Outlook - The Standard Mobile Inspection
uh
well good afternoon everybody i
appreciate uh all of you getting on the
call
this morning or possibly this afternoon
depending upon where you're
where you're calling in from i'm in
balmy chicago today
i i'm sitting inside but i should be
doing what brian's doing which is
sitting outside
we talked about having this as a casual
conversation so it's too early to crack
open a beer.
You can also check us out on Linkedin:
For Heavy Industry's Latest Outlook 2021 - 2022 Conference Talk:
brian but uh maybe you're
still drinking a cup of coffee or
something like that
i have finished coffee for the day
because i'm on the east coast i'm in
south georgia where it's sunny in 70
today so uh
so it's a it's a lovely day here it
looks it looks very nice
so but again we appreciate everybody
getting on the on the call this morning
uh i think you're going to find the the
the topics this morning that we talk
about
are going to be somewhat informal but i
think you're going to find them really
interesting
let's start with uh some introductions
um
and and then we'll kick things off my
name is paul moran
i'm the chief commercial officer for
turner mining group
um we are a company that performs
contract mining services uh
specifically and solely for the mining
industry
so that's where we uh that's where we
live
that's where we do our work that's what
we love that's our passion
and so when it comes to anything related
to mining that's what we like to talk
about
i our guest today is someone that i met
via a zoom
call which really is our life right now
i think for most of us or many of us
um just a few months ago but uh have
struck up a friendship
and share professional
uh information about about industry and
and i think you're going to find
uh brian's insights um
really useful not just not just
interesting but useful
and and we'll dig into that a little bit
more as
we get going but with that i am going to
turn it over to you brian
um and if you wouldn't mind providing an
introduction of yourself
and and your company and what you guys
do i think
uh i think our participants would would
find it really interesting
help get things started yeah sure uh
happy to do that paul and um brian moore
is my name
for those of you who may not have read
that on the invite
our company is um fmi corporation
headquartered in raleigh north carolina
and for 60 plus years our company has
has had a singular focus
on serving the built environment the
construction industry
broadly speaking with two main things
that we do
one is investment banking mergers and
acquisitions
helping companies buy and sell transfer
stock
make capital uh capital placements uh
things like that and then the other side
of the business where i work is
is management consulting where we again
do we do three basic
things for mostly contractors
and that's oriented around you know
strategy and strategy development
for our clients we work with them on
leadership and organizational
development
an organizational structure and then
we've got a practice that's focused on
on performance which is you think of
lean manufacturing but it's lean
construction processes
technology compensation consulting
things things like that i've been with
the company for
for right at 20 years now and most of
most of my career
paul has been focused on on the heavy
civil highway construction segment and
construction materials producers
as i got started in the construction
materials side of this working with
aggregates producers um objects asphalt
producers ready mixed producers doing
doing market due diligence supporting
mergers and acquisitions for the first
few years doing that
and then transitioned over to working
working work mostly with heavy civil
highway contractors today
although a lot of them are also ag
against producers also
uh and most of the work i do is solely
focused on on strategy work which is
helping our clients really understand
what are the market dynamics that are
shaping the market we're in what are the
future trends how do we make
how do we position ourselves long-term
and really advising clients on
how do they need to organize their
business and think long term so we're
picking our heads up out of today's
business operation
and looking over the horizon sort of the
way the way we think of that and
and to sort of summarize what we do you
know we we always talk about our
our purpose and our organization is to
be the most influential advisor in in
our industry and to catalyze
exceptional performance we work with
great companies to do better things
uh in essence the way we like to think
about that
got it well i think brian first of all
thanks for the for the introduction and
i think one
you touched on a couple things that that
really interested me and
actually is is is really the reason for
for
turner you know having an interest in in
connecting with you to do this webinar
and that is
when i listened to your presentation i
think it was back in august
and it was called i think it was called
paving the road to success
in these uncertain times especially for
the infrastructure market
and i think what what i found so helpful
personally and i and i hope our
you know participants today find find
you know this conversation uh useful is
that not only did you
share your insights and your you know
what you and your team have done
in terms of research and data and and
trying to pick out trends
but then you share ideas on you know how
to respond to those trends and what to
do and and so you go that extra step
and i think i found that very
interesting and so when i think about
the purpose of today's call and why
we're here is
i think if you can if you can not only
share your insights but then also
give us you know what does that mean to
those of us who are in the industry
and and how should we think about
responding
um in uncertain times how do we bring
certainty to uncertain times
and and so t you know to the extent that
you you have thoughts and ideas on that
please share those with the group you
know the our audience is is made up of a
lot of the
people that are uh are on that producer
side
you know cement aggregates mining you
know raw materials and
and we're the ones that feed those
industries that that you're talking
about
and so it helps us to understand that so
anyways with that i
again i appreciate the intro uh one last
logistical point here for those that are
listening we would love
to get your questions this is going to
be initially just a conversation between
brian and myself and and just kind of
picking
brian's brain a little bit but but
really we'd love to get questions from
from those of you who are listening in
today and watching
um there should be i believe in the
bottom right hand corner of your screens
an opportunity to click
on a q a you can submit questions during
you know our discussions and then you
know we tend to we
our goal is to you know wrap up within
20 or 30 minutes of
some discussion and then leave it open
to questions and
we probably will be about 50 minutes on
the call
a little bit longer if necessary but
um so with that said brian the uh
the the 64 000 question
is we we we thought maybe we'd know
who our president would be at this point
uh that was the
that was the intention of having the
call right after the election
and you advised me this was i think 90
days ago that we probably won't know
uh the day after the election and sure
enough you were right
so i guess let me start by just asking
you you know i've i've read
industry articles that have said hey
there's advantages and disadvantages to
both
candidates in other words if trump stays
in office there's advantages to the
industry to heavy civil
um and there's disadvantages and i've
read the same thing about
biden uh that you know if biden gets
elected there are some advantages and
disadvantages
can you you know to the extent that your
team has done you know research on
on on predicting what it will mean for
industry
especially heavy civil can you share
some initial thoughts with us
sure dan yeah it's um it's issuing paul
because
probably back in the spring is when
people really started to ask that that
specific question what's the election
going to mean
for for the construction industry
broadly and and the particular interest
on on the
heavy civil which has a significant
component that's publicly funded
what's that going to mean for the heavy
civil uh
arena and we asked our research team to
go back and look historically
and just help us understand the impact
of
presidential elections on uh on total
spending
in those segments and what does that
mean particularly when there's
when there's a change for of parties in
the white house
and oddly enough with what they went
back and found is it bears almost no
impact
it has very little correlation over time
and
it really makes sense when you go back
and look historically at the growth of
of the heavy civil segments and and to
sort of define what we mean by the heavy
civil segments
it's the segments you would think about
it it's it's highways and streets and
bridges
it doesn't include in the categorization
of the numbers
site contracting site development work
because that's categorized with
either residential or commercial or
other segments but
but we also include dams ports airports
railroads all those sorts of things and
and then there's a there's a significant
public spending component and the
conventional wisdom would be
that uh the the democrat party and
democrat democrat um
white house uh would lead more
investment
in infrastructure more and more spending
on public projects
and things of that nature but what we
find is the over the overriding fact of
that
really is the long-term federal programs
right the the six year federal programs
that are that are focused on on highways
and bridges and federal infrastructure
really sort of sort of supersede what
what a specific particular white house
um would want to do
the um the big the big sort of tell on
that
was when when trump came into office if
you'll remember one of his
one of his big um initiatives was to
spend a trillion dollars on
infrastructure you guys remember that i
mean there's a trillion dollars on the
infrastructure do you know how much of
that actually got done none of it
i never got that it never it never
happened because
because it requires the white house in
concert with
with the congress and and with the
senate and
and essentially i had this conversation
this morning with with the guy who heads
our research
department up and we were sort of
chuckling about the fact that we stood
on those
who's going to you know exactly what the
makeup and washing is going to be and he
said but you know
he's a brand it really doesn't matter um
because if you look historically you
know those
those segments which is one reason
they're so attractive the heavy civil
segments are so attractive to a lot of
people because they don't move a lot
they never have great big ups they never
have great big downs
um and so they usually fluctuate within
a small band
over time and operates more like a bond
market
as opposed to the other construction
segments which have are much
more cyclical in nature so sort of
circling back to what we think this is
going to mean
is we we think that that the one thing
that that really matters now
or this will matter very soon once we
get some clarity is we have clarity
right and so so you know state dots and
people who are making long-term
investment
uh really count on clarity of the future
to be able to have those long
programs to to know what their funding
is going to be
so they can actually actually develop
their longer-term programs
uh the other side of that is you know
that now in the politics of a
of an election year are out of the way
or soon
getting out of the way the expectation
that some of the stimulus spending
coming out of washington
focused on the infrastructure market can
now get done may not get done in
in huge numbers i mean the things that
people were hoping for back in
in summer and spring would you know that
we would go spend
hundreds of billions of dollars on
federal infrastructure
