New Awards Won Year-to-Date Approaching
Record Levels
Total Debt Reduced to Lowest Levels
Since IPO
Charah® Solutions, Inc. (NYSE: CHRA) (“Charah Solutions” or the
“Company”), a leading provider of environmental and maintenance
services to the power generation industry, today announced
financial results for the three and nine months ended September 30,
2019. Revenues for the third quarter of 2019 were $121.1 million
with a net loss attributable to Charah Solutions, Inc. of $3.3
million, or $0.11 per basic share. Adjusted net loss and adjusted
loss per basic share1 were $2.9 million and $0.10, respectively.
Adjusted EBITDA1 was $5.6 million.
“Our third quarter results reflect meaningful improvement over
the difficult second quarter and the return of a positive
trajectory in operating performance. Consistent with our previous
guidance, we realized improvements in our operating efficiency, a
material reduction in our total debt balance and an increase in our
margins over the second quarter,” said Scott Sewell, President and
Chief Executive Officer of Charah Solutions. “Though our
year-to-date 2019 results have been challenging compared to the
prior year, we are continuing to win new business at a record pace
as business development activities have resulted in approximately
$385 million in new awards won year-to-date and more than $300
million in verbal awards are currently under negotiation. We expect
additional success with current bid proposal developments during
the remainder of 2019 and in 2020, as new business awards that had
been previously delayed become realized. We remain extremely
excited about our new award prospects and our ability to further
grow our business.”
“We are committed to significantly reducing our debt further
while maintaining a capitalization level that will enable us to
take advantage of the abundance of coal ash remediation and
beneficiation opportunities we anticipate,” said Mr. Sewell. “With
our ability to provide custom solutions that combine our
market-leading ash management capabilities and our proprietary
beneficiation technologies, along with a regulatory environment
increasingly conducive to our business, we believe we’re ideally
positioned to expand our revenue-generating potential.”
Summary of
Financial Results
Three Months Ended
September 30,
(Unaudited in thousands, except per share
and margin data)
2019
2018
Revenue
$
121,113
$
186,002
Gross profit
13,859
26,706
Gross margin
11.4
%
14.4
%
Net loss attributable to Charah Solutions,
Inc.
(3,313
)
(17,395
)
Loss per common share (basic /
diluted)
$
(0.11
)
$
(0.60
)
Non-GAAP Financial Measures
Adjusted net (loss) income1
(2,908
)
7,563
Adjusted (loss) income per diluted
share1
$
(0.10
)
$
0.25
Adjusted EBITDA1
5,596
32,553
Adjusted EBITDA margin1
4.6
%
17.5
%
(1) This is a non-GAAP financial measure;
see explanation and reconciliation of this non-GAAP financial
measure to the most directly comparable GAAP financial measure
below.
Third Quarter 2019
Results
Revenue decreased $64.9 million, or 34.9%, for the three months
ended September 30, 2019 to $121.1 million as compared to $186.0
million for the three months ended September 30, 2018, primarily
due to project completions, delays in new project awards in the
three months ended September 30, 2018, and reduced nuclear
maintenance services. Gross profit decreased $12.8 million, or
48.1%, for the three months ended September 30, 2019 to $13.9
million as compared to $26.7 million for the three months ended
September 30, 2018. Gross profit as a percentage of revenue, or
gross margin, declined for the three months ended September 30,
2019 to 11.4% as compared to 14.4% for the three months ended
September 30, 2018, primarily due to lower gross margin in the
Company’s Environmental Solutions segment resulting, partially
offset by an improvement in gross margin in the Company's
Maintenance and Technical Services segment.
