GlobeNewswire Inc | Nov 9, 2020 04:05PM EST

November 09, 2020

Third Quarter 2020 Overview

-- Consulting Fee Revenue (CFR) of $71.5 million compared to $75.7 million in the prior year period -- Net income of $2.1 million, or $0.04 per diluted share, compared to net income of $2.5 million, or $0.04 per diluted share in the prior year period -- Adjusted EBITDA of $4.8 million, compared to $5.6 million in the prior year period -- New contract awards totaled $154.5 million, resulting in a book-to-burn ratio of 216% -- Cash from operations improved to $7.8 million from cash used in operations of $0.7 million in the prior year period

PHILADELPHIA, Nov. 09, 2020 (GLOBE NEWSWIRE) -- Hill International, Inc. (NYSE:HIL) ("Hill" or the "Company"), the global leader in managing construction risk, announced today its financial results for the third quarter ended September30, 2020 (Q3 2020).

We reported a strong 2020 third quarter with notable improvements in a variety of metrics, while at the same maintaining stability across our operations as we continue to address the effects of the COVID-19 pandemic," said Hill Chief Executive Officer Raouf Ghali. "Our performance this quarter was highlighted by strong bookings and cash flow generation, and a return to net profitability. We generated $154.5 million in new contract awards during the third quarter, representing the best new bookings period this year These new projects cover multiple geographies and end markets, including infrastructure. We believe that this level of new bookings bodes well for our ability to grow our revenue in 2021. Our consulting fee revenue was negatively impacted by the pandemic, which caused delayed project starts, delays in mobilizing billable staff and certain suspensions. We remain confident that our global team of construction management professionals will allow us to effectively navigate these challenges, continue to provide the highest level of client service, and build upon the strong business and operational foundation reflected in our third quarter results."

Mr. Ghali concluded, "As a result of a recent acquisition of an engineering license, Hill is now able to provide resident engineering and inspection services in New York State. We believe that the introduction of these high-value services represents a significant potential growth engine in one of our largest U.S. operating regions and reflects our commitment to client service."

Our backlog at quarter end was $672.9 million, a $25 million improvement from June 30, 2020 and reflective of strong third quarter bookings," said Todd Weintraub, Hill's Chief Financial Officer. "Additionally, we generated $7.8 million of cash from operations and, when compared to June30, 2020, increased our total liquidity, consisting of unrestricted cash and available undrawn credit facilities, by $8.8 million to $36.6 million."

Q3 2020 Financial Results Overview

Hill's consulting fee revenue ("CFR") declined to $71.5 million in Q3 2020 from $75.7 million in the third quarter of 2019 ("Q3 2019"), primarily due to delayed projects starts, slower staff mobilization and certain project suspensions due to the COVID-19 pandemic.

Selling, general, and administrative ("SG&A") expenses were $25.6 million, or 35.8% of CFR, compared to $27.4 million, or 36.2% of CFR, in Q3 2019. This decline was primarily attributable to lower labor, corporate, and business development expenses due to COVID-19 stay at home orders, partially offset by a decline in bad debt recoveries.

Operating profit for Q3 2020 was $4.7 million, a 52.9% increase from operating profit of $3.1 million in Q3 2019, driven primarily by lower SG&A expenses and favorable foreign currency impacts when compared to last year's third quarter. Adjusted operating profit, a non-GAAP measure (see definition and reconciliation below) was $4.4 million in Q3 2020, compared to $4.3 million in Q3 2019.

Net income attributable to Hill in Q3 2020 was $2.1 million, or $0.04 per diluted share, compared to net income attributable to Hill of $2.5 million, or $0.04 per diluted share, in Q3 2019. Adjusted net income, a non-GAAP measure (see definition and reconciliation in the table below), was $1.8 million, compared to $3.6 million in Q3 2019.

Adjusted EBITDA, a non-GAAP measure (see definition and reconciliation below) was $4.8 million in Q3 2020, compared to $5.6 million in Q3 2019.

Financial Condition and Backlog

Net cash provided by operating activities in Q3 2020 improved to $7.8 million from net cash used in operating activities of $0.7 million in Q3 2019. Free cash flow, a non-GAAP measure (see definition below) for Q3 2020 was $7.7 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 2019 was $(2.1) million, which represents net cash used in operating activities, less $1.4 million in property and equipment purchased during the quarter.

Unrestricted cash at September30, 2020 was $33.3 million, a $10.1 million improvement from June30, 2020 and a $17.4 million increase from December 31, 2019. The Company had approximately $3.3 million in available and undrawn credit facilities at September30, 2020, compared to $4.6 million at June30, 2020. The Company's total liquidity was $36.6 million at September30, 2020, up $8.8 million from June30, 2020.

