Ecology and Environment, Inc. (NASDAQ:EEI) Q4 2018, Q1 2019, Q2 2019 Results Conference Call June 3, 2019 8:30 AM ET
Marshall Heinberg - Chairman
Todd Musterait - President of U.S. Operations
Peter Sorci - Acting-Chief Financial Officer
Conference Call Participants
Peter Rabover - Artko Capital
Randy Mehl - Stewardship Capital
Good morning. And welcome to the Ecology and Environment Incorporated Fiscal Year 2018 Year-End and Fiscal Year 2019 Q1 and Q2 Investor Conference Call. Today’s webcast is being recorded. The slide deck can be accessed on the Investor Relations page of E&E’s corporate website at ene.com.
At this time, I would like to turn the call over to Mr. Marshall Heinberg.
Thank you, Operator, and good morning everyone. And thank you for joining us to discuss Ecology and Environment’s financial fiscal results for the year 2018 and the first two quarters of fiscal year 2019. I am Marshall Heinberg, E&E’s Executive Chairman. Joining me on the call today are Todd Musterait E&E’s President of U.S. Operations and Peter Sorci, our Acting Chief Financial Officer. After finishing our prepared remarks, we will be happy to open up the call to take your questions.
First as is required, I’d like you to note that certain statements made in the course of today’s conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve certain risks and uncertainties. And it’s important to note that the company’s actual future results could differ materially from such forward-looking statements. The company cautions investors not to place undue reliance on any forward-looking statements made during the course of this conference call. And E&E disclaims any obligation to update any forward-looking statements made today.
So with that, I think it’s important that we give an explanation as to why it has taken us so long to make our filings. We certainly appreciate the patience of our shareholders, which you’ve shown us during the time period when we were unable to report, and able to provide very little information to the marketplace. As previously noted and after we discovered that we do not have control of our Chilean subsidiary, known as GAC, we were required to restate all of our financial statements for a three year period. Unfortunately, once you get into a restatement and into the National Office of the Major Accounting Firm, it ends up being a very slow and time consuming process. You’ll see that there were no other major issues from an audit perspective or an integrity perspective. It was as we’ve describe previously, requirement coming out of a discovery of our lack of control of the one subsidiary.
What's probably as, or more important as you review our recent results, is that our financial performance has been severely disappointing. The approach that we were taking to organic growth was clearly not working, and the company had been distracted by our wish to do acquisitions. We also realized, as we dug into the results, that our cost structure was severely bloated and our utilization was well below where we needed to operate.
A determination was made to embark on a significant cost reduction program; and we initiated a three pronged approach of a voluntary retirement program for some of our long standing employees; a reduction in workforce; and a discipline look at some of our overhead costs. As we reported previously to the marketplace, we have been able to take out more than $6 million in costs on an annualized basis.
The board also made a fundamental decision that we needed a dramatic change in leadership. The decision was made to ask me to serve as Executive Chairman for a period of time, but most importantly, to employ, Todd Musterait, who joins us on the call today as President of U.S. Operations and to add Kurt Zmich as Senior Vice President of U.S. Operations. Both of whom are along with me members of the operations committee.
Together, we made a determination that we needed to operate the business in a much more data driven manner, which had not been done before in quite the same analytical way. We are also keen to build a professional sales staff and a marketing platform to drive future growth. We are very fortunate to have a very talented and dedicated group of professionals who are eager to reinvigorate the company.
With that, I would now like to turn the call over to Todd to discuss all of the strategic initiatives that we've undertaken since his appointment. Todd?
Thanks, Marshall. If you could please turn to Slide 3. As Marshall previously mentioned, our leadership team has implemented several improvements to set us on a path for growth. During the first two quarters of fiscal year 2019, we restructured the U.S. business to better align with our core lines of business and practice areas, and set us up to expand further into emerging markets.
Our new structure is centered on three business lines, including site assessment and remediation, energy, and a third area, named enterprise programs. Our site assessment and remediation business is focused on addressing legacy pollution to the federal, state and commercial markets.
