IEA - Earnings call transcript Q3 2018 | Infrastructure and Energy Alternatives Inc

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Operator

Good morning, and welcome to the Infrastructure and Energy Alternatives Third Quarter 2018 Conference Call. [Operator Instructions] And with that, I will turn the call over to Kimberly Esterkin of Investor Relations. Kimberly, please go ahead.

Kimberly Esterkin

Thank you for joining us today to discuss IEA’s third quarter 2018 financial results. A presentation associated with today’s call can be found on the Investors section of IEA’s website at ir.iea.net. management Chief Roehm, Financial from and Executive today Layman, Andy Officer. us are Chief JP Officer; With

obligation Before turning statement. the financial like forward-looking to call about expectations. over to you statements should the management Any to included forward-looking by the SEC filings. company’s forward-looking cautionary with safe be growth press law, conjunction harbor the future Today’s takes in today’s its release as in required statements to and contains in direct discussion statements the and statements. I IEA no considered risk update factors Except would

press management go presenting of And the section be ahead, now I’ll In Please will addition, call with as reconciliations on measurements found non-GAAP IEA’s references, website since to that, GAAP can release. financial JP the be Roehm. today’s turn JP. some as Investors financial over well the appropriate in as

JP Roehm

XXXX our many transformational diversification today Thank XXXX have short achieving Earnings you, and joining a taken In time, for Kim. period Call. growth long-term our success. us towards been plans met you very Good of and we Quarter Third for great thank IEA. has have a steps for morning, Conference and year truly

a management over renewable we financing gaining publicly niche-market size consolidated and March, Then course the a relationships and quarters, business well-performing have journey These acquisition. of strengthen returns. blue-chip IEA acquisitions the fit capabilities, Construction bringing which proven the Both significant shareholder to stronger business the that and the our lines world-class resulted with strong, customers. business growth two owning. well Ragnar company in acquisitions, short, Group our of including cultures, the acquiring for long-term with in nearly includes Saiia and began Benson with in ability on generate our doubled as retained next of strategy two CCS our strong Charles teams are with and or post we access and under our customers complementary our listed businesses First, as and William services, traded additional as excellent business NASDAQ, ACC to construction to acquisitions expand

have mix acquisitions combined to complete, with reduced revenue business approximately of XX% portfolio. revenues now backlog from XX% We both is entity, our as transformed completely wind With $X.X or also our energy a billion.

employees eightfold We started from equipment, fleet in over have X,XXX of X,XXX and pieces when over we a XXXX. topping

in cash as have cash customers, operations robust including $XX operate companies. of synergies. services certain remained XX of Class and leverage across we We licenses months effect We’ve to from give further roughly ratio three flows. to also under-levered fairly the alone, million. even In utility acquired flow base as companies, world, and pro renewable markets cost the energy and additional developers not past maintain acquire estimated turnkey adjusted highly to diversify attractive entities, adjusted forma customers and of a largest XXXX savings the EBITDA, nine and with all our including we can blue-chip topped conservative full, times very I long-standing states the some best And rail offer the as to well

has IEA of scaled, the positioning balance throughout than well Although into as built that public. cash the built our southern, geographic a we attractive company free begin returns. States. a cycles. take flow In using to dramatically entry our with United M&A focused opportunities laser infrastructure our over to strategy de-lever extended on to our light and quarters company as less become footprint revenues diversified provides. and have is we coming stronger Today, and environmental and to first a advantage we’ve shareholder positions large, be in robust our – long-term even pipeline, our of civil the platform IEA less year, a highly when went are solidly to diversified succeed we were E&C seasonal sheet regions rail platform engineering than significant market remediation and synergy broadened growing the and an in-markets, and heavy industry, exposure western we southwestern in market-leading services the is additional diversifying construction for With growth in further

end let speak more of plan quarter exciting as services to of goal share accomplish part We an provider customer in But have the third one engineering a each to of in our has a thoughtful, future, me been few IEA, and whether highlights never time a about of the we premier be our employee, our strategic shareholder. before a or to markets. become There every place results.