Cash flow generation and the increases in cash and liquidity during the quarter were achieved primarily from the Company's operating activities.

Backlog (which is a non-GAAP measure; see definition below) improved to $672.9 million at September30, 2020 from $647.9 million at June30, 2020, due to strong booking activity, partially offset by COVID-related cancellations and scope reductions. Backlog at September 30 also reflected a joint venture agreement associated with Hill's Hamad International Airport (HIA) project in Doha, Qatar. This agreement allows Hill to elevate its client service and positions the Company to work collaboratively with its new JV partner to secure additional project work, some of which could be significant in size and scope. The agreement decreased Hill's portion of the HIA backlog by $45 million; however, the Company believes that this reduction will be more than offset by the new projects that are expected to be secured by Hill via this new JV relationship.

2020 Financial Guidance

CFR for 2020 is expected to range between $300 - $310 million, consisting of both new awards and extensions of existing contracts. However, the impact of the COVID-19 pandemic on project start dates and mobilization will likely result in Hill reporting 2020 CFR at the lower end of this range.

Annual gross margin is targeted at 38% - 39% for 2020, consistent with previous guidance.

SG&A for 2020 is expected to approximate $107-109 million, down from the Company's prior estimate of $110 million. The revised outlook for SG&A reflects continuing cost cutting measures in light of the lingering impact of COVID-19 on certain aspects of the Company's business. The Company will continue to manage SG&A and its association with CFR relative to the evolving effects of COVID-19.

Adjusted EBITDA for 2020 had been expected to range between $16 million - $20 million; however, based on its year-to-date performance the Company has increased the lower end of this range and now expects Adjusted EBITDA for 2020 will range between $18 million - $20 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 companys 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 Hills financial statements understanding of a companys operating performance, without regard to non-recurring and other non-cash activity.

The Company does not provide a reconciliation of its 2020 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 10, 2020 at 9:00 am ET to discuss the results and business activities. Interested parties may participate in the call by dialing:

-- (877) 407-9753 (Domestic) or -- (201) 493-6739 (International)

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

About Hill International

Hill International, with approximately 2,700 professionals in more than 69 offices worldwide, provides program management, project management, construction management, and other consulting services to clients in a variety of market sectors. Engineering News-Record magazine recently ranked Hill as the eighth-largest construction management firm 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 and any statements regarding our expectations for the timing of our work on projects 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, including but not limited to the effects of any continued spread of the COVID-19 virus or effects of decreased oil and gas prices. 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, 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 SullivanSenior Vice President Hill International, Inc Senior Vice PresidentOne Commerce Square (212) 836-96082005 Market Street, 17th Floor dsullivan@equityny.comPhiladelphia, PA 19103 (215) 309-7707 Lena Catielizabethzipf@hillintl.com Vice President (212) 836-9611 lcati@equityny.com

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

September December 30, 2020 31, 2019Assets (Unaudited) Cash and cash equivalents $ 33,270 $ 15,915 Cash - restricted 4,680 4,666 Accounts receivable, net 104,764 103,892 Current portion of retainage receivable 12,540 16,459 Accounts receivable - affiliates 25,070 18,776 Prepaid expenses and other current assets 12,148 9,340 Income tax receivable 1,822 2,256 Total current assets 194,294 171,304 Property and equipment, net 9,485 11,895 Cash - restricted, net of current portion 4,155 4,401 Operating lease right-of-use assets 14,022 17,451 Financing lease right-of-use assets 271 ? Retainage receivable 6,113 5,695 Acquired intangibles, net 165 232 Goodwill 45,253 48,024 Investments 3,055 1,711 Deferred income tax assets 3,104 3,800 Other assets 2,520 5,038 Total assets $ 282,437 $ 269,551 Liabilities and Stockholders? Equity Current maturities of notes payable and long-term $ 3,261 $ 1,792 debtAccounts payable and accrued expenses 68,452 65,172 Income taxes payable 1,951 3,152 Current portion of deferred revenue 9,180 10,773 Current portion of operating lease liabilities 5,025 5,736 Current portion of financing lease liabilities 70 ? Other current liabilities 7,999 4,876 Total current liabilities 95,938 91,501 Notes payable and long-term debt, net of current 54,362 41,150 maturitiesRetainage payable 823 1,551 Deferred income taxes 418 419 Deferred revenue 1,887 3,041 Non-current operating lease liabilities 14,141 17,030 Non-current financing lease liabilities 274 ? Other liabilities 4,082 4,631 Total liabilities 171,925 159,323 Commitments and contingencies Stockholders? equity: Preferred stock, $0.0001 par value; 1,000 shares ? ? authorized, none issuedCommon stock, $0.0001 par value; 100,000 sharesauthorized, 62,916 shares and 62,708 shares issued 6 6 at September 30, 2020 and December 31, 2019,respectivelyAdditional paid-in capital 214,596 212,759 Accumulated deficit (77,781 ) (71,360 )Accumulated other comprehensive income (loss) 1,673 (3,817 )Less treasury stock of 6,807 and 6,546 at September (29,056 ) (28,231 )30, 2020 and December 31, 2019, respectivelyHill International,Inc. share of equity 109,438 109,357 Noncontrolling interests 1,074 871 Total equity 110,512 110,228 Total liabilities and stockholders? equity $ 282,437 $ 269,551

