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| EX-99.1 - EARNINGS RELEASE Q3 2018 - Infrastructure & Energy Alternatives, Inc. | earningsrelease3rdqtr2018.htm |
| 8-K - Q3 2018 EARNINGS RELEASE - Infrastructure & Energy Alternatives, Inc. | a8-k3rdquarterersept2018.htm |
Third Quarter 2018 Results November 8, 2018
DISCLAIMER This presentation includes “forward looking statements” (within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “forecast,” “intend,” “seek,” “target,” “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward looking statements include projected financial information. Such forward looking statements with respect to projections, revenues, earnings, performance, strategies, prospects and other aspects of the businesses of Infrastructure and Energy Alternatives, Inc. (the “Company” or “IEA”) are based on current expectations that are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward looking statements. These factors include, but are not limited to: (1) the ability to realize financial and strategic goals from acquisition and investment activity, including the ability to integrate acquired businesses; (2) 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; (3) the effect on demand for our services and changes in the amount of capital expenditures by customers; (4) significant changes in tax and other economic incentives and political and governmental policies which could materially and adversely affect the U.S. wind and solar industries; (5) substantial liabilities that could result from physical hazards; (6) the inability to operate efficiently if we are unable to attract and retain qualified managers and skilled employees; (7) variability in quarterly results due seasonality, spending patterns of our customers and adverse weather conditions, particularly during the winter season; and (8) adverse effects on our financial results from project delays and the completion time of contracts. 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 and Exchange Commission ("SEC") including those described as “Risk Factors” in IEA’s Proxy Statement on Schedule 14A filed on February 9, 2018 (the "Proxy Statement"). You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company does not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. This presentation includes information based on independent industry publications and other sources. You should not construe the contents of this presentation as legal, accounting, business or tax advice and you should consult your own professional advisors as to the legal, accounting, business, tax, financial or other matters contained herein. The estimates, forecasts and projections contained herein involve significant elements of subjective judgment and analysis and reflect numerous judgments, estimates and assumptions that are inherently uncertain in prospective financial information of any kind. As such, no representation can be made as to the attainability of such estimates, forecasts and projections. Investors are cautioned that such estimates, forecasts or projections have not been audited and have not been prepared in conformance with generally accepted accounting principles. For a listing of risks and other factors that could impact the combined company’s ability to attain its projected results, please refer to the “forward looking statements” above and the “Risk Factors” section of the Proxy Statement. This presentation includes projections that are forward-looking and based on growth assumptions that are inherently subject to significant uncertainties and contingencies, many of which are beyond IEA’s control. While all projections are necessarily speculative, IEA believes that projections relating to periods beyond 12 months from their date of preparation carry increasingly higher levels of uncertainty and should be read in that context. There will be differences between actual and projected results, and actual results may be materially greater or materially less than those contained in the projections. This presentation includes non-GAAP financial measures. Definitions of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this presentation. IEA believes that these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to IEA’s financial condition and results of operations. A more fulsome description of the nature of the adjustments from GAAP is provided elsewhere in this presentation. These non-GAAP financial measures may exclude items that are significant in understanding and assessing financial results. Therefore, these financial measures should not be considered in isolation or as an alternative to net income or other measures of profitability or performance under GAAP. Because these non-GAAP financial measures are not in conformity with GAAP, we urge you to review IEA’s audited financial statements, which have been filed with the SEC. 1
