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Informa PlcLs-,001 (IEA) Q1 2021 Earnings Call Transcript

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IEA earnings call for the period ending March 31, 2021.

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Informa PlcLs-,001 (IEA 0.21%)
Q1 2021 Earnings Call
May 11, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, and welcome to Infrastructure and Energy Alternatives first-quarter and full-year 2021 conference call. [Operator instructions] And with that, I'll turn the call over to Kimberly Esterkin, investor relations for IEA. Kimberly, please go ahead.

Kimberly Esterkin -- Investor Relations

Hello, and thank you for joining us today to discuss IEA's first-quarter 2021 financial results. With us from management are JP Roehm, president and chief executive officer; and Pete Moerbeek, executive vice president and chief financial officer. Before turning the call over to management, I would like to note that today's discussion contains forward-looking statements about IEA's future growth and financial expectations. Any forward-looking statements should be considered in conjunction with the cautionary statements in yesterday's press release and the risk factors included in the company's SEC filings.

Except as required by law, IEA undertakes no obligation to update its forward-looking statements after today's call. Since management will be presenting some non-GAAP financial measurements as references, including adjusted EBITDA, the appropriate GAAP financial reconciliations can be found in yesterday's press release. And with that, I'll now turn the call over to JP Roehm, chief executive officer. Please go ahead, JP.

JP Roehm -- President and Chief Executive Officer

Well, thank you, Kimberly, and good morning to everyone. We appreciate you joining our first-quarter earnings conference call. IEA's performance for the first quarter was in line with our expectations. Consolidated revenues were $276 million and adjusted EBITDA was $3.4 million.

While both revenue and adjusted EBITDA saw declines from last year's first quarter, as we had indicated would be the case on our fourth-quarter call, our underlying business remains strong as demonstrated by our backlog increase of $606 million to a record total of $2.7 billion at the end of the first quarter. Unlike last year, when revenue and profitability were front-loaded, we are expecting a more traditional seasonality period in 2021 with our financial performance ramping through the year. IEA remains on track to meet our full-year guidance numbers. And in fact, we raised the bottom end of our revenue guidance for the year to $1.8 billion.

As the economy gradually reopens across the country, we are getting to go ahead to start jobs previously delayed by the pandemic challenges such as slower permitting. Such project starts have resulted in the onboarding of over 450 employees already in the second quarter, and we expect that ramp in employees to continue well into the third quarter. We are continuing to abide by all health and safety requirements at our project sites, but we are seeing some states relax their protocols as more people, including IEA's crews, become vaccinated. One of the main challenges to our renewable work this year will be ensuring that the scheduled delivery of wind turbines meets our high demand given the surge in renewables work.

The delays in starting projects mean that construction time lines have become less flexible. While we may experience some equipment delays due to COVID-19 and other supply chain issues, we believe that our contractual protections with our clients will minimize our exposure to those delays. Naturally, we're not out of the woods when it comes to COVID-19's impact and we are still navigating some delays from customers whose workforce continues to work remotely. The good news is that bidding activity, particularly in renewables, remain strong, providing significant solar and wind construction and services opportunities.

Turning to the first-quarter results for our business lines. Our Renewables segment was 65% of overall revenue for the quarter and revenue of $180 million, a decrease of 28% from last year's record first quarter. Within the segment, our solar division continued to perform very well, and revenues grew from $0.2 million to approximately $34 million in the quarter. Our newly formed wind services group also made positive contributions to the quarter.

During the first quarter, we won several wind and solar projects, including both wind and solar farms in Texas, the state which ranks No. 1 for operating wind, solar and energy storage capacity in the country. The Texas solar farm project began this past quarter and is anticipated to be completed in December. IEA is self-performing all the work on this project, including the construction of project roads, the erection of the solar trackers and installation of the inverter system.