programs to boost the economy that's not
going to happen
we don't think it's going to happen but
but some smaller stuff can can get done
in the meantime
and that's what we're basing our
forecast around and that was the assumed
expectations going into this and now it
looks like given
the tightness of of the of the
electorate
no matter which party wins you know each
of those branches the tightness of it
means that much more moderation is
likely in store
once we can get the politics out of the
way
so it's interesting really so what i
hear you saying if i understood it
correctly is
is that it's it's really not from your
analysis it's not so much
who wins the white house as opposed to
just getting clarity and certainty that
okay that
this will not decision but that outcome
has now happened
and it's behind us and everybody can
think about moving forward and start
planning accordingly
regardless of congress
yeah exactly and that now congress can
get because you think about you
in this year and we talked about this
before the fast act which is the federal
highway program which is about a 55
billion
dollar a year program now which expired
at the end of october just
it's a six year program it expired the
end of end of october congress is
supposed to have
a renewal package in place before that
couldn't get it done because of the
politics of an election year
that's one of the big reasons so they
had to put forth a one-year extension on
that which means that state dots
who develop their two and three-year
loan programs based on what they're
expecting from
from uh from the federal program can
only plan a year out so those long-term
projects have to sort of be pushed aside
uh or delayed a little bit and so now
that the politics are aside congress can
go back to work now
getting a long-term replacement for that
federal program that gives
that gives state and and federal
agencies more
clarity on what their long-term funding
is going to be and then that will be an
update because everyone most everyone on
both sides of this we're looking to have
an
increase in the fast act right in
washington depending on
a lot of specifics around that but there
was almost no circumstance in which it
stayed the same or went down
and so now that the politics are behind
we can we can look towards getting that
renewal sometime next year and it will
be
an uptick in in highway um spending with
this next package
uh that comes out presumably next year
now that now that
now that there's the dust is settling in
in washington
so you when you talk about the fast act
so so i've read that
both trump and i do remember him talking
about the two trillion dollar
you know infrastructure spending uh
initiative and
i've read that biden has a two million
or sorry two trillion dollar
infrastructure spending initiative that
he plans to
implement if he is finally elected
uh i guess my question would be
is that is there a difference bet is the
fast act just a portion
of that or is that separate from this
sort of
over reaching two trillion dollar
spending package that we're both talking
about
it is separate so so the the fast act
really is just for the name that they
give to the federal highway
transportation package it's a six year
package
it's funded uh primarily by motor fuels
taxes
um that the federal highway federal
highway administration
uh collects um and and
theoretically it's funded by that but
there's usually some other funding that
has to go into that as well
and so that's the that's the sort of
base based number of spending and it's
about
it's about 50 some odd billion per year
over a five-year plan was the fast act
the expectation is that the next one
will be
above up to about 60 billion or so over
a five-year period
which would be a pretty good a pretty
good boost in the highway program
the other sort of large stimulus
investment that you hear
you know trump and and biden talking
about a trillion or so dollars of
of infrastructure investment when you
peel away the layers of all that
how much of that is actually
construction that we would care about
not as not a
not enough of it you see ingest
investment in 5g infrastructure
yeah you see investment in in iep
infrastructure
and so it doesn't translate into in the
dollars that we
really um we care about it but it's not
it's not the stuff that impacts our
industry as
as much as the headline makes it appear
yeah i know i know in biden's package he
talks a lot about
some of the green initiatives which yeah
i don't
really think would would impact us as
favorably as we
we would like uh agreed but
anyways so again going back to
this idea then that that regardless of
who
you know gains office whether the
republicans you know and trump keeps the
presidency or it goes to biden
you know the the the impact it's it's
more about
just let's get a decision and let's move
on
so but when you look back at 2020 and
and this sort of ties into another topic
that obviously is in
all of our minds is covid19
and the impact that it's had on our on
our industry
uh and and really just our economy in
general and how that
impacts all the different segments of
industry but my my question and
just sort of curiosity is what have you
seen
when you look back at 2020. i want to
talk about 2021
in in the future here in a little bit
but when you look at
2020 what impact has has
coveted had either directly or
indirectly on the industry because i
know
as a as a player in the industry
as a services provider quite frankly
even though we
are deemed an essential industry
we felt an impact i mean we we have felt
you know in the in the in the late uh
second quarter and third quarter
we felt like projects were being delayed
spending that we thought was going to
happen
capital spending that we thought was
going to happen either got
canceled or delayed or what what's your
research showing for 2020 in the impact
of covid
in our industry yeah it's interesting
yeah that there were a lot of immediate
impacts you know if we if we think about
the line of demarcation being march 15th
i mean that's kind of
the the it's not a very specific date or