Our energy business continues to provide services to pipelines, LNG, deepwater ports, transmission renewables and offshore resources. And our third business line is focused on restoration, department of defense, climate adaption, resiliency, sustainability, emergency planning and response, infrastructure, water resources and telecommunications. We're excited to align our resources and offerings to the marketplace under this new structure.
As part of our restructuring, we have launched a new sales and marketing strategy that supports the growth of our business clients with a fresh perspective of our company in the marketplace. We are procuring new Sales Directors, including Elizabeth Powell in our enterprise programs business line who brings over 25-years of environmental market experience. And we have recently added a new Marketing Director, Russ Reardon, who brings over 20 years of industry marketing leadership to our organization. We are also procuring new sales managers to work within our business lines.
We have implemented cost reduction initiatives to improve profitability and create better alignment of our staff resources for growth. As we have previously communicated, the staff production programs, including voluntary retirement and involuntary separation programs, are being implemented along with other expense reduction initiatives that have resulted to-date in annual pre-tax cost savings of approximately $6 million.
These activities are expected to result in pre-tax charges and cash expenditures of approximately $1 million during the fiscal year ending July 31, 2019, consisting primarily of employee severance and termination benefits. These initiatives were substantially completed by April 30, 2019 and are expected to be completed by July 31, 2019.
A key component to realizing our growth expectation is our focus on organic growth through improved operational efficiencies and management, including a more uniform reporting approach to drive informed decision making. Another key component to realizing our growth expectations is growing our revenue with key account management, which emphasizes cross-selling our services and providing value-add services to our key clients.
We are also prioritizing the acquisition of top-tier market talent organization to expand our participation in core business lines and emerging practice areas, including climate adaption, resiliency, sustainability, natural systems' restoration, coastal engineering and water resources.
Strengthening our regional local presence in partnerships where these opportunities exist will also be a key component of our growth strategy. Our new business line structure integrate sales and project delivery functions to create efficiencies, improved communication and faster or more collaborative approach to capturing work and delivering services.
Now, I'd like to turn it over to Peter Sorci to review our financial results.
Thank you, Todd and good morning, everyone. Before I review our results, I'll provide additional information regarding the statements of our prior year financial statements. This is a summary of information included in our recent SEC filings.
In December 2018, our audit committee determined that the company's previously issued financial statements for annual and quarterly periods prior to July 31, 2018, could no longer be relied upon by our shareholders. As a result, the consolidated financial statements included in our annual report on Form 10-K included restated financial statements for fiscal years ended July 31, 2017 and 2016. In addition, the quarterly and year-to-date financial statements included in our quarterly reports on Form 10-Q for the period end of October 27, 2018 and January 26, 2019, included restated financial statements for the comparative prior year reporting periods.
The audit committee concluded that previously issued financial statements could no longer be relied upon due to areas related to accounting for our investment in a Chilean subsidiary, which we refer to as GAC, since our initial investment in 1999. We included GAC's financial statements in our consolidated financial statements filed with the SEC prior to July 31, 2018.
In December 2018, we determine that although we had majority ownership interest in GAC, we did not have a controlling interest in GAC's operations due to lack of continuous control with the activities and GAC's Board of Directors and Senior Management team. As a result, our net investment in GAC should have been accounted for using the equity method of accounting.
Although, de-consolidation of GAC had minimal impact on our consolidated net income, it did result in material reductions of multiple lines of all of our consolidated financial statements. For example, adjusted to deconsolidate GAC resulted in decreases in consolidated gross revenue of $7.6 million and $7.5 million for fiscal years 2017 and 2016 respectively, and a decrease of $2.3 million of consolidated total assets at July 31 2017.
In addition to the GAC de-consolidation adjustments, previously filed financial statements were also adjusted to correct other areas in the financial statements and disclosures that were deemed to be material on an individual basis and in the aggregate for the fiscal years during which the areas were originally identified.