Environmental Solutions Segment: Environmental Solutions
segment revenue decreased $57.8 million, or 55.7%, for the three
months ended September 30, 2019 to $46.0 million as compared to
$103.8 million for the three months ended September 30, 2018,
primarily driven by project completions within our remediation and
compliance services component, including the completion of the
Brickhaven project resulting from the deemed termination, and
delays in new project awards in the three months ended September
30, 2018, partially offset by a net overall increase in revenue
from our byproduct sales offerings. Gross profit decreased $13.1
million, or 65.8%, for the three months ended September 30, 2019 to
$6.8 million as compared to $19.9 million for the three months
ended September 30, 2018, primarily due to project completions
within our remediation and compliance services component and one
project-specific issue continuing from the first quarter of 2019,
partially offset by a net overall increase in gross profit from
byproduct sales. Gross margin declined to 14.8% from 19.1% in the
third quarter of 2018.
Maintenance and Technical Services Segment: Maintenance
and Technical Services revenue decreased $7.1 million, or 8.6%, for
the three months ended September 30, 2019 to $75.1 million as
compared $82.2 million for the three months ended September 30,
2018. The decrease was primarily attributable to fewer nuclear
outages in the current period, partially offset by a net overall
increase in revenue from our fossil services offerings. Gross
profit for our Maintenance and Technical Services segment increased
$0.2 million, or 3.2%, for the three months ended September 30,
2019 to $7.1 million as compared to $6.9 million for the three
months ended September 30, 2018. The increase was primarily
attributable to a net overall increase in gross profit from our
fossil services offerings, partially offset by fewer nuclear
outages in the current period. Gross margin rose to 9.4% from 8.3%
in the third quarter of 2018. The increase in gross profit margin
was primarily driven by an increase in revenue associated with our
fossil service offerings that generate a higher gross profit.
Net loss attributable to Charah Solutions, Inc. decreased $14.1
million, or 81.0%, for the three months ended September 30, 2019 to
$3.3 million as compared to $17.4 million for the three months
ended September 30, 2018. The decrease was primarily attributable
to lower general and administrative expenses and interest expense,
net, partially offset by the decrease in gross profit as discussed
above and the change in the income tax benefit of $4.6 million. The
decrease in general and administrative expenses was primarily
attributable to a reduction in non-recurring legal costs and
expenses, including $20.0 million in reserves incurred in the prior
period related to legal proceedings during the three months ended
September 30, 2018, as disclosed in our Adjusted EBITDA
reconciliation included herein, partially offset by increased
transaction related expenses associated with the amendment to our
senior secured credit facility. The decrease in interest expense,
net was primarily attributable to the absence of $12.5 million of
costs incurred in conjunction with the refinancing of our debt
during the three months ended September 30, 2018, consisting of a
$10.4 million non-cash write-off of debt issuance costs and a $2.1
million pre-payment penalty, and a reduction in the debt balances
using cash received from the Brickhaven deemed termination payment
received during the three months ended September 30, 2019. Adjusted
EBITDA1 decreased $27.0 million, or 82.8%, to $5.6 million for the
three months ended September 30, 2019 as compared to $32.6 million
for the three months ended September 30, 2018.
2019 and 2020 Guidance
We have tightened the ranges of our previous guidance for 2019
and affirmed our outlook for 2020. Our current expectations for
2019 reflect increased visibility in the full year outcome and our
outlook for 2020 includes incremental revenue that is mostly
represented by booked projects, contract renewals, verbal awards
and only a modest amount of new prospective awards. Our current
2020 outlook is substantially represented by high confidence
projections, while the potential for winning one or more large
prospective contracts from current or future proposals provides
upside to our outlook. Our current 2019 guidance has been revised
as follows:
- Revenues of $520 million to $540 million
- Net loss of $26 million to $24 million
- Adjusted EBITDA2 of $25 million to $27 million
- Free cash flow positive
Our 2020 outlook has been affirmed as follows:
- Revenues of $560 million to $610 million
- Net income of $9 million to $14 million
- Adjusted EBITDA2 of $45 million to $50 million
- Free cash flow positive
(1)
This is a non-GAAP financial measure; see
explanation and reconciliation of this non-GAAP financial measure
to the most directly comparable GAAP financial measure below.
(2)
The forward looking measures of 2019 and
2020 Adjusted EBITDA are non-GAAP financial measures that cannot be
reconciled to net income as the most directly comparable GAAP
financial measure without unreasonable effort primarily because of
the uncertainties involved in estimating forward-looking
measures.
