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INDIANAPOLIS, Nov. 12, 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 financial results for the third quarter ended September 30, 2019.
Third Quarter Highlights
Subsequent Events
Management Commentary
JP Roehm, Chief Executive Officer of the Company, commented, “We are very pleased with our financial and operational performance for the third quarter and are encouraged by the significant contract awards that we continue to secure across all of our business units, particularly the multiple new wind energy project awards that our renewable energy group has won in the last six months. These significant projects are indicative of an enduring shift to clean energy across North America that we believe will drive demand for our services for many years to come.
“Furthermore, our recently announced equity financing transactions will reduce our outstanding debt and significantly improve our liquidity, putting us on solid footing to execute our business plan going forward. We appreciate the support of Ares and Oaktree, as well as our public equity investors and our lenders.
“Our pipeline and backlog remain healthy across all of our businesses, giving us confidence that we will continue to drive revenue growth through the final months of 2019 and providing us strong visibility into 2020 and beyond with expectations for continued solid momentum,” concluded Mr. Roehm.
Third Quarter Results
Revenue for the third quarter of 2019 totaled $422.0 million, up $142.7 million, or 51%, from the third quarter of 2018. The increase was primarily due to the inclusion of $159.7 million from our acquired businesses, partially offset by a $20.0 million year-over-year decline in our Renewables operations due to certain project timelines being delayed. On a comparable basis, taking into account the 2018 acquisitions of Consolidated Construction Solutions (“CCS”) and William Charles Construction Group (“William Charles”), revenue for the third quarter was down from pro forma revenue of $446.6 million in the third quarter of 2018. During the current year quarter, revenue from our Renewables and our Specialty Civil segments represented 57.5% and 42.5% of total revenue, respectively.
Cost of revenue totaled $369.2 million, an increase of $116.9 million, compared to the same period in 2018. The increase was primarily due to $136.8 million of costs related to the 2018 acquisitions, partially offset by a decrease in costs related to our Renewables operations of $22.5 million due to the timing of projects year-over-year.
Gross profit totaled $52.9 million for the quarter, compared to gross profit of $27.0 million in the third quarter of 2018. As a percentage of revenue, gross profit increased to 12.5%, as compared to 9.7% in the prior-year period. The Company's gross profit margin increased primarily due to higher margins on our Specialty Civil segment coupled with margin increases related to self-performing electric work on renewable projects.
Selling, general and administrative expenses were $31.3 million for the third quarter, an increase of 85% year-over-year. SG&A expenses as a percentage of revenues were 7.4% in the third quarter, compared to 6.1% in the third quarter of 2018. Both the dollar and percentage increase in SG&A expenses were primarily driven by our larger operating platform due in part to the 2018 acquisitions, and were partially offset by a decrease in merger and acquisition costs.
The effective tax rates for the period ended September 30, 2019 and 2018 were (4.6%) and 13.2%, respectively. The lower effective tax rate in the third quarter of 2019 is primarily attributable to interest accrued for the Series B Preferred Stock, which is not deductible for federal and state income taxes.
Net income for the quarter was $12.6 million, or $0.24 per diluted share compared to net income of $5.7 million, or $0.23 per share in the third quarter of 2018.
Adjusted EBITDA was $38.7 million for the quarter, as compared to pro forma adjusted EBITDA of $37.9 million in the third quarter of 2018. As a percentage of revenue, Adjusted EBITDA increased to 9.2%, as compared to 8.5% in the prior-year period. This increase was primarily the result of the higher gross margins as explained above. For a reconciliation of net income to Adjusted EBITDA, please see the tables following the results of operations.
Cash provided by operations during the third quarter totaled $5.3 million, compared to $3.4 million in the third quarter of 2018. The slight increase in cash from operations was primarily driven by the higher net income and the impact of the timing of receipts from customers and payments to vendors.
Balance Sheet
As of September 30, 2019, the Company had $43.2 million of cash and cash equivalents and total debt of $385.6 million, which consisted of $277.7 million outstanding under its credit facility, $104.1 million of Series B Preferred Stock and $3.8 million of commercial equipment loans. At the end of the third quarter, the Company had $29.0 million of availability under the credit facility.
