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INDIANAPOLIS, May 16, 2019 (GLOBE NEWSWIRE) -- Infrastructure and Energy Alternatives, Inc. (NASDAQ: IEA) (“IEA” or the “Company”), a leading infrastructure construction company with specialized energy and heavy civil expertise, today announced its full financial results for the first quarter of 2019.
First Quarter Highlights
JP Roehm, Chief Executive Officer of IEA, commented, “We have taken steps to move past the extraordinary weather issues that impacted us late in the third quarter and into the fourth quarter of 2018, and I am confident that we are on track to achieve our 2019 guidance. We continue to have momentum across the business and are already seeing early dividends from cross-selling efforts between our legacy business units and the companies we acquired in 2018. At the same time, our integration plans for the 2018 acquisitions are on schedule and we are achieving the cost synergies we had originally forecast. We are building a world-class specialty construction company, and I am looking forward to demonstrating to our shareholders the growth and earnings potential of the businesses we have assembled.”
Mr. Roehm continued, “As we have previously disclosed, the additional costs that we incurred to complete the projects impacted by multiple severe weather events in 2018 constrained our liquidity going into 2019. With record backlog and a large pipeline of opportunities ahead of us, we concluded that it was necessary to raise additional capital to improve our liquidity. To that end, we have secured a $50 million equity commitment agreement with Ares, a leading global alternative asset manager, along with our largest shareholder, Oaktree Capital. This capital will further strengthen our balance sheet and provide us the financial flexibility we need to execute our 2019 business plan, supporting our recent growth and larger, more diversified platform.”
“Our top priorities for the year remain driving organic growth, operational excellence and collaboration across our newly scaled and diversified platform. We are making progress on all fronts, and while there is a lot of work ahead, we remain confident that we can meet and potentially exceed our goals and deliver stronger financial performance in 2019 and over the long term,” Mr. Roehm concluded.
First Quarter Results
Revenue for the first quarter 2019 totaled $190.8 million, up $140.7 million, or 281%, from the first quarter of 2018. The increase was primarily due to the inclusion of $109.9 million from our acquired businesses, as well as year-over-year growth in our wind operations for our top ten projects. On a comparable basis, taking into account the 2018 acquisitions of CCS and William Charles Construction, revenue for the first quarter increased approximately 12% versus the first quarter of 2018.
Cost of revenue totaled $184.0 million, an increase of $130.8 million, compared to the same period in 2018. The increase was primarily due to the 2018 acquisitions and the increased cost to finish remaining projects affected by multiple severe weather events in the fourth quarter of 2018.
Gross profit totaled $6.8 million for the quarter, compared to a negative gross profit of $3.1 million in the first quarter of 2018. The improvement in gross profit was primarily driven by higher revenues and a more profitable mix of business, partially offset by very nominal gross profit on approximately $44 million of revenue from the six weather-impacted projects, which were written down in 2018. The six projects are now substantially complete and no material risk remains to reach final completion on these projects, which is expected to largely run through in the second quarter. As a percentage of revenue, gross profit improved to 3.5% for the quarter as compared to negative 6.2% in the prior-year period. Excluding the impact of the 2018 weather-impacted projects, gross margin in the first quarter was 4.4%.
Selling, general and administrative expenses were $27.8 million for the first quarter, an increase of 63.6% year-over-year. SG&A expenses as a percentage of revenues were 14.5% in the first quarter, compared to 33.8% in the same period in 2018. The dollar increase in SG&A expenses was primarily driven by our larger operating platform as a result of the 2018 acquisitions. SG&A expenses as a percentage of revenue are generally the highest in the first and second quarters of any given calendar year, due to lower seasonal revenue.
Net loss for the quarter was $22.9 million, or $1.06 per diluted share, compared to net loss of $17.4 million, or $0.81 per diluted share, for the prior-year period. Diluted share count for the first quarter of 2019 totaled 22.2 million shares compared to 21.6 million diluted shares in the prior-year period.
Adjusted EBITDA was a loss of approximately $4.7 million for the quarter, an improvement from a loss of $8.9 million in the first quarter of 2018. Adjusted EBITDA in the first quarter of 2019 benefited from the higher margin mix on projects and from positive operating leverage as the Company’s relatively fixed overhead costs were spread over a larger revenue base than in the first quarter of 2018. For a reconciliation of net income to Adjusted EBITDA, please see the tables following results of operations.
Cash used in operations during the first quarter totaled $37.5 million, compared to cash provided by operations of $14.8 million in the first quarter of 2018. The reduction in cash from operations was driven by the higher net loss in the quarter, combined with the impact of the timing of receipts from customers and $43.9 million of payments to vendors, which was partially offset by $8.9 million of change orders collected from customers, related to the wind projects which were impacted by extreme weather in 2018.
As of March 31, 2019, the Company had $47.9 million of total cash and cash equivalents and $345.5 million of debt (excluding capital leases). The Company also had $83.6 million of capital leases.
Preferred Equity Commitment
On May 13, 2019, the Company entered into an equity commitment agreement with a fund managed by the Private Equity Group of Ares Management Corporation and funds managed by Oaktree Capital Management, L.P. Under the terms of the commitment, the funds have agreed to purchase $50 million of newly created Series B Preferred Stock from the Company, subject to certain terms and conditions, including making certain amendments to the Company’s credit agreement and approval of the issuance by NASDAQ. Ares and Oaktree will receive warrants with an exercise price of $.01 per share for the purchase of up to 10% of the Company’s common stock on a fully diluted basis with the opportunity to obtain warrants for up to an additional 6% of the Company’s outstanding fully diluted common stock in the event that the Company fails to meet certain performance targets. Dividends shall be payable quarterly in cash at a rate of 15% per year; provided, however, the Company may elect to accrue dividends in-kind at a rate of 18% per year. The Series B Preferred Stock may be redeemed by the Company under certain terms and conditions prior to its mandatorily redeemable date of February 25, 2025. The transaction is expected to fund on or about May 20, 2019, subject to certain closing conditions. The proceeds from the sale of the Series B Preferred Stock will be used for working capital and to reduce outstanding borrowings under the the revolving senior credit facility. Following the closing of the transaction, Ares will be entitled to appoint one director to the Company’s board of directors. A special committee of the Company’s Board of Directors consisting solely of independent disinterested directors reviewed and approved the terms of the preferred stock issuance.
Amendment to Senior Credit Facility
On May 15, 2019, the Company reached agreement with a majority in interest of its lenders under its senior credit facility to amend such facility effective upon, among other conditions, the Company’s closing of its Series B Preferred Stock financing with proceeds of not less than $50 million. Interest on term loan borrowings for consenting lenders will be increased by 200 basis points, subject to reduction to its previous level upon a reduction in the Company’s first lien leverage. In addition, the first lien leverage to Adjusted EBITDA ratio has been increased for 2019 allowing the Company additional flexibility. The Company has also agreed to provide the lenders with several additional protections, including further limitations on existing negative covenants and limits on the Company’s ability to incur additional debt and make payments on its equity. Investors should review the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 for a more detailed description of the Amendment.
Backlog as of March 31, 2019 totaled $2.2 billion, up from $2.1 billion at the end of the fourth quarter of 2018.
We define “backlog” as the amount of revenue we expect to realize from the uncompleted portions of existing construction contracts, including new contracts under which work has not begun and awarded contracts for which the definitive project documentation is being prepared, as well as revenue from change orders and renewal options.
The Company remains confident in its long-term growth outlook driven primarily by its strong existing backlog, growing pipeline of opportunities and continued strength across all of its end markets. As such, the Company confirmed the guidance that was provided on the year-end earnings conference call.
For the full year 2019, we anticipate revenues in the range of $1.0 billion to $1.2 billion and Adjusted EBITDA to be in the range of $90 million to $110 million. For a reconciliation of Adjusted EBITDA and discussion of further adjustments for cost savings and synergies, please see the appendix to this release.
IEA will hold a conference call to discuss its first quarter 2019 results today, May 16, 2019 at 11:00 a.m. EST. To join the conference call, please dial (877) 407-0784 (domestic) or (201) 689-8560 (international) and ask for the Infrastructure and Energy Alternatives’ First Quarter 2019 Conference Call. To listen via the Internet, please visit the investor section of the Company’s website at www.iea.net at least 15 minutes prior to the start of the call to download and install any necessary audio software. The conference call webcast will also be archived on the Company’s website for thirty days or by dialing 844-512-2921 and providing the replay pin number: 13690918.
