Infrastructure and Energy Alternatives, Inc.
Q4 2020 Earnings Call Transcript

Published: 9 Mar 2021

[Operator:]

Good morning, and welcome to Infrastructure and Energy Alternatives' Fourth quarter and Full Year 2020 Conference Call. I’d like to note that all participants on today’s call are in a listen-only mode. And with that, I will now turn the call over to Kimberly Esterkin with Investor Relations. Kimberly, please go ahead.

[Kimberly Esterkin:]

Hello, and thank you for joining us today to discuss IEA's fourth quarter and full year 2020 financial results. With us, from management, are JP Roehm, President and Chief Executive Officer; and Pete Moerbeek, Executive Vice President and Chief Financial Officer. Before turning the call over to management, I would like to note that this discussion contains forward-looking statements about IEA's future growth and financial expectations. Any forward-looking statements should be considered in conjunction with the cautionary statements in yesterday's press release and the risk factors included in the company's SEC filings.

[John Roehm:]

Well, thank you, Kimberly, and good morning to everyone. We appreciate you joining our earnings conference call. While this is a call about the fourth quarter, I want to start with the full 2020 results. IEA achieved record revenues and record adjusted EBITDA in 2020. Our consolidated revenues were $1.8 billion for 2020, up 20.1% year-over-year, and our adjusted EBITDA was almost $128 million, up 27.2% year-over-year. Both revenues and adjusted EBITDA were above the high end of our guidance range. We were able to achieve the result in a year overshadowed by the COVID-19 pandemic. The services we provide are considered essential infrastructure, but we were not sheltered from the impacts of COVID-19 and we continue to see an impact to our daily workflows as we abide by increased safety protocols and practice social distancing at our project sites. It is difficult to precisely measure the inefficiencies that have resulted from these extra precautions, but they do increase costs overall. Last year, we also experienced pandemic related delays in delivery materials and turbines at some projects, but we were able to complete our projects as scheduled. Even with the impact of the pandemic, our teams responded, and we improved our safety metrics to our total reportable incident rate of just 0.61 with almost 8.5 million man-hours worked. That rate is about 40% lower than the industry standard. Our backlog also remained strong and totaled $2.1 billion at the end of the year. The final approval process for some projects has been slower-than-expected and project start dates have been delayed by 1 to 2 quarters in many instances unlike the end of 2019 when we saw a push to begin wind and solar construction due to the then impending step down of the tax credits. The extension of the PTC for wind and ITC for solar this past December may reduce some of the urgency to complete renewable projects in the very near term. Bidding activity remains high, and none of our projects have been canceled as renewable energy continues to expand as part of the overall power generation in the country. Enabling sustainability is a cornerstone of our business, and we are committed to environmental, social and governance or ESG matters, and look forward to issuing our first ESG report in the coming months. IEA was added to a number of sustainability equity indices in the past year, including the Wilver Hill Clean Energy Index, the CIBC Atlas Clean Energy Index and Ardour Global Alternative Energy Index, reflecting the fact that approximately sector revenue is derived from activities that enable energy transition.

[Peter Moerbeek:]

Thanks, JP, and thanks to everyone for listening. As we issued our earnings press release and filed our Form 10-K yesterday, I promise not to repeat all those numbers. As expected, revenues, gross profit and gross profit margin all decreased in the fourth quarter of 2020 compared to the fourth quarter of 2019. The decrease resulted from the timing of our renewable projects in 2020 compared to 2019. Historically, first quarter is lowest in revenue and profitability as we begin projects and winter weather reduces construction activity. Second and third quarter revenue and profitability increased, while we complete many projects in the fourth quarter and construction begins to slow down. This pattern changed at the end of 2019 as customers started projects early to ensure they would receive the benefits the PTC, which was scheduled to step down in 2020.

[John Roehm:]

Well, thank you, Pete. With our bidding opportunities remaining high, we continue to see strong prospects for growth across both of our operating segments. In the renewables space, IEA is a direct beneficiary of the growing investment in the wind and solar markets. Despite the global pandemic, 2020 set a new high for utility-scale solar projects in the United States. With total solar project count surpassing records previously set in 2016. The U.S. Energy Information Administration, or EIA, for short, anticipates this trend renewable growth will continue in 2021 with 39.7 gigawatts of new energy to go with a commercial operation this year.

[Operator:]

. Our first question comes from the line of Brent Thielman with D.A. Davidson.

[Brent Thielman:]

JP and Pete, I guess, first question, you guys did $1 billion in the wind business in 2020, which is extraordinary, really great year. How do you think about that business in 2021, particularly in context of the revenue outlook?

[John Roehm:]

We would expect similar outcomes in 2021. The industry is expecting a similar build out, depending on who you listen to, you hear anywhere from 14 to 17 gigawatts for 2021. So I would -- from the activities that we've seen, we would -- our analysis of the market is very similar to what we saw in 2020.

