|
Infrastructure and Energy Alternatives, Inc. Announces Second Quarter 2018 Results INDIANAPOLIS
Announces Signing of Definitive Agreement
for Strategic Acquisition of Saiia and The ACC Companies
Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) (“IEA”
or the “Company”), a leading U.S. provider of infrastructure solutions
for the renewable energy, traditional power and civil infrastructure
industries, today announced financial results for the second quarter
ended June 30, 2018.
Highlights
-
Revenue of $174.1 million, up 64% year over year
-
Net income of $4.9 million, up 37% year over year
-
Adjusted EBITDA of $15.5 million, up 28.4% year over year
-
Cash flow from operations of $13.3 million, up 7.5% year over year
-
Backlog of $1.0 billion at June 30, 2018, as compared to $348.0
million at June 30, 2017
-
Announces signing of definitive agreement for the strategic
acquisition of Saiia and ACC Companies, with closing expected end of
third quarter
Management Commentary
JP Roehm, Chief Executive Officer of IEA commented, “We are pleased that
our revenue for the second quarter increased by 64%, reflecting the
continuing strength of our core wind business. Our Adjusted EBITDA,
which increased by 28% year over year after excluding the impact of a
customer settlement announced in Q1, reflects our increased revenue for
the quarter. Revenue and Adjusted EBITDA for the quarter increased year
over year notwithstanding the second quarter of 2017 benefited from two
large wind projects in the final phase of construction, which is when
margins are the highest as execution risks diminish. Our construction
activity for the second quarter of 2018 grew to a record level when
compared to the comparable quarter of prior years and our backlog at the
end of second quarter was at a record level for this point in the year.
“We continue to expect that 2018 will be a record year for the Company.
Nonetheless, the overall effect of the recent delay of commencement of
construction on two of our wind energy projects from late 2018 to early
2019, has caused us to reduce our guidance for revenue, Adjusted EBITDA,
and Adjusted Free Cash Flow for fiscal 2018. We are confident, however,
that revenue that was deferred from the fourth quarter of 2018 will be
recovered in the first quarter of 2019 and thereafter and when coupled
with the strength of our backlog and pipeline, we are very optimistic
about our long-term outlook for our core business and our continued
growth for 2019 and 2020.
“We are proud to have a leading market position in the wind energy
sector, which is expected to remain a high-growth industry in the coming
years, and we have an installed base of tier-one, blue chip customers,
80% of which are repeat clients. Our current backlog of approximately $1
billion is expected to build for 2019 and 2020 by the end of 2018, as a
significant portion of our pipeline of new wind and solar opportunities
traditionally has been converted to backlog during the second half of
the year, providing us with solid revenue visibility into 2019. Looking
to the second half of 2018, which traditionally is the strongest for us,
we expect to see expanding margins as several key projects now
well-underway move towards completion. We remain very focused on
executing our long-term growth strategy to expand our specialized
engineering capabilities and solar construction market share through a
combination of organic growth and strategic acquisitions to create value
for our shareholders,” Mr. Roehm concluded.
Second Quarter Results
Revenue for the second quarter of 2018 totaled $174.1 million, up 64.2%,
or $68 million, from the second quarter 2017. The increase in revenue is
primarily due to the overall strength of the renewable energy project
sector and, to a lesser extent, a number of renewable energy project
starts in the quarter that had been previously postponed due to
uncertainty related to federal tax policy changes.
Cost of revenue for the second quarter was $157.3 million, up 71.3% from
the prior year, primarily due to the larger volume of business in the
quarter and, to a lesser extent, inefficiencies caused by work stoppages
as a result of unusually severe weather conditions in certain portions
of the Midwest and South West regions of the country. Although not
reflected in our results for the quarter, we expect to recover a portion
of the additional charges for weather delays in subsequent quarters
through contractually-entitled change orders with customers that are now
being negotiated.
For the quarter, gross profit was $16.8 million, up 18.3% from the
second quarter of 2017. The increase in gross profit was primarily
driven by the higher revenues, partially offset by a larger increase in
costs. As a percentage of revenue, gross profit declined and totaled
9.7% in the quarter, as compared to 13.4% in the prior-year period. The
decrease in margin was primarily due to a higher number of projects in
the early phase of construction (as margin traditionally is more fully
recognized as projects near completion) and work stoppages due to
extreme weather described above. To a lesser extent, the decrease in
margin also reflected early signs of labor and other cost inflation due
to increasingly robust construction markets across the country during
the second quarter. In addition, gross profit continued to be negatively
impacted due to the previously disclosed customer dispute, both due to
unbilled revenue and costs associated with the project, resulting in a
negative impact of approximately $3.4 million and $8.5 million for the
three and six months periods ended June 30, 2018.