it's a specific date around
some unspecific um times of when
the the the us basically went on
lockdown shortly after that
and and the very first things were just
sort of a complete shutdown of almost
all economic activity it seems like um
and
with construction coming back fairly
quickly in most places because it was
deemed essential
and in fact in a lot of places a lot of
construction was expedited because you
know there wasn't a whole lot of other
stuff happening most of us was taking
home some loud construction to pick up
more quickly
and for a lot of our class i thought hey
that's great we're we're able to
take what was going to be a 12-month
highway project and turn it into three
months because there's no one
on the street no one on the road so we
can get things that much more quickly
um the problem is after a few months
time we begin you know plus there's also
productivity impacts because of all the
code
requirements and that was generally um
minor
in essence um but we started to see the
economic
impacts creep in a few months later on
when we started to really be able to
quantify
just what's being just what level of gdp
reduction we were starting to see it
would fall off a cliff
from from a gd stand gdp standpoint and
while that that makes headlines in the
wall street journal and people a lot of
people look at that sort of from an
aseptic standpoint who cares about gdp
that hasn't impacted my business
except the fact that gdp is an
accumulation of all business activities
so there
every business has a small share of that
in assets we also
also saw significant drop in tax
uh tax receipts right motor fuels taxes
uh corporate taxes local restaurant
taxes hotel motel taxes
your airline fees your cruise ships that
stationary
still set say stationary for months on
end
and so the need for infrastructure and
for cruise ship terminals
for airport infrastructure the funding
around that infrastructure
the funding around highways just
basically was
was not entirely cut off but
dramatically cut off
for a period of months on the end and so
the declines into these agencies and
these private
entities that that that fund future
capital expansion
really made them go to go go back to the
um um
to their financial advisor and say what
do we do right i mean
because that doesn't just translate into
let's just stop spending for a few
months that impacts us for years
in our capital planning and thinking and
you can look at some
very large multi-billion dollar
projects that were public private
ventures particularly around
airports funded by concessions going
forward
you think jfk for instance it was with a
20-plus billion dollar project but when
you when you talk about
an almost stoppage of concessions a
stoppage of airport fees and a
significant decline in these fees going
forward
that project no longer makes financial
sense that's a significant
impact on spending from a commercial
market
in the commercial construction markets
most
most projects that were in process or
close to in process
continued on right i mean it takes dire
circumstances to stop a project
that's part ways through but new
projects
new projects starting you know there was
you know through the summer and late
summer
and into the fall we saw a lot of
projects being delayed postponed pushed
off
sort of what you were talking about
which which was really sort of
let's buy a little time until we can get
a little more clarity about the
long-term financial implications from
coveting the economy are going to be
our conventional wisdom has told us
looking at past recessions
that project delays a large part
a large part of a large portion of the
project delays
ultimately turn into project
cancellations the delays are really sort
of buying time
until we can rework the numbers and see
if they work and some share of them will
come back or go forward in a smaller
amount
but we didn't just delay it just to
delay it it's delayed because there's a
financial
issue behind that and so while we still
don't
fully know what the impact is going to
be we've got our forecast we've got our
metrics we know our numbers
um around that we still don't fully know
what the impact may be from
future declines um if there's something
else in the future that we can't quite
quite bake into it yet
so we saw a complete sort of sort of
fall off a cliff climbing back
out of out of it but then we we haven't
gotten back up to sort of
full go yet in our industry and there's
another shoe i think to fall
because the construction industry
follows the general economy in the
cycles by about 12 to 18 months
historically it always does and so for a
lot of our clients who this summer and
fall we're saying
what are you talking about we still got
backlog we're good but yeah because you
haven't felt the impact of it yet
your clients the the market the
commercial you know the
gdp falls today we will see the impacts
over 12 to 18 months down the road
um and our forecast bears that out and
that's what we're beginning to see when
you start to look at a lot of the
metrics about project cancellations
delays
backlogs that are slipping away um from
clients that's
that's what we're beginning to see the
beginnings of that
so that's it's interesting i i actually
had a meeting
a month or so ago with a senior
executive
one of the big global aggregate and
cement producers
and you you had mentioned airports in
particular and they
uh they had a client that a couple
clients that were on one of the big
airport you know infrastructure rebuild
projects that actually
at chicago o'hare airport and
they saw a definite slowdown in the
activity
it the project is still it's one of
those you know multi-billion dollar
multi-year
you know projects they're adding runways
but
but they felt the impact uh because that
project was slowed down i
i think they're still going forward but
i guess
so along those lines the other thing
that that is
a little bit disconcerting i think for
all of us
is this resurgence of covid
that we're sort of seeing now you know
towards the end of third quarter and
into fourth quarter