IEA OVERVIEW AND HIGHLIGHTS
COMPANY OVERVIEW IEA is a leading diversified infrastructure NASDAQ: IEA construction company with specialized Headquarters: Indianapolis, IN energy and heavy civil expertise As of 6/30/18 Incorporated:NASDAQ: 1947 IEA(as White Construction) Public: MarchHeadquarters: 2018 Indianapolis, IN • Tier 1 provider of U.S. wind energy construction; Employees: Incorporated:~ 2,400 1947 (as White Construction) estimated 30% market share March 2018 Market cap:Public: $226.6M − 200+ utility-scale wind & solar projects Employees: ~ 1,500 Basic Shares outstanding: 21.6M completed Market cap: $200.9M − 8,000+ wind turbines erected Diluted SharesBasic outstanding: Shares outstanding: 34.1M 21.6M representing >14 Gigawatts of generation capacity 2018 Q3 revenues:Diluted Shares $279.3M outstanding: 34.4M 2018 Q2 revenues: $174.1M(1) • Heavy civil and industrial projects 2018 Q3 Adj EBITDA: $21.2M 2018 Q2 Adj EBITDA: $15.5M(1) • 2018 Q3 net income: $5.7M Leading national provider of rail civil 2018 Q2 net income: $4.9M infrastructure with limited competition Backlog: $1.3B(2) Backlog: $1.0B(2) • Growing presence in utility-scale solar − >750 Megawatts of solar power installed Information above as of September 30, 2018 (1) Non-GAAP measure; see slide 14 for a definition of Adj. EBITDA and a reconciliation to net income. (2) Backlog means the amount of revenue expected to be realized from the uncompleted portions of existing awards and contracts, including any contracts under which work has not begun and any 3 awarded contracts for which the definitive project documentation is being prepared, as well as expected revenue from change orders and renewal options.
IEA HIGHLIGHTS • IEA Went Public on March 26, 2018 – provides IEA with entry into the public markets and create future growth through strategic acquisitions • New Credit Facility - $300M term loan and $50M revolver • Acquisition of CCS, including Saiia and the ACC Companies – provides IEA with entry into the environmental and remediation industry and diversifies our geographical locations for construction projects • Acquisition of William Charles Construction Group, including Ragnar Benson – provides IEA with entry into the rail civil infrastructure construction industry. Further enhances our geographic footprint and expands our environmental remediation, heavy civil and light civil infrastructure presence. • Combined Backlog of more than $1.8 billion(1) - provides excellent visibility into 2019 and beyond Other, 4% Mining, 3% IEA Before P & E, 6% IEA After Solar, 3% Wind, 88% Rail, 13% P & P, 2% Diversified Transportation, 6% Wind, 42% Transportation, 26% Solar, 6% (1) Backlog data as of September 30, 2018 and includes an estimated $520M for William Charles as of May 31, 2018. See slide 3 for definition of backlog. 44 (2) IEA revenue percentages in the graphs are based on management estimates for 2018 revenue split. “IEA Before” refers to IEA excluding any acquisitions and “IEA After” refers to IEA inclusive of acquisitions.
STRATEGIC RATIONALE FOR ACQUISTIONS Entry into Rail and Environmental Remediation Markets Provides additional end market diversification William Charles has a national, market-leading platform in the attractive rail market with limited competition Provides entry into the environmental remediation market, which is a natural extension for IEA services with existing utility customers IEA gains long-term relationships with stable, blue chip customers Expansion of Heavy and Light Civil Infrastructure Facilitates capture of greater portion of heavy and light civil infrastructure market including the market leader of rail transport and specialty paving Expands IEA equipment fleet and resources which are leverageable across the platform Broadening of Geographic Footprint Broadens IEA’s footprint into the less-seasonal Southeast, West and Southwest U.S. markets Expansion of IEA’s Capabilities of Outsourced Services to Clients Offers cross-selling opportunities and additional strategic abilities to utilize other areas of IEA Strong Cultural Fit with Proven Management Teams Strong cultural fit with IEA (entrepreneurial, safety-focused, preferred employer, dedication to quality and customer service) Well-respected, proven, successful and experienced management teams IEA Provides Enhanced Financial Support to Take Advantage of Growth Opportunities Strong growth and margin profiles and can leverage expanded opportunities in the rail, environmental and civil infrastructure markets 5