Infrastructure and Energy Alternatives, Inc. (IEA) is a leading infrastructure construction company with specialized energy and heavy civil expertise. Headquartered in Indianapolis, Indiana, with operations throughout the country, IEA’s service offering spans the entire construction process. The company offers a full spectrum of delivery models including full engineering, procurement, and construction, turnkey, design-build, balance of plant, and subcontracting services. IEA is one of three Tier 1 wind energy contractors in the United States and has completed more than 200 wind and solar projects across North America. In the heavy civil space, IEA offers a number of specialty services including environmental remediation, industrial maintenance, specialty transportation infrastructure and other site development for public and private projects. For more information, please visit IEA’s website at www.iea.net or follow IEA on Facebook, LinkedIn and Twitter for the latest company news and events.
Forward Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “forecast,” “seek,” “target,” “continue,” “plan,” “intend,” “project,” or other similar words. All statements, other than statements of historical fact included in this press release, regarding our ability to consummate the transactions described herein, expectations for future financial performance, business strategies, expectations for our business, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements. These forward-looking statements are based on information available as of the date of this release and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct. Forward-looking statements should not be relied upon as representing our views as of any subsequent date. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
|Andrew Layman||Financial Profiles, Inc.|
|Chief Financial Officer||Larry Clark, Senior Vice President|
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statement of Operations
($ in thousands, except per share data)
|Three Months Ended|
|Cost of revenue||184,037||53,220|
|Selling, general and administrative expenses||27,754||16,960|
|Loss from operations||(20,981||)||(20,045||)|
|Other expense, net:|
|Interest expense, net||(10,367||)||(851||)|
|Loss before benefit for income taxes||(31,518||)||(20,907||)|
|Benefit for income taxes||8,629||3,515|
|Net loss per common share - basic and diluted||(1.06||)||(0.81||)|
|Weighted average shares - basic and diluted||22,188,757||21,577,650|
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Balance Sheets
($ in thousands, except per share data)
|March 31, 2019||December 31, 2018|
|Cash and cash equivalents||47,917||71,311|
|Accounts receivable, net||143,982||225,366|
|Costs and estimated earnings in excess of billings on uncompleted contracts||59,526||47,121|
|Prepaid expenses and other current assets||16,323||12,864|
|Total current assets||267,748||356,662|
|Property, plant and equipment, net||170,893||176,178|
|Company-owned life insurance||4,056||3,854|
|Deferred income taxes - long term||21,403||11,215|
|Liabilities and Stockholder's Equity (Deficit)|
|Billings in excess of costs and estimated earnings on uncompleted contracts||85,269||62,234|
|Current portion of capital lease obligations||23,424||17,615|
|Term loan - short-term||32,435||32,580|
|Total current liabilities||283,727||364,563|
|Capital lease obligations, net of current maturities||60,156||45,912|
|Commitments and contingencies:|
|Preferred stock, par value, $0.0001 per share; 1,000,000 shares authorized; 34,965 shares and 34,965 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively||34,965||34,965|
|Stockholders' equity (deficit):|
|Common stock, par value, $0.0001 per share; 100,000,000 shares authorized; 22,266,211 and 22,155,271 shares issued and 22,252,489 and 22,155,271 outstanding at March 31, 2019 and December 31, 2018, respectively||2||2|
|Treasury stock, 13,722 shares at cost||(76||)||—|
|Additional paid in capital||5,501||4,751|
|Retained earnings (deficit)||(156,066||)||(135,931||)|
|Total stockholders' equity (deficit)||(150,639||)||(131,178||)|
|Total liabilities and stockholders' equity (deficit)||$||548,986||$||639,228|
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
|Three Months Ended March 31,|
|Cash flows from operating activities:|
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities:|
|Depreciation and amortization||12,017||1,972|
|Amortization of deferred financing charges||1,239||—|
|Share-based compensation expense||1,040||—|
|Loss on sale of equipment||133||—|
