Q3 2019 Earnings Call
Welcome to chorus call leasehold and.
Fourth quarter every name.
Hi, it's Rachel.
Our a C H T O last name Smith.
Yes.
The company with me.
Yeah.
Era and I E R E.
[noise].
I'm not sure all of them at please.
Thank you.
[noise] good morning.
Welcome to the Walmart technologies Q3, 2019 earnings call.
All participants will be in listen only mode should you need assistance. Please signal for conference specialist by pressing the star key followed by zero.
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Please note this event is being recorded.
I would now like to turn the conference over to Rob Fink of F. NK. Our please go ahead.
Thank you operator hosting the call today are Isaac Angel, Chief Executive Officer drone Blush, our Chief Financial Officer, It's Madonna lobby, Vice President corporate finance and Investor Relations.
Before beginning we would like to remind you that the information provided during this call may contain forward looking statements relating to current expectations estimates forecasts and projections about future events that are forward looking as defined in the private Securities Litigation Act of 1995.
These forward looking statements generally relate to the company's plans objectives expectations for future operations and are based on management's current estimates and projections future results were trends.
[noise] actual future results may differ materially from those projected as a result of certain risk factors and uncertainties.
For a discussion of such risk factors and uncertainties. Please see risk factors as described in Ormat technologies annual report on Form 10-K , and quarterly report on 10-Q that are filed with the FCC.
In addition, during the call the company will present non-GAAP financial measures such as adjusted EBITDA and adjusted net net net income attributable both to the company's should stockholders.
Reconciliations to the most directly comparable GAAP measures and managements reasons for presenting such information is set forth in the press release that was issued last night as well as in the slides on the company's website.
Because these measures are not calculated in accordance with gap they should not be considered in isolation for them financial statements prepared in accordance with GAAP.
Before I turn the call over to management I would like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at <unk> Dot com under the presentation like that is found in the Investor Relations tab with all that said I'd now like to turn the call over to Isaac Angel Isaac the call is yours.
Thank you very much draw and good morning, everyone. Thank you for joining us.
Turning to slide.
Third quarter was another core growth.
Okay.
Other revenues increased to <unk>.
Driven by 5% growth generation thrown grow six with what we said no corporate interest.
The growth helped also both revenue.
Oh, no way, which is preparing to recycle ratio to damage from the 2000 irrational.
Yeah.
It will be expected quarterly decline for the sake.
[laughter]. These results demonstrate the overall roselands along with the second and then well diversified.
Reach.
Gross margin also expended on a year over year basis.
The positive impact our initiatives, so who and there was efficiency increase geographic.
Question on that.
Hi margin.
We are raising our 2009.
Oh.
And increasing our adjusted EBITDA measure.
And then.
I will turn the call over to the wrong or use financial results before.
I'll now which normally.
Thanks, Good morning Evermore.
Starting with revenues on slides the.
Total revenues for the quarter, a $170.5 billion.
Focusing on does is able to learn.
Breaking this down the typically segment will see split focuses and product segments revenue decreased 7.2.
Moving to slide eight.
Revenues in our business segments. The 100 point, we'll get involved for the quarter of physical how does the $16.9 million. It's the same quarter last year.
Resulting although expanded operations beginning.
Turning to slide.
Product sales revenues were $43 million down from $48.4 million in sync with a lot.
The decrease in revenue was due to the timing of certain older which is not unusual in this bodes well.
On slide two.
Other segment contributed $3.5 billion revenue or build $1.2 million at the same will fill slightly as we have started benefiting from revenue losses and type of battery energy storage budget, which came online during the first quarter.
Moving to slide 11 for discussion of our overall gross profit and loss.
Third quarter consolidated Guzman her well so that we buy person who builds a 29 for 3% safe whether or not.
On slide 12 gross margin for the sake.
And the yoga yield so leipheimer focus.
The improvement was primarily due to weakness in gross profit and loss.
The commenced commercial operations, we're beginning to say.
Gross margin included 4.5 billion, though with additional cost revenues related to pulled up in Q3, 2019, and 4.6 million, though in Q3 joined the team.
Excluding the impact of Golar gross margin was 38.
Q3 of 19.
35.3% use real 28.
In the product segment gross margin was 27.8%.
After a business 26.4% for the so called the last year.
We continue to expect margins was only minor between 20 to 27 cents for these statements.
[laughter] other segment reported a negative margin as well.
Turning to slide 30, selling and marketing and this was so we'll do a plenty 19 was 3.8 million dollar eight went.
Thanks, Good luck.
This decrease was primarily due to a $5 million nations.
Recorded in the so called the money related well vision to terminate the dilemma.
[noise] general and administrative expense for the so called US only 19 was 11.9 billion, though okay. So did but both for the sake.
This decrease was mainly related to visit.
Turning to slide 14.
Operating income for the other plenty Nike was 38.7 million dollar compared to $25.9 million same quarter last year.
The increase was primarily attributable to higher gross margins in our discipline and lower sitting in marketing expenses, you to dig a little terminations in the latest Mitch.
We will partially offset by decreasing our product segment gross profit as a result motor.
[laughter] on slide 16, you can see the brain, though.
Turning to slide 16.
Net interest expense for the third quarter, 2019, or $20.1 billion compared to $18.7 million.
This increase was primarily attributable to an overall increase know that performed you felt comfortable.
Turning to slide 17.
Income tax for the so called including $99.6 billion opened $1.2 million.
Our effective tax rates with the support of connected was 40 point surplus.
Turning to slide 18.
Well not reported net income attributable to the company show.
$50.6 million.
Oh 30 cents per diluted share.
It was $6 million or 21, centsper diluted ship and 42.9%.
Turning to slide 19.
Adjusted EBITDA increased 13% to 85.5 million, though for $75.6 million Juicers 28.
Adjusted EBITDA includes the loss of approximately 1.5 billion dollar related to work.
Reconciliation of EBITDA and adjusted EBITDA are provided in the appendix.
Turning to slide 20.
Cash cash equivalents elicited cash cost.
As of September 30 planning.
Was $180 million.
Another 10, and 7.5 billion dollar as of December 31st CD.
The company's libraries down the youth Ashley Tonight.
Our long term and show them that as of September studies by 19 was $1.2 billion NATO deferred financing costs and stainless good work is presented site.
The average cost of debt for the company so on nitrogen.
Our net debt as of September 32 million 90 was $1.1 billion.
[noise] turning to slide 22.
As we speak briefly well financing activities do so.
Year to date was successfully raised approximately $242 billion did that movie, including $69.3 billion proceeds into so order.
Late into the debt equity partnership units, three and $50 million condition.
Overall, our lunch is well positioned ample access.
To fund future.
On November six 2019, the company's Boulder declare approval and also as Damon quarterly dividend of 11 cents ownership pursuant to the company's dividend autos.
The dividend will be paid on December four when he then you to show the critical a little bit growth business on November 20, only 90.
That concludes my financial so I would now like to does a good why is it fully operational business update.
Thank you very much so.
Starting on slide 24 is an update on overage year over year, we is approximately 4000 megawