QualTek Services Inc.

Revenue for Q3 2022 was $216.1 million, up 0.3% from $215.5 million in Q3 2021, and management also called it record revenue topping $216 million. Net loss from continuing operations was $6.9 million versus net income of $14.5 million last year. Adjusted EBITDA was $15.7 million, down from $45.3 million a year ago; Telecom adjusted EBITDA was $14.1 million, up 29.5% from $10.9 million, while Renewables and Recovery Logistics adjusted EBITDA was $8.7 million versus $38.2 million last year. Full-year 2022 guidance was for revenue of $750 million to $760 million, up 22% year-over-year, and adjusted EBITDA of $50 million to $55 million. Management said Q4 should be cash flow positive, and noted about a $12 million working-capital build tied to recovery work should collect in Q4.

Scott Hisey emphasized that QualTek is in a long-term growth phase with strong customer demand, especially in Telecom, and said the company has grown through acquisitions, geographic expansion, and new services like recovery logistics and renewable support. He framed 2022 as a challenging year for profitability because of inflation and ramp-related costs, but said the company is negotiating better pricing and payment terms and is focused on converting the $2.4 billion backlog profitably. His tone was constructive and confident, repeatedly stressing that margins should normalize as pricing resets and the business mix improves.

Adam Spittler highlighted the hard numbers: $216.1 million of revenue, a $6.9 million net loss from continuing operations, and $15.7 million of adjusted EBITDA in Q3. He broke out Telecom revenue of $188.3 million with adjusted EBITDA of $14.1 million, and said corporate costs were $7 million, or 3.3% of revenue, slightly better than the 3.4% seen in Q2. He also noted the ABL amendment increased the credit line to $130 million from September 15 through year-end before reverting to $103.5 million, with about $102 million drawn at quarter end, and said the company expects to be strongly cash flow positive in Q4, helped by roughly $12 million of recovery-related collections.

Analysts pressed management on when price increases would flow through, whether margins could return to historical double-digits, and why Q3 profitability missed earlier expectations. Management said many contracts are resetting for 2023, pricing discussions are ongoing, and they expect margins to return to normal levels around Q2 2023, though Q1 is seasonally weak. Questions also focused on the timing and size of hurricane-related recovery revenue; management said it was too early to quantify because the team was still deployed and working down the event. On backlog versus 2023 visibility, management said the $2.4 billion backlog is mostly Telecom, includes price increases, and reflects work scheduled into 2023 and 2024, even as they continue to add labor and equipment.