|Provision for losses on uncompleted contracts||—||872|
|Deferred income taxes||(8,629||)||(2,567||)|
|Change in operating assets and liabilities:|
|Costs and estimated earnings in excess of billings on uncompleted contracts||(12,405||)||3,685|
|Prepaid expenses and other assets||(3,149||)||(601||)|
|Accounts payable and accrued liabilities||(110,060||)||(16,943||)|
|Billings in excess of costs and estimated earnings on uncompleted contracts||23,032||24,726|
|Net cash provided by (used in) operating activities||(37,547||)||14,845|
|Cash flow from investing activities:|
|Company-owned life insurance||(202||)||(25||)|
|Purchases of property, plant and equipment||(1,908||)||(108||)|
|Proceeds from sale of property, plant and equipment||47||—|
|Net cash used in investing activities||(2,063||)||(133||)|
|Cash flows from financing activities:|
|Proceeds from debt and line of credit||9,400||64,927|
|Payments on debt and line of credit||(16,151||)||(38,447||)|
|Debt issuance costs||—||(2,144||)|
|Payments on capital lease obligations||(4,289||)||(1,304||)|
|Proceeds from stock-based awards, net
|Net cash provided by financing activities||16,216||59|
|Net change in cash and cash equivalents||(23,394||)||14,771|
|Cash and cash equivalents, beginning of the period||71,311||4,877|
|Cash and cash equivalents, end of the period||$||47,917||$||19,648|
|Supplemental disclosure of cash and non-cash transactions:|
|Cash paid for interest||$||9,168||$||853|
|Cash paid for income taxes||$||190||$||—|
|Merger-related contingent consideration||$||—||$||69,373|
|Issuance of common shares||$||—||$||90,282|
|Issuance of preferred shares||$||—||$||34,965|
|Preferred dividends declared||$||525||$||—|
Non-U.S. GAAP Financial Measures
We define EBITDA as net income (loss), determined in accordance with GAAP, for the period presented, before depreciation and amortization, interest expense and provision (benefit) for income taxes. We define Adjusted EBITDA as net income (loss) plus depreciation and amortization, interest expense, provision (benefit) for income taxes, restructuring expenses, acquisition or disposition related expenses, non-cash stock compensation expense, and certain other non-cash charges, unusual, non-operating or non-recurring items and other items that we believe are not representative of our core business or future operating performance.
Adjusted EBITDA is a supplemental non-GAAP financial measure and, when considered along with other performance measures, is a useful measure as it reflects certain drivers of the business, such as revenue growth and operating costs. We believe Adjusted EBITDA can be useful in providing an understanding of the underlying operating results and trends and an enhanced overall understanding of our financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under GAAP, management uses this financial measure to evaluate and forecast business performance. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not consider certain requirements, such as capital expenditures and depreciation, principal and interest payments, and tax payments. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.
The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
The following table outlines the reconciliation from net income (loss) to Adjusted EBITDA for the periods indicated:
|Three Months Ended|
|(in thousands)||March 31,|
|Net income (loss)||$||(22,889||)||$||(17,392||)|
|Interest expense, net||10,367||851|
|Provision (benefit) for income taxes||(8,629||)||(3,515||)|
|Depreciation and amortization||12,017||1,972|
|Transaction costs (1)||—||7,620|
|Diversification SG&A (2)||—||1,187|
|Credit support fees (3)||—||231|
|Consulting fees & expenses (4)||—||159|
|Non-cash stock compensation expense (5)||1,039||—|
|Acquisition integration costs (6)||3,380||—|
The following table outlines the reconciliation from estimated net income (loss) to estimated Adjusted EBITDA for December 31, 2019:
|For the year ended|
|(in thousands)||December 31, 2019|
|Net income (loss)||$||3,600||$||8,600|
|Interest expense, net||26,000||31,000|
|Provision (benefit) for income taxes||1,400||3,100|
|Depreciation and amortization||49,000||55,100|
|Non-cash stock compensation expense (1)||4,000||4,400|
|Acquisition integration costs (2)||6,000||7,800|
The following table outlines the impact to complete the 2018 weather related projects for the first quarter of 2019:
|Three months ended|
|(in thousands)||March 31, 2019|
ex. 2018 Weather
|Cost of Revenue||184,037||43,490||140,547|
|% Gross Margin||3.5||%||0.9||%||4.4||%|