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Ormat Technologies Reports Second Quarter 2020 Financial Results

/EIN News/ -- COMPANY IMPROVED ITS MARGINS IN ALL OPERATING SEGMENTS, LED BY THE STRENGTH AND RESILIENCY OF OUR ELECTRICITY SEGMENT

MANAGEMENT NARROWS THE UPPER-END OF THE GUIDANCE

RENO, Nev., Aug. 04, 2020 (GLOBE NEWSWIRE) -- Ormat Technologies, Inc. (NYSE: ORA) today announced financial results for the second quarter ended June 30, 2020.

FINANCIAL RESULTS

($ MILLIONS, EXCEPT PER SHARE AMOUNTS) Q2 2020 Q2 2019 CHANGE (%)
Revenues      
Electricity 128.7      129.1      (0.3  ) %
Product 43.7      52.0      (16.0 ) %
Energy Storage and Management Services 2.5      3.0      (15.0 ) %
Total Revenues 174.9      184.1      (5.0 ) %
       
Gross Profit   65.4   65.1 0.4    %
Gross margin (%)      
Electricity 44.1    % 42.8    %  
Product 20.6    % 20.6    %  
Energy Storage & Management Services (13.6 ) % (29.5 ) %  
Gross margin (%) 37.4    % 35.4    %  
       
Operating income 48.1      46.9      2.5    %
Net income attributable to the Company’s stockholders 23.0      33.9      (32.1 ) %
Diluted EPS 0.45      0.66      (32.8 ) %
Adjusted Net income attributable to the Company’s stockholders1 23.0      20.6      11.7    %
Adjusted diluted EPS1 0.45      0.40      11.1    %
Adjusted EBITDA1 97.9      94.9      3.2    %

1 Reconciliation is set forth below in this release

“This was another solid quarter of strong execution led by the improved profitably of our Electricity segment,” commented Doron Blachar, Chief Executive Officer. “I am extremely proud of how our team is operating through  the challenging COVID-19 environment and how we were able to successfully complete the enhancement of our 19MW Steamboat Hills complex on time and make significant progress to bring Puna back online  by the end of the year.”

“We continue with our efforts to minimize the COVID-19 implication on our business, and while we did not experience material impact on our results so far, the continued outbreak of the COVID-19 may affect us more  in the future. Specifically, awarding contracts for significant projects in the Products segment is currently delayed. Nevertheless, our Product segment is currently on track to meet its revenue forecast for the full-year 2020,” added Mr. Blachar.

“Since March 31, 2020,” Mr. Blachar continues, “we have increased our liquidity by over $400 million through the issuance of long-term debt that gives us the flexibility to allocate our resources and manufacturing capabilities to support our organic growth. We are increasing and focusing our efforts on exploring and developing internal projects with a target to increase our geothermal portfolio in the US and globally by 2023 and beyond. This quarter reinforces our confidence that Ormat is on the right path to continue its growth trajectory by relying on Ormat’s integrated business model, our geographic and revenue diversity, and our excellent team.”

FINANCIAL HIGHLIGHTS FOR THE SECOND QUARTER OF 2020

  • Total revenues of $174.9 million, down 5.0% compared to Q2 2019;
    • Electricity segment revenues of $128.7 million compared to $129.1 million in Q2 2019;
    • Product segment revenues of $43.7 million, down 16.0% compared to Q2 2019;
    • Energy Storage & Management Services segment revenues of $2.5 million compared to $3.0 million in Q2 2019;
  • Total gross margin was 37.4%, compared to 35.4% in Q2 2019;
    • Electricity segment gross margin was 44.1% compared to 42.8% for Q2 2019;
    • The Company recorded business interruption insurance income of $3.3 million related to the 2018 volcanic eruption in Hawaii, which netted to zero Puna’s cost of revenues and reduced general and administrative costs by $0.6 million; In the second quarter 2019, the Company recorded business interruption insurance income of $6.8 million that resulted in a positive gross margin of $1.8 million.
  • Operating income increased 2.5% due to better gross margins and lower operating expenses;
  • Net income was $25.3 million compared to $36.2 million in Q2 2019; Q2 2019 net income included $13.3 million related to a one-time Tax benefit;
  • Net income attributable to the Company's stockholders was $23.0 million, or $0.45 per diluted share, compared to $33.9 million, or $0.66 per diluted share in Q2 2019; adjusted net income attributable to the Company's stockholders1 for Q2 2019 was $20.6 million  or $0.40 per diluted share;
  • Adjusted EBITDA1 increased 3.2% to $97.9 million, up from $94.9 million in Q2 2019;
  • Product segment backlog was approximately $66 million as of August 3, 2020; and
  • The Company declared a quarterly dividend of $0.11 per share for the second quarter of 2020.