Business Update
The addition of new work awards and a broader scope of nuclear
outage services resulted in sequential improvements in revenue,
gross profit, and adjusted EBITDA1 over the second quarter. The
pace of new awards in the third quarter of 2019 has quickened and
we expect this upward trend to continue in the fourth quarter as
more verbal awards and other outstanding bid proposals convert to
signed contracts. Our success rate in winning awards year-to-date
on the basis of the total value of project bid proposals is
significantly higher than it was during the comparable period in
2018, with an average anticipated gross profit margin contribution
slightly above year ago levels. We have signed approximately $385
million in new contracts year-to-date and are in exclusive
negotiations on more than $300 million in additional contracts. A
substantial majority of these contracts were awarded within our
Environmental Solutions segment. The success achieved in winning
new business through the first three quarters this year has nearly
surpassed the all-time Company record for new contracts in a full
calendar year. Though the timing of future awards is difficult to
determine, we believe these recent accomplishments demonstrate we
are well-positioned to benefit from the market momentum for
responsibly recycling and remediating coal ash and capture a
significant portion of a large market opportunity.
Gross profit in the maintenance and technical services segment
for the three months ended September 30, 2019 was higher than in
the year ago period due to higher gross profit in the fossil
services business, but revenue declined in relation to the three
months ended September 30, 2018, primarily as a result of fewer
nuclear refueling outages and reductions in the scope of nuclear
work. A substantial portion of our nuclear services operations is
driven by scheduled nuclear maintenance outages, which are
typically planned for every 12 to 24 months.
Within our byproduct sales offerings, which is a part of our
environmental solutions segment, we realized a net overall increase
in year-over-year revenues. However, the roll-out of our technology
initiatives, including our MP618 thermal beneficiation technology
and our grinding technology, has been slower than previously
anticipated, resulting in a lower than expected contribution to
operating results. Customer interest in our MP618 technology has
been strong, and contracts are currently under discussion.
We continue to see a growing trend in coal ash regulation toward
more prescriptive approaches that dictate the means and methods for
ash pond closures at the state level than are required at the
federal level. States like Kentucky, South Carolina, North
Carolina, Virginia, Oklahoma, Missouri, Indiana, and Illinois have
already developed their own rules for coal ash management and some
utility customers in other states are proceeding with coal ash
closure plans more proactively, which we expect will contribute to
the anticipated growth in new work awards in the coming quarters.
At the federal level, the EPA has recently released proposed
amendments to its 2015 Coal Combustion Residuals (CCR) regulations
that would reclassify clay-lined and soil-lined surface
impoundments as “unlined” and bring forward the deadline for
unlined or failing CCR units to stop receiving ash and initiate
closure to August 31, 2020 from October 31, 2020. These recent
examples and others demonstrate our expectation for regulatory and
public policy trends to increasingly drive customer needs for
creative remediation solutions, including where beneficiation, or
recycling of ash, plays a significant role.
CONFERENCE CALL
Charah Solutions will host a conference call at 8:30 a.m. ET on
Wednesday, November 13 to discuss the third quarter results.
Information contained within this press release will be referenced
and should be considered in conjunction with the call.
Participants may access the conference call live via webcast on
the Investors section of the Charah Solutions website at
ir.charah.com. To participate via telephone, please dial (877)
273-7219 within the United States or (647) 689-5395 outside the
United States, approximately 15 minutes prior to the scheduled
start time. The conference ID for the call is 9276529.
A webcast replay will be available on the Investor Relations
section of the Charah Solutions website at ir.charah.com after
11:30 a.m. ET on Wednesday, November 13, 2019. In addition, an
audio replay will be available for one week following the call and
will be accessible by dialing (800) 585-8367 within the United
States or (416) 621-4642 outside the United States. The replay ID
is 9276529.
A supplementary presentation will also be available on the
Investors section of the Charah Solutions website at ir.charah.com.
ABOUT CHARAH SOLUTIONS, INC.