Similarly, IEA is self-performing all the work on one of our Texas wind farm projects, including the construction of all the project roads, the erection of the wind turbines and installation of the underground electrical collection system. In a separate Texas contract, IEA is constructing a 200-megawatt utility-scale wind farm about 23 miles Northwest of Corpus Christi. Outside of the Texas region, we won an award for a $50 million wind contract in Northwest Iowa and a $40 million wind construction contract in Colorado, both of which will be completed in late 2021. Iowa was the first state in the U.S.

to generate more than 30% of its total electricity from wind power. And in 2020, wind energy officially surpassed coal as Iowa's largest single source of electricity. In Colorado, wind accounts for roughly 25% of all electricity produced or enough energy to produce or power 2 million homes per year. We are also building another new wind farm in Illinois.

IEA is leading the way in expanding renewable energy generation for our nation's leading state producers of clean energy sources. Turning now to our Specialty Civil segment. Specialty Civil accounted for 35% of total revenue in Q1 2021 with revenue of $96 million, down 12% year over year. The primary reason for the decline in segment revenue was delays in projects in the rail market.

The pandemic has caused a decline in the number of active freight railcars. However, we were able to win citing extension work in several states. Our Specialty Civil work that we won during the quarter includes a landfill expansion contract in Illinois, a bridge rehabilitation contract in Northern California, that includes general contracting work along with the treatment of the road surface, and electrical substation work in Iowa and Nebraska. At this point, We do not know the extent of the impact a federal infrastructure bill will have on our overall revenue.

That said, we anticipate that many of our Specialty Civil segment customers are waiting to see how that bill transpires before aggressively bidding new contracts. We would anticipate the bill's passage will be a positive for rail and other surface transportation. Before speaking further about the growth trajectory of our end markets and the potential impact of legislation, I'll turn the call over to Pete Moerbeek, our CFO, to highlight the first quarter's financial results and provide our 2021 guidance. Pete?

Pete Moerbeek -- Executive Vice President and Chief Financial Officer

Thanks, JP, and good morning to everyone listening. Last night, we issued our 2021 first-quarter earnings press release and filed our Form 10-Q. Let me start by noting that from a financial perspective, the first quarter was quiet and in line with our expectations. As we have communicated in the past few calls, we expected that the 2021 first quarter would be challenging, especially when compared to the 2020 first quarter.

JP has talked about the decrease in revenue, so I will speak briefly about the gross margin. The primary driver for the reduced margin was unabsorbed or idle equipment costs. For the quarter, that amount was approximately $10 million in total, $5 million in each of our operating segments. Monthly depreciation and operating lease expenses continue even when equipment is not assigned to projects.

If IEA were only a $270 million a quarter or $1.1 billion annual revenue company, we would have way too much equipment. But we are a more than $1.8 billion revenue construction company, and we will need all of our equipment to achieve that level of revenue in 2021. The unused equipment did not sit idle during the quarter as we were able to accomplish some preventative maintenance. Similarly, we incurred labor inefficiencies during the quarter as some of our key craft and project management employees were not assigned to projects.

They used the time for safety and job-related training as they will be very busy building wind and solar farms for the rest of the year. To reach the midpoint of our guidance, we need to generate revenues of $1.6 billion during the next three quarters. Our expectation is that by the end of the year, we will have returned to our traditional gross profit margin. For the quarter, SG&A expenses decreased by $4.6 million compared to last year's first quarter, primarily from reductions in performance-related compensation.

For the quarter, SG&A expenses were 9% of revenue, compared to 8.2% of revenue in last year's first quarter. As the revenue increases throughout the year, we would expect SG&A expenses to be similar to last year's mid-6% of revenue range. Some other financial highlights. In the first quarter, our cash used in operations totaled $53.8 million, compared to $74.2 million in the same period a year ago.

We generally have negative cash flow from operations in the first quarter of each year resulting from the lower level of first-quarter operations compared to the fourth quarter of the previous year. Interest expense for the quarter totaled $14.4 million, down from $16.1 million in the first quarter of 2020, primarily as a result of lower effective interest rates on our term loan, partially offset by an increased dividend rate on our Series B preferred stock from 12% to 13.5% for the quarter. The increase of the dividend rate resulted from a first lien net leverage ratio above 1.5 at the end of the quarter. We made the Series B dividend payments in cash at the end of the quarter.