1 Reconciliation is set forth below in this release

RECENT DEVELOPMENTS

  • As of August 2020, Ormat continue its efforts to recommission its Puna power plant. The Company obtained all necessary permits to start operation, completed the construction of the substation and connected a new production well to the power plant. We expect to resume commercial operation during the fourth quarter with gradual increase of generation to 29MW by the end of the year, subject to on time completion of the transmission line by HELCO and additional field recovery work.
  • In July 2020, we completed the acquisition of the 20MW/80MWh Pomona energy storage asset in California from Alta Gas for a total net consideration of $43.9 million. The facility is our first battery storage asset in operation in California, increasing our existing operating portfolio to 73MW/136MWh and adding to our battery storage assets in New Jersey, New England and Texas. 
  • In July, Ormat issued approximately $290.0 million of corporate bonds at an effective fixed interest rate of 4.34%. In April and May the Company has issued approximately $130 million of new corporate debt.
  • In June, Ormat completed the enhancement of its Steamboat Hills complex and increased its generating capacity by 19MW to a total of 84MW.

2020 GUIDANCE

Mr. Blachar added, “We are narrowing the upper-end of the guidance for full-year 2020 and expect total revenues of between $710 million and $725 million with Electricity segment revenues between $550 million and $560 million. We expect Product segment revenues of between $140 million and $150 million. Revenues from Energy Storage and Management Services segment are expected to be between $15 million and $17 million. We expect 2020 Adjusted EBITDA of between $400 million and $410 million for the full year. We expect annual Adjusted EBITDA attributable to minority interest to be approximately $27 million.”

The Company provides a reconciliation of Adjusted EBITDA, a Non-GAAP financial measure for the three months ended June 30, 2020. However, the Company is unable to provide a reconciliation for its Adjusted EBITDA guidance range due to high variability and complexity with respect to estimating forward looking amounts for impairments and disposition and acquisition of business interests, income tax expense, and other non-cash expenses and adjusting items that are excluded from the calculation of Adjusted EBITDA.

SECOND QUARTER 2020 FINANCIAL RESULTS (COMPARING THE QUARTER ENDED JUNE 30, 2020 TO THE QUARTER ENDED JUNE 30, 2019)

Total revenues for the quarter were $174.9 million, down 5.0% compared to the same quarter last year. Electricity segment revenues of $128.7 million were down slightly compared to $129.1 million last year. Product segment revenues decreased 16.0% to $43.7 million, down from $52.0 million in the same quarter last year due lower contract backlog. Energy Storage and Management Services segment revenues were $2.5 million compared to $3.0 million in the same quarter last year.

The Company recorded $3.3 million of business interruption insurance income related to the 2018 volcanic eruption, which disrupted operations at its Puna plant. Consistent with generally accepted accounting practices, $2.7 million was allocated to offset costs of revenue at Puna, which netted to zero, and the remaining $0.6 million was allocated to reduce general and administrative expenses.

General and administrative expenses were $11.3 million, or 6.5% of total revenues, compared to $14.2 million, or 7.7% of total revenues. The decrease was primarily attributable to a decrease in professional fees, business interruption insurance income related to Puna and gain of $1.3 million from sale of concession.