With 30 years of experience, Charah® Solutions, Inc. is a
leading provider of environmental and maintenance services to the
power generation industry, with operations in fossil fuel and
nuclear power generation sites across the country. Based in
Louisville, Kentucky, Charah Solutions assists utilities with all
aspects of managing and recycling ash byproducts generated from the
combustion of coal in the production of electricity as well as
routine power plant maintenance and outage services for the fossil
fuel and nuclear power generation industry. The company also
designs and implements solutions for ash pond management and
closure, landfill construction, fly ash and slag sales, and
structural fill projects. Charah Solutions is the partner of choice
for solving customers’ most complex environmental challenges, and
as an industry leader in quality, safety, and compliance, the
company is committed to reducing greenhouse gas emissions for a
cleaner energy future. For more information, please visit
https://charah.com/.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, included in this press
release that address activities, events or developments that the
Company expects, believes or anticipates will or may occur in the
future are forward-looking statements. These forward-looking
statements are identified by their use of terms and phrases such as
“may,” “expect,” “estimate,” “project,” “plan,” “believe,”
“intend,” “achievable,” “anticipate,” “will,” “continue,”
“potential,” “should,” “could,” and similar terms and phrases.
These statements are based on certain assumptions made by the
Company based on management’s experience and perception of
historical trends, current conditions, anticipated future
developments and other factors believed to be appropriate. Such
statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of the Company,
which may cause actual results to differ materially from those
implied or expressed by the forward-looking statements.
Any forward-looking statement speaks only as of the date on
which such statement is made and the Company undertakes no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as required by applicable law.
NON-GAAP FINANCIAL MEASURES
Adjusted net (loss) income and Adjusted (loss) earnings per
basic/diluted share are not financial measures determined in
accordance with GAAP. Charah Solutions defines Adjusted net (loss)
income as net (loss) income attributable to Charah Solutions plus,
on a post-tax basis, non-recurring legal and start-up costs and
expenses, and transaction-related expenses and other items.
Adjusted (loss) earnings per basic/diluted share is calculated
using Adjusted net (loss) income.
Adjusted EBITDA and Adjusted EBITDA margin are not financial
measures determined in accordance with GAAP. Charah Solutions
defines Adjusted EBITDA as net (loss) income before interest
expense, income taxes, depreciation and amortization, equity-based
compensation, non-recurring legal and start-up costs and expenses,
Brickhaven termination revenue reversal, and transaction-related
expenses and other items. Adjusted EBITDA margin represents the
ratio of Adjusted EBITDA to total revenues.
Management believes Adjusted EBITDA and Adjusted EBITDA margin
are useful performance measures because they allow for an effective
evaluation of our operating performance when compared to our peers,
without regard to our financing methods or capital structure.
Management excludes the items listed above from net loss in
arriving at Adjusted EBITDA because these amounts are either
non-recurring or can vary substantially within Charah Solutions’
industry depending upon accounting methods and book values of
assets, capital structures and the method by which the assets were
acquired. Adjusted EBITDA should not be considered as an
alternative to, or more meaningful than, net loss determined in
accordance with GAAP. Certain items excluded from Adjusted EBITDA
are significant components in understanding and assessing a
company’s financial performance, such as a company’s cost of
capital and tax structure, as well as the historic costs of
depreciable assets, none of which are reflected in Adjusted EBITDA.
Charah Solutions’ presentation of Adjusted EBITDA should not be
construed as an indication that the Company’s results will be
unaffected by the items excluded from Adjusted EBITDA. Charah
Solutions’ computations of Adjusted EBITDA may not be identical to
other similarly titled measures of other companies. Charah
Solutions uses Adjusted EBITDA margin to measure the success for
the Company’s business in managing its cost base and improving
profitability. A reconciliation between Adjusted EBITDA to net
loss, Charah Solutions’ most directly comparable financial measure
calculated and presented in accordance with GAAP, along with a
calculation of the Company’s Adjusted EBITDA margin is included in
the supplemental financial data attached to this press release.