Selling, general and administrative expenses for the second quarter were
$9.2 million, up 9.6% from the second quarter of 2017, primarily driven
by $0.8 million in costs related to the merger with M III Acquisition
Corp. (“the Merger”) and costs related to acquisition activities but
offset by a reduction in credit support fees paid in 2017. Excluding
these costs, SG&A was consistent with the prior-year period.
Net income for the quarter was $4.9 million, or $0.14 per diluted share,
compared to $3.6 million, or $0.17 per diluted share, for the prior-year
period. Weighted-average diluted shares outstanding increased to 34.4
million from 21.6 million year-over-year due to the completion of the
Merger.
Adjusted EBITDA was approximately $15.5 million, up 28.4%. Adjusted
EBITDA for the second quarter of 2017 benefited from the higher margin
on a larger number of projects that were nearing completion during that
period. Adjusted EBITDA includes an adjustment of $3.4 million and $8.5
million for the three and six months ended June 30, 2018 related to the
customer dispute, which adjustment includes revenue for unbilled change
orders as the result of the settlement and costs incurred to complete
the project.
Adjusted EBITDA is a supplemental non-GAAP financial measure and should
not be considered in isolation or as a substitute for, or superior to,
the financial information prepared and presented in accordance with
GAAP. For a full reconciliation of GAAP to non-GAAP results, and an
explanation of the adjustments please refer to the reconciliation table
at the end of this press release.
Cash flow from operations for the second quarter of 2018 totaled $13.3
million, compared to $12.3 million in the second quarter of 2017. The
year-over-year improvement in cash flow from operations was due to
higher net income.
Acquisition of Saiia and The ACC Companies
As an important step in IEA’s long-term diversification and growth
strategy, the Company is pleased to announce an agreement to acquire
Saiia and the ACC Companies (together “ACC”) in an all-cash transaction
for $145 million (subject to customary adjustments), which equates to a
4.3x multiple of projected Adjusted EBITDA of $34 million for 2018
(based upon the midpoint of the range of $32 million to $36 million and
before giving effect to any synergy-related cost savings that may be
realized following its acquisition by IEA). Saiia is a provider of
environmental and industrial site services in the Southeastern U.S. The
ACC Companies are providers of heavy and light civil infrastructure
services in the Mountain West, Southwest and West Coast regions of the
U.S. This acquisition provides the Company with a strong and established
presence in the industrial and environmental engineering markets,
enhanced civil construction capabilities and an expanded domestic
footprint.
“We are very proud to announce the acquisition of ACC, a market leader
in specialty engineering and construction, that is consistent with our
stated strategy to expand IEA’s growth potential through selective,
strategic M&A,” commented Mr. Roehm. “With ACC’s complementary skill
set, labor, and equipment, we can leverage a scaled organization to
provide full turn-key solutions to solve some of the most complex and
critical environmental and infrastructure projects across the country.
Saiia’s long-term, recurring contracts, combined with the ACC Companies
focus on publicly-funded projects, will contribute predictable and
stable revenue streams to our company. Together, we will benefit from an
expanded national footprint, and we see many opportunities to grow IEA’s
current heavy civil and infrastructure contracts through the addition of
the ACC Company’s services.”
“We expect that, upon closing, ACC will add approximately $265 million
to our total backlog, and it will contribute revenue of approximately
$285 million - $300 million and Adjusted EBITDA of approximately $32
million - $36 million in 2018,” Mr. Roehm further stated. “This
acquisition provides IEA with a greater opportunity than ever before for
continued growth and further diversification of our end markets,
customers, and geographic reach, while creating significant value for
our shareholders.”
Saiia specializes in environmental remediation and industrial
maintenance in the power generation, mining and mineral, and pulp and
paper end-markets. The ACC Companies provide heavy and light civil
infrastructure services for public and private projects, including
high-altitude road and bridge construction, complex bridge
rehabilitation and specialty paving as well as highly specialized
engagements for the mining, energy, and waste management industries.