COMBINED BUSINESS OVERVIEW ($Millions) Consolidated Construction Solutions (“CCS”) - Current - New Industry Renewable Civil & Environmental Rail Diversified Specializes in the design Leading environmental and Provides heavy and light civil Leading heavy civil A scaled, highly diversified and construction of wind industrial services company infrastructure services for both contractor with broad self- engineering and Company and solar electric energy offering comprehensive on-site public and private projects perform capabilities, construction services firm generating facilities services to industrial markets in across the United States including electrical, and with attractive and growing Overview the Southeastern United States extensive experience end markets with market servicing the rail industry leadership in niche civil and energy markets Transportation Others Transportation Solar Pulp & Paper Solar 6% Pulp & Paper 2% 100% Other Mining 3% 2% 6% 17% 16% 3% Power & Other Wind Rail Wind Energy 5% 42% Revenue by 88% 54% 49% (1) Power End Market & Energy Transportation Rail Mining 6% 35% 13% 27% Transportation 26% $315 $1,315 $292 2018E Revenue $708 Bridge (2) $329 $1,073 $462 $1,814 $91 $520 $944 $221 $578 $254 $42 $112 $408 Backlog as of $166 $67 $175 9/30/2018 (3) '18 '19 '20+ Total '18 '19 '20+ Total '18 '19 '20 Total '18 '19 '20+ Total (1) IEA revenue percentages are based on management estimates for 2018 revenue split. (2) 2018E revenues are based on the midpoint of management estimates for 2018. 6 (3) William Charles and Ragnar Benson backlog amounts as of May 31, 2018.
COMBINED BUSINESS OPERATIONAL OVERVIEW CCS - Current - New Geographic Footprint IEA now has licenses to operate across all 50 states Total: 471 Total: 554 Total: 1,584 Total: 1,448 Total: 4,057 Forklifts Cranes & Compactor & Specialty Trucks Forklifts Cranes & Rigging Trucks Compactor & Cranes & Forklifts 1% Trucks 1% 1% 5% Rigging Tractors Rigging Paving 5% Tractors Specialty Paving 1% Tractors 16% Compactor & 1% 1% 2% Tractors Cranes & 1% 1% 5% 1% Specialty Paving Compactor & 1% Rigging Trucks Fleet 8% Specialty (1) 10% Paving 7% Overview Dozers, Loaders & 7% Tools & Misc. Dozers, Loaders Support Units Excavators Tools & Dozers, 45% 40% 8% Misc & Excavators Tools & Misc. Support Units Support Support Units Loaders & 7% Support Units 12% 35% 67% Units Dozers, Loaders 76% Excavators 66% 32% Dozers, & Excavators 9% Loaders & 17% Excavators 11% Headcount 1,500 500 400 214 2,614 Select Customers Denotes headquarters and regional offices (1) Support units primarily consist of water trucks, trucks/autos, trailers, screens, crushers, light plants, pumps, reel stand trailers, bucket/attachments, utility vehicles, vehicles, work trucks, 7 semi tractors and storage containers.
INDUSTRY TAILWINDS WITH DIVERSE AND GROWING END MARKETS Construction Power Transportation Water, Sewage & Waste Recreation Aggregate Mining Pulp / Paper 2018E Construction 400+ Pulp & Paper $99 Billion $138 Billion $32 Billion $25 Billion $1 Billion Put-in-Place / Mills Market Size Existing – Highway New / Existing Existing – Renewable New – Rail, Specialty New Market New Market New Market New Market Market to IEA New – Thermal Paving, Bridge Market leader in Saiia’s / ACC’s / Core competencies ACC specializes in Saiia is focused in Saiia’s focus includes Wind EPC with a William Charles’s include drainage constructing high growth regions site work, process growing solar transportation focus systems, pump stations professional golf such as the waste hauling, landfill business includes railroad, and sewer construction courses, indoor and Southeast construction and highway and bridge projects outdoor sport fields maintenance, ash IEA Focus Full coal plant construction as well as and parks and sludge pond Areas construction, specialty paving cleanout, pond decommissioning, construction and maintenance and A small part of IEA’s closure coal ash services existing revenue is transport related Wind capacity to Aging infrastructure Increased Increased municipal Correlated to Plant conversions double by 2023 environmental revenues residential and non- from graphic paper Increases in public compliance residential to specialty and Solar capacity to spending initiatives Growth requirements construction packaging paper grow 400% over the Dynamics next 15 years Population growth Population growth FAST Act tailwinds FAST Act tailwinds Pipes Act tailwinds Southeast region is high growth Acquisitions will enable tremendous end market diversification for the IEA platform 8 (1) Source: FMI, BISI, MAKE Consulting.
THIRD QUARTER 2018 RESULTS AND COMBINED FINANCIALS
THIRD QUARTER 2018 RESULTS Third Quarter Financials Principal IEA Balance Rate Debt Summary – as of September 30, 2018 • Revenue of $279.3 million, up 57.0% year over year (In millions) • Net income of $5.7 million, down 37.3% year over year Term Loan $ 200.0 7.7% • Adjusted EBITDA(1) of $21.2 million, up 6.4% year over Revolving Credit Facility 30.5 6.7% year Other Equipment Note Payables 5.1 5.0% • YTD cash flow from operations of $31.6 million, up Total Debt $ 235.6 $29.4 million year over year Weighted Average Interest Rate 7.5% • Backlog of $1.3 billion at September 30, 2018 ($1.8 billion including William Charles), as compared to Other Obligations (2) $1.0 billion at September 30, 2017 Capital Leases $ 29.6 Liquidity: Available Liquidity • $35.6 million of cash and cash equivalents Revolver and Term Loan $ 325.0 Less: Term Loan (200.0) • $94.5 million of availability on existing credit facility Less: Revolving Credit Facility (30.5) • As of the closing of William Charles, available Available Credit $94.5 liquidity was $86 million, including availability on the (3) revolving credit facility and cash on the balance Letters of credit under revolver $6.2 sheet (1) See slide 14 for a definition of Adj. EBITDA and a reconciliation to net income. (2) See slide 3 for a definition of backlog. 10 (3) As of the closing of William Charles, letters of credit outstanding was $1.5 million.
COMBINED FINANCIAL OVERVIEW Annually the Combined Company is expected to generate approximately: • $1,270M - $1,360M of revenue • $110M - $130M in Adjusted EBITDA (1) • 8.7% - 9.6% Adjusted EBITDA Margin (1) Acquisition related synergies and benefits: • $7.4M - $11.6M of synergy costs related to executive, finance, insurance, HR and T&E related costs • $7.0M - $10.0M of potential EBITDA benefits related to converting operating leases to capital leases • $2.9M - $3.3M of corporate overhead cost savings (2) (1) See slide 15 for definition of adjusted EBITDA and adjusted EBITDA margin. (2) Related to costs of acquired companies for components that IEA did not purchase or for costs for which IEA will not continue to pay (CEO expense, rent expense, etc). (3) IEA combined revenue and combined adjusted EBITDA include certain adjustments made to actual amounts under the assumption that the acquisitions had occurred prior to the earliest 11 period shown in the graphs above. See slide 15 for definition of adjusted EBITDA.
APPENDIX
MULTIPLE LEVERS TO DRIVE IEA GROWTH Multiple Growth Opportunities For IEA Beyond Executing ~$1.8 Billion Current Backlog(3) Projects Organic Growth External Growth Opportunities to grow presence across attractive markets Robust platform for M&A growth with long-term growth potential Mergers & Acquisitions Grow Foothold in Civil, Build Solar Presence Industrial & Power Expand Self- Perform Capabilities • Active pursuit list of highly • Leverage 60+ years of strategic and actionable experience across targets • Large addressable market petrochemical, • • Increase medium and high with secular growth drivers Potential to increase (1) pharmaceutical and other voltage electrical self-perform through at least 2050 heavy industrial facilities project diversification capabilities through work with • Cross-selling opportunity • Positive tailwinds exist for conventional power, • Potential for over 300 bps with existing wind customer traditional U.S. civil and downstream oil and gas- Adjusted EBITDA margin base industrial markets increase(2) over the medium- related and other • Ability to capture ‒ term The Fast Act and IDOT and industrial customers incremental share of the INDOT budgets provide for • Initial self-perform projects expanding utility-scale solar billions of dollars of funding • Accelerate share of have commenced in 2018 construction market for civil/infrastructure currently outsourced high ‒ $10 million incremental • Solar PV installed capacity projects voltage scope, including EBITDA projected for 2019(2) expected to grow at a ~10% • T-line interconnect (1) IEA maintains a distinctive CAGR from 2017 – 2020 resume and excellent reputation across these diverse markets (1) Source: U.S. Energy Information Administration (January 2018). (2) IEA management estimates, based upon industry and customer data available to IEA management. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Revenue. 13 (3) Backlog data as of September 30, 2018 and includes an estimated $520M for William Charles as of May 31, 2018. See slide 3 for definition of backlog.
EBITDA ADJUSTMENTS Three Months Ended Nine Months Ended SUMMARY OF EBITDA ADJUSTMENTS ($ in thousands) September 30, September 30, 2018 2017 2018 2017 1. Diversification SG&A – 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 Total Revenue $279,279 $177,830 $503,487 $336,128 scale solar, and heavy civil infrastructure. These costs currently do not have corresponding revenue, but management anticipates revenue to fiscal 2018. Net Income from Cont. Operations $5,736 $9,155 ($6,741) $14,133 2. Credit Support Fees – reflect payments to Oaktree for its guarantee of certain borrowings, which guarantees did not continue post-combination. Interest Expense, net 1,579 690 3,960 1,404 3. Consulting Fees & Expenses – represents consulting and professional fees and expenses in Depreciation & amortization 2,614 1,385 6,591 3,534 connection with the merger between IEA and MIII Acquisition Corp. Taxes 870 5,354 (1,467) 8,128 4. Non-cash Stock Compensation Expenses – represents non-cash stock compensation expense. EBITDA from Continuing Operations $10,799 $16,584 $2,343 $27,199 5. Full Year Impact of 2017 Capital Leasing Program – Reflects the annualization of the impact % Margin 3.9% 9.3% 0.5% 8.1% 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 Adjustments and operational efficiencies resulting from the program, and (iii) representing a pro rata 1. Diversification SG&A 911 1,599 2,896 2,682 portion of the estimated gain due to estimated future residual value exceeding depreciated 2. Credit support fees - 358 231 1,213 carrying value on the sale of the leased assets following the 48 month term of the lease. 3. Consulting fees & expenses 72 (208) 433 219 6. Transaction Costs – include legal, consulting, filing and other costs associated with the 4. Non-cash stock compensation expenses 500 13 500 40 acquisition of IEA Energy Services by MIII Acquisition Corp. and the subsequent public listing Full year impact of 2017 capital 5. - 1,567 - 4,700 of IEA securities on the NASDAQ stock exchange. leasing program 7. Merger and Acquisition costs – include legal, consulting, travel and other costs associated 6. Transaction costs 149 - 8,521 - with acquisition activity. 7. Merger and acquisition costs 6,914 - 7,602 - 8. Settlement of Customer Project Dispute - related to a dispute regarding the costs to be 8. Settlement of customer project dispute - - 8,500 - incurred to complete a project and the loss of revenue related to unbilled change orders. 9. Loss on extinguishment of debt 1,835 - 1,835 - The three and nine months ended September 30, 2018, regarding the costs to finish the project were $0 and $5.6 million respectively. The loss of revenue related to unbilled changed orders for the three and nine months ended September 30, 2018, was $0 and $2.9 Total Adjustments $10,381 $3,329 $30,518 $8,854 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 Adjusted EBITDA $21,180 $19,913 $32,861 $36,053 determined that it was in the best interests of the Company to settle the dispute, retain the % Margin 7.6% 11.2% 6.5% 10.7% important customer relationship and secure the award of an additional Wind energy project with the customer, which will be built in 2018. 9. Loss on extinguishment of debt – write-off of previously deferred financings fees in connection with refinancing the Company’s credit facility in September 2018. 14
EBITDA ADJUSTMENTS Combined Combined SUMMARY OF EBITDA ADJUSTMENTS ($ in thousands) 2018 Low 2018 High Range(1) Range(1) A. Discontinued Operations – in FY15, IEA began the process of winding down its Canadian operations. The operating results for Canadian operations were reclassified as discontinued operations. Total Revenue $1,270,000 $1,360,000 1. Diversification SG&A – reflects the costs, including recruiting, compensation and benefits for additional Net Income / (Loss) $18,835 $26,465 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 A. Discontinued Operations - - infrastructure. These costs currently do not have a material amount of corresponding revenue, but management anticipates revenue beginning in FY18. Net Income / (Loss) from Cont. Operations $18,835 $26,465 2. Credit Support Fees – reflect payments to Oaktree for its guarantee of certain borrowings, which guarantees 13,500 14,750 that do not continue post-combination. Interest Expense, net 20,500 21,700 3. Consulting Fees & Expenses – represents consulting and professional fees and expenses in connection with Depreciation & amortization the merger between IEA and MIII Acquisition Corp. Taxes 8,000 9,400 4. Non-cash Stock Compensation Expenses – represents non-cash stock compensation expense. EBITDA from Continuing Operations $60,835 $72,315 5. Transaction costs – include legal, consulting, filing and other costs associated with the acquisition of IEA % Margin 4.8% 5.3% Energy Services by MIII Acquisition Corp. and the subsequent public listing of IEA securities on the NASDAQ stock exchange. Adjustments 6. Merger and Acquisition costs – include legal, consulting, travel and other costs associated with acquisition 1. Diversification SG&A 3,145 3,300 activity. 2. Credit support sees 231 231 7. Settlement of Customer Project Dispute - related to a dispute regarding the $5.6 million in costs to be 3. Consulting sees & expenses 433 598 incurred to complete a project and the loss of revenue related to unbilled changed orders of $2.9 million for 4. Non-cash stock compensation expenses 700 800 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 5. Transaction costs 8,521 8,521 best interests of the Company to settle the dispute, retain the important customer relationship and secure 6. Merger and acquisition costs 8,500 9,000 the award of an additional Wind energy project with the customer, which will be built in 2018. 7. Settlement of customer project dispute 8,500 8,500 8. Loss on extinguishment of debt – write-off of previously deferred financings fees in connection with 8. Loss on debt extinguishment 1,835 1,835 refinancing the Company’s credit facility in September 2018. Total Adjustments $31,865 $32,785 9. Operating lease conversion– estimated pro forma EBITDA savings from the planned conversion of operating leases of CCS and William Charles to capital post-acquisition. 10. Corporate overhead costs– related to costs that are removed from acquired companies operations post- Adjusted Pro Forma EBITDA $92,700 $105,100 acquisition (CEO expense, rent expense, etc). 11. Potential synergies – related to potential executive, finance, insurance and HR. 9. Operating lease conversion 7,000 10,000 10. Corporate overhead costs 2,900 3,300 11. Potential synergies 7,400 11,600 Total Adjustments $17,300 $24,900 Further Adjusted Pro Forma EBITDA $110,000 $130,000 % Margin 8.7% 9.6% 15 (1) IEA management’s 2018 low and high range for projected pro forma revenue, net income and adjusted EBITDA.
THANK YOU Investor Relations Contact: Financial Profiles Kimberly Esterkin, Senior Vice President kesterkin@finprofiles.com 310.622.8235