very pleased are improved the year-over-year. achieved third totaling over an Revenues we with million, $XXX.X quarter. in the We increase XX% growth

billion XXXX. have quarter also the a compared had reached at XX, of end company. Backlog billion We record September now of the the we’ve $X visibility XXXX, as ever third strongest the in history at to $X.X

of quarterly detail. that continue Additionally, wind Layman, energy doing are highest opportunities CFO, more in I’ll turn to so, history. plans, be the our company call of speak I’ll our in our before but results the over on pipeline the number included to discuss growth in levels projects Andy utility Andy? more at scale the to long-term

Andy Layman

thank third And quarter you for all our JP. XXXX joining again Thanks, call.

reported we year-over-year. tax related sector energy project extent late million, a energy of to mentioned, delays XX% lesser quarter, first starts during the credits XXXX. the to at renewable half was up and the increase postponed the in third by to of in year by due federal number a JP caused This for uncertainty strong $XXX.X renewable strength overall quarter the the primarily of revenues As driven

in revenues quarter. high expect remain the to We fourth levels in

JP mentioned, transitioned recent has revenue, much become the as acquisitions, balanced. Following our more to

XX% of the Adjusted XX% XXXX, transportation of the quarter from larger $XX.X projects EBITDA in of of and EBITDA gone as when of benefited start earlier and rail wind a diversified. from more we at construction to have on million X.X% We civil to our for energy a an Projects year-over-year. remediation energy, nearly Clearly, quarter, saw XX% has third XX% business become number of quarter totaled increase the the significantly and compared XXXX, construction. cycle. of accrete projects civil over environmental XXXX other wind margin third in margin adjusted larger phases construction. their completion number nearing higher life In tend to the

profit So have basis a which the the $XX those construction to revenues, increased approaching or of projects dollar XX.X% of completion. than year-over-year in their EBITDA on of beginning totaled lower X.X% work. million margin due volume higher Gross

in XXXX. decreased construction. of to a compared revenue, was of profit basis the The points due to number margin in primarily earlier percentage decrease XXX phases a gross projects higher As quarter third of of

believe year capabilities As broaden it compared to million included to we million our prior $X.X continue niche we with the our and SG&A for III. will to $X.X to enter maintain merger margins. the end gross strong in the quarter million M – markets, related million additional we period. in related $X.X growing totaled as and activities $XX SG&A acquisition

Diluted period. XX.X quarter, our new quarter in borrowings totaled $X.X the diluted Interest year XXXX up in a facility. million quarter of was result XXXX diluted income of share compared million third million count million credit for share totaled $X.XX the on expense from million of net as the XX.X $X.X prior quarter $X.X Third million the increased $X.X in compared XXXX. share or or third per to to per $X.XX

down the LIBOR of was on of period. effective rate weighted quarter rate of XXXX. on XXX million As XX.X% to XX.X% XXXX on interest based tax revolver in The rates points effective our decrease taxes X.X% the compared the basis the our plus reduction average in corporate $X.X January our loan was year quarter XXX primarily federal plus in Provision in end, rate due income quarter interest basis for quarter the prior rate effective compared of of the rate from term third for million, tax the points. The X, when interest to $X.X in third XXXX the LIBOR third of was XXXX. was and quarter to

range roughly leases a of income due past was the were of percentage additional XX% revenue tax to slightly this XX%, third varying on state. expect $XX.X our or the and of expenditures XXXX quarter in by cash rate as acquisitions. annual to X% capital with actual the depending of mix the for related effective taxable effective our Capital purchases We be in million revenue. to CapEx higher recent quarter rate to

capital including contributions is XX, to visibility We September long totaled XXXX. be expect XXXX. which our $X.X CCS, expenditures billion from over Charles, William billion, for from continue terrific Including September $X term. XXXX, revenues now is up acquisition X% billion, as of of backlog Backlog a $X.X in XX, providing will of around