The Company intends to fund the transaction and repay its existing
credit facility with borrowings under a new credit facility, for which
it has obtained a debt commitment letter (which is subject to customary
terms and conditions). The new credit facility includes a $200 million
term loan available to finance the transaction and a $50 million asset
based revolving credit facility. This new credit facility will refinance
and replace the Company’s existing facility. The transaction is expected
to close at the end of the third quarter of 2018, subject to customary
closing conditions.
The Company continues to actively pursue additional M&A opportunities
which, if completed, could offer the opportunity for incremental growth
and diversification during 2018.
Kirkland and Ellis LLP acted as legal counsel to IEA. Jefferies Finance
LLC is providing financing for the transaction on behalf of IEA. Cowen
and Company, LLC acted as the financial advisor to ACC on the
transaction. Hunton Andrews Kurth LLP acted as legal counsel to ACC.
2018 Guidance, Backlog and Business Outlook
For the full year 2018, the Company now expects revenue of $685 million
to $730 million and Adjusted EBITDA of $64 million to $70 million. This
change to prior guidance primarily reflects the delay of commencement of
construction on two projects from the fourth quarter of 2018 to the
first quarter of 2019 and an anticipated reduction in gross margins
caused by higher construction costs and compressed construction
schedules. For a reconciliation of our current guidance to prior
guidance, please see the accompanying tables at the end of this release.
The Company projects adjusted free cash flow from operations of $40
million to $45 million. Fiscal 2018 guidance does not take into account
the acquisition of ACC discussed above or any additional acquisitions
that may occur in the second half of 2018.
The Company currently anticipates that the proposed transaction with ACC
will close on or about the end of the third quarter and will contribute
approximately $55 million - $65 million in revenue and $5 million - $7
million in Adjusted EBITDA to the Company’s fourth quarter financial
results. On a combined basis not giving effect to any estimated cost
savings or synergies, we estimate that the companies would have had
revenue of approximately $970 million to $1 billion and Adjusted EBITDA
of approximately $96 million to $106 million for fiscal year 2018, if
the acquisition had occurred at the start of the year.
Backlog as of June 30, 2018 totaled $1.0 billion, up from $348.0 million
at the end of the second quarter 2017. Nearly half of this backlog, or
approximately $445 million, relates to revenue anticipated to be
recognized in the second half of 2018. This backlog is supported by a
pipeline of more than $1.2 billion of high-probability opportunities
(i.e., project opportunities for which we have been shortlisted and
which we believe we have a high probability of being awarded).
Balance Sheet
As of June 30, 2018, the Company had $23.8 million of total cash and
cash equivalents, $57.2 million of debt (excluding capital leases) and
$16.0 million of availability under its $50.0 million revolving credit
facility and $26.0 million available under its delayed-draw term loan
facility. The Company also had $20.7 million of capital leases.
Conference Call
IEA will hold a conference call to discuss its second quarter 2018
results and the proposed acquisition of the ACC Companies on Thursday,
August 9, 2018 at 11:00 a.m. ET/10:00 a.m. CT. To participate on the
call via telephone, please dial (201) 493-6739 at least ten minutes
prior to the start of the event. IEA will also broadcast the conference
call live via the Internet. Interested parties may access the webcast
through the Investor Relations section of IEA’s website at www.iea.net.
A replay of the conference call with be available on the Company’s
website for 30 days.
About IEA
Infrastructure and Energy Alternatives (IEA) is a leading provider of
infrastructure solutions for the renewable energy, traditional power and
civil infrastructure industries throughout the United States. Currently,
IEA is primarily focused on the wind energy industry and is one of three
Tier 1 providers in the space. IEA specializes in providing complete
engineering, procurement and construction (‘‘EPC’’) services and has
completed more than 200 wind and solar projects in 35 states. IEA offers
design, site development, construction, installation and restoration of
infrastructure services. As of June 30, 2018, IEA held an estimated 30%
U.S. market share.
Forward Looking Statements
This release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. The use of words
such as “anticipate,” “expect,” “could,” “may,” “intend,” “plan” and
“believe,” among others, generally identify forward-looking statements.