Adjusted EBITDA for the quarter totaled $3.4 million or 1.2% of revenues as compared to $16.5 million or 4.6% of revenues in the first quarter of 2020. As of March 31, 2021, our balance sheet showed cash of $95.2 million. Our debt at the end of the quarter included $173.3 million outstanding under our credit facility with no amortization payments due until December 2022, $4.9 million of commercial equipment loans and $51.8 million of financing leases. We also showed $186 million of Series B preferred stock that is mandatorily redeemable in 2025, and therefore, categorized as long-term debt on the balance sheet.

We had $53 million of availability under our revolving credit facility, a decrease of $14.2 million from the prior quarter due to increased letters of credit related to recent project wins. Capital expenditures for the first quarter totaled $6.1 million, of which $2.2 million was financed through leases. We continue to expect that capital expenditures for the year will be in the $35 million to $38 million range or approximately 2% of revenues for 2021. Turning to backlog.

We added $606 million to our backlog in the first quarter ending with a record total of $2.7 billion. Our new contract awards for the quarter were $883 million, also a record. We expect to recognize $1.9 billion of that backlog amount in the next 12 months. On to guidance for full-year 2021.

While the year started solely, we have not experienced significant cancellations and projects nor have we lost projects to competitors. So we are expecting that the next three quarters will be very busy. We are increasing the bottom end of our revenue range from $1.7 billion to $1.8 billion while reiterating the top end of the revenue range at $1.95 billion and our full-year 2021 guidance for adjusted EBITDA of $130 million to $140 million. Finally, let me comment on our capital structure.

During Q1, we made some progress as Oaktree completed a secondary offering for most of their shares in February. And last week, Oaktree converted all of their Series B warrants to common shares. Their holdings are currently slightly less than 2 million shares of common stock. We continue our discussions with all of our stakeholders, including Ares, which owns all of our Series A and Series B preferred equity; our sureties, who view our balance sheet and making decisions about bonds; many of our investors; and our board of directors.

We expect that we will be able to improve our capital structure, but we are not yet ready to commit to a specific direction or timetable at this point. Thank you, and I will now turn the call back over to JP to talk about IEA's market opportunities.

JP Roehm -- President and Chief Executive Officer

Well, thank you, Pete. As IEA's business continues to grow, our focus on environmental, social and governance issues has only increased. And I am particularly proud to announce that IEA will be releasing our first-ever ESG report later this week. As a key player in the renewable energy space, we committed ourselves to building a greener future from the very start.

And we now look forward to sharing our progress in a formalized report. The results of our study will serve as a baseline from which we can continue to improve in years to come. Mike Stoecker, our chief operating officer, leads our ESG initiatives, spearheading the ESG team that tracks internal data, evaluates our efforts and maintains best practices for our company. Mike and his team have done an exceptional job in increasing IEA's transparency and fostering a dialogue around our ESG policies and metrics.

Our board of directors has reviewed and endorsed our efforts as well. Adding to our efforts to improve our governance. Just yesterday, we announced the addition of Theodore Bunting to our board of directors. Theo is a qualified financial expert and a very experienced public company director who comes to IEA from the utility industry.

Most recently, Theo served as group president, Utility Operations at Entergy Corporation, a Fortune 500 power company, a role he held for five years prior to his retirement in 2017. In total, Theo spent 34 years of various leadership positions at Entergy. He will bring strong utility operations experience to IEA. On behalf of our entire board of directors, we welcome Theo and look forward to working together.

As we consider the growth of IEA, we see strong macro trends across each of our end markets. Obviously, the first one is the potential impact of a federal infrastructure bill and proposed tax plans. The administration's American Rescue Plan calls for a number of changes that could benefit the renewables industry. These include a requirement that utilities source 100% of their electricity needs from clean energy.