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

Three Months Ended Nine Months Ended September September 30, 30, 2020 2019 2020 2019Consulting fee $ 71,543 $ 75,747 $ 224,453 $ 231,782 revenueReimbursable 17,109 19,923 51,956 60,828 expensesTotal revenue $ 88,652 $ 95,670 $ 276,409 $ 292,610 Direct expenses 59,998 64,086 190,078 198,288 Gross profit 28,654 31,584 86,331 94,322 Selling, generaland administrative 25,588 27,422 80,543 86,163 expensesForeign currencyexchange (benefit) (694 ) 1,839 3,622 1,824 lossPlus: Share ofprofit of equity 983 780 2,021 1,911 method affiliatesOperating profit $ 4,743 $ 3,103 $ 4,187 $ 8,246 Interest andrelated financing 1,275 1,485 3,870 4,408 fees, netOther (loss) (152 ) 549 (3,654 ) 549 income, netEarnings (loss)before income $ 3,316 $ 2,167 $ (3,337 ) $ 4,387 taxesIncome tax expense 1,071 (340 ) 2,776 2,248 (benefit)Net (loss) $ 2,245 $ 2,507 $ (6,113 ) $ 2,139 earningsLess: net earnings- noncontrolling 131 26 308 176 interestsNet earnings(loss)attributable to $ 2,114 $ 2,481 $ (6,421 ) $ 1,963 HillInternational,Inc. Basic earnings(loss) per commonshare - Hill $ 0.04 $ 0.04 $ (0.11 ) $ 0.03 International,Inc.Basic weightedaverage common 56,702 56,549 56,551 56,178 shares outstanding Diluted earnings(loss) per common $ 0.04 $ 0.04 $ (0.11 ) $ 0.03 share - HillInternational,Inc.Diluted weightedaverage common 56,702 56,549 56,551 56,178 shares outstanding

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

Three Months Ended Nine Months Ended September 30,^(1) September 30, 2020 2019 2020 2019Cash flows from operating activities:Net (loss) income 2,245 2,507 (6,113 ) 2,139 Adjustments to reconcile net(loss) income to net cash provided by (used in):Depreciation and amortization 705 850 3,380 2,435 (Recovery) provision for bad (296 ) (2,389 ) (1,306 ) (2,946 )debtsAmortization of deferred loan 173 178 521 539 feesDeferred tax expense (benefit) (174 ) 1,021 500 659 Share-based compensation 415 1,212 1,616 2,254 Operating lease right-of-use 1,207 1,372 3,163 3,936 assetsLoss on liquidation of ? ? 4,064 ? subsidiaryForeign currency remeasurement 232 1,060 3,622 104 lossesDeferred payroll tax payments 2,711 ? 2,711 ? Changes in operating assets and liabilities:Accounts receivable 6,310 3,645 4,686 13,988 Accounts receivable - affiliate (1,832 ) (1,118 ) (6,294 ) (6,306 )Prepaid expenses and other 1,167 (1,540 ) (2,418 ) (2,136 )current assetsIncome taxes receivable (266 ) (147 ) 39 (748 )Retainage receivable (671 ) (1,077 ) (416 ) (2,559 )Other assets (1,297 ) (161 ) (2,643 ) 920 Accounts payable and accrued (3,160 ) (2,978 ) 1,641 (5,463 )expensesIncome taxes payable 89 (2,608 ) (1,161 ) (1,286 )Deferred revenue 2,065 1,736 (2,451 ) (2,235 )Operating lease liabilities (1,093 ) (1,544 ) (3,259 ) (4,361 )Other current liabilities (236 ) (2,472 ) 3,426 (264 )Retainage payable (1,195 ) 599 (730 ) 624 Other liabilities 721 1,134 688 1,422 Net cash provided by operating 7,820 (720 ) 3,266 716 activitiesCash flows from investing activities:Purchase of property and (129 ) (1,383 ) (1,101 ) (2,958 )equipmentNet cash used in investing (129 ) (1,383 ) (1,101 ) (2,958 )activitiesCash flows from financing activities:Proceeds from term loans 26 ? 1,291 ? Repayment of term loans (232 ) (264 ) (666 ) (795 )Proceeds from revolving loans 10,290 4,759 38,486 10,070 Repayment of revolving loans (8,100 ) (3,984 ) (24,268 ) (4,977 )Proceeds from stock issuedunder employee stock purchase 20 20 221 167 planNet cash provided by financing 2,004 531 15,064 4,465 activitiesEffect of exchange rate changeson cash, cash equivalents and 749 764 (97 ) (170 )restricted cashDeconsolidated cash ? ? 9 ? Net increase in cash, cash 10,444 (808 ) 17,123 2,053 equivalents and restricted cashCash, cash equivalents andrestricted cash ? beginning of 24,982 23,107 periodCash, cash equivalents and $ 42,105 $ 25,160 restricted cash ? end of period