These forward-looking statements are based on currently available
operating, financial, economic and other information, and are subject to
a number of risks and uncertainties. Readers are cautioned that these
forward-looking statements are only predictions and may differ
materially from actual future events or results. A variety of factors,
many of which are beyond our control, could cause actual future results
or events to differ materially from those projected in the
forward-looking statements in this release. These factors include the
Company’s ability to identify acquisition candidates, integrate acquired
businesses and realize upon the expected benefits of the acquisition of
ACC; consumer demand; our ability to grow and manage growth profitably;
the possibility that we may be adversely affected by economic, business,
and/or competitive factors; market conditions, technological
developments, regulatory changes or other governmental policy
uncertainty that affects us or our customers; our ability to manage
projects effectively and in accordance with management estimates, as
well as the ability to accurately estimate the costs associated with
ours fixed price and other contracts, including any material changes in
estimates for completion of projects; the effect on demand for our
services and changes in the amount of capital expenditures by customers
due to, among other things, economic conditions, commodity price
fluctuations, the availability and cost of financing, and customer
consolidation; the timing and extent of fluctuations in geographic,
weather and operational factors affecting our customers, projects and
the industries in which we operate; the ability of customers to
terminate or reduce the amount of work, or in some cases, the prices
paid for services, on short or no notice; customer disputes related to
the performance of services; disputes with, or failures of,
subcontractors to deliver agreed-upon supplies or services in a timely
fashion; our ability to replace non-recurring projects with new
projects; the impact of U.S. federal, local, state, foreign or tax
legislation and other regulations affecting the renewable energy
industry and related projects and expenditures; the effect of state and
federal regulatory initiatives, including costs of compliance with
existing and future safety and environmental requirements; fluctuations
in maintenance, materials, labor and other costs; and our beliefs
regarding the state of the renewable wind energy market generally. For a
full description of the risks and uncertainties which could cause actual
results to differ from our forward-looking statements, please refer to
IEA’s periodic filings with the Securities & Exchange Commission
including those described as “Risk Factors” in IEA’s Proxy Statement on
Schedule 14A filed on February 9, 2018. IEA does not undertake any
obligation to update forward-looking statements whether as a result of
new information, future events or otherwise, except as may be required
under applicable securities laws.
|
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC
|
|
Condensed Consolidated Statement of Operations
|
|
($ in thousands)
|
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Revenue
|
|
$
|
174,073
|
|
|
$
|
106,042
|
|
|
$
|
224,208
|
|
|
$
|
158,298
|
|
|
Cost of revenue
|
|
157,274
|
|
|
91,838
|
|
|
210,494
|
|
|
136,030
|
|
|
Gross profit
|
|
16,799
|
|
|
14,204
|
|
|
13,714
|
|
|
22,268
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
9,198
|
|
|
8,395
|
|
|
26,158
|
|
|
14,462
|
|
|
Income (loss) from operations
|
|
7,601
|
|
|
5,809
|
|
|
(12,444
|
)
|
|
7,806
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(1,530
|
)
|
|
(352
|
)
|
|
(2,381
|
)
|
|
(714
|
)
|
|
Other income (expense)
|
|
22
|
|
|
148
|
|
|
11
|
|
|
660
|
|
|
Income (loss) before benefit (provision) for income taxes
|
|
6,093
|
|
|
5,605
|
|
|
(14,814
|
)
|
|
7,752
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit (provision) for income taxes
|
|
(1,178
|
)