That by 2035, the U.S. would achieve 100% clean power and that $15 billion would be provided for demonstration projects, including those related to utility-scale clean energy storage. Bloomberg has stated that the U.S. will need to add at least 70 gigawatts of wind and solar per year from 2025 onward to reach the 100% clean energy by 2035 goal.

On the tax side of the equation, in December 2020, legislation added a one-year extension of the 60% PTC for wind and a two-year extension of the ITC for solar at 26% of the project's value. For both wind and solar projects placed into service by 2025 are eligible for these extended credits. The proposed federal tax plan also provides for a 10-year extension of the PTC and ITC and creates incentives for long-distance transmission lines needed to move electricity from clean energy generators. Our Specialty Civil segment could also benefit from funding legislation as the administration's infrastructure bill proposal includes $621 billion for transportation infrastructure.

Of which $115 billion goes to fixing roads and bridges or over 20,000 miles of highways, roads and streets, and another $85 billion of modernization of transit systems, including rail. Beyond the proposed government investment in the renewable space, we see other secular drivers, including state renewable power mandates and the previously disclosed interest of both utilities and large corporations to focus on renewable energy. Because we are an EPC company, we are dependent on owners to complete their funding and permitting prior to the start of construction. As such, we do not expect that we would see a benefit to 2021 revenue from either a tax plan or infrastructure bill but that these pieces of legislation would accelerate our growth opportunities in the next few years.

Beyond renewables, we are also seeing strong growth drivers for our Specialty Civil business and in particular, coal ash removal. As I noted on last quarter's call, there are more than 700 coal ash impoundment and landfills in the United States today. Approximately 15% have been closed or remediated. The coal ash remediation opportunity in this country could therefore exceed $50 billion over the next decade alone.

And at present, there are very few companies of the scale and the experience, one of whom is IEA that can serve this market. We are hopeful that we will be able to announce progress in our coal ash efforts in the near future. In the rail space, aging commuter infrastructure, combined with the anticipated growth in freight volume of 36% over the next decade is actively driving the opportunity for additional rail improvement projects. In November of last year, we announced a joint venture contract awarded by the Northern Indiana Commuter Transport District to design and build a commuter railroad project.

In the past two years, IEA has gained significant experience in commuter rail, which is one area of emphasis in the administration's infrastructure proposal. While the administration's infrastructure proposal does not emphasize nonrail surface transportation, the need to improve the country's roads and bridges certainly remains. As the economies across the country continue to open up, we would expect the historical bipartisan support to create a transportation system that is safe, resilient and that has the capacity to handle the nation's growing population. IEA entered 2021 knowing that we had a tough comparison to the first quarter of the prior year.

But as Pete noted, we anticipate that 2021 will be a strong year for IEA. Not only has the traditional seasonality of our business return, but the overall macro conditions have improved, and so too has the demand for our services as demonstrated by our record backlog. As I hope you have gathered from my comments, almost any version of an infrastructure bill would appear to be transformational for the renewables industry. While we need to temper expectations of the time frame for turning legislation into actual projects, the passage of a bill would generate momentum for our industry and for IEA.

I want to conclude by noting that we were in the right businesses at the right time. To continue to advance IEA's business, we will focus on five key growth areas: one, and most importantly, developing our people; number two, engaging with our community; three, continually improving our safety; four, increasing our efficiency; and five, diversifying our businesses to take advantage of meaningful opportunities. I certainly believe that IEA is up to the task and look forward to continuing to update all of you and share our progress in the future. Thank you again for joining us this morning for our first-quarter call.

We have our Virtual Annual Shareholder Meeting in two days and hope that you could join us. Operator, would you please open the call to questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] Thank you. Our first question is coming from the line of Noelle Dilts with Stifel. Please proceed with your question.

Noelle Dilts -- Stifel Financial Corp. -- Analyst

Hi, guys. Good morning, and thanks for taking my question. I was hoping you could just maybe expand a little bit on how we should all be thinking about the trajectory of wind versus solar? I know you said slower bidding activity is strong, but I think on the last call, there was some discussion about solar potentially doubling. Can you give us any sense of what the backlog is looking like maybe so we can think about kind of how to think about the directional changes for those businesses?

