Hill International, Inc. (NYSE:HIL) ("Hill" or the "Company"), delivering the infrastructure of change, announced today its financial results for the third quarter ended September 30, 2021 (“Q3 2021”).

“We reported strong results for the 2021 third quarter, highlighted by increased CFR and gross profit, strong new bookings, and a return to profitability," said Raouf Ghali, Hill's Chief Executive Officer. "Adjusted operating profit, Adjusted EBITDA, and Adjusted net income rose by 34%, 33%, and 60%, respectively, from last year's third quarter. New contract awards in the 2021 third quarter were $92.6 million, resulting in a book to burn ratio of 120%. New awards for the first nine months of 2021 were $274.5 million, resulting in a book to burn ratio of 121%.

"Hill's success is defined by strong project execution and a reputation for excellence. We have been engaged to support some of the world's most meaningful and challenging infrastructure projects, with wins during the third quarter including the Metro Gold Line Foothill Extension in southern California, a contract with Kosovo Railways JSC (INFRAKOS) for Phase 2 of the rehabilitation and upgrade of Rail Route 10, the ongoing Capital Program at Philadelphia International Airport and the Miami-Dade County Aviation Department’s $5 billion Capital Improvement Program. Additionally, bookings during the fourth quarter have been strong, totaling $71 million through November 1, including a five-year contract with Southern California Edison."

"Our Adjusted EBITDA increased to $6.4 million, our unrestricted cash position at September 30, 2021 rose by $5.3 million from June 30, 2021, and we generated positive free cash flow," said Todd Weintraub, Hill's Chief Financial Officer. "Total liquidity at September 30, 2021 was $38.6 million, a $10.3 million improvement from June 30, 2021. For the fourth quarter of 2021, we expect to report higher CFR when compared to Q3 2021 and expect to continue generating positive cash flow.”

Q3 2021 Financial Results Overview

Hill's consulting fee revenue ("CFR") rose to $77.1 million in Q3 2021, from $71.5 million in the third quarter of 2020 ("Q3 2020") as activity continues to return to pre-COVID levels.

Gross profit in Q3 2021 increased by $3.8 million to $32.4 million, or 42.1% of CFR, from $28.7 million, or 40.1% of CFR, in Q3 2020, driven by higher CFR and improved contract profit margins.

Selling, general, and administrative ("SG&A") expenses in Q3 2021 were $28.1 million, compared to $25.6 million in Q3 2020. This included non-recurring and non-cash expenses of $1.8 million and $1.1 million in Q3 2021 and 2020, respectively. Excluding these non-recurring and non-cash expenses, SG&A expenses in Q3 2021 were $26.3 million, or 81.2% of gross profit, compared to $24.5 million, or 85.4% of gross profit in Q3 2020. This decline in SG&A as a percentage of gross profit reflected continuing management of expenses to ensure costs grow more slowly than gross profits, resulting in creating operating leverage.

Operating profit for Q3 2021 was $4.3 million compared to operating profit of $4.7 million in Q3 2020, as improved gross profit from higher CFR was offset by an increase in foreign currency exchange losses when compared to Q3 2020 and higher SG&A as discussed above. Adjusted operating income, a non-GAAP measure (see definition and reconciliation in the table below) was $5.9 million in Q3 2021, compared to $4.4 million in Q3 2020.

Net income attributable to Hill in Q3 2021 was $1.3 million, or $0.02 per diluted share, compared to net income attributable to Hill of $2.1 million, or $0.04 per diluted share, in Q3 2020. This decline was due primarily to increased gross profit in Q3 2021, compared to Q3 2020 being more than offset by the negative impact of unrealized foreign exchange of $1.1 million and non-recurring and non-cash items of $0.7 million in Q3 2021 compared to Q3 2020. Adjusted net income, a non-GAAP measure (see definition and reconciliation in the table below) which excludes the impact of these items, was $2.8 million in Q3 2021, compared to adjusted net income of $1.8 million in Q3 2020.

Adjusted EBITDA, a non-GAAP measure (see definition and reconciliation in the table below) was $6.4 million in Q3 2021, compared to adjusted EBITDA of $4.8 million in Q3 2020. Improved gross profit from higher CFR was partially offset by an increase in labor costs as business activity returns to normal levels, the reinstatement of the Company 401(k) match and the partial resumption of business travel.