um and you know i i you know do you guys
have you guys looked carefully at that
to see
is it possible we're going to see
another you know sort of shut down
if these numbers don't start to to come
down or flatten out
um or are you feeling confident that
look we
we know um that
it's that the numbers are creeping back
up again but we think collectively as an
economy we know that that would
just do significant damage and so we're
not going to shut down
and we're going to figure out how to
deal with this and move forward what
what's your guys sense on that
yeah the the scenario that we're sort of
incorporating into into our base
forecast and and we've developed three
forecasts just just to be clear we think
the
the base forecast is this is what we
think is going to happen there's a worst
case scenario which
which we place there's not a whole lot
of likelihood that's going to occur but
we put it out there just
in case and then there's there's an
upside forecast which i think is
it's more likely than than the worst
case but but still not it's not
not extremely likely but our base case
the assumptions that we're focusing on
does have some second waves of of covet
impact from that
but the the positive side of that if you
want to call it the positive side of it
is
there seems to be such a lack of
political will to really have a shutdown
like what we saw
from an economic standpoint government
mandated shutdowns we think are less
likely to be government
government restrictions and curtailment
but not the same kind of shutdowns
i just i just personally don't don't see
that happening
unless we have a dramatic spike in cases
the positive news is you know there
continue to be um
and and when we built this into our
forecast and our
our our best case our best assumptions
around these are that we're
you will see um improvements in
therapeutics you will see
um you will you will see vaccines coming
online
later this year early next year and and
the thinking is is that
it doesn't have to reach critical mass
deployment of vaccines so much as it has
to affect the psyche
that is out there right we think that
has a that has an
upside impact just having it approved um
and being available even even if you
can't go get one you know that it's out
there
it's kind of a curious way to think
about that um
so yes we we expected fully that there
would be
minor growth in cases um
over the over the through the winter
improvement in therapeutics
availability of vaccines the limited
will to have government
shut downs but but there would be
curtailment in in economic activity
through the winter
so you you would mention this a little
bit earlier and
i want to go back to it because that you
you talked about um
you know the impact of of tax reductions
tax you know gas taxes you know fuel
surcharges
just the overall economy and and
you know being weak in 2020 because of
covid
and so therefore revenue state and local
government revenue has gone down
when you when you think about these
federal programs like
fast and and these you know if biden or
trump goes ahead with a two trillion
dollar
you know infrastructure spending program
how do the does the funding from that
ultimately come from state and local
governments or
you know with the reduced revenues at
the state and local level
obviously that's not good for anybody
but
will you still be able will we still see
programs going forward because they're
coming from a different funding source i
guess is what i'm trying to say
yeah yeah there's a couple things to
look at and if you refer back to the
webinar you attended back it was august
september when it is we
we pulled some research and looked at
state resiliency
to deal with this and and not every
state's the same and so for
for companies that operate across
multiple
states across the u.s it really is
impactful
really is important from a strategy
standpoint to think about which states
are
better positioned to deal with the
economic calamity that they're facing
and the things you look at is is what's
their unemployment liability
what's what's their their medicaid
liability uh what's their what's their
economic base what sort of a rainy day
fund did they already have in place
to be able to stand this uh withstand
this
the stimulus packages and then
you have two things federal programs and
then stimulus packages
the stimulus packages would not require
on local uh local
or state government funding for that the
fast act and whatever it's replaced with
the highway program
does because that requires a local
matching and that's part of the
challenge is that
that there's a concern next year that
some of these states who have been
gutted economically their tax their tax
revenues
tax receipts have gone way down they're
not positioned well
to to have matching funding for
federal highway investment which is why
there's a fairly large debate in
washington around
making states whole helping them fill in
the gaps around that and
and now that the election is over i
think it's a lot more we believe it's a
lot more likely there will be some
modest
um payments made to states to help them
shore up their their financial situation
we don't think it's going to be what the
initial ask was which was to cover all
the tax
the tax decline but there will be enough
of that to make it possible for them to
have matching funds
for these federal programs from from a
stimulus standpoint though it really
isn't isn't all that um depended upon
upon local funding for that and quite
frankly
you can see that you could make the
argument that some of that federal
assuming there's a federal stimulus
package focused on infrastructure that
that it would be targeted and some of
the worst uh the worst hit
economic uh areas of that that's where
it's needed the most right i mean
it's emotion in places that are hit the
hardest um
again politics always plays into that
and that's really difficult to sort of
you know sort of cipher cipher through
that
so state tax receipts um that are that
are down now
impacts their ability to to have
matching funds for federal programs but