JP Roehm -- President and Chief Executive Officer

Yeah. Great question, Noelle. Well, certainly, we're seeing the biggest growth opportunity in our Renewables segment in the solar industry. It certainly had a growth trajectory that's exceeding that of wind.

Now that being said, we're all-time record kind of backlog for wind as well and an all-time kind of record build-out from an industry standpoint. But as we kind of look at the road in front of us, we think solar has an opportunity to continue to grow. And we have an opportunity to make that much more a part of the revenue mix in our Renewables segment.

Noelle Dilts -- Stifel Financial Corp. -- Analyst

OK. Great. And then just in terms of this slowdown and some of the transit and Specialty Civil work ahead of an anticipated infrastructure bill and we've certainly witnessed that in the past. But could you, again, maybe talk us through how you're thinking about I mean, really, when we think about the funding going into these markets, sometimes it's a 12-, 18-months delay post the passage of a build.

So are we looking at kind of a two-year slowdown in those businesses ahead of the bill or maybe kind of this year and then things start to pick up next year? Just kind of curious how you're thinking about that timing.

JP Roehm -- President and Chief Executive Officer

Well, good question. Ultimately, really the only material slowdown we're seeing so far is mostly in our rail portion of our Specialty Civil segment. And we directly attribute that to our freight rail business and the car counts being lower during the COVID pandemic. We believe that's a couple of quarter type of situation.

In fact, we think that is starting to recover right now with the recovery and the opening up of the nation. As far as kind of the other areas of Specialty Civil both either our environmental or transportation offerings, we're -- believe it or not, we're seeing the opportunities kind of maintaining par with -- prior to the pandemic. I know we've talked in past calls -- quarterly calls about our concerns about the revenue shortfall, particularly in the transportation funding side. But right now, at least in the end markets that IEA participates, the bidding activity seems to be at pre-pandemic levels.

So we're hoping for a post-infrastructure build just to see further upside in those areas.

Noelle Dilts -- Stifel Financial Corp. -- Analyst

OK. Great. That's really helpful. Thank you.

Operator

Our next question is coming from the line of Adam Thalhimer with Thompson Davis. Please proceed with your question.

Adam Thalhimer -- Thompson Davis -- Analyst

Hey, good morning, guys. Congrats on the backlog growth. I was hoping you guys can help a little bit on the cadence of EBITDA as we go through the year, curious if we see more year-over-year declines in Q2 and then followed by strength in the second half.

Pete Moerbeek -- Executive Vice President and Chief Financial Officer

Well, Adam, we're not going to give guidance at quite that level, definitely not quarterly guidance. I think you are going to see a very strong second half, maybe even stronger because we started so slowly. We may very well see 60% of our revenue and somewhat corresponding EBITDA in the second half, but those stronger than normal in the back end.

Adam Thalhimer -- Thompson Davis -- Analyst

OK. That makes sense. And then you briefly touched on the equipment delays, I think, that's mostly on the wind side. How is that tracking versus your expectations earlier this year?

JP Roehm -- President and Chief Executive Officer

Well, so far, we really haven't seen many delays materialize. But we're sitting here, it's May and those deliveries will kind of follow our revenue trends. So it is early to tell about what deliveries will look like in Q2, Q3 and even Q4. But we haven't been advised by any of our customers any of major delays.

But we've -- we're certainly cognizant that we're at an all-time buildout for the industry. COVID-19 is still in areas of the world and the supply chain still existent. So we remain vigilant and cautious, and we'll handle those as they come.

Adam Thalhimer -- Thompson Davis -- Analyst

OK. And then just one more. I'm curious how you're thinking about backlog and backlog growth from here. I mean have you told your sales guys almost -- to pull back a little bit? I'm just curious, the $2.7 billion backlog, I mean does that strike is kind of sold out for the near term? Or do you continue to grow backlog?

JP Roehm -- President and Chief Executive Officer

Come on, Adam, I never slow down.