Financial Condition and Backlog

Net cash provided by operating activities in Q3 2021 was $6.2 million compared to net cash provided by operating activities of $7.8 million in Q3 2020. Free cash flow, a non-GAAP measure (see definition below) for Q3 2021 was $6.1 million, which represents net cash provided by operating activities, less $0.1 million in purchases of property and equipment during the quarter. Free cash flow during Q3 2020 was $7.7 million, which represents net cash provided by operating activities, less $0.1 million in property and equipment purchased during the quarter.

Unrestricted cash at September 30, 2021 was $26.3 million compared to unrestricted cash of $21.0 million at June 30, 2021 and $34.2 million at December 31, 2020, due primarily to seasonality and the timing of certain collections. The Company had approximately $12.3 million in available and undrawn credit facilities at September 30, 2021, compared to $7.3 million at June 30, 2021 and $11.7 million at December 31, 2020. The Company's total liquidity was $38.6 million at September 30, 2021, compared to $28.3 million at June 30, 2021 and $45.9 million at December 31, 2020.

Backlog (which is a non-GAAP measure; see definition below) was $660.7 million at September 30, 2021, compared to $666.7 million at December 31, 2020, primarily due to new bookings throughout the year, offset by CFR burn and reductions.

2021 Financial Guidance

Hill is updating its CFR guidance for 2021.

CFR for 2021 is expected to range between $305 - $315 million, representing an increase of 3% - 6% from 2020. This compared to previous guidance of $320 - $330 million. The revised CFR guidance primarily reflects COVID-19-driven project deferrals in the Middle East and, to a lesser extent, domestic project deferrals. Hill expects that these deferred projects will commence in 2022.

Adjusted EBITDA (a non-GAAP measure) for 2021 is expected to be at the lower end of the previous guidance of $20 - $22 million.

Non-GAAP Measures

The following measures below are not measures of financial performance under U.S. generally accepted accounting principles ("GAAP") and should be considered in addition to and not as a substitute for, or superior to, the related measure of performance prepared in accordance with GAAP.

Backlog

Backlog represents the Company's estimate of the amount of uncompleted projects under contract and awards in-hand that are expected to be recognized as CFR in future periods as a component of total revenue. Hill's backlog is based upon the binding nature of the underlying contract, commitment or letter of intent, and other factors, including the economic, financial and regulatory viability of the project and the likelihood of the contract being extended, renewed or canceled. Although backlog reflects business that the Company considers to be firm, cancellations or scope adjustments may occur. It is an important indicator of future performance and is used by the Company in planning Hill's operational needs. Backlog is not a measure defined in GAAP and the Company's methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog.

Adjusted Operating Profit (Loss)

Adjusted operating profit (loss) is operating profit (loss), adjusted to exclude non-recurring items and non-cash items including unrealized foreign currency exchange losses (gains), share-based compensation and the write-off of leasehold improvements previously included in property and equipment on the Company's consolidated balance sheets. The Company believes that adjusted operating profit (loss) is useful to investors and other external users of Hill's financial statements as a measure of a company's core ongoing operations, without regard to generally non-recurring items and non-cash activity.

Adjusted Net Income (Loss) Attributable to Hill

Adjusted net income (loss) attributable to Hill is net income (loss) attributable to Hill, adjusted to exclude non-recurring and non-cash items including unrealized foreign currency exchange losses (gains), share-based compensation and the write-off of leasehold improvements previously included in property and equipment on the Company's consolidated balance sheets. The Company believes that adjusted net income (loss) attributable to Hill is useful to investors and other external users of Hill's financial statements as a measure of a company's operating performance, without regard to generally non-recurring items and non-cash activity.

EBITDA and Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization ("EBITDA"), in addition to operating profit, net income, and other GAAP measures, is a useful indicator of Hill's financial and operating performance. Investors should recognize that EBITDA might not be comparable to similarly titled measures of other companies. The Company believes that EBITDA is useful to investors and other external users of Hill's financial statements in evaluating its operating performance because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.

Adjusted EBITDA is EBITDA, adjusted to exclude the impact of certain items, including non-recurring, one-time costs (as presented in the table below) and non-cash items such as unrealized foreign currency exchange losses (benefit) and share-based compensation expense. The Company believes that adjusted EBITDA helps its investors and other external users of Hill’s financial statements understanding of a company’s operating performance, without regard to non-recurring and other non-cash activity.