Nine Months Ended September 30,Supplemental disclosures of cash flow information: 2020 2019Interest and related financing fees paid $ 2,722 $ 4,113 Income taxes paid 2,018 2,484 Transfer of proceeds from shares pledged as 825 ? collateral to treasury stockCash paid for amounts included in the measurement of 5,914 6,062 lease liabilitiesRight-of-use assets obtained in exchange for 288 19,340 operating lease liabilities ^(2)Right-of-use assets obtained in exchange for finance 475 ? lease liabilities

(1) Amounts for the three months ended September30, 2020 and 2019 calculated based on the change between the nine months ended September 30, 2020 and 2019 and thethree months ended June30, 2020 and 2019.(2) Amount for the nine months ended September 30, 2019 relates to the Company's January 1, 2019 adoption of Accounting Standards Update ("ASU") 2016-2, Leases (Topic - 842). See Note 14 - Leases to the Company's Consolidated Financial Statements for the period ended September30, 2020.

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 Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Operating profit $ 4,743 $ 3,103 $ 4,187 $ 8,246 Adjustments to operating profitShare-based compensation ^(1) 415 296 1,616 1,338 Unrealized foreign currency (760 ) 858 3,399 359 exchange lossWrite-off of leasehold ? ? 1,582 ? improvement^ (2)Non-recurring activity ^(3) ? ? 636 146 Adjusted operating profit $ 4,398 $ 4,257 $ 11,420 $ 10,089 Net earnings (loss) 2,245 2,507 (6,113 ) 2,139 Less: net earnings - 131 26 308 176 noncontrolling interestsNet earnings (loss)attributable to Hill $ 2,114 $ 2,481 $ (6,421 ) $ 1,963 International, Inc.Adjustments to net (loss)earnings attributable to Hill International, Inc.Interest and related 1,275 1,485 3,870 4,408 financing fees, netIncome tax expense (benefit) 1,071 (340 ) 2,776 2,248 Depreciation and amortization 705 850 3,380 2,435 expense ^(2)EBITDA 5,165 4,476 3,605 11,054 Adjustments to EBITDA: Share-based compensation^ (1) 415 296 1,616 1,338 Unrealized foreign currency (760 ) 858 3,399 359 exchange lossBrazil Office Closure ? ? 4,064 ? Non-recurring activity ^(3) ? ? 636 146 Adjusted EBITDA $ 4,820 $ 5,630 $ 13,320 $ 12,897 Net earnings (loss)attributable to Hill $ 2,114 $ 2,481 $ (6,421 ) $ 1,963 International, Inc.Adjustments to net (loss)earnings attributable to Hill International, Inc.Share-based compensation^ (1) 415 296 1,616 1,338 Unrealized foreign currency (760 ) 858 3,399 359 exchange (benefit) lossWrite-off of leasehold ? ? 1,582 ? improvement ^(2)Brazil Office Closure ? ? 4,064 ? Non-recurring activity ^(3) ? ? 636 146 Adjusted net income $ 1,769 $ 3,635 $ 4,876 $ 3,806

(1) Share-based compensation excludes amounts paid related to the Company's Profit Improvement Plan during Q3 2019 and accrued in previous quarters.

(2) 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.

(3) Non-recurring activity includes costs incurred/(recovered) from the Company's Profit Improvement Plan during Q2 2019 and the settlement of Hill's employer tax liability under its former subsidiary recognized during Q2 2020, which are both reflected in SG&A within the Company's consolidated statements of operations.

(HIL-G)