Net income attributable to the Company’s stockholders was $23.0 million, or $0.45 per diluted share, compared to $33.9 million, or $0.66 per diluted share. In the second quarter 2019 net income attributable to the Company’s stockholders included $13.3 million of one-time Tax benefit. Adjusted net income attributable to the Company's stockholders1 in the second quarter 2019 was 20.6 million, or $0.40 per diluted share.

Adjusted EBITDA1 was $97.9 million compared to $94.9 million last year.

1 Reconciliation is set forth below in this release

DIVIDEND

On August 4, 2020, the Company’s Board of Directors declared, approved, and authorized payment of a quarterly dividend of $0.11 per share pursuant to the Company’s dividend policy. The dividend will be paid on September 1, 2020 to stockholders of record as of the close of business on August 18, 2020.

CONFERENCE CALL DETAILS

Ormat will host a conference call to discuss its financial results and other matters discussed in this press release on Wednesday, August 5th, at 10 a.m. ET. The call will be available as a live, listen-only webcast at investor.ormat.com. During the webcast, management will refer to slides that will be posted on the website. The slides and accompanying webcast can be accessed through the News & Events in the Investor Relations section of Ormat’s website.

An archive of the webcast will be available approximately 60 minutes after the conclusion of the live call.

Investors may access the call by dialing:

Participant dial in (toll free): 1-877-511-6790   
Participant international dial-in: 1-412-902-4141                               

Conference replay

US Toll Free: 1-877-344-7529                                                         
International Toll: 1-412-317-0088                                           
Replay Access Code: 10145766

ABOUT ORMAT TECHNOLOGIES

With over five decades of experience, Ormat Technologies, Inc. is a leading geothermal company and the only vertically integrated company engaged in geothermal and recovered energy generation (“REG”), with the objective of becoming a leading global provider of renewable energy. The Company owns, operates, designs, manufactures and sells geothermal and REG power plants primarily based on the Ormat Energy Converter – a power generation unit that converts low-, medium- and high-temperature heat into electricity. With 63 U.S. patents, Ormat’s power solutions have been refined and perfected under the most grueling environmental conditions. Ormat has 578 employees in the United States and 830 overseas. Ormat’s flexible, modular solutions for geothermal power and REG are ideal for vast range of resource characteristics. The Company has engineered, manufactured and constructed power plants, which it currently owns or has installed to utilities and developers worldwide, totaling over 3,000 MW of gross capacity. Ormat’s current 933 MW generating portfolio is spread globally in the U.S., Kenya, Guatemala, Indonesia, Honduras, and Guadeloupe. Ormat expanded its operations to provide energy storage and energy management solutions, by leveraging its core capabilities and global presence as well as through its Viridity Energy Solutions Inc. subsidiary.

ORMAT’S SAFE HARBOR STATEMENT

Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to Ormat's plans, objectives and expectations for future operations and are based upon its management's current estimates and projections of future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties.

For a discussion of such risks and uncertainties, see "Risk Factors" as described in Ormat’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 2, 2020 and from time to time, in Ormat’s quarterly reports on Form 10-Q that are filed with the SEC.

These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

ORMAT TECHNOLOGIES, INC AND SUBSIDIARIES
Condensed Consolidated Statement of Operations
For the Three and Six-Month Periods Ended June 30, 2020 and 2019

