Record Revenue of $195.7 Million, 163% Increase Year Over Year
Comprehensive Suite of Management and Recycling Services Drives Profitable Growth
Gross Leverage Reduced to 2.8X LTM EBITDA Following Debt Repayment with Net Proceeds of IPO
August 14, 2018
LOUISVILLE, Ky.–(BUSINESS WIRE)– Charah Solutions, Inc. (NYSE: CHRA), a leading provider of mission-critical environmental and maintenance services to the power generation industry, today announced financial results for its second quarter ended June 30, 2018. Revenues were $195.7 million, compared to $74.4 million for the same period in 2017. Net income was $3.2 million and adjusted EBITDA1 was $26.0 million for the second quarter of 2018.
“Our second quarter performance marked a strong start to Charah’s new era as a public company,” said Charles Price, President and Chief Executive Officer of Charah. “We generated record revenue, driven by the addition of our Nuclear Services division within the Maintenance & Technical Services segment, strong organic growth in our core businesses and the successful acquisition and integration of SCB International. We are uniquely positioned as the industry’s only broad-based environmental and maintenance services provider to capitalize on a number of attractive growth opportunities in our pipeline as we continue to increase market share and expand our offerings to grow on-site services. Going forward, we are focused on strengthening our position as the market leader in environmental and maintenance services to the power generation industry and creating long-term value for our stockholders.”
KEY HIGHLIGHTS FOR THE SECOND QUARTER 2018
For the three months ended June 30, 2018, Charah generated revenue of $195.7 million, a 163% increase year over year. Gross profit increased 49% year over year to $30.5 million.
Environmental Solutions Segment: Environmental Solutions generated record revenue of $90.1 million, an increase of 46% from the second quarter a year ago, reflecting both growing ash sales and the impact of the SCB acquisition on volumes of materials sold. Gross profit increased $4.6 million, or 26%, for the three months ended June 30, 2018 to $22.1 million from $17.5 million for the three months ended June 30, 2017.
Maintenance & Technical Services Segment: Maintenance & Technical Services increased revenue to $105.6 million from $12.8 million in the same quarter a year ago. Gross profit increased $5.5 million, or 183%, for the three months ended June 30, 2018 to $8.5 million from $3.0 million for the three months ended June 30, 2017. The increases in revenue and gross profit were primarily attributable to the increased maintenance activities performed at the largest fleet of nuclear power plants in the United States.
General and administrative expense increased $11.5 million for the three months ended June 30, 2018 to $18.9 million from $7.5 million for the three months ended June 30, 2017. The increase was primarily attributable to additional expenses associated with the addition of Nuclear Services and SCB, notably $4.3 million in one-time, non-recurring and non-operating costs.
From its completed IPO, Charah received net proceeds of approximately $59.2 million, prior to deducting offering expenses and after deducting underwriting discounts. A portion of the proceeds was used to repay approximately $40.0 million of long-term debt, which reduced gross leverage to 2.8X LTM EBITDA.
ADDITIONAL BUSINESS UPDATES FOR THE THIRD QUARTER 2018
Following Charah’s acquisition of SCB, which was completed in the first quarter of 2018, the Company expects to open two facilities in the third quarter that will use SCB’s grinding and thermal beneficiation technologies to produce high-quality recycled products at a fraction of the cost of the competition.
The Company completed seven outages at nuclear power plants year-to-date and a total of 11 since it began providing maintenance services to nuclear plants in the third quarter of 2017, and expects to perform an additional seven outages in the second half of 2018.
Charah will host a conference call at 8:30 a.m. ET today to discuss the second 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 Investor Relations section of the Charah website at ir.charah.com. To participate via telephone, please dial (866) 393-4306 within the United States or (734) 385-2616 outside the United States, approximately 15 minutes prior to the scheduled start time. The conference ID for the call is 2358208 or “Charah Earnings”.
A webcast replay will be available on the Investor Relations section of the Charah website at ir.charah.com after 12:00 p.m. ET on Tuesday, August 14, 2018. In addition, an audio replay will be available for one week following the call and will be accessible by dialing (855) 859-2056 within the United States or (404) 537-3406 outside the United States. The replay ID is 2358208.
ABOUT CHARAH SOLUTIONS
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 coal-fired and nuclear power generation sites across the country. Based in Louisville, Kentucky, Charah 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 coal and nuclear energy providers. 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 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 www.charah.com.
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. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company. 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. These include the timing of planned capital expenditures, availability of acquisitions, economic and competitive conditions, the condition of the capital markets generally, as well as the Company’s ability to access them and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company’s business and other important factors that could cause actual results to differ materially from those projected as described in the Company’s reports filed with the SEC.
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 EBITDA and Adjusted EBITDA margin are not financial measures determined in accordance with GAAP.
Charah defines Adjusted EBITDA as net income before interest expense, income taxes, depreciation and amortization, equity-based compensation, elimination of certain legacy expenses, amounts from a non-acquired business line 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 income in arriving at Adjusted EBITDA because these amounts are either non-recurring or can vary substantially within Charah’s 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 income 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’s 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’s computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies. Charah 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 income, Charah’s most directly comparable financial measure calculated and presented in accordance with GAAP, along with the Company’s Adjusted EBITDA margin is included in the supplemental financial data attached to this press release.
(1) The successor columns represent the combined financial information of Charah and Allied for the period from January 13, 2017 through June 30, 2017 and January 1, 2018 through June 30, 2018 as applicable, as reflected in our financial statements included elsewhere in this Quarterly Report. The predecessor and successor columns together represent our accounting Predecessor for purposes of this Quarterly Report.
(2) The predecessor columns represent the financial information of Charah for the period from January 1, 2017 through January 12, 2017 as reflected in our audited financial statements included elsewhere in this Quarterly Report. The predecessor and successor columns together represent our accounting Predecessor for purposes of this Quarterly Report.
(3) For the three and six months ended June 30, 2018, represents non-recurring legal expenses associated with the lawsuit filed by APTIM Corp. against Allied in July 2017. As a result, these costs will be non-recurring following the resolution of the APTIM litigation and are not representative of legal costs that we will incur from time to time in the ordinary course of our business.
(4) Represents non-recurring start-up costs associated with the startup of Allied and our nuclear services offerings, including the setup of financial operations systems and modules, pre-contract expenses to obtain initial contracts and the hiring of operational staff. Because these costs are associated with the initial setup of the Allied business to initiate the operations involved in our nuclear services offerings, these costs are non-recurring in the normal course of our business.
(5) Adjusted EBITDA margin is a non-GAAP 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.
1 Adjusted EBITDA is a non-GAAP financial measure and the reconciliation is included above.
Charah Solutions, Inc.
Charles W. Price, 502-245-1353
Joele Frank, Wilkinson Brimmer Katcher
Ed Trissel / Kate Clark / Tim Ragones
Source: Charah Solutions, Inc.