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EEI - Ecology & Environment Inc.


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Ecology and Environment, Inc. (EEI) has been written up on VIC and seekingalpha a few times over the past couple of years. It’s a $50M market cap environmental consulting firm that provides professional services to government and private customers worldwide.


TTM FCF is about $6.6m. EV is $33M. LTM revenues are about $106m. Through Q2 2018, they've paid 61 consecutive dividends. The current dividend yield is around 3.5%. They have approximately $17.7 million of available cash as of the end of Q2. They have $40.1 million in total lines of credit, of which $37.8 million is available. Insider ownership is high with recent insider buying.


Mill Road has been involved since 2013. In July 2015, Mill Road acquired an approximately 14.5% stake in EEI by purchasing the outstanding shares from the founder’s family. Mill Road made an offer in August 2015 and said that it was interested in acquiring EEI for somewhere around $13 to $14 a share. Mill Road recently got a board seat.


One concern is that they are not buying back stock. Instead considering M&A. Water resources, civil infrastructure is an area where they're focusing a lot of their attention. Coastal restoration, water resources, emergency management planning, and in the DOD area for facilities planning and environmental planning. These are all areas where they're exploring heavily and pursuing opportunities.


Modest revenue growth or M&A could provide a catalyst.

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From the earnings call, they indicated that the Q2 loss was due to lagging revenue in U.S. operations. They talked about changing policy and processes in how federal and states review and approve projects leading to uncertainty and project delays. While that gets worked out, they are focusing on the energy sector and in particular liquefied natural gas export terminals, renewable energy development and elective transmission infrastructure continuing.


They also stated that "despite continuing challenges for our U.S. operations, our fundamentals remain stable. Results from our South American operations are improving, we have seen modest improvements in our backlog despite challenging marketplace conditions."

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Accounting is due to be sorted by May 13th, at least that's what they've said.


The current Chairman, who is now running the company, is an ex M&A banker and has said "look at my background and it'll tell you why I'm here". They're lining the company up for sale. Mill Road offered $14 when cash was much lower than today, and if this was sold to a strategic who could take $1mn of pubco costs out, then this could go for $18+ today probably.



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