is including: begun; number two, components change three, sum For been which generator including awards uncompleted realized expected contracts always define that of number cash revenue backlog the revenue cash cash, reference, operations contracts, documentation totaled IEA a On and as prepared; number proof of contracts year-to-date of of a XXXX. from point. portions be million project compared three options. has existing work million we to not is from which nine-month to yet renewal $X.X being for and and $XX.X flow orders and basis, one, operations for has from flow in awarded our from strong

for cash us flow de-lever our will sheet our deploy allow will down going mentioned, well to our as de-lever. strong business we balance and characteristics flow tuck-in quickly acquisitions. cash The of JP As as forward, continue to to debt pay our

capital and you reviewing progress. to opportunities we Additionally, are simplify on periods, posted upcoming we’ll in keep structure our

Now turning to balance the sheet.

$XX cash on $XX.X in the we of debt credit acquisition. of million. have of our XXXX, which $XX.X of the sites. related credit revolving term we was XX approximately Total refinanced $XXX The In September loans, September September, million $XXX includes capital leases and September in used in and of equipment CCS facility to credit million million. XXXX, with mature As and connection cash of closing of XX, facility a facility new equivalents job million as

X, William the million With debt to IEA to Charles finance additional November acquisition of the an $XXX added on acquisition.

integration ratings report strong back of – respectively, report IEA’s that credit stable also limited I are office financial corporate We to BBB from integration outlook fulsome acquisitions thrilled new received credit progressing our our and operational to and strength. that and am are very well. and our pleased a Moody’s Poor’s, continued BX with strategy our of of more Standard facility indication

opportunities, financing, and We are equipment rates utilization and reduced which and elements. laser customers’ significant as insurance reduced logistics well synergies, improved performance as equipment operational include cost on achieving focused cross-selling equipment other

opportunities As our million, focus for of market – the was while additional available on synergy cash revolving including $XX availability we also will sheet. and recent of be acquisitions, balance closing the strategic the liquidity on in achieving facility from acquisitions. William And our the credit to of Charles, the continue on substantial we

are IEA for term. the developing We long

XXXX mentioned, a building is for year JP As us.

far We we are March than more NASDAQ balanced this listed company with diversified year. when and of in

expected concludes call. my portion $XXX to to on savings pro margin pro forma for further future turn revenue of As adjusted William to back anticipate and and to now acquisitions to we for things remarks. to synergies, effect and pro EBITDA to billion of $X.XX of the million forma adjusted closing million the will today, effect basis, Charles, That giving see XXXX forma billion of CCS cost we X.X% I give $X.XX a the $XXX call JP and EBITDA, or adjusted of X.X%.

JP Roehm

or Andy. you, is much new improved. IEA X.X, Thank The IEA,

years our XX a the over Construction, arm, have White founded. days when We come way ago, long unionized since was initial

leading energy Class presence and construction in now have United environmental provider top growing wind rail a States, a remediation with a the I customers. position in We’re of

diversify the our in needed our strong put area significant place grow broadened to coverage business, have create and to continue foundation barriers scale We and entry. and to

in advantage all XXXX and solar presence. grow power the projected incremental our capacity for our We commitment wind to installed needs projected capitalize vastly is the of industries will projects Renewable for end to with the success double addressable today, XX by for in highly we take the expanding XX an substantially capacity to remains demonstrated positions to strong to evolving well utility grow business tax by markets next market. growing and our positioned market to years. wind that to nearly combined projected scale ability IEA’s fast-tracked future are XXX% will on EPC U.S. generate us meeting propel with a opportunity. while demand build continue as And clients’ fastest-growing It from capacity in power IEA. IEA’s solar federal opportunities. tailwinds are this the specialized our our industry each well growth leverage energy total With right forward to segment demand over operate in is states, to platform to with