The Company does not provide a reconciliation of its 2021 financial guidance for such non-GAAP measure to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for non-recurring, one-time costs and other charges reflected in its reconciliation of historic numbers.

Free Cash Flow

Free cash flow, a non-GAAP measure, includes net cash provided by (used in) continuing operations, less purchases of property and equipment. Free cash flow is a useful indicator that provides additional perspective on Hill's ability to generate cash that is available to the Company for taxes and other corporate purposes. Investors should recognize that free cash flow might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.

Conference Call

Management will host a conference call on Tuesday, November 9, 2021 at 9:00 am ET to discuss the results and business activities. Interested parties may participate in the call by dialing:

  • (866) 682-6100 (Domestic) or
  • (862) 298-0702 (International)

The call will also be accessible on the “Investor Relations” section of Hill’s website at www.hillintl.com. Click on “Financial Information” and then “Conferences and Calls”.

About Hill International

Hill International, with more than 3,000 professionals and 100 offices worldwide, provides program management, project management, construction management, project management oversight, facilities management, and other consulting services to clients in a variety of market sectors. Engineering News-Record magazine recently ranked Hill as one of the largest construction management firms in the United States. For more information on Hill, please visit our website at www.hillintl.com.

Forward Looking Statements

Certain statements contained herein 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 statements of belief or intent, any statements concerning our plans, strategies, and objectives for future operations 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 our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Important factors that could cause our actual results to differ materially from estimates or projections contained in our forward-looking statements are set forth in the Risk Factors section and elsewhere in the reports we have filed with the Securities and Exchange Commission, including that unfavorable global economic conditions may adversely impact our business, our backlog may not be fully realized as revenue, infrastructure legislation may not be implemented, and our expenses may be higher than anticipated. We do not intend, and undertake no obligation, to update any forward-looking statement.

Hill International, Inc.   The Equity Group Inc.
     
Elizabeth J. Zipf, LEED AP BD+C   Devin Sullivan
Senior Vice President Hill International, Inc   Senior Vice President
One Commerce Square   (212) 836-9608
2005 Market Street, 17th Floor   dsullivan@equityny.com
Philadelphia, PA 19103    
(215) 309-7707   Lena Cati
elizabethzipf@hillintl.com   Vice President
    (212) 836-9611
    lcati@equityny.com

HILL INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands)

    September 30, 2021   December 31, 2020
Assets   (Unaudited)    
Cash and cash equivalents   $ 26,293     $ 34,229  
Cash - restricted   3,811     3,752  
Accounts receivable, net   115,049     98,186  
Current portion of retainage receivable   11,813     11,775  
Accounts receivable - affiliates   29,013     23,285  
Prepaid expenses and other current assets   13,494     9,378  
Income tax receivable   1,026     2,298  
Total current assets   200,499     182,903  
Property and equipment, net   8,816     9,443  
Cash - restricted, net of current portion   3,069     3,432  
Operating lease right-of-use assets   17,908     13,116  
Financing lease right-of-use assets   692     288  
Retainage receivable   6,988     6,044  
Acquired intangibles, net   2,767     2,253  
Goodwill   44,903     46,397  
Investments   2,511     2,805  
Deferred income tax assets   3,880     3,698  
Other assets   2,268     1,620  
Total assets   $ 294,301     $ 271,999  
Liabilities and Stockholders’ Equity        
Current maturities of notes payable and long-term debt   $ 22,780     $ 987  
Accounts payable and accrued expenses   80,230     67,797  
Income taxes payable   1,021     2,219  
Current portion of deferred revenue   4,339     3,305  
Current portion of operating lease liabilities   4,937     4,797  
Current portion of financing lease liabilities   202     70  
Other current liabilities   9,264     5,796  
Total current liabilities   122,773     84,971  
Notes payable and long-term debt, net of current maturities   29,442     48,294  
Retainage payable   285     600  
Deferred income taxes   1,299     1,210  
Deferred revenue   7,527     7,488  
Non-current operating lease liabilities   18,393     13,184  
Non-current financing lease liabilities   502     186  
Other liabilities   7,253     6,778  
Total liabilities   187,474     162,711  
Commitments and contingencies        
Stockholders’ equity:        
Preferred stock, $0.0001 par value; 1,000 shares authorized, none issued        
Common stock, $0.0001 par value; 100,000 shares authorized, 63,249 shares and 62,920 shares issued at September 30, 2021 and December 31, 2020, respectively   6     6
Additional paid-in capital   216,942     215,010  
Accumulated deficit   (81,467 )   (79,542 )
Accumulated other comprehensive (loss) income   (66 )   1,318  
Less treasury stock of 6,807 at September 30, 2021 and December 31, 2020   (29,056 )   (29,056 )
Hill International, Inc. share of equity   106,359     107,736  
Noncontrolling interests   468     1,552  
Total equity   106,827     109,288  
Total liabilities and stockholders’ equity   $ 294,301     $ 271,999  
                 