[Brent Thielman:]

Okay. And JP, the wind maintenance business, I know it's starting sort of from scratch here, but maybe could you just talk about what you're anticipating from the business in 2021, particularly, any sort of targets you're hoping the business can get to?

[John Roehm:]

Well, we haven't guided to a certain target for that segment of our business, Brent, but what I can tell you is management is extremely happy with how that's getting out of the ground, so to speak, and very pleased with the management team that we brought together. So I think as we said in our remarks, we do believe that it will be a meaningful contributor to both revenue and the bottom line for this year. But we're not prepared to come out with specific guidance for that business segment.

[Brent Thielman:]

Okay. On the Civil side, JP, just want to come back to that. And what areas you're most optimistic about for growth in 2021? I mean, assuming we get some sort of an infrastructure bill, I can't imagine it's necessarily a benefit this year, but certainly end of the out years. But maybe what do you see that you're most excited about in that business for this year, in particular?

[John Roehm:]

Especially civil, I do think that as a benefit of the energy transition, our environmental business, which is embedded in our Specialty Civil segment is ripe for growth. We believe we're the kind of the infant stage of that of that market. As we talked in the commentary, only 15% of the coal ash to date has been remediated in this country. We believe that it's in excess of a $50 billion addressable market over the next decade. So we do see some opportunities of relatively decent size coming in that market this year. We hope to get our fair share of those. But that doesn't diminish areas of our other business. Obviously, rail business continue, we continue to see quite a bit of opportunities as we continue to not only service our freight rail customers, but expand our reach into passenger rail. And quite frankly, as we kind of wind up that segment in the transportation, highway and bridge side, we've been cautiously optimistic all along about what kind of spins out of the COVID pandemic in regards to the consumption taxes and such that drives that market. But so far, we're still seeing brisk bidding opportunity. And I know -- I think we've experienced some assistance in the COVID relief legislation that was passed back in December for that industry. So far, so good as far as opportunities going forward in Specialty Civil.

[Brent Thielman:]

Okay. Last one for me. Just the you talked about it, Pete, the coal across the country and all the stuff that's been going on. Any major disruptions to some of your ongoing projects is seasonally, this is a pretty slow period for you anyway. But anything out of the ordinary we should be aware of?

[Peter Moerbeek:]

Well, just like probably most anybody who's working in Texas, we did see a slowdown of work during that climactic event that I think everybody is well aware of a few weeks ago. So certainly, we were short-term impacted by that. But other than that, no.

[Operator:]

Our next question is from the line of Noelle Dilts with Stifel.

[Noelle Dilts:]

Congrats on a great year. And so first, I just wanted to ask about these delayed awards. Obviously, a lot of positive things are on the horizon in terms of what I think Biden is looking to do with renewable energy. But sometimes ahead of anticipation of stimulus or some sort of to the market, you can see award flow do you think any of that is going on? Or do you think this is more related to COVID and that sort of thing, that would be helpful.

[John Roehm:]

We think it's almost entirely related to COVID. Just everything works a little slower in today's world. It takes a little longer for our clients to get permits upfront. I don't know of a client of ours yet, particularly in the renewable side of our business. It's back in the office like we are. So their internal processes for approvals and such, just work a lot slower. And of course, our clients require financing. So the finance markets moving just a little slower. So nothing alarming, but -- and today, we're in that kind of new COVID normal, where things just come in the backlog, just a little slower.

[Noelle Dilts:]

Okay. Great. That's really helpful. And then second, obviously, a lot of optimism across the contracting industry as it relates to the solar opportunities. Could you just kind of remind us of some of the kind of key differentiators you have as it relates to the solar market? And why you believe you have a contractor of choices as more and more of this work starts to come out?

[John Roehm:]

Well, good question. Certainly, that market is -- it lags the wind market as far as maturation. It is reaching kind of the stage now where the wind market reached what I would personally say, was a decade ago, where now you'll see the largest developers or builders of solar in the country are much the same as our wind customers, large IPPs or large investor owned utilities. And it's, quite frankly, not lost on any of us that if you look at the largest solar contractors today, utility-scale in the United States, it remarkably looks -- the list looks remarkably similar to our wind list -- or the wind competitors. So certainly, having a familiarity with those customers and how they want projects delivered, the methodology, the safety, the quality that they want the projects delivered are very important. And I think, as you know, Noelle, the -- there -- well, price is important in renewables, it's a very relationship-based business, given the short time span and the large CapEx involved with these projects. And our clients want contractors who have demonstrated time and time again, the ability to get these projects in the ground on time.

[Operator:]

At this time, we've reached our allotted time for question-and-answer session, and I will turn the floor back to JP Roehm, CEO of IEA, for closing remarks.

[John Roehm:]

Well, thank you, operator. And it's been a pleasure to spend some time with you all today, and we welcome you back here just a few short weeks away in early May when we report on our first quarter results. Everybody stay safe and healthy, and look forward to seeing you then. Thank you.

[Operator:]

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.