I'll begin on Slide 4 with a review of our fiscal year 2018 results. Please note for purposes of this presentation that gross revenue less the contract costs is the key revenue metric for our business, because it represents revenue that we generate strictly from our consulting services and it excludes pass-through revenue that we collect from client and pay-out to subcontractors. When we refer to revenue or revenues during this call, we're generally referring to gross revenue less some contract costs.
Also, our management team generally assess its operating performance and makes strategic decisions based on the geographic regions in which we do business. Our SEC reports include operating segment information for our U.S. and South American operations. And information for these operating segments is also included in this presentation.
We reported a consolidated net loss of $0.3 million or $0.07 per share for fiscal year 2018, down from restated net income of $2.8 million or $0.66 per share for the previous year. Consolidated revenue of $73.5 million for fiscal year 2018 was down 8% to $80.1 million for the previous fiscal year. The loss for fiscal year for 2018 was driven by lower revenue and earnings from our U.S. operations, which was only partially offset by improved revenue and earnings from our South American operations.
In the U.S., lower revenue during fiscal year 2018 primarily resulted from depressed activity in our core markets, particularly energy and federal government sectors. We experienced a trend of longer periods being required for current or potential client to make contract reward decisions, particularly within the liquid natural gas and transmission markets.
We also experienced a trend of longer periods required for clients to release contract scopes and delivery schedules, particularly within our energy, international cable and Federal Department of Defense markets. In addition, final settlements of projects and allowances resulted in $1.1 million increase in revenue during fiscal year 2017. We did not report any similar activity during fiscal year 2018.
Improved results from our South American operations during fiscal year 2018 were driven by higher revenue from our operations in Brazil and Peru. In Brazil, an economic downturn that adversely affected our operations for several previous reporting periods, continued to stabilize during fiscal year 2018, resulting in additional business development opportunities and increased project activity within the energy transmission, seismic and wind sectors. The mix of contract work along with changes in our pricing strategy also generated a higher average selling rate in fiscal year 2018 as compared to prior years.
Higher revenue from our Peruvian operations during fiscal year 2018 resulted from increased project activity within the energy sector. Increases in mineral prices, gas demand and private, and public investments and energy projects, each contributed to strong revenue growth in Peru.
Slide 5 provides a summary of our results for the first six months of fiscal year 2019 compared with restated results for the first six months of the prior fiscal year. We reported a consolidated net loss of $0.4 million or $0.10 per share for the first six months of fiscal year 2019, down from a restated net income of $0.1 million or $0.02 per share for the first six months of the previous fiscal year.
Consolidated revenue and $33.8 million for the first six months of 2019 was down 8% compared with $36.6 million for the previous year. Lower revenue and earnings from our U.S. and our Peruvian operations in South America were partially offset by improved revenue and earnings from Brazilian operations.
During the second quarter and first six months of 2019, we recognized revenue growth in the U.S. from survey impact assessment, planning and data management services provided to clients in the LNG, offshore resources and resilient communities markets. However, this revenue growth was more than offset by decreases in revenue in the pipeline, onshore renewables, armed services, insight assessment and remediation markets, as projects completed during fiscal year 2018 and the first quarter fiscal year 2019 were not replaced with new work of comparable size.
In addition, the federal government shutdown that occurred during the second quarter of fiscal year 2019 delayed new work authorizations, affected ongoing project schedules and postponed revenue delivery on various federal government contracts.
After initial outlays from cash for employee severance and termination benefits, the corporate restructuring plan and staff reduction programs described previously by Todd, are expected to have a significant positive impact on our U.S. earnings and liquidity position during the fourth quarter of fiscal year 2019 and future reporting periods.
Revenue from our Brazilian operation increased 19% during the first six months of fiscal year 2019 compared to the same period of the prior year. In local currency, revenue from our Brazilian operations increased 30% due mainly to increased project values with commercial clients in the transmission, energy and mining sectors. Strengthening of U.S. dollar compared to the Brazilian real significantly offset the positive impact of higher project values.