HILL INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)

    Three Months Ended September 30,   Nine Months Ended September 30,
    2021   2020   2021   2020
Consulting fee revenue   $ 77,061     $ 71,543     $ 227,158     $ 224,453  
Reimbursable expenses   19,543     17,109     58,079     51,956  
Total revenue   $ 96,604     $ 88,652     $ 285,237     $ 276,409  
Direct expenses   64,196     59,998     194,314     190,078  
Gross profit   32,408     28,654     90,923     86,331  
Selling, general and administrative expenses   28,121     25,588     82,906     80,543  
Foreign currency exchange loss (benefit)   511     (694 )   2,751     3,622  
Plus: Share of profit of equity method affiliates   551     983     1,805     2,021  
Operating profit   $ 4,327     $ 4,743     $ 7,071     $ 4,187  
Less: Interest and related financing fees, net   1,226     1,275     4,077     3,870  
Less: Other loss, net       152         3,654  
Earnings (loss) before income taxes   $ 3,101     $ 3,316     $ 2,994     $ (3,337 )
Income tax expense   1,784     1,071     4,653     2,776  
Net earnings (loss)   $ 1,317     $ 2,245     $ (1,659 )   $ (6,113 )
Less: net earnings - noncontrolling interests   58     131     265     308  
Net earnings (loss) attributable to Hill International, Inc.   $ 1,259     $ 2,114     $ (1,924 )   $ (6,421 )
                 
Basic earnings (loss) per common share - Hill International, Inc.   $ 0.02     $ 0.04     $ (0.03 )   $ (0.11 )
Basic weighted average common shares outstanding   57,245     56,702     57,102     56,551  
                 
Diluted earnings (loss) per common share - Hill International, Inc.   $ 0.02     $ 0.04     $ (0.03 )   $ (0.11 )
Diluted weighted average common shares outstanding   57,245     56,702     57,102     56,551  
                         

HILL INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)

    Three Months Ended September 30,   Nine Months Ended September 30,
    2021   2020   2021   2020
Cash flows from operating activities:                
Net loss   1,318     2,245     (1,659 )   (6,113 )
Adjustments to reconcile net loss to net cash provided by (used in):                
Depreciation and amortization   567     705     1,856     3,380  
Recovery of bad debts   (337 )   (296 )   (2,794 )   (1,306 )
Amortization of deferred loan fees   174     173     568     521  
Deferred tax expense   (263 )   (174 )   (120 )   500  
Share-based compensation   443     415     1,814     1,616  
Operating lease right-of-use assets   462     1,207     3,306     3,163  
Loss on liquidation of subsidiary               4,064  
Foreign currency remeasurement losses   270     232     2,510     3,622  
Deferred payroll tax payments       2,711         2,711  
Changes in operating assets and liabilities:                
Accounts receivable   (8,426 )   6,310     (15,521 )   4,686  
Accounts receivable - affiliate   4,509     (1,832 )   (5,728 )   (6,294 )
Prepaid expenses and other current assets   1,209     1,167     (3,951 )   (2,418 )
Income taxes receivable   43     (266 )   1,232     39  
Retainage receivable   (534 )   (671 )   (953 )   (416 )
Other assets   216     (1,297 )   (1,926 )   (2,643 )
Accounts payable and accrued expenses   9,144     (3,160 )   13,181     1,641  
Income taxes payable   (826 )   89     (1,202 )   (1,161 )
Deferred revenue   1,010     2,065     1,482     (2,451 )
Operating lease liabilities   (711 )   (1,093 )   (2,698 )   (3,259 )
Other current liabilities   (1,692 )   (236 )   3,432     3,426  
Retainage payable   8     (1,195 )   (314 )   (730 )
Other liabilities   (418 )   721     492     688  
Net cash provided by (used in) operating activities   6,166     7,820     (6,993 )   3,266  
Cash flows from investing activities:                
Purchase of NEYO Group   2         (681 )    
Purchase of property and equipment   (110 )   (129 )   (1,197 )   (1,101 )
Net cash used in investing activities   (108 )   (129 )   (1,878 )   (1,101 )
Cash flows from financing activities:                
Proceeds from term loans       26         1,291  
Repayment of term loans   (280 )   (232 )   (802 )   (666 )
Proceeds from revolving loans   13,812     10,290     29,785     38,486  
Repayment of revolving loans   (14,590 )   (8,100 )   (25,816 )   (24,268 )
Proceeds from stock issued under employee stock purchase plan   23     20     118     221  
Net cash provided by financing activities   (1,035 )   2,004     3,285     15,064  
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (549 )   749     (2,654 )   (97 )
Deconsolidated cash               9  
Net (decrease) increase in cash, cash equivalents and restricted cash   4,474     10,444     (8,240 )   17,123  
Cash, cash equivalents and restricted cash — beginning of period           41,413     24,982  
Cash, cash equivalents and restricted cash — end of period           $ 33,173     $ 42,105  
                         