  Three Months Ended June 30, Six-Months Ended June 30,
  2020 2019 2020 2019
  (Dollars in thousands, except per share data)
Revenues:        
Electricity 128,685      129,079      271,541      271,987     
Product 43,701      52,030      91,112      104,158     
Energy storage and management services 2,514      2,956      4,360      6,958     
  Total revenues 174,900      184,065      367,013      383,103     
Cost of revenues:        
Electricity 71,950      73,775      143,318      151,318     
Product  34,709      41,316      71,687      83,422     
Energy storage and management services 2,855      3,827      4,804      9,037     
  Total cost of revenues 109,514      118,918      219,809      243,777     
  Gross profit 65,386      65,147      147,204      139,326     
Operating expenses:        
Research and development expenses 1,172      810      2,791      1,710     
Selling and marketing expenses  4,854      3,276      9,648      7,141     
General and administrative expenses  11,285      14,181      25,633      29,870     
  Operating income 48,075      46,880      100,605      100,605     
Other income (expense):        
Interest income  441      420      843      713     
Interest expense, net  (19,785 )   (21,517 )   (37,058 )   (42,740 )  
Derivatives and foreign currency transaction gains (losses)  671      19      1,064      491     
Income attributable to sale of tax benefits  5,672      4,637      9,804      12,401     
Other non-operating income (expense), net  304      1,027      382      1,118     
  Income from operations before income tax and equity in earnings (losses) of investees  35,378      31,466      84,167      72,588     
Income tax (provision) benefit (11,766 )   3,529      (29,914 )   (10,510 )  
Equity in earnings (losses) of investees, net  1,658      1,202      923      2,249     
Net income 25,270      36,197      55,176      64,327     
Discontinued operations:         
Net income 25,270      36,197      55,176      64,327
Net income attributable to noncontrolling interest  (2,224 )   (2,259 )   (6,097 )   (4,443 )  
Net income attributable to the Company's stockholders  23,046      33,938      49,079      59,884     
Earnings per share attributable to the Company's stockholders:        
Basic:        
  Net income 0.45      0.67      0.96      1.18     
Diluted:        
  Net income 0.45      0.66      0.95      1.17     
Weighted average number of shares used in computation of earnings per share attributable to the Company's stockholders:        
  Basic 51,043      50,800      51,040      50,757     
  Diluted  51,362      51,094      51,448      51,058     

ORMAT TECHNOLOGIES, INC AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
For the Periods Ended June 30, 2020 and December 31, 2019

  June 30, 2020   December 31, 2019
ASSETS
Current assets:      
Cash and cash equivalents  173,718       71,173    
Restricted cash and cash equivalents  76,116       81,937    
Receivables:      
  Trade  179,757       154,525    
  Other  18,121       22,048    
Inventories 38,932       34,949    
Costs and estimated earnings in excess of billings on uncompleted contracts  19,477       38,365    
Prepaid expenses and other  10,948       12,667    
  Total current assets 517,069       415,664    
Investment in unconsolidated companies  84,414       81,140    
Deposits and other  37,278       38,284    
Deferred income taxes 116,758       129,510    
Property, plant and equipment, net 2,038,038       1,971,415    
Construction-in-process 394,123       376,555    
Operating leases right of use 17,638       17,405    
Finance leases right of use  13,280       14,161    
Intangible assets, net 179,659       186,220    
Goodwill 20,120       20,140    
Total assets 3,418,377       3,250,494    
       
LIABILITIES AND EQUITY
Current liabilities:      
Accounts payable and accrued expenses  149,591       141,857    
Short term revolving credit lines with banks (full recourse)  100,057        40,550     
Commercial paper  3,775        50,000     
Billings in excess of costs and estimated earnings on uncompleted contracts  5,599        2,755     
Current portion of long-term debt:      
  Senior secured notes 28,544       24,473    
  Other loans  34,341       34,458    
Full recourse  76,572       76,572    
Operating lease liabilities  3,016       2,743     
Finance lease liabilities 3,151        3,068     
   Total current liabilities  404,646        376,476     
Long-term debt, net of current portion:      
  Limited and non-recourse:      
  Senior secured notes  325,714       339,336    
  Other loans  301,318       317,395    
Full recourse: —        —     
  Senior unsecured bonds 415,751        286,453     
  Other loans  64,150        68,747     
Operating lease liabilities 14,201        14,008     
Finance lease liabilities 10,523        11,209     
Liability associated with sale of tax benefits  118,072       123,468    
Deferred income taxes 104,013       97,126    
Liability for unrecognized tax benefits  15,309       14,643    
Liabilities for severance pay  18,835       18,751    
Asset retirement obligation  51,414       50,183    
Other long-term liabilities 7,814       8,039    
Total liabilities  1,851,760       1,725,834    
       