Revenue from our Peruvian operations decreased 39% during the first six months of fiscal year 2019 as compared with the prior year due to lower project values with commercial clients in the energy sector. In Peru, a continuing corruption investigation and related policy changes slowed public and private investments. However, during the second quarter of 2019, Peru won two large service contracts valued at over $5 million, which we expect will begin generating revenue during the fourth quarter with increasing revenue early in fiscal year 2020.
Slide 6 provides a summary of operating cash activity for our consolidated operations. Our consolidated cash balances increased slightly during fiscal year 2018 as cash flow from operations continued to outpace cash required for investing in financing activities. Cash decreased during the first six months of fiscal year 2019. Negative operating cash flows resulted from the trend to lower revenues and earnings previously addressed during this call.
Initiatives implemented recently to improve revenue growth and reduce operating expenses, as well as those to be implemented over the next several months, are expected to result in improved operating cash flows for future reporting periods.
We paid dividends of $1.7 million during fiscal years 2018 and 2017, and $0.9 million for the first nine months of fiscal year 2019. Our net liquidity position remained strong as we continue to require minimal support from lines of credit, or other debt instruments to fund our consolidated operations. As of January 26, 2019, we had $32.4 million of availability under lines of credit to support our U.S. operations, and $1.6 million of availability under lines of credit to support our South American operations.
And now, I'll turn it back to Todd to review our contract backlog and the market outlook.
Thanks Peter. Slide 7 provides a summary of our firm backlog. Firm backlog represents an estimate of gross revenue expected to be recognized over the remaining life of projects under contracts that are awarded, funded and in progress. The amounts in Slide 7 reflect a recently refined definition of firm backlog to exclude estimates of unfunded backlog that may someday become firm backlog.
Projects included in our firm backlog include work to be performed under contracts, which contains termination provisions that maybe exercised without penalty at any time by our clients upon written notice to us. In which case, the client would only be obligated to pay out for services provided through the termination date.
A significant portion of our revenue is generated through projects awarded under master service agreements with our clients. In these instances, only the current unfinished projects are included in our backlog. Moderate fluctuations in backlog from quarter-to-quarter and year-to-year are normal occurrences in our industry.
In our U.S. operating segment, we recorded 5% increase in firm backlog from July, 2018 to January, 2019. Most of which was associated with our site assessment and remediation business line. We also recorded a significant increase in backlog in our South American operating segment for the first six months of fiscal year 2019, which provides further indication of continued improvement in revenue growth and operating results expected within those markets.
Please turn to Slide 8. I'll now speak about market conditions, our position in these markets and the associated market benefits and challenges for the business. First, our work for the federal government continues to be dynamic. Funding for environmental programs continues to flow from the federal governments, the states and local municipalities via grant programs and other mechanisms.
There is increased competition in the federal space with an emphasis from the federal government to maximize small business contracting through small business set asides for the creation of larger mega contracts. Also, trend towards lowest price technically acceptable contract awards is driving increased price competition. We continue to evaluate strategic partnerships through joint ventures in our mentor-protege relationships, and to identify small business partnerships to be successful in capturing these contracts.
Further, federal agencies are developing strategies for private public partnerships to address infrastructure needs, including programs to accelerate clean-up of legacy pollution and encourage economic development. EEI's is positioning to participate in the space leveraging our experience on legacy clean-up issues with various federal agencies in the private sector to promote these partnership opportunities.
The extended federal government shutdown earlier this year did have an impact on our ability to deliver work under certain contracts, and delay the issuance of task orders, particularly in non-DoD agencies. Projected delivery of this project backlog was extended further into the fiscal year.
Energy infrastructure development continues at the state and local scale under state driven planning and permitting frameworks. The national and regional energy systems are mature, leading to increased investment in replacing and upgrading existing systems. EE continues to participate in regional markets to support our energy clients' infrastructure development projects.