|
|
(2,017
|
)
|
|
2,337
|
|
|
(2,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,915
|
|
|
$
|
3,588
|
|
|
$
|
(12,477
|
)
|
|
$
|
4,978
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share - basic
|
|
0.20
|
|
|
0.17
|
|
|
(0.60
|
)
|
|
0.23
|
|
|
Net income (loss) per common share - diluted
|
|
0.14
|
|
|
0.17
|
|
|
(0.60
|
)
|
|
0.23
|
|
|
Weighted average shares - basic
|
|
21,577,650
|
|
|
21,577,650
|
|
|
21,577,650
|
|
|
21,577,650
|
|
|
Weighted average shares - diluted
|
|
34,392,159
|
|
|
21,577,650
|
|
|
21,577,650
|
|
|
21,577,650
|
|
|
|
|
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC
|
|
Condensed Consolidated Balance Sheets
|
|
($ in thousands, except per share data)
|
|
(Unaudited)
|
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
23,793
|
|
|
4,877
|
|
|
Accounts receivable, net of allowances of $216 and $216, respectively
|
|
66,246
|
|
|
60,981
|
|
|
Costs and estimated earnings in excess of billings on uncompleted
contracts
|
|
44,712
|
|
|
18,613
|
|
|
Prepaid expenses and other current assets
|
|
2,361
|
|
|
862
|
|
|
Total current assets
|
|
137,112
|
|
|
85,333
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
31,244
|
|
|
30,905
|
|
|
Goodwill
|
|
3,020
|
|
|
3,020
|
|
|
Company-owned life insurance
|
|
4,314
|
|
|
4,250
|
|
|
Other assets
|
|
10
|
|
|
115
|
|
|
Deferred income taxes - long term
|
|
4,508
|
|
|
3,080
|
|
|
Total assets
|
|
$
|
180,208
|
|
|
$
|
126,703
|
|
|
|
|
|
|
|
|
Liabilities and Stockholder's Equity (Deficit)
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
125,826
|
|
|
70,030
|
|
|
Billings in excess of costs and estimated earnings on uncompleted
contracts
|
|
22,112
|
|
|
7,398
|
|
|
Current portion of capital lease obligations
|
|
6,524
|
|
|
4,691
|
|
|
Term loan - short-term
|
|
3,360
|
|
|
—
|
|
|
Line of credit - short-term
|
|
—
|
|
|
33,674
|
|
|
Total current liabilities
|
|
157,822
|
|
|
115,793
|
|
|
|
|
|
|
|
|
Capital lease obligations, net of current maturities
|
|
14,148
|
|
|
15,899
|
|
|
Long-term debt
|
|
51,835
|
|
|
—
|
|
|
Deferred compensation
|
|
5,263
|
|
|
5,030
|
|
|
Contingent consideration
|
|
69,373
|
|
|
—
|
|
|
Total liabilities
|
|
$
|
298,441
|
|
|
$
|
136,722
|
|
|
|
|
|
|
|
|
Commitments and contingencies:
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value, $0.0001 per share; 1,000,000 shares
authorized; 34,965 shares and 0 shares issued and outstanding at
June 30, 2018 and December 31, 2017, respectively
|
|
34,965
|
|
|
—
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
Common stock, par value, $0.0001 per share; 100,000,000 shares
authorized; 21,577,650 shares issued and outstanding at June 30,
2018 and December 31, 2017, respectively
|
|
2
|
|
|
2
|
|
|
Additional paid in capital
|
|
|
|
—
|
|
|
Retained earnings (deficit)
|
|
(153,200
|
)
|
|
(10,021
|
)
|
|
Total stockholders' equity (deficit)
|
|
(118,233
|
)
|
|
(10,019
|
)
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
180,208
|
|
|
$
|
126,703
|
|
|
|
|
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC
|
|
Condensed Consolidated Statements of Cash Flows
|
|
($ in thousands)
|
|
(Unaudited)
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2018
|
|
2017
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(12,477
|
)
|
|
$
|
4,978
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
3,977
|
|
|
2,149
|
|
|
Amortization of deferred financing charges
|
|
179
|
|
|
—
|
|
|
Profit units compensation expense
|
|
—
|
|
|
27
|
|
|
Gain on sale of equipment
|
|
(16
|
)
|
|
(652
|
)
|
|
Deferred compensation
|
|
234
|
|
|
(211
|
)
|
|
Provision for losses on contract receivables
|
|
230
|
|
|
—
|
|
|
Deferred income taxes
|
|
(1,428
|
)
|
|
114
|
|
|
Other
|
|
—
|
|
|
(187
|
)
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
(5,265
|
)
|
|
32,163
|
|
|
Costs and estimated earnings in excess of billings on uncompleted
contracts
|
|
(26,099
|
)
|
|
(18,181
|
)
|
|
Prepaid expenses and other assets
|
|
(1,453
|
)
|
|
258
|
|
|
Accounts payable and accrued liabilities
|
|
55,795
|
|
|
(26,549
|
)
|
|
Billings in excess of costs and estimated earnings on uncompleted
contracts
|
|
14,484
|
|
|
(8,691
|
)
|
|
Net cash provided by (used in) operating activities
|
|
28,161
|
|
|
(14,782
|
)
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
Company-owned life insurance
|
|
(64
|
)
|
|
(1,524
|
)
|
|
Purchases of property, plant and equipment
|
|
(1,548
|
)
|
|
(899
|
)
|
|
Proceeds from sale of property, plant and equipment
|
|
17
|
|
|
895
|
|
|
Net cash used in investing activities
|
|
(1,595
|
)
|
|
(1,528
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from debt and line of credit
|
|
92,772
|
|
|
—
|
|
|
Payments on debt and line of credit
|
|
(30,840
|
)
|
|
—
|
|
|
Payments on line of credit - short term
|
|
(38,447
|
)
|
|
—
|
|
|
Debt issuance costs
|
|
(2,144
|
)
|
|
—
|
|
|
Payments on capital lease obligations
|
|
(2,627
|
)
|
|
(489
|
)
|
|
Preferred dividends
|
|
(548
|
)
|
|
—
|
|
|
Recapitalization transaction
|
|
(25,816
|
)
|
|
—
|
|
|
Net cash provided by financing activities
|
|
(7,650
|
)
|
|
(489
|
)
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
18,916
|
|
|
(16,799
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the period
|
|
4,877
|
|
|
21,607
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the period
|
|
$
|
23,793
|
|
|
$
|
4,808
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash and non-cash transactions:
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
2,210
|
|
|
$
|
717
|
|
|
Cash paid for income taxes
|
|
$
|
632
|
|
|
$
|
2,753
|
|
|
Acquisition of assets/liabilities through capital lease
|
|
$
|
2,709
|
|
|
$
|
1,550
|
|
|
Merger-related contingent consideration
|
|
$
|
69,373
|
|
|
$
|
—
|
|
|
Issuance of common shares
|
|
$
|
90,282
|
|
|
$
|
—
|
|
|
Issuance of preferred shares
|
|
$
|
34,965
|
|
|
$
|
—
|
|
|
|
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 take into account certain
requirements, such as capital expenditures and related 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. With respect to forecasted Adjusted EBITDA figures
pertaining to ACC and presented herein, because of the timing of the
transaction, the fact that IEA did not derive ACC’s financial
information and the inherent difficulty in forecasting and quantifying
certain amounts that are necessary for reconciliations, including as
impacted by the aforementioned factors, reconciliations for ACC’s
forecasted Adjusted EBITDA figures have not been provided.
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
|
|
Six Months Ended
|
|
(in thousands)
|
|
June 30,
|
|
June 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net income (loss)
|
|
$
|
4,915
|
|
|
$
|
3,588
|
|
|
$
|
(12,477
|
)
|
|
$
|
4,978
|
|
|
Interest expense, net
|
|
1,530
|
|
|
352
|
|
|
2,381
|
|
|
714
|
|
|
Provision (benefit) for income taxes
|
|
1,178
|
|
|
2,017
|
|
|
(2,337
|
)
|
|
2,774
|
|
|
Depreciation and amortization
|
|
2,005
|
|
|
1,192
|
|
|
3,977
|
|
|
2,149
|
|
|
EBITDA
|
|
9,628
|
|
|
7,149
|
|
|
(8,456
|
)
|
|
10,615
|
|
|
Transaction costs (1)
|
|
752
|
|
|
—
|
|
|
8,372
|
|
|
—
|
|
|
Diversification SG&A (2)
|
|
798
|
|
|
904
|
|
|
1,985
|
|
|
1,083
|
|
|
Credit support fees (3)
|
|
—
|
|
|
430
|
|
|
231
|
|
|
855
|
|
|
Consulting fees & expenses (4)
|
|
202
|
|
|
427
|
|
|
361
|
|
|
427
|
|
|
Non-cash stock compensation expense (5)
|
|
—
|
|
|
13
|
|
|
—
|
|
|
27
|
|
|
Merger and acquisition costs (6)
|
|
688
|
|
|
—
|
|
|
688
|
|
|
—
|
|
|
Full year impact of 2017 capital leasing programs (7)
|
|
—
|
|
|
3,133
|
|
|
—
|
|
|
3,133
|
|
|
Settlement of customer project dispute (8)
|
|
3,413
|
|
|
—
|
|
|
8,500
|
|
|
—
|
|
|
Adjusted EBITDA
|
|
$
|
15,481
|
|
|
$
|
12,056
|
|
|
$
|
11,681
|
|
|
$
|
16,140
|
|
|
|
|
(1)
|
|
Transaction costs-include legal, consulting, filing and other
costs associated with the acquisition of IEA Energy Services by
MIII Acquisition Corporation and the subsequent public listing of
IEA securities on the NASDAQ stock exchange.