Commitments and contingencies      
       
Redeemable noncontrolling interest  9,806        9,250     
       
Equity:      
The Company's stockholders' equity:      
  Common stock 51       51    
  Additional paid-in capital 917,403       913,150    
  Retained earnings  524,864       487,873    
  Accumulated other comprehensive income (loss)  (13,921 )     (8,654 )  
  Total stockholders' equity attributable to Company's stockholders 1,428,397        1,392,420     
Noncontrolling interest  128,414        122,990     
  Total equity 1,556,811        1,515,410     
  Total liabilities, redeemable noncontrolling interest and equity  3,418,377        3,250,494     


ORMAT TECHNOLOGIES, INC AND SUBSIDIARIES
Reconciliation of EBITDA and Adjusted EBITDA
For the Three and Six-Month Periods Ended June 30, 2020 and 2019

We calculate EBITDA as net income before interest, taxes, depreciation and amortization. We calculate Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, adjusted for (i) termination fees, (ii) impairment of long-lived assets, (iii) write-off of unsuccessful exploration activities, (iv) any mark-to-market gains or losses from accounting for derivatives, (v) merger and acquisition transaction costs, (vi) stock-based compensation, (vii) gain or loss from extinguishment of liabilities, (viii) gain or loss on sale of subsidiary and property, plant and equipment and (ix) other unusual or non-recurring items. EBITDA and Adjusted EBITDA are not measurements of financial performance or liquidity under accounting principles generally accepted in the United States, or U.S. GAAP, and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net earnings as indicators of our operating performance or any other measures of performance derived in accordance with U.S. GAAP. We use EBITDA and Adjusted EBITDA as a performance metric because it is a metric used by our Board of Directors and senior management in evaluating our financial performance. However, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do.

The following table reconciles net income to EBITDA and Adjusted EBITDA for the three and six - month periods ended June 30, 2020 and 2019.

  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (Dollars in thousands) (Dollars in thousands)
Net income 25,270      36,197      55,176      64,327     
Adjusted for:        
Interest expense, net (including amortization of deferred financing costs) 19,344      21,097      36,215      42,027     
Income tax provision (benefit) 11,766      (3,529 )   29,914      10,510     
Adjustment to investment in an unconsolidated company: our proportionate share in interest expense, tax and depreciation and amortization in Sarulla 3,199      2,579      5,876      5,240     
Depreciation and amortization 36,812      35,751      72,100      70,617     
EBITDA  96,391      92,095      199,281      192,721     
Mark-to-market gains or losses from accounting for derivative  (1,482 )   (370 )   (2,043 )   (1,579 )  
Stock-based compensation  2,264      2,643      4,253      5,003     
Merger and acquisition transaction costs  618      500      1,158      500     
Settlement expenses  89      —      1,277      —     
Adjusted EBITDA  97,880      94,868      203,926      196,645     


ORMAT TECHNOLOGIES, INC AND SUBSIDIARIES
Reconciliation of Adjusted Net Income attributable to the Company's stockholders
For the Three-Month Period Ended June 30, 2020 and 2019

Adjusted Net Income attributable to the Company's stockholders and Adjusted EPS are adjusted for one-time expense items that are not representative of our ongoing business and operations. The use of Adjusted Net income attributable to the Company's stockholders and Adjusted EPS is intended to enhance the usefulness of our financial information by providing measures to assess the overall performance of our ongoing business.

The following table reconciles Net income attributable to the Company's stockholders and Adjusted EPS for the three-month ended June 30, 2020 and 2019.

  Three Months Ended June 30,
  2020 2019
     
Net income attributable to the Company's stockholders 23.0    33.9     
One-time tax items —    (13.3 )  
Adjusted Net income attributable to the Company's stockholders 23.0    20.6     
Weighted average number of shares diluted used in computation of earnings per share attributable to the Company's stockholders:  51.4    51.1     
Diluted Adjusted EPS  0.45    0.40     
     


Ormat Technologies Contact:
Smadar Lavi
VP Corporate Finance and Head of Investor Relations
775-356-9029 (ext. 65726)
slavi@ormat.com 

Investor Relations Agency Contact:
Rob Fink
FNK IR
646-415-8972
rob@FNKIR.com

 

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