We expect continued growth in the infrastructure necessary to support the U.S. export of both oil and natural gas of LNG. Our work in renewable continues to have a positive outlook based on market conditions and favorable policy. Major corporations, utilities and jurisdictions are responding to their shareholder and rate repayer demands for renewable energy generation and the associated electric transmission infrastructure.
Federal permitting of energy and infrastructure projects is changing with the administration streamlining requirements for environment review, including environmental assessments and environmental impact statements. This introduces uncertainty on projects with our federal agency and commercial clients.
Our experience with similar streamlining efforts of previous administrations have agencies welcoming our support. Broader transportation in civil infrastructure investment continues to be slowed to adjust our country's deteriorating infrastructure. And environmental and climate change provisions would be positive signs for our work.
While Department of Defense spending has increased for defense products, there is a declining trend in DoD defense services contracting with a redirection of funding this year due to Hurricane damaged installations requiring capital to rebuild. We continue to navigate opportunities within DoD. We are pursuing upcoming Navy need for home basing, Air Force encroachment, additional work in DoD cleared space and leveraging our mentor-protege relationship to secure and aid small business set aside funding.
We continue to see more opportunities for our resilient community offerings, in particular; on the West Coast we're going to trend toward more complete ecosystem restoration project implementation; from program design to design build; supplemental federal disaster response funding for construction and restoration of hurricane impacted states and areas may provide additional opportunities for our restoration practice; and we see a growth trend and coastal stream restoration opportunities.
Our South American operations continue to stabilize from previous years. Mining, energy and telecommunications have been the primary revenue drivers for the past several years, and will continue going forward. In addition, we have seen increased opportunities with each entity in recent months. For example, in Peru, political issues continue to impact economic growth. However, new opportunities with highway and rail infrastructure are emerging.
In Brazil, there is an increase in energy and civil infrastructure projects due to the new administration's priorities. And in Chile, while this economy continuing to grow at a lower rate, they too are seeing increased opportunities in infrastructure and anticipate an upsurge in lithium mining with increasing demand for electric vehicle battery manufacturing.
The strategic initiatives I mentioned earlier, including our new internal business line structure, our emphasis on key account management, and our investment in building a marketing and sales platform for critical initiatives that will allow us to understand these market trends more thoroughly, identify opportunity more swiftly and create avenues for new growth, going forward.
In summary, we believe our new business structure creates a stable platform to best utilize our resources for growing U.S. business. We have a renewed focus on our core markets to maximize capture of opportunities, while strategically investing in growth markets, as I described previously.
Our sales and marketing strategies are aligned with project delivery teams, creating a unifying and streamlined approach to meet our clients' needs with an eye towards delivering value added services and expanding into emerging markets with our specialized services and offerings.
Our South American operations continue to stabilize in Brazil and Chile, and we continue to evaluate the impacts of current political influences and policy changes in Peru. We have seen increased opportunities, for example, in Brazil related to energy and civil infrastructure, as well telecommunications and cable lining projects.
The business continues to be in a sound liquidity position with approximately $11 million of consolidated cash at the end of the second quarter for fiscal year 2019. We have delivered 64 consecutive semiannual dividends since 1987 with a yield of approximately 3.6% for the dividend paid recently in March 2019.
That concludes our presentation. We'll now open up the call to your questions.
Thank you [Operator Instructions]. And our first question comes from the line of Peter Rabover with Artko Capital. Your line is now open.
I've got a bunch of questions, so if there's a big line, I'll just jump back in. So congratulations on getting the audit done. And so I guess my first question is what are the approximate costs of the audit, how much did that impact the first six months of 2019?
Well, the first six months of 2019 did reflect a large portion of the costs. Most of the costs associated with the audit fees and there is also some legal fees will be third quarter costs. I'm not prepared today to tell you the exact amount. I would ask that you wait till we file our third quarter report to get the exact amount for how much was expanded but as you can imagine, it was a fairly significant amount for the third quarter.
So that hasn't been reflected in the final statements yet?
Mostly it's going through in the period of third quarter, that's correct.