Free cash flow is not a financial measure determined in
accordance with GAAP. We define free cash flow as cash flows from
operating activities, less cash used for capital expenditures, net
of proceeds. We exclude capital expenditures because we consider
them to be a necessary component of our ongoing operations. We
consider free cash flow to be a measure that provides useful
information to management and investors about the amount of cash
generated by the business that can be used for investing in our
business and strengthening our balance sheet, but it is not
intended to represent the amount of cash flow available for
discretionary expenditures since other non-discretionary
expenditures, such as mandatory debt service requirements, are not
deducted from this measure.
The Company uses non-GAAP measures internally as a key
performance measure of the results of operations for purposes of
evaluating performance. These measures facilitate comparison of
operating performance between periods and help investors to better
understand the operating results of the Company by excluding
certain items that may not be indicative of the Company's core
business or operating results. The Company believes the use of
these measures enables management and investors to evaluate and
compare, from period to period, the Company’s operating performance
in a meaningful and consistent manner. The non-GAAP measures are a
supplemental measure of our performance that is not required by, or
presented in accordance with, GAAP, and should not be considered as
an alternative to, or more meaningful than, net income or earnings
per basic/diluted share (as determined in accordance with GAAP) as
a measure of our operating results.
CHARAH SOLUTIONS, INC.
Condensed Consolidated Balance
Sheets
(dollars in thousands except
per share data)
(Unaudited)
September 30, 2019
December 31, 2018
Assets
Current assets:
Cash
$
7,586
$
6,900
Trade accounts receivable
68,072
60,742
Receivable from affiliates
598
894
Costs and estimated earnings in excess of
billings
11,550
86,710
Inventory
15,487
25,797
Income tax receivable
2,860
—
Prepaid expenses and other current
assets
5,781
5,133
Total current assets
111,934
186,176
Property and equipment:
Plant, machinery and equipment
73,808
74,896
Structural fill site improvements
55,760
55,760
Vehicles
19,455
17,407
Office equipment
2,537
1,623
Buildings and leasehold improvements
262
262
Structural fill sites
7,110
7,110
Construction in progress
10,636
3,488
Total property and equipment
169,568
160,546
Less accumulated depreciation
(83,994
)
(71,605
)
Property and equipment, net
85,574
88,941
Other assets:
Trade names, net
34,816
34,920
Customer relationships, net
57,977
63,898
Technology, net
1,702
1,853
Non-compete and other agreements, net
72
180
Other intangible assets, net
—
22
Goodwill
74,213
74,213
Other assets
—
891
Deferred tax asset
10,250
2,747
Equity method investments
5,294
5,060
Total assets
$
381,832
$
458,901
CHARAH SOLUTIONS, INC.
Condensed Consolidated Balance
Sheets
(dollars in thousands except
per share data)
(Unaudited)
September 30, 2019
December 31,
2018
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
29,575
$
24,821
Billings in excess of costs and estimated
earnings
393
1,352
Notes payable, current maturities
60,565
23,268
Accrued payroll and bonuses
23,373
15,480
Asset retirement obligation, current
portion
13,738
14,704
Purchase option liability
7,110
10,017
Accrued expenses
20,735
22,473
Other liabilities
1,207
—
Total current liabilities
156,696
112,115
Long-term liabilities:
Contingent payments for acquisitions
11,417
11,214
Asset retirement obligation, less current
portion
4,029
11,361
Line of credit
10,215
19,799
Notes payable, less current maturities
128,550
211,022
Total liabilities
310,907
365,511
Commitments and contingencies (see Note
11)
Stockholders’ equity:
Retained (losses) earnings
(14,744
)
9,414
Common Stock, $0.01 par value; 200,000,000
shares authorized; 29,622,835 and 29,082,988 shares issued and
outstanding as of September 30, 2019 and December 31, 2018,
respectively
296
291
Additional paid-in capital
84,340
82,880
Total stockholders’ equity
69,892
92,585
Non-controlling interest
1,033
805
Total equity
70,925
93,390
Total liabilities and equity
$
381,832
$
458,901
CHARAH SOLUTIONS, INC.