IEA’s support to continue niche growing markets. will into expansion We

renewable industry in remediation, $XX on billion and construction to relationships concludes construction is to domestically you, remediation share to road progress overall rail is future right look expand customer specialty is such in business, make the will in There heavy the we over and modernize We’d growing certainly This industry, while most infrastructure our capabilities put reach $XXX Thank today. States next in up and rail improvement of a five to to long-standing generate than the Operator? on in energy, are to have as expected and team continuing markets, opportunities billion scale, The in to significantly time continue end your years, our this open environmental questions. reach construction, strong calls. the infrastructure is rail focus prepared billion size of to needed in United in highway now more We margins. again, billion place expected number anticipated reach forward we right expand civil remarks. and our with and market environmental where The by to have for XXXX, smaller development. the vast your country. and XXXX. call the $XX though capacity like $X our to by to place earnings can We

Operator

Capital. first Thank Please you. of Our Instructions] coming Penney is [Operator from ahead. go question Northland Paul

Paul Penney

JP. my morning question. Andy Thanks and Good taking you. Thank

JP Roehm

morning Paul. Good

Paul Penney

Good morning.

funnel demand power opportunity new more XX the what backdrop, and to months projects some versus ago? you pricing robust seeing – you and of your Given strong today are XX on saw

JP Roehm

and obviously ways activity certainly market. is market. Yes, move It’s We play we’re sorry, into see more for of in indicative dynamic further take then opportunistic XXXX, seeing obviously, yes, look the I’m But we – out. a bit. to that XXXX advantage – XXXX accumulating little into hope we – the the we to as of backlog,

Paul Penney

at during Okay, the for better quarters? we look great. operating And for the of margins? and you granularity maybe, integration-related looking a operating question on Andy, us feel into XXXX, a and the expenses, you – give those of if last for And just can leverage out, expect onetime acquisition expenses then When kind more you back you. maybe should couple

Andy Layman

the as significant we’ve expenses quite do, amount incurred incremental we Definitely, a of a of result acquisition.

the an walk presentation. in forward there’s EBITDA appendix of So the

opportunities achieving. So we expenses, certainly, we focused go we won’t as we are have those on – forward, are nonrecurring and have that significant very synergy

Paul Penney

JP cleaning Okay, retiring great. include potentially looking into you briefly warrants? structure. And then talked up capital also that your the about Would

JP Roehm

something as a de-lever of priority and about It’s the our board the a as management certainly clean We – team. business, we we and that as the – obviously on bit, for structure certainly capital is table. go forward they options call today’s the up one in talked little

Paul Penney

now more It – seems in solar new market wind Obviously, – the just question. the what there a granularity in of know railroad some Last seeing exposure that’s you’re out been maybe deemphasized. like Maybe solar has seeing of opportunities in acquisition solar? maybe and you’re terms just and solar opportunities, the give the great. and Okay, on in we exposure.

JP Roehm

discussed we are previous evolve certainly we see in market as talked We that focused previously. as continuing to We about calls. as that on

We’re for that certainly working that – towards some XXXX good in opportunities space.

the but forward. de-leveraging us, and out laser perspective, cash cautious industry to that business M&A opportunities. flow an grow – That results of also participation that at for continue – evaluate we interest an same we to on to further producing solar a been Paul. continue specifically, And with our and want perspective. the yes, way said, – an operating to it our – from business transactions, continuing balance to we’re of opportunities we and – M&A about coming cultivate time, two also stay M&A focused And is We be these we’ll those targeting in area the still continues our from are to that look

Paul Penney

Great. Last question.

self-performing just the get this And an new terms you but – is the on see on Maybe, side? just enhanced the – in over with – in enhancement, quarters self-performing terms coming there back some update your of current your the verbally give in we touched efforts margin acquisitions? your – of focus. opportunities of – these where You next the

JP Roehm

self-performing, with contractors. The great both it’s they Charles They transaction. synced well. a They thing up all about self-performing They IEA self-performing these CCS are match acquisitions or are is transaction standpoint. up capability the on whether very William