|
|
|
|
|
|
|
|
|
|
(2)
|
|
Diversification selling, general and administrative-reflects the
costs, including recruiting, compensation and benefits for
additional personnel, associated with IEA beginning to expand into
electrical transmission work and corresponding services, which
were historically subcontracted to third parties, U.S. utility
scale solar, and heavy civil infrastructure. These costs currently
do not have corresponding revenue, but management anticipates
revenue to fiscal 2018.
|
|
|
|
|
|
|
|
|
|
(3)
|
|
Credit support fees-reflect payments to Oaktree for its guarantee
of certain borrowings, which guarantees are not expected to
continue post-combination.
|
|
|
|
|
|
|
|
|
|
(4)
|
|
Consulting fees and expenses- represents consulting and
professional fees and expenses in connection with the Merger.
|
|
|
|
|
|
|
|
|
|
(5)
|
|
Non-cash stock compensation expenses-represents non-cash stock
compensation expense.
|
|
|
|
|
|
|
|
|
|
(6)
|
|
Merger and acquisition costs - include legal, consulting, travel
and other costs associated with acquisition activity.
|
|
|
|
|
|
|
|
|
|
(7)
|
|
Reflects the annualization of the impact on EBITDA of the capital
leasing program for cranes and yellow iron, which was implemented
in 2017, consisting of a (i) positive adjustment due to the
elimination of cost of goods sold attributable to operating lease
payments, (ii) reduction in cost of goods due to estimated and
operational efficiencies resulting from the program, and (iii)
representing a pro rata portion of the estimated gain due to
estimated future residual value exceeding depreciated carrying
value on the sale of the leased assets following the 48 month term
of the lease.
|
|
|
|
|
|
|
|
|
|
(8)
|
|
Settlement of customer project dispute-related to a dispute
regarding the costs to be incurred to complete a project and the
loss of revenue related to unbilled change orders. The three and
six months ended June 30, 2018, regarding the costs to finish the
project were $0.9 million and $5.6 million respectively. The loss
of revenue related to unbilled changed orders for the three and
six months ended June 30, 2018, was $2.5 million and $2.9 million,
respectively. The add back reflects the associated negative impact
to gross margin. While IEA believed it had a strong legal position
to support the charges, management determined that it was in the
best interests of the Company to settle the dispute, retain the
important customer relationship and secure the award of an
additional Wind energy project with the customer, which will be
built in 2018.
|
|
|
|
|
The following table outlines the reconciliation from projected net
income to projected Adjusted EBITDA for the periods indicated using
relevant estimated figures:
|
|
|
Previous
|
|
Current
|
|
|
|
Year Ending December 31,
|
|
Year Ending December 31,
|
|
|
|
2018
|
|
2018
|
|
|
|
|
|
High
|
|
|
|
High
|
|
(in thousands)
|
|
Low Estimate
|
|
Estimate
|
|
Low Estimate
|
|
Estimate
|
|
Net income
|
|
$
|
42,700
|
|
|
$
|
47,500
|
|
|
$
|
21,700
|
|
|
$
|
25,200
|
|
Interest expense, net (1)
|
|
1,400
|
|
|
1,500
|
|
|
5,500
|
|
|
5,700
|
|
Provision for income taxes (1)
|
|
13,700
|
|
|
16,200
|
|
|
6,300
|
|
|
7,100
|
|
Depreciation and amortization (1)
|
|
7,000
|
|
|
7,000
|
|
|
8,000
|
|
|
8,500
|
|
EBITDA
|
|
64,800
|
|
|
72,200
|
|
|
41,500
|
|
|
46,500
|
|
Diversification SG&A (2)
|
|
1,200
|
|
|
1,900
|
|
|
2,000
|
|
|
2,400
|
|
Credit Support (3)
|
|
230
|
|
|
230
|
|
|
230
|
|
|
230
|
|
Consulting Fees & Expenses (4)
|
|
170
|
|
|
170
|
|
|
370
|
|
|
970
|
|
Transaction costs (5)
|
|
7,600
|
|
|
8,000
|
|
|
8,400
|
|
|
8,400
|
|
Merger and Acquisition costs (6)
|
|
$
|
1,000
|
|
|
$
|
2,500
|
|
|
$
|
3,000
|
|
|
$
|
3,000
|
|
Settlement of customer project dispute (7)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,500
|
|
|
$
|
8,500
|
|
Adjusted EBITDA
|
|
$
|
75,000
|
|
|
$
|
85,000
|
|
|
$
|
64,000
|
|
|
$
|
70,000
|
|
|
|
(1)
|
|
The Company’s previous guidance had estimated ranges for interest
expense, provision for income taxes and depreciation and
amortization expense. These estimates have been changed in the
updated guidance due to the following;
|
|
|
|
|
|
-
Interest expense increase is related to the amount of expected
borrowing for the remainder of the year based on current six
month ended June 30, 2018 results,
|
|
|
|
|
|
-
Provision for income tax decrease is related to lower net income
coupled with a decrease in the effective tax rate, and
|
|
|
|
|
|
-
Depreciation and amortization increase is related to an increase
in equipment related to capital leases and capital expenditures
|
|
|
|
(2)
|
|
Diversification selling, general and administrative-reflects the
costs, including recruiting, compensation and benefits for
additional personnel, associated with IEA beginning to expand into
electrical transmission work and corresponding services, which
were historically subcontracted to third parties, U.S. utility
scale solar, and heavy civil infrastructure. These costs currently
do not have corresponding revenue, but management anticipates
revenue to fiscal 2018.