Condensed Consolidated &
Combined Statements of Operations
(dollars in thousands except
per share data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
Revenue
$
121,113
$
186,002
$
405,307
$
537,254
Cost of sales
107,254
159,296
378,134
460,901
Gross profit
13,859
26,706
27,173
76,353
General and administrative expenses
14,096
32,625
45,481
65,944
Operating (loss) income
(237
)
(5,919
)
(18,308
)
10,409
Interest expense, net
(3,833
)
(17,034
)
(12,987
)
(26,708
)
Income from equity method investment
667
786
1,884
2,072
Loss before income taxes
(3,403
)
(22,167
)
(29,411
)
(14,227
)
Income tax benefit
(1,100
)
(5,667
)
(7,489
)
(2,761
)
Net loss
(2,303
)
(16,500
)
(21,922
)
(11,466
)
Less income attributable to
non-controlling interest
1,010
895
2,236
1,904
Net loss attributable to Charah
Solutions, Inc.
$
(3,313
)
$
(17,395
)
$
(24,158
)
$
(13,370
)
Loss per common share:
Basic
$
(0.11
)
$
(0.60
)
$
(0.82
)
$
(0.52
)
Diluted
$
(0.11
)
$
(0.60
)
$
(0.82
)
$
(0.52
)
Weighted-average shares outstanding used
in loss per common share:
Basic
29,604,500
29,082,988
29,451,873
25,776,720
Diluted
29,604,500
29,082,988
29,451,873
25,776,720
Pro forma net loss information:
Net loss attributable to Charah Solutions,
Inc. before provision for income taxes
$
(4,413
)
$
(23,062
)
$
(31,647
)
$
(16,131
)
Pro forma provision for income taxes
(1,100
)
(5,667
)
(7,489
)
(4,358
)
Pro forma net loss attributable to
Charah Solutions, Inc.
$
(3,313
)
$
(17,395
)
$
(24,158
)
$
(11,773
)
CHARAH SOLUTIONS, INC.
Condensed Consolidated &
Combined Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Nine Months Ended
September 30,
2019
2018
Cash flows from operating
activities:
Net loss
$
(21,922
)
$
(11,466
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization
17,034
33,898
Amortization of debt issuance costs
520
11,460
Deferred income tax benefit
(7,503
)
(3,076
)
Loss on sale of fixed assets
1,732
749
Income from equity method investment
(1,884
)
(2,072
)
Distributions received from equity
investment
1,650
1,689
Non-cash share-based compensation
1,666
2,449
Loss (gain) on interest rate swap
2,098
(2,857
)
Interest accreted on contingent earnout
liability
203
—
Changes in cash due to changes in:
Trade accounts receivable
(7,330
)
(21,706
)
Costs and estimated earnings in excess of
billings
75,160
(54,590
)
Inventory
10,310
(4,480
)
Accounts payable
4,754
4,192
Billings in excess of costs and estimated
earnings
(959
)
(11,283
)
Asset retirement obligation
(8,298
)
7,834
Other current assets and liabilities
2,944
38,755
Net cash provided by (used in) operating
activities
70,175
(10,504
)
Cash flows from investing
activities:
Proceeds from the sale of equipment
1,672
1,297
Purchases of property and equipment
(13,672
)
(14,948
)
Payments for business acquisitions, net of
cash received
—
(19,983
)
Purchase of intangible assets
—
(31
)
Net cash used in investing activities
(12,000
)
(33,665
)
Cash flows from financing
activities:
Net (payments) proceeds on line of
credit
(9,584
)
5,106
Proceeds from long-term debt
16,907
214,330
Principal payments on long-term debt
(62,603
)
(251,563
)
Repurchases of shares
(201
)
—
Payments of offering costs
—
(8,916
)
Issuance of common stock
—
59,241
Distributions to non-controlling
interest
(2,008
)
(1,626
)
Distributions to members
—
(686
)
Net cash (used in) provided by financing
activities
(57,489
)
15,886
Net increase (decrease) in cash
686
(28,283
)
Cash, beginning of period
6,900
32,264
Cash, end of period
$
7,586
$
3,981
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest
$
8,562
$
19,244
Cash paid during the year for taxes
$
91
$
—
CHARAH SOLUTIONS, INC.