Adam Thalhimer -- Thompson Davis -- Analyst

Slow down, guys. We can't do all this work.

JP Roehm -- President and Chief Executive Officer

Well, good question. I think you ought to -- I think we ought to think about that in context of our segments. We have pretty much brought in the backlog what we will build in 2021. We are in a sales cycle now for 2022 and beyond in our Renewables segment, quite frankly.

And our Specialty Civil segment is more of a book-to-burn type of business. So we still have the opportunity in that side of the business to bring projects into backlog and execute them and run them off before the end of the year. But there's still a possibility of picking up some renewable work that may start at the end of the year and really trail into 2022. But the real big renewable opportunity is going to be 2022 and beyond.

And -- but as I said, we're still concentrating on bringing 2021 Specialty Civil work in the door.

Adam Thalhimer -- Thompson Davis -- Analyst

Got it. OK. Thanks, guys.

Operator

Our next question is coming from the line of Zane Karimi with D.A. Davidson. Please proceed with your question.

Zane Karimi -- D.A. Davidson -- Analyst

Hey, thank you for the time and question, guys. So first off, people have talked about backlog. Actually, one more time on it. So backlog numbers in the quarter were significantly ahead of our expectations on prior-year numbers.

I was just wondering if you could provide some more background on it, in particular, backlog composition. And if you have seen any changes in the margins of those backlogs or the average project length or a different type of growing work in that backlog?

JP Roehm -- President and Chief Executive Officer

Probably our -- I think our biggest growth is -- I talked about earlier here in the questions about our biggest opportunities. Well, we're seeing the biggest growth in solar. Our year-over-year growth in backlog, I think the biggest area in growth is certainly solar. We're seeing margins remain consistent.

But I would certainly attribute a good portion of that growth in backlog to our solar efforts at growth.

Zane Karimi -- D.A. Davidson -- Analyst

OK. And then I think in your prepared remarks, you guys mentioned that there needs to be about 15 gigawatts of nuclear energy coming online a year to meet the 2035 goals around clean energy. And on a more normalized basis, how much of that work do you think you could get done on the current platform? And how large of a market opportunity could that be? I understood that the years out? I'm just trying to get my head wrapped around that opportunity.

JP Roehm -- President and Chief Executive Officer

So to meet the administration's goals, it's about 70 gigawatts a year of clean energy that has to be constructed to meet those goals. And just to level set, that's about two to three times the amount of wind and solar that's being -- that was built between 2019 and 2021. So tremendous opportunity for companies like ourselves. And back to my comments in the earnings call, any kind of -- the current administration's plan, it's certainly transformational as is.

But even a percentage of that plan, half of that plan, a quarter to that plan is still going to be tremendous growth from what the market has been the last three years. So we're extremely excited ourselves, and I'm sure companies like ourselves are starting to applaud about strategies of how you get the resources and how you grow to meet that demand. And we'll certainly hopefully be talking to that about in many calls here in the future.

Zane Karimi -- D.A. Davidson -- Analyst

OK. Thank you for the time and question.

Operator

Thank you. Our next question is from the line of Shar Pourreza with Guggenheim Partners. Please proceed with your question.

Constantine Lednev -- Guggenheim Partners -- Analyst

Hi. Good morning. This is actually Constantine Lednev in for Shar. Thanks for taking our questions.

And congratulations on a solid quarter, especially with the backlog adds. And just curious to kind of get some of your thoughts on the increase of workflow in backlog and how will that impact kind of utilization and the margin profile going forward? And understanding that there was kind of some margin compression unusual and with the seasonality that you mentioned. But just kind of how do you see that trending on an annual basis? And is there room to kind of improve not even in '21, but going forward kind of as you grow into a bigger backlog in terms of utilization?

Pete Moerbeek -- Executive Vice President and Chief Financial Officer

The first part of your answer is we expect by the end of this year, that we will be back to much more normal traditional margins and a margin profile. So it's probably going to be a little bit better for the last three quarters since we were somewhat challenged in the first quarter. I think that the utilization that we're expecting and that we're staffed for and that -- for which we have equipment is really intended to be able to get to the top end of our revenue range. As we look going forward, some of the challenges we have is that there are kind of generic markers where most of our customers expect that we're going to represent somewhere around 30% of their capital spend on a project.