|
|
|
|
|
|
|
|
|
|
(3)
|
|
Credit support fees-reflect payments to Oaktree for its guarantee
of certain borrowings, which guarantees are not expected to
continue post-combination.
|
|
|
|
|
|
|
|
|
|
(4)
|
|
Consulting fees and expenses-represents consulting and
professional fees and expenses in connection with the Merger.
|
|
|
|
|
|
|
|
|
|
(5)
|
|
Transaction costs-include legal, consulting, filing and other
costs associated with the acquisition of IEA Energy Services by
MIII Acquisition Corporation and the continued listing of the
combined company’s securities on the NASDAQ stock exchange.
|
|
|
|
|
|
|
|
|
|
(6)
|
|
Merger and Acquisition costs-include legal, consulting, travel and
other costs associated with acquisition activity.
|
|
|
|
|
|
|
|
|
|
(7)
|
|
Settlement of customer project dispute-related to a dispute
regarding the $5.6 million in costs to be incurred to complete a
project and the loss of revenue related to unbilled changed orders
of $2.9 million for that specific project. The add back reflects
the associated negative impact to gross margin. While IEA believed
it had a strong legal position to support the charges, management
determined that it was in the best interests of the Company to
settle the dispute, retain the important customer relationship and
secure the award of an additional Wind energy project with the
customer, which will be built in 2018.
|
|
|
|
|
The following table outlines the reconciliation from projected Adjusted
EBITDA to projected Adjusted Free Cash Flow for the periods indicated
using relevant estimated figures:
|
|
|
Previous
|
|
Current
|
|
|
|
Year Ending December 31,
|
|
Year Ending December 31,
|
|
|
|
2018
|
|
2018
|
|
(in thousands)
|
|
Low Estimate
|
|
|
High Estimate
|
|
Low Estimate
|
|
High Estimate
|
|
Adjusted EBITDA
|
|
$
|
75,000
|
|
|
|
$
|
85,000
|
|
|
$
|
64,000
|
|
|
$
|
70,000
|
|
|
Less adjustments:
|
|
|
|
|
|
|
|
|
|
|
Capital lease payments
|
|
7,000
|
|
|
|
7,000
|
|
|
8,000
|
|
|
8,000
|
|
|
Capital expenditures
|
|
300
|
|
|
|
300
|
|
|
4,200
|
|
|
4,200
|
|
|
Interest expense, net
|
|
1,400
|
|
|
|
1,500
|
|
|
5,500
|
|
|
5,700
|
|
|
Provision for income taxes
|
|
13,700
|
|
|
|
16,200
|
|
|
6,300
|
|
|
7,100
|
|
|
Adjusted Free Cash Flow
|
|
$
|
52,600
|
|
(1)
|
|
$
|
60,000
|
|
|
$
|
40,000
|
|
|
$
|
45,000
|
|
(1) Original low range of the guidance was rounded to $50.0 million.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180809005393/en/ Copyright Business Wire 2018
Source: Business Wire
(August 9, 2018 - 8:30 AM EDT)
News by QuoteMedia
www.quotemedia.com
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