Backlog
Backlog as of September 30, 2019 totaled $2.6 billion, consistent with backlog at the end of the second quarter of 2019.
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 the impact of change orders and renewal options.
Outlook
Given that we were able to begin work on several projects in the fourth quarter of 2019 that we had forecasted for 2020 starts, we are increasing our revenue estimate for 2019. We now anticipate full year 2019 revenues to be in the range of $1.3 billion to $1.4 billion. The increase in our 2019 forecasted revenue does not include a meaningful margin contribution as this new work is early in the project cycle, therefore our guidance for full year Adjusted EBITDA remains unchanged and is expected 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.
Conference Call
IEA will hold a conference call to discuss its third quarter 2019 results today, November 12, 2019 at 11:00 a.m. Eastern Time. To join the conference call, please dial (877) 407-0784 (domestic) or (201) 689-8560 (international) and ask for Infrastructure & Energy Alternatives’ Third Quarter 2019 Conference Call. To listen via the Internet, please visit the investor section of the Company’s website at https://ir.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 30 days or by dialing 844-512-2921 and providing the PIN code: 13695764.
About IEA
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.
Additional Information
This press release is not a proxy statement or solicitation of a proxy, consent or authorization with respect to any proposed transaction, and shall not constitute an offer to sell or a solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended (the “Securities Act”), or an applicable exemption.
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 expectations for the use of offering proceeds, 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.
Contact
Andrew Layman | Financial Profiles, Inc. |
Chief Financial Officer | Larry Clark, Senior Vice President |
Andrew.Layman@iea.net | lclark@finprofiles.com |
765-828-2580 |
310-622-8223 |
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statement of Operations
($ in thousands, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue | $ | 422,022 | $ | 279,279 | $ | 940,793 | $ | 503,487 | |||||||
Cost of revenue | 369,152 | 252,271 | 849,728 | 462,765 | |||||||||||
Gross profit | 52,870 | 27,008 | 91,065 | 40,722 | |||||||||||
Selling, general and administrative expenses | 31,313 | 16,964 | 84,945 | 43,122 | |||||||||||
Income (loss) from operations | 21,557 | 10,044 | 6,120 | (2,400 | ) | ||||||||||
Other income (expense), net: | |||||||||||||||
Interest expense, net | (13,959 | ) | (1,579 | ) | (35,822 | ) | (3,960 | ) | |||||||
Other income (expense) | 4,455 | (1,859 | ) | 22,557 | (1,848 | ) | |||||||||
Income (loss) before benefit for income taxes | 12,053 | 6,606 | (7,145 | ) | (8,208 | ) | |||||||||
Benefit (provision) for income taxes | 556 | (870 | ) | 3,073 | 1,467 | ||||||||||
Net income (loss) | $ | 12,609 | $ | 5,736 | $ | (4,072 | ) | $ | (6,741 | ) | |||||
Net income (loss) per common share - basic | 0.37 | 0.24 | (1.44 | ) | (0.36 | ) | |||||||||
Net income (loss) per common share - diluted | 0.24 | 0.23 | (1.44 | ) | (0.36 | ) | |||||||||
Weighted average shares - basic | 20,446,811 | 21,577,650 | 20,425,801 | 21,577,650 | |||||||||||
Weighted average shares - diluted | 35,419,432 | 25,100,088 | 20,425,801 | 21,577,650 | |||||||||||
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Balance Sheets
($ in thousands, except per share data)
(Unaudited)
September 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | 43,174 | 71,311 | |||||