it also impacts their ability to direct
direct investment as well as your local
your local municipalities that invest in
in parking structures and
and roadway investment and in building
building um
um new landfills and all these sorts of
things are impacted by the local funding
okay so um
i wanted to i wanted to switch gears a
little bit um
and and talk a little bit about 2021 in
the future and
in reference specifically to you know
you your team at fmi you and your team
put out a report that i saw yesterday
i think it's called the heavy civil
construction index
report which is i had a chance to read
through it and
it's very detailed and i thought
provided a lot of good information
my thought was or my question really in
in my my ask is
if you could maybe share with
the folks on the call you know just sort
of the highlights from the you know what
that report is
you know you guys have done it now a
couple times who do you survey
and what some of the key takeaways and
then what i thought we could do
you know after the after today's webinar
maybe if it's okay can we send the
participants a copy of that report
because i i think it's very valuable for
anybody in the industry yeah
but maybe just yeah we're we're happy to
share that
yeah absolutely and and happy to happy
to share that with anybody that won't i
mean that's that's the reason
we do these publications is to serve the
industry and and we've done it
um i want to think we began it in 2017 i
think
i can look at look at my math and see
exactly when that occurred but it's it's
a quarterly publication that we do
it's a lot like other sentiment index
which is really
gauging um the the industry's
outlook on the market today compared to
last quarter
and so anything above 50 is is seen as
uh as
optima optimism anything below 50 is
pessimism and as you can imagine when we
did it last quarter it was
terrible i think it was in the 30s at
that point
um which was as low as it had ever been
and you could think of it think think
about it in the summertime
it was really it really was a terrible
time to try to gauge them
on anything because everyone was it was
not everyone but a large
swath of the economy was in just
real uncertainty about the future while
we we came up from that low
it's still below 50 which means the
industry still has a negative
outlet on the future or not as not as
positive but just slightly
slightly negative there's a few big
takeawa and so
the question was who who who populates
this survey so we
we actually sent it out to a list of
it's actually several
thousand um people that we send this to
we get response back from a couple
hundred
um respondents on this and it's from
across all
swaths of heavy civil um site
contractors residential
site contractors commercial site
contractors um
highway contractors people who work
across the u.s people who only work in
one region so it's
it's a fairly diverse group of companies
who respond to this all sizes from small
to the biggest of the
of the large companies respond to this
and there's
it's a fairly quick survey but it really
is asking a handful of questions around
around their outlook on some specific
things around their
the economy where they work uh their
their their perspective on the national
economy
their specific segment uh the kinds of
work they do and
their outlook whether whether it's
better or worse than it was a quarter
ago
as well as around productivity you know
costs and materials and
things like that and all that factors
into
with a whole lot of math and hocus pocus
into the sentiment index
about that our economist prepares out of
that but there's a few specific
current events questions that we ask and
and so we have to sort of running
running
running lists about what are the most
what are the things that will impact
most positively or negatively your
outlook on the economy and they're
exactly what you would think
things that would impact it most and
it's sort of the same
same same thing as positive or negative
which is it kind of makes sense
the election the covet and the general
economy okay no kidding right we
could have expected that and there's a
whole list of other things that people
have on their radar screen but the
questions they got
from me at least the most so what does
that mean
we're asking about um the metric of
backlog book to burn which is how
quickly are you adding backlogs and how
quickly are you burning backlog what's
that ratio
and about half the contractors who
responded this said
it's down today compared to a year ago
which means we're burning backlogs more
quickly than we're adding
backlog today and that's something that
that when
when we first began sort of the the
covenant environment you know
our expectation was you can expect to
see that that's what we expect to see
heading into uh the early stages of a
recession
although we're not predicting long-term
recession but a down cycle in market
that's what you expect you expect people
to see
to burn backlog more quickly than
they're booking it
the other questions were around the
competitive landscape and the questions
were you know
how around how has the competitive
landscape changed in the last quarter
75 percent of the companies who
responded said they have seen an
increase in competition you know
more than half said they've seen a
moderate to significant increase in
number of competitors in their market
places
over half said they've seen bid prices
go down
and about a third say they've seen new
competitors new competitors
from outside of their traditional market
come into their marketplace
which which really gives us we had
anecdotally had lots of conversations
about what's going on
competitively in the marketplace this
put some hard edges around what
what are people really seeing in the
marketplace and we're and we're
we're seeing what we expected to see um
and and the expectation expectations
that that's going to
continue through into next year
most respondents also expect in 2020 to
be an
up year from a revenue standpoint we
would too given how strong we started