And so we don't quite have the ability to change margins dramatically. Where we noticed the benefit of the market right now is in the contractual terms. So we end up with much better terms than we do when we're in a position -- or when they're in a position, whether the way too many EPC contractors and not enough work. So right now, as we look forward, we expect to see margins on an annual basis to be consistent with where we've been or perhaps slight improvements, and we expect to see better contractual terms for the next -- certainly in the next few quarters.

Constantine Lednev -- Guggenheim Partners -- Analyst

And maybe a quick kind of operational follow-up to that. Just kind of as you expand the product offerings and backlog kind of maybe in terms of an order of magnitude, do you need kind of incremental capex or staffing to kind of to grow the backlog, let's call it, if you double your backlog in '22, kind of what sort of incremental costs or capex would you anticipate? Is it still kind of within that 2% of revenue that was allocated that you announced previously? Or how should we think about that?

Pete Moerbeek -- Executive Vice President and Chief Financial Officer

Yeah. It somewhat depends where the increase is. For example, if we ended up with significant CCR or coal ash contract, we may have to spend -- that tends to be very hard on equipment. So we may need to spend slightly more than 2%.

Again, if we are in the renewables, you're probably going to see us stay a lot closer to the 2%. So it really is a function of where the increase comes. And so I think as you look forward, that's going to be the determinant. Obviously, if you're talking about doubling our challenge, we'll probably be much more on finding craftsman and craft labor than it is on the equipment.

I think we're kind of seeing that all over, everybody is saying pretty much where we are today, yes, we can meet our commitments. If you were to try to change us dramatically, we double our revenue, those are some of the challenges we're going to have to deal with.

Constantine Lednev -- Guggenheim Partners -- Analyst

OK. And then the last follow-up that I have, if I may, it's just on kind of the financial strategy, and I appreciate that there's still some analysis that kind of goes into your decision-making. But just directionally, as you kind of get more visibility with the backlog and into future revenues, how does that change your trajectory and your thoughts on kind of the capital structure?

Pete Moerbeek -- Executive Vice President and Chief Financial Officer

Yeah. I'm not sure that those are the drivers of the capital structure. We have, obviously, as I mentioned in my prepared remarks, we are focused on improving the structure. We recognize that in today's market, there are some potential opportunities that we would certainly like to look at and understand and consider.

I think the real driver for us is making it a cleaner, more understandable capital structure and making sure we have something that is a sureties desire, tangible net worth. So I think we are headed in that direction. We just don't know yet the precise path or how quickly we get there. But I don't think the driver is necessarily the backlog, the driver is really more our ability to produce profitably and generate cash flow.

Constantine Lednev -- Guggenheim Partners -- Analyst

Perfect. That's a very wholesome. Thank you. Thank you so much.

JP Roehm -- President and Chief Executive Officer

Thank you.

Operator

Thank you. We have reached the end of a question-and-answer session. I'll now turn the call back over to JP Roehm, CEO, for closing remarks.

JP Roehm -- President and Chief Executive Officer

Well, thank you, operator. And we certainly appreciate each and every one of you showing your interest in joining us today and learning about our Q1 2021 results. Stay safe, stay healthy and we'll see everybody in early August as we look forward to announcing our Q2 results. We'll talk to you all then.

Thank you.

Operator

[Operator signoff]

Duration: 40 minutes

Call participants:

Kimberly Esterkin -- Investor Relations

JP Roehm -- President and Chief Executive Officer

Pete Moerbeek -- Executive Vice President and Chief Financial Officer

Noelle Dilts -- Stifel Financial Corp. -- Analyst

Adam Thalhimer -- Thompson Davis -- Analyst

Zane Karimi -- D.A. Davidson -- Analyst

Constantine Lednev -- Guggenheim Partners -- Analyst

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