Accounts receivable, net | 244,465 | 225,366 | |||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 109,540 | 47,121 | |||||
Prepaid expenses and other current assets | 18,533 | 12,864 | |||||
Total current assets | 415,712 | 356,662 | |||||
Property, plant and equipment, net | 151,784 | 176,178 | |||||
Goodwill | 37,373 | 40,257 | |||||
Intangibles | 40,626 | 50,874 | |||||
Company-owned life insurance | 3,935 | 3,854 | |||||
Other assets | 550 | 188 | |||||
Deferred income taxes | 15,847 | 11,215 | |||||
Total assets | $ | 665,827 | $ | 639,228 | |||
Liabilities and Stockholder's Equity (Deficit) | |||||||
Current liabilities: | |||||||
Accounts payable | 126,484 | 158,075 | |||||
Accrued liabilities | 131,170 | 94,059 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 71,814 | 62,234 | |||||
Current portion of capital lease obligations | 24,640 | 17,615 | |||||
Current portion of long-term debt | 31,119 | 32,580 | |||||
Total current liabilities | 385,227 | 364,563 | |||||
Capital lease obligations, net of current maturities | 49,268 | 45,912 | |||||
Long-term debt, less current portion | 226,606 | 295,727 | |||||
Debt - Series B Preferred Stock | 76,766 | — | |||||
Series B Preferred Stock - warrant obligations | 4,223 | — | |||||
Deferred compensation | 8,077 | 6,157 | |||||
Contingent consideration | — | 23,082 | |||||
Total liabilities | $ | 750,167 | $ | 735,441 | |||
Commitments and contingencies: | |||||||
Series A Preferred Stock, par value, $0.0001 per share; 1,000,000 shares authorized; 34,965 shares and 34,965 shares issued and outstanding at September 30, 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; 20,460,533 and 22,155,271 shares issued and 20,446,811 and 22,155,271 outstanding at September 30, 2019 and December 31, 2018, respectively | 2 | 2 | |||||
Treasury stock, 13,722 shares at cost | (76 | ) | — | ||||
Additional paid in capital | 18,018 | 4,751 | |||||
Retained earnings (deficit) | (137,249 | ) | (135,931 | ) | |||
Total stockholders' equity (deficit) | (119,305 | ) | (131,178 | ) | |||
Total liabilities and stockholders' equity (deficit) | $ | 665,827 | $ | 639,228 | |||
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
Nine Months Ended September 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (4,072 | ) | $ | (6,741 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 36,373 | 6,591 | |||||
Contingent consideration fair value adjustment | (23,082 | ) | — | ||||
Amortization of debt discounts and issuance costs | 3,765 | 357 | |||||
Share-based compensation expense | 2,812 | 500 | |||||
(Gain) loss on sale of equipment | 743 | 28 | |||||
Deferred compensation | 1,494 | 313 | |||||
Paid-in-kind interest | 4,135 | — | |||||
Deferred income taxes | (3,073 | ) | (577 | ) | |||
Change in operating assets and liabilities: | |||||||
Accounts receivable | (19,108 | ) | (72,895 | ) | |||
Costs and estimated earnings in excess of billings on uncompleted contracts | (62,419 | ) | (46,030 | ) | |||
Prepaid expenses and other assets | (5,938 | ) | (1,489 | ) | |||
Accounts payable and accrued liabilities | 3,317 | 131,682 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 9,580 | 19,896 | |||||
Net cash provided by (used in) operating activities | (55,473 | ) | 31,635 | ||||
Cash flow from investing activities: | |||||||
Company-owned life insurance | (81 | ) | (156 | ) | |||
Purchases of property, plant and equipment | (5,599 | ) | (2,445 | ) | |||
Proceeds from sale of property, plant and equipment | 7,266 | 40 | |||||
Acquisition of business, net of cash acquired | — | (106,579 | ) | ||||
Net cash provided by (used in) investing activities | 1,586 | (109,140 | ) | ||||