So revenues. by they their majority the of far, self-perform

– we and our that IEA as our to the versa, spectrum the acquisitions. our – certainly, market. look at companies there’s move could Certainly, ways synergy across core one help some actually acquisitions – are capabilities we add is help cooperate at the And self-perform ability we of to of markets. So forward, could end additional end vice

So – years great, we been used a have kind are for for folks who criteria and that of they’re businesses self-performed meet that time well-performing have around IEA the to. long look

Andy Layman

This projects plan a I’ll much couple year. our more successfully completed – electrical or year. just to Andy. to that two We’ve self-perform comments this add have And to the that. of robust We’ve work we self-perform a is year, next initiative Maybe three undertaken work. this

Paul Penney

Great, thank guys.

JP Roehm

Thank you Paul.

Operator

you. Thank

Brent from D.A. Thielman Please coming ahead. go is question next Our of Davidson.

Brent Thielman

done. about was you margins, I business Great, jobs long core before a you’ve to that, I to you. to of I the to to call it, next kind about profitability back projects the guess, how of of into thank much guess, levels of ramp timing impact year the start low ramping how of in double-digit you return seen of gradual a JP, we you’re or ago? where IEA thinking this might kind EBITDA see a any these have is through – exclusive see year a I’m Good morning. range, think up deals further the and trying again, situation

Andy Layman

So this is Andy. I’ll take that question.

good think and significant. have I I They very a to So backlogs mean, acquired. incremental are our robust wind companies summary. these civil we’ve very that’s well-performing that also that are backlogs, work

have that So really think next of we’re be into going from levels utilization perspective. levels this go year. we year, bridge kind get as overhead margin kind And a those back great I as into year and expect of amount and quickly next to fairly we it are opportunity, of next what we’ll year, we equipment through tremendous to

Brent Thielman

Okay. on there a particular, though, And Andy, completion it call XX%, where through I guess, jobs the is pop? XX% job, wind margins of kind those that in to you see tend threshold

Andy Layman

do projects the a completion, of the our accrete. of basis start term typically, on final Yes, a portfolio From typically through to points the margin get we’ll of projects. couple overall

see here. on range of a the puts that accrete rest some to We’ll the how starting through of do put come through EBITDA, out the together We’ve project. low-end kind year high-end, that. terms projects We’re our which normally, of QX. But in plays the of see a of range

Brent Thielman

Okay. standpoint of piece bigger what the the from talk themselves, seen? pipeline you portfolio about see even perspective within of maybe from much they relative acquisitions can now, to bid And that? they’ve a the then a what with transportation developing Maybe, environment the

JP Roehm

that undergoing we’ve Midwest I kind I spin West when that on of ACC what kind you all – Coast an in of the Midwest, on – of scene, that nationwide in at Mountain least, not other other is paving that’s has, I last the include think, the the areas in, transportation decade Rocky a here the but only in seeing or geographic all-time know and the geographies well, even we’re the the – biggest offering different mentioned. seen that specialty IEA basis, The operates whether Sure.

the we ability of and infrastructure we to in segment, And over we XXXX governments kind very business to infrastructure think of be. for the several invest is in So strongly years. feel look to the about the place America that to continue XXXX, a and the that grow for many space infrastructure – next and build

Brent Thielman

for have want It’s it’s clarify. just baseline deck, like in I Okay, a the to And Is thanks, slide a for million any XQ. $XXX backlog. us burn In $XXX weather. the shows or fourth company? in you think revenue to then million guess level delays the to good about quarter for scheduled JP. I it borrowing,

Andy Layman

– entire We’ve or for year. the provided guidance, in an outlook,

math you’re effectively can what but you So the there, looking of do kind that’s at.