Segment Results
(dollars in thousands)
Three Months Ended
September 30,
Change
2019
2018
$
%
(dollars in thousands)
Revenue:
Environmental Solutions
$
46,013
$
103,848
$
(57,835
)
(55.7
)%
Maintenance and Technical Services
75,100
82,154
(7,054
)
(8.6
)%
Total revenue
121,113
186,002
(64,889
)
(34.9
)%
Cost of sales
107,254
159,296
(52,042
)
(32.7
)%
Gross Profit:
Environmental Solutions
6,789
19,852
(13,063
)
(65.8
)%
Maintenance and Technical Services
7,070
6,854
216
3.2
%
Total gross profit
13,859
26,706
(12,847
)
(48.1
)%
General and administrative
expenses
14,096
32,625
(18,529
)
(56.8
)%
Operating loss
(237
)
(5,919
)
5,682
(96.0
)%
Interest expense, net
(3,833
)
(17,034
)
13,201
77.5
%
Income from equity method investment
667
786
(119
)
(15.1
)%
Loss before taxes
(3,403
)
(22,167
)
18,764
(84.6
)%
Income tax benefit
(1,100
)
(5,667
)
4,567
(80.6
)%
Net loss
(2,303
)
(16,500
)
14,197
(86.0
)%
Less income attributable to
non-controlling interest
1,010
895
115
12.8
%
Net loss attributable to Charah
Solutions, Inc.
$
(3,313
)
$
(17,395
)
$
14,082
(81.0
)%
CHARAH SOLUTIONS, INC.
Non-GAAP Reconciliation: Net
Loss to Adjusted EBITDA
(dollars in thousands)
We define Adjusted EBITDA as net loss
attributable to Charah Solutions, Inc. before interest expense,
net, income taxes, depreciation and amortization, equity-based
compensation, non-recurring legal and start-up costs and expenses,
the Brickhaven contract deemed termination revenue reversal, and
transaction-related expenses and other items. Adjusted EBITDA
margin represents the ratio of Adjusted EBITDA to total revenues.
We believe Adjusted EBITDA and Adjusted EBITDA margin are useful
performance measures because they allow for an effective evaluation
of our operating performance when compared to our peers, without
regard to our financing methods or capital structure.
The following represents a reconciliation of net loss, our
most directly comparable financial measure calculated and presented
in accordance with GAAP, to Adjusted EBITDA.
Three Months Ended
September 30,
2019
2018
(dollars in thousands)
Net loss attributable to Charah Solutions,
Inc.
$
(3,313
)
$
(17,395
)
Interest expense, net
3,833
17,034
Income tax benefit
(1,100
)
(5,667
)
Depreciation and amortization
5,399
16,763
Elimination of certain non-recurring legal
costs and expenses(1)
(1,485
)
20,033
Equity-based compensation
659
1,046
Transaction-related expenses and other
items(2)
1,603
739
Adjusted EBITDA
$
5,596
$
32,553
Adjusted EBITDA margin(3)
4.6
%
17.5
%
(1)
Represents non-recurring legal costs and
expenses, which amounts are not representative of those that we
historically incur in the ordinary course of our business. Negative
amounts represent insurance recoveries related to these
matters.
(2)
Represents SCB transaction expenses,
executive severance costs, IPO-related costs and other
miscellaneous items.
(3)
Adjusted EBITDA margin is a non-GAAP
financial measure that represents the ratio of Adjusted EBITDA to
total revenues. We use Adjusted EBITDA margin to measure the
success of our businesses in managing our cost base and improving
profitability.
CHARAH SOLUTIONS, INC.