I guess, maybe we can talk about the U.S., the federal government, the domestic government business. It sounds like you guys lost most of the decline, for 2018, has come from that and based -- just reading your 10-K. And I'm just curious is there -- what impact -- is that the gross margins they used to be more of a lower margin business, and maybe talking about the layoffs and how does that, which areas are the layoffs coming from and how does that impact productivity and things like that? So is there any color you can give me?
Regarding the initial part of your question, we did see a reduction in what we call our site assessment and remediation business line moving from fiscal year '18 into the first quarter of fiscal year 2019. We do see improvement on our backlog, as we indicated, associated with site assessment and remediation. And keep in mind that that is composed of both state contracts, as well as federal contracts specifically within that area that's driving revenue. We did have some weather delays in the first quarter in the Southeast. If you recall, Hurricane Michael hit the Panhandle in early October, which did have an impact on our delivery of site assessment and remediation work under certain contracts.
Regarding your question and I'll let Peter take the gross margin perspective. But regarding the staff makeup, I can say that as part of the cost reduction initiatives, a key component to that was ensuring that we have the right staff makeup to approach the market and go out to the opportunities we feel would be good for the firm in the U.S. operations, moving forward. I won't necessarily comment on the demographics with respect to the type of people. But we did look across the business and ensure that we have the right staff makeup to ensure excellent project and client delivery, as well as looking forward to the opportunities that we're going to be pursuing.
Would most of that cost savings come from SG&A or gross costs?
I think most of the cost savings would be indirect areas, would be overhead and SG&A.
And do you think what's the impact of productivity and ability to win additional revenues as on the last?
So after enacting the cost reduction initiatives, we've seen a fairly decent increase in our director utilization by 10 percentage points that essentially landed at where our targeted utilization we believe needs to be for the business moving forward. I do believe we have the right staff makeup but we continue, as I mentioned, to look for talent in the marketplace to help us on the technical delivery side, but also on the sales and marketing side of the business as well.
Maybe a quick question on the backlog revenues. Do you guys have like a sense of a historical percentage of how much of your revenues come not from backlog, but as that comes in for the year? So if you have a backlog that maybe it's like 80% and then 20% comes in as needed work, the hypothetical?
As we sit here today, I don't have that information. I don't believe we have that information available. You certainly could follow up for some perspective on that…
I just want to make sure I understand your question, Peter, a little bit better. Can you restate that?
Sure. I guess, I'm just thinking like you guys, in terms of your visibility, right, that you have your backlog, which I think is $52 million for, as of January. And then I'm just curious, in addition to that, how much work would you say, as a percent of your revenues, that doesn't come in from the backlog? Do you have anything that just in a quarterly basis?
I mean, I think it's difficult to really forecast what work is going to come in to the quarter that will replace backlog that's consumed. I will say that we've identified $24 million in unfunded contract that those are vehicles that, of course, we have a contract ceiling in place and we are funded, which is what we’re reporting as our backlog. And we have $24 million out there in unfunded backlog that we will continue to pursue, so that we can deliver on that revenue. But it can be dynamic throughout the quarter and depending on the quarter in the sectors that we're speaking to.
Is that $24 million more near term or longer term?
I mean, I think that's really over the course of 12 months plus in terms of when that revenue would move from unfunded to funded. But of course, there's no guarantee that particular funding would move into our backlog, and there's a lot of variable associated with that.
I’ll ask one more and then I'll hop back. But maybe you can give us some color on your infrastructure business, what areas of strength that you're seeing? And I think the last time we had a call you talked about potential partnerships with bigger players. And maybe you can give us an update on that and how to participate in that? And thank you so much for taking all my questions.
I can provide some color and then perhaps we'll move on to the next question. But around infrastructure, our participation I think, in particular in restoration, looks to be favorable for even though we're terming as restoration as our infrastructure projects that are related to resiliency and climate adaption work. As I mentioned in my notes and in my discussion, we've seen an increase in opportunities in the West Coast around climate resiliency and climate adaption. And these projects, these planning projects, have a tie into infrastructure and transportation systems and what is the risk associated with, say, a wildfire, and what would that impact be on a major transportation system.