the market given what the backlog was
at the beginning of the beginning of the
year the next year we would see it would
see a decline in revenue
a slight decline in revenue but by 2022
most expect to be sort of back
back out of this recession our thinking
is that's probably optimistic it's kind
of
figures right maybe this is an
optimistic industry um
so that kind of makes sense we then at
the talent of that
we put together our detailed forecast
for for the transportation highway
segments which are the biggest segments
of the heavy civil arena you're looking
at
and and and it really i mean it makes
logical sense right yeah our expectation
for the
uh for the airport construction air
transportation segment to be down right
i mean
people aren't flying they're not gonna
even though
airport projects are ongoing large
infrastructure airport projects are
ongoing especially the ones that begun
that they're they're smaller than they
were they're delayed a little bit
there's going to be a decline in that
for several years um
until we can get a vaccine and people
get back to travel
same thing for water transportation
right i mean i mean although we have
um more need to ship from
overseas just in general you know we've
seen this push back against
import importing of goods we've seen
just a general decline in
in economic activity and so so that that
that is declined
uh somewhat you think of what's going on
in the port industry and there's no need
to build
new ports of call at least not in
in the near term because the cruise
industry has suffered so those segments
are down
highway you know our expectation is the
highway market is going to suffer
next year and here's here's why that is
we were we were up in in 2020 uh because
of projects ongoing
states are curtailing their their
funding for next year
we don't have any federal program to
backfill that even if they came back in
january and said
let's go get it and redo the fast act
immediately
that takes time we're not going to get
any of that done next year that you're
likely
at least nine months before any of that
would begin and so 2021 is going to be a
down
year for the highway construction market
but we expect it to be back up after
that so it's kind of a short-term blip
the bridge market has been down for the
last several years the bridge
construction market has been now
we expect that to sort of pick up your
bridge programs are
are are necessary and needed i mean
because there's a lot of press around
deficient bridges going forward
we don't say it in in our in this
forecast but that's what's all in that
in that uh heavy highway
sentiment uh construction index the
other segment
we look at the commercial site
construction and the residential
site construction commercial side
construction is going to follow the
commercial markets
which are going to see a tough few years
as you can expect
residential though is sort of a sort of
an anomaly it's kind of an odd market
right now it's a strong
market lots of residential construction
ongoing the expectation is that's not
going to see a dramatic decline
near term although that's what our
economists tell us but i have sort of a
i have a sneaking suspicion that there's
a shoe to fall there somehow when you
look at the
what's going on the mortgage market
right now and the amount of mortgages
that have been
deferred um and with no no recourse uh
from from lenders
um that's got to have an impact we think
um
i believe in the next year so yeah yeah
kind of one
answer to your question though no no
that's okay and by the way
we've got um if anybody would like to
submit a question by all means do so
just tab on the q
a button and you can submit a question
and then we'll uh
we'll see if we get any questions and
and otherwise uh begin to wrap up
but you made a comment there that i
thought was interesting from the and i
saw it in the hcci report
that um you're seeing uh i think what
you call it the backlog to burn
um ratio the book to buying rate yep
book to burn rate so basically if i
understand that correctly
you know as projects are finishing up
their rate of
projects to i'll use the word backfill
for lack of a better word
are not there as strong as they
typically are in the past
so that you're keeping your backlog full
if you will going forward the other
thing that you
and that's declining yeah and that's
declining the other thing that's
interesting too and i
we personally have seen it a little bit
in our business is is it does seem that
there are more bidders on projects on
individual projects because there are
fewer projects i'm guessing
so more more participants kind of jump
in the game when there's fewer to choose
from if you will
um i think we've seen we've personally
experienced a little bit of that um
yeah so i'm i'm gonna go ahead and check
to see if we have any questions
um and then i i do have another question
for you and
um gosh it's it's already been about 45
minutes so we'll we'll
definitely wrap up in the next 10
minutes or so
um so question has come in
how have each of your businesses
prepared for continued
impacts of covid or potential delay in
infrastructure
package funding so
um yeah do you want to comment on that
yeah yeah so and i'll talk about our
clients with the way our clients are are
thinking through this and then
and there's a very um
a very sort of specific mindset that we
counsel our clients to think through
in this sort of sort of environment when
you get an environment that has
lots of ambiguity very volatile in terms
of the information that we're getting
pretty uncertain about about what's
going to happen over the next several
years
to build two um just sort of parallel
strategies to deal with that
first is is a defensive strategy around
what do we do
today given what we know right now given
what we know about the near-term
impacts of project project cancellations
project delays
downturn in the marketplace um
which i don't know i don't want to
overstate the downturn in the
marketplace because there are lots of
places the markets booming right now
but sort of in general if you think