Non-GAAP Reconciliation: Net
Loss to Adjusted Net (Loss) and
Adjusted (Loss) Income per
Diluted Share
(dollars in thousands)
We define Adjusted net (loss) income as net (loss) income
attributable to Charah Solutions, Inc. plus, on a post-tax basis,
non-recurring legal costs and expenses, non-recurring start-up
costs and expenses, and transaction-related expenses and other
items. Adjusted (loss) earnings per basic/diluted share is based on
Adjusted net (loss) income.
The following represents a reconciliation
of net loss, our most directly comparable financial measure
calculated and presented in accordance with GAAP, to Adjusted net
(loss) income.
Three Months Ended
September 30,
2019
2018
(dollars in thousands)
Net loss attributable to Charah Solutions,
Inc.
$
(3,313
)
$
(17,395
)
Income tax benefit
(1,100
)
(5,667
)
Loss on extinguishment of debt(1)
—
12,451
Elimination of certain non-recurring legal
costs and expenses(2)
(1,485
)
20,033
Transaction-related expenses and other
items(3)
1,603
739
Adjusted (loss) income before income taxes
attributable to Charah Solutions, Inc.
$
(4,295
)
$
10,161
Adjusted income tax provision(4)
(1,387
)
2,598
Adjusted net (loss) income attributable to
Charah Solutions, Inc.
$
(2,908
)
$
7,563
Weighted average basic / diluted share
count(5)
29,605
30,264
Adjusted (loss) income per diluted
share
$
(0.10
)
$
0.25
(1)
Represents non-recurring costs associated
with our term loan refinancing.
(2)
Represents non-recurring legal costs and
expenses, which amounts are not representative of those that we
historically incur in the ordinary course of our business. Negative
amounts represent insurance recoveries related to these
matters.
(3)
Represents SCB transaction expenses,
executive severance costs, IPO-related costs, expenses associated
with the amendment to the Credit Facility and other miscellaneous
items.
(4)
Represents the effective income tax rate
of 32.3% and 25.5% for three months ended September 30, 2019 and
September 30, 2018, respectively, multiplied by adjusted (loss)
income before income taxes attributable to Charah Solutions,
Inc.
(5)
As a result of the adjusted net loss per
share for the three months ended September 30, 2019, the inclusion
of all potentially dilutive shares would be anti-dilutive.
Therefore, dilutive shares (in thousands) of 1,510 were excluded
from the computation of the weighted-average shares for diluted
adjusted net loss per share for the three months ended September
30, 2019.
CHARAH SOLUTIONS, INC.
Non-GAAP Reconciliation: Cash
Flows from Operating Activities
to Free Cash Flow
(dollars in thousands)
We define free cash flow as cash flows
from operating activities, less cash used for capital expenditures,
net of proceeds. We exclude capital expenditures because we
consider them to be a necessary component of our ongoing
operations. We consider free cash flow to be a measure that
provides useful information to management and investors about the
amount of cash generated by the business that can be used for
investing in our business and strengthening our balance sheet, but
it is not intended to represent the amount of cash flow available
for discretionary expenditures since other non-discretionary
expenditures, such as mandatory debt service requirements, are not
deducted from this measure.
The following represents a reconciliation
of net cash provided by (used in) in operating activities to free
cash flow, our most directly comparable financial measure
calculated and presented in accordance with GAAP. The presentation
of free cash flow is not meant to be considered in isolation or as
an alternative to net cash provided by (used in) operating
activities as a measure of liquidity.
Nine Months Ended
September 30,
2019
2018
Net cash provided by (used in) operating
activities
$
70,175
$
(10,504
)
Capital expenditures, net of proceeds:
Maintenance and growth(1)
(4,431
)
(13,651
)
Technology
(7,569
)
—
Total capital expenditures
(12,000
)
(13,651
)
Free cash flow
$
58,175
$
(24,155
)
(1)
Proceeds of $1,672 and $1,297 were
included in maintenance and growth capital expenditures for the
nine months ended September 30, 2019 and 2018, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191112006156/en/
Investor Contact Tony Semak, Head of Investor Relations
Charah Solutions, Inc. ir@charah.com (502) 245-1353
Media Contact Katrina Gallagher PriceWeber Marketing
media@charah.com (502) 472-6003
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