    Nine Months Ended September 30,
Supplemental disclosures of cash flow information:   2021   2020
Interest and related financing fees paid   $ 3,520     $ 2,722  
Income taxes paid   3,830     2,018  
Transfer of proceeds from shares pledged as collateral to treasury stock       825  
Cash paid for amounts included in the measurement of lease liabilities   4,897     5,914  
Right-of-use assets obtained in exchange for operating lease liabilities   8,568     288  
Right-of-use assets obtained in exchange for finance lease liabilities   538     475  

    

HILL INTERNATIONAL, INC. AND SUBSIDIARIESRECONCILIATION OF NON-GAAP MEASURES(In thousands)

The following table includes a reconciliation of these non-GAAP measures to its most directly comparable GAAP measure:

    Three Months EndedSeptember 30,   Nine Months EndedSeptember 30,
    2021   2020   2021   2020
                 
Operating profit   $ 4,327      $ 4,743      $ 7,071      $ 4,187   
Adjustments to operating profit                
Share-based compensation   443     415     1,814     1,616  
Unrealized foreign currency exchange loss (benefit)   342     (760 )   241     3,399  
Write-off of leasehold improvement (1)               1,582  
Non-recurring activity (2)   782         308     636  
Adjusted operating profit   $ 5,894      $ 4,398      $ 9,434      $ 11,420   
                 
Net earnings (loss)   1,317     2,245     (1,659 )   (6,113 )
Less: net earnings - noncontrolling interests   58     131     265     308  
Net earnings (loss) attributable to Hill International, Inc.   $ 1,259      $ 2,114      $ (1,924 )   $ (6,421 )
Adjustments to net loss attributable to Hill International, Inc.                
Less: Interest and related financing fees, net   1,226     1,275     4,077     3,870  
Income tax expense   1,784     1,071     4,653     2,776  
Depreciation and amortization expense (1)   567     705     1,856     3,380  
EBITDA   4,836      5,165      8,662      3,605   
Adjustments to EBITDA:                
Share-based compensation   443     415     1,814     1,616  
Unrealized foreign currency exchange loss (benefit)   342     (760 )   241     3,399  
Brazil Office Closure               4,064  
Non-recurring activity (2)   782         308     636  
Adjusted EBITDA   $ 6,403      $ 4,820      $ 11,025      $ 13,320   
                 
Net earnings (loss) attributable to Hill International, Inc.   $ 1,259      $ 2,114      $ (1,924 )   $ (6,421 )
Adjustments to net loss attributable to Hill International, Inc.                
Share-based compensation   443     415     1,814     1,616  
Unrealized foreign currency exchange loss (benefit)   342     (760 )   241     3,399  
Write-off of leasehold improvement (1)               1,582  
Brazil Office Closure               4,064  
Non-recurring activity (2)   782         308     636  
Adjusted net income   $ 2,826      $ 1,769      $ 439      $ 4,876   
                                 

(1) The write-off of leasehold improvements that was incurred during the quarter ended March 31, 2020 as a result of the sublease of the Company's corporate headquarters as part of its cost reduction initiatives was included in depreciation and amortization expense and is reflected in SG&A in the Company's consolidated statements of operations.

(2) Non-recurring activity includes the partial collection of a fully reserved receivable in Libya, net of other non-recurring activity, during the nine months ended September 30, 2021.

(HIL-G)

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