about if you're in a market that is
seeing significant downward
downward impacts from covenant the idea
is to build defensive strategies today
and then think about long-term what
what's our offensive strategy to play in
the market that we're going to see
over the next two to three years which
means you have to get some clarity of
what that
looks like and so if we if we factor in
what our what our best
understanding is of what's going to
happen from an infrastructure package
funding
meaning the the fast or the federal
highway program and its subsidiary
components
you know that that we know it's going to
stay at about the same pace at a minimum
we know it's going to be at about 50
plus 50 plus billion
next year at a minimum potentially some
upside to that
and so we we sort of walk our clients
through the strategy planning of
building defensive strategies and focus
on our business today
what's our offensive strategy to take
advantage of any upside to that
uh and and really position ourselves for
for sort of a base case around that as
well
the challenge is you know that sort of
strategy you know strategy requires us
to make commitments to a
to a an expected future but what we're
asking our clients to do is to real
build two strategies
and have opposing viewpoints uh about
that and be willing to be agile and
nimble
uh to think through that so it's a very
complicated time to develop strategy for
our clients
it's not like it was a year ago when the
expectation was steady as she goes we're
continuing to climb up it's not like we
haven't seen this before but you think
about 2009-1011
different different influencers on the
marketplace right i mean it was
instigated differently it happened more
slowly but this is not new i mean
we've been through market turmoil before
yeah right
the challenge is if you've got a
management team who hasn't who doesn't
know how to think through that it can be
a real
um it can be a struggle so i've got one
more question and then you know if we
get any others we can
we can uh hit those before we conclude
um the discussion but you know
one thing i've read a lot just in in
general with the economy and industry is
is what are going to be the long-term
impacts of covet what are the
what are things that are fundamentally
changing so you know i'm i'm an eternal
optimist so i believe we're going to get
a vaccine i believe our testing
procedures are going to get better i
think we're going to have
therapies that that will
help us get back to a more normal
lifestyle i think the question is
when obviously the sooner the better
but but but in light of that even when
things do get back to normal and again i
believe they will get back to some level
of normalcy
what will some of the things that will
fundamentally have changed in our
industry that won't go back i mean
you know for example they talk about you
know a lot of companies have
you know people are working remote and a
lot of companies have come out and said
we're not going to bring people back
they're going to continue to work
remotely
when you think about heavy civil are
there things that
are going to come out of this whole
covered pandemic experience that are
going to fundamentally change
how those people in our industry do
business
you know some of what's happened i think
we're seeing a little bit of an
acceleration in an adoption of
technology right
but forced by this um
not only in in the remote working and
and all that sort of aspects
so there's that there's a little bit
more
nimbleness required because of the last
six months and that just sort of becomes
a now part of our dna going forward
the interesting thing is though you know
i'm kind of like i'm an eternal optimist
that we're going to see all these things
happening
and you hate to say it but i mean
americans have sort of a short memory
go back to what they were doing before
um i think we're i think you're you're
going to see some variation
in things that get built uh some way we
do
businesses but but at this point
our um our um
i don't call it our conventional wisdom
but our point of view is that we don't
see dramatic
increases in the way we do business
going forward unless
unless this thing persists if this
persists
and eeks through next year and then then
i think you're going to see
really entrenched sort of doing business
this way people not not liking to come
into the office
people working remotely even even not
even not even in the same city
city as as our employers uh we're we'll
see we'll see
more um which really sort of
this sort of technology gives us comfort
level of technology so it allows us then
because i've had a lot of my clients who
then well they're more willing to look
into them
robotics and remote remote vehicle
uh remote vehicles and and things of
that nature
but i think i think that's i think
that's around the periphery i think the
core
of our business the way we do business
the
things that get built um impact from
covet is going to be minimal there are
other
other impacts and other changes there
are some dramatic changes that are
occurring
but they were already occurring
pre-coded um yeah in terms of the things
that we're building right the technology
that's available to us the autonomous
vehicles
all those sorts of things are already
occurring this maybe accelerates our
adoption of technology because we're
more comfortable with it now than we
were
six or eight months ago okay
well brian i think that's it uh we don't
have any other questions at this
at this point so we'll go ahead and uh
wrap things up
we will we appreciate your first of all
getting on the call and sharing your
insights with us
um i would very much like to send that
report out to
the participants on the call so we'll do
that after the call coordinate with you
on that
and uh i think that's basically it
thank you for having me well thanks
thanks for joining us and uh enjoy the
the nice weather you're having uh down
south
and uh we'll do we'll do the same we'll
do the same up north
enjoy okay thanks brian talk to you
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