Cash flows from financing activities: | |||||||
Proceeds from long-term debt | 50,400 | 381,272 | |||||
Payments on long-term debt | (121,215 | ) | (139,501 | ) | |||
Payments on line of credit - short term | — | (38,447 | ) | ||||
Extinguishment of debt | — | (51,762 | ) | ||||
Debt financing fees | (14,738 | ) | (12,675 | ) | |||
Payments on capital lease obligations | (15,953 | ) | (4,284 | ) | |||
Sale-leaseback transaction | 24,343 | — | |||||
Preferred dividends | — | (548 | ) | ||||
Proceeds from issuance of stock - Series B Preferred Stock | 100,000 | — | |||||
Proceeds from stock-based awards, net | 159 | — | |||||
Merger recapitalization transaction | 2,754 | (25,816 | ) | ||||
Net cash provided by (used in) financing activities | 25,750 | 108,239 | |||||
Net change in cash and cash equivalents | (28,137 | ) | 30,734 | ||||
Cash and cash equivalents, beginning of the period | 71,311 | 4,877 | |||||
Cash and cash equivalents, end of the period | $ | 43,174 | $ | 35,611 | |||
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 | Nine Months Ended | ||||||||||||||
(in thousands) | September 30, | September 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) | $ | 12,609 | $ | 5,736 | $ | (4,072 | ) | $ | (6,741 | ) | |||||
Interest expense, net | 13,959 | 1,579 | 35,822 | 3,960 | |||||||||||
Provision (benefit) for income taxes | (556 | ) | 870 | (3,073 | ) | (1,467 | ) | ||||||||
Depreciation and amortization | 12,572 | 2,614 | 36,373 | 6,591 | |||||||||||
EBITDA | 38,584 | 10,799 | 65,050 | 2,343 | |||||||||||
Diversification SG&A (1) | — | 911 | — | 2,896 | |||||||||||
Credit support fees (2) | — | — | — | 231 | |||||||||||
Consulting fees & expenses (3) | — | 72 | — | 433 | |||||||||||
Non-cash stock compensation expense (4) | 1,052 | 500 | 2,813 | 500 | |||||||||||
Transaction costs (5) | — | 149 | — | 8,521 | |||||||||||
Merger and acquisition costs (6) | — | 6,914 | — | 7,602 | |||||||||||
Acquisition integration costs (7) | 2,130 | — | 8,728 | — | |||||||||||
Loss on extinguishment of debt (8) | — | 1,835 | — | 1,835 | |||||||||||
Settlement of customer project dispute (9) | — | — | — | 8,500 | |||||||||||
Contingent consideration fair value adjustment (10) | (4,247 | ) | — | (23,082 | ) | — | |||||||||
Project settlement legal fees (11) | 1,186 | — | 1,186 | — | |||||||||||
Adjusted EBITDA | $ | 38,705 | $ | 21,180 | $ | 54,695 | $ | 32,861 | |||||||
Pro forma adjustment for 2018 acquisitions | — | 16,736 | — | 33,953 | |||||||||||
Adjusted Pro forma EBITDA | $ | 38,705 | $ | 37,916 | $ | 54,695 | $ | 66,814 | |||||||
Revenue | $ | 422,022 | $ | 279,279 | $ | 940,793 | $ | 503,487 | |||||||
Pro forma adjustment for 2018 acquisitions | — | 167,278 | — | 445,056 | |||||||||||
Adjusted Pro forma revenue | $ | 422,022 | $ | 446,557 | $ | 940,793 | $ | 948,543 | |||||||
Adjusted EBITDA margin | 9.2 | % | 7.6 | % | 5.8 | % | 6.5 | % | |||||||
Adjusted Pro forma EBITDA margin | — | % | 8.5 | % | — | % | 7.0 | % | |||||||
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 | ||||||
Low | High | ||||||
Net income (loss) | $ | 2,000 | $ | 9,100 | |||
Interest expense, net | 50,000 | 52,000 | |||||
Depreciation and amortization | 47,500 | 49,500 | |||||
Provision (benefit) for income taxes | (2,000 | ) | (1,000 | ) | |||
EBITDA | 97,500 | 109,600 | |||||
Non-cash stock compensation expense (1) | 4,000 | 4,400 | |||||
Acquisition integration costs (2) | 10,400 | 12,100 | |||||
Contingent consideration fair value adjustment (3) | (23,100 | ) | (17,500 | ) | |||
Project settlement legal fees (4) | 1,200 | 1,400 | |||||
Adjusted EBITDA | $ | 90,000 | $ | 110,000 | |||