So due specialization that we have within the firm, we can provide services within those spaces. In some cases, those are contracts that will take on as the solar prime. And in other cases, we'll look to work with larger integrated companies to gain access and to put a good solid project team together to be awarded the work.
[Operator Instructions] And our next question comes from the line of Randy Mehl with Stewardship Capital. Your line is now open.
Good morning guys. And really appreciate the color on the call and I’m sure it’s nice be out of the restatement mess at this point. I just had a couple follow up questions to some of the last ones that were asked. You've listed several U.S. market opportunities and state and local funded programs, particularly energy, restoration, resilience. What needs to happen from a BD perspective, or just an organizational perspective overall to really capture these?
Thanks for the question, Randy. As I mentioned earlier, as we set up our three business line structure within the organization, we have a keen eye to putting a sales force, which includes sales directors and sales managers that are aligned within those business units. So, the perspective is that we have people that are looking for opportunities and selling opportunities within a specific lines space. So for example, in energy, as we look at the regional build out -- continued regional build out of LNG and transporting that to the gulf that's obviously a regional play, but does require a level of specialization that we can pull from across the country to deliver on that. But having a sales force that knows the space well, knows who's participating. And of course, a number of these are key clients of ours that, as I mentioned previously, we would reinforce and ensure that we're not only delivering on the work that we have today, but we're helping them further become a successful business from a B2B perspective.
So are these people in place today, or are these largely people that you're out looking for?
Randy, I would say, it's a mix right now. We do have some of the sales force that's come into place that that is new to the business. So I mentioned a couple names on the call. We're going to continue to look for talent in the marketplace to come into the business to fulfill these roles. We do have people in the business that, not to say that we don't have it that are driving these sales efforts. But again, we continue to look for additional resources in those spaces.
And forgive me if I didn't catch this if said it. But is there a target that you've thrown out or that you're willing to discuss for maybe end of fiscal '19 run rate in the U.S. and international on a net revenue basis?
Unfortunately, we're not going to provide that information today. I would ask shareholders to wait till we get our SEC filings done for the fourth quarter and year end in order to see how we did for the year.
And in terms of those filings, is there any reason that those filings should be delayed, or are you out the woods on that at this point?
I'd like to think that we are out of the woods. But we got these filings done and we are well underway preparing our third quarter reports. The auditors that are looking at them, the report -- the due date of those reports is next week. And we are hopeful that we will be then back on track for time of the quarterly filling.
And then capital allocation priorities, at this point, your cash on the balance sheet and expected dip overtime. How are you thinking about the dividend? I know there's still unused share repurchase out there I think and then acquisitions?
So Randy, it's Marshall. I'm going to jump in on this one. So I think the board will continue to evaluate every time we meet what our policies on the dividend. Obviously, we've been a consistent dividend payer and we recognize the importance to shareholders. But I think we have an obligation to review our cash position and prospects every time there is a board meeting, which we will continue to do.
I think one of the comments that we made was that I felt that prior management was looking for acquisitions to be the answer, and was singularly unsuccessful at completing any. And we have our own house to keep in order and make sure that we start getting organic growth to what it needs to be. So we're going to suspend acquisition activity for a period of time until we have fully established that we are on the right track for U.S. growth again.
And in terms of the dividend, obviously, both get voted every year. But is it your intent to hold the line on that? Or obviously, it could be increase and so you don't need to increase. I'm just wondering what your thoughts are there?
Yes, I mean, it wouldn't be appropriate for me as one board member to say what we will do? I mean, I think we certainly have an appreciation of what it means to our shareholders, and the fact that we've been a consistent payer. But it's a board decision, so we'll take it up at the board level and make a determination every six months.
Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back to Todd Musterait for any further remarks.
No further remarks. I appreciate everybody calling in for our review this morning.
Ladies and gentlemen, thank you for participating in today's conference. This does include today's program. You may all disconnect and everyone have a great day.