businesses, consolidated orders were up 16% in Q3 compared to the same period a year ago. On the same basis, the strong orders quarter resulted in 5% growth in ending backlog. I'll spend a few minutes discussing operational highlights and the market outlook within each of the three segments.

Turning first to Infrastructure Solutions. The strong improvements in the North America CIPP business continued to be the largest contributor to Aegion's achievement of targeted results this year. Significant productivity gains by our crews, which has been a focus in 2019, has led to increased revenues and nearly a 200 basis point gross margin improvement. Average weekly crew productivity year-to-date has increased 8% from the prior year and controllable production misses are trending at historical lows. It seems they have made improvements across multiple areas, including site and client readiness, product quality and equipment and manpower availability, and we continue to navigate an extremely tight labor market that sometimes required us to merge crews to fully staff projects.

But we have seen significant benefits from expanded crews and supervisor training, upgraded project management, and improvements in equipment deployment and onsite troubleshooting. In addition to the strong operational performance, the market outlook for North