Brent Thielman

in very steady JP, Or construction a sounds commentary, inflow are some you And of in repowering of still to projects? Is – bid? projects the bigger wind seeing then, your think more Okay. it new wind a general. influx in of market active of I it

JP Roehm

reported. Yes, in repowering wind construction there’s a seen that steady we’ve continue not to inflow change what we of previously any Definitely, see new than we opportunities. projects. Repowering,

previous look calls, a I from same we repowering the of IEA think Basically, level as greenfield a perspective, the I spoke team. effort, on greenfield-type focuses project at a in or projects. management new, wind takes same

opportunities a much greenfield the However, less revenue repowering project. than from are

pursue focused that to don’t of on and out, the to to best But in Not greenfield on that our repowering opportunity That’s we we repowering. say a be pursue team of upside gaps kind close are we’ll have basis. the So about repowering gaps have between resources a – of we’re farm our we in opportunities selective them kind market, a as two just we fill case-by-case our repowering totally use greenfield deploy that if of to resources use our projects plan. projects, projects. But not to wind additional

Brent Thielman

guys, Okay you. thank

JP Roehm

Thanks Brent.

Operator

Thank you.

next coming FBR. from Please of go is Our question B. Rygiel Riley Alex ahead.

Alex Rygiel

and the Andy transaction this quarter. congratulations on Thank JP you

JP Roehm

Alright, thank you.

Alex Rygiel

questions. of Couple

an opportunity about work of next of the You kind referenced profile, of years? do of, over to internalizing you activities internalize little bit a kind to more the in margin some other In the business. of the enhance wind businesses, your see any handful quickly

JP Roehm

self-perform businesses, in – all Well, in revenue of the base. they acquired most well pretty the

pretty which – most work. than we’re other – the this well contemplating of that time, self-perform acquired pretty specialty-type entering work, So their not they already into companies at

initiative standpoint. say at renewable organic this the be I That’s from business to geared focus biggest addition that think our future. other this could expanded electrical it’s self-perform – our side take of in accurate that in areas mostly the So I an

Alex Rygiel

I’m But for guidance assuming a thank organic how year about how pro been ago tremendous months? And this we should on it’s the pro for in positive. next there. thanks about that and versus on of the EBITDA backlog backlog you revenue we pro and basis think forma backlog, But forma sort should think over sort what growth backlog like revenue growth today? could forma versus that the XX of look

Andy Layman

Yes, stage we year at have next not provided outlook this or guidance.

– do continues to our basis. grow. backlog So billion $X.X on I combined got mean, we – but a we

as bigger is an on been pipeline Our the the than wind company, the ever in the well of it’s two acquisitions. both – side in as – history from

So optimistic the to we’re about opportunities come. very

Alex Rygiel

on end sort I’m contemplating. of that fair? that annual incorporates figure the a the a assuming pro guidance And forma you’re the that EBITDA range of high of Is the basis. of number synergies

Andy Layman

conservatively, of, include we’re of the it kind that synergies contemplating. Yes, does, some – we’ve

the the there’s – We’ve So in work mean, field. there’s presentation. that resources this are I to the still done – well on And – and be year. a lot forward underway. got a in that projects of walk we

played. a So we got of game lot to still quite be

of depends see the we the close how projects lot rest how it year, on we’ll throughout So the year. those of a perform out

Alex Rygiel

raise forma pro sense, broader more a inside guidance? fairly the But sort I in lastly, bidding about that Do in has should we suspect been think it’s and margin backlog profile you of the similar. there on? how your profile of change margin any recent labor work And any ability in the an profile of versus price margin you’ve whatnot? been inflation see environment where some to is there

Andy Layman

look the and aware can that. to that, achieve where we’re taking certainly of opportunity We’re we to

a going into We’ve got backlog. we’ve as terrific market here, an visibility of into amount next enormous So we’re got year. great

to we our impact fill start as the for organization, could we opportunities look results. up that – to So

Alex Rygiel

you. helpful. Very Thank

JP Roehm

Thank you Alex.

Operator

you. Thank

today’s have in session. We time We for your you run thank for question-and-answer IEA. of would to like out interest

a time, wonderful have may lines You this at and your day. disconnect

Infrastructure and Energy Alternatives (IEA) 9 Nov 182018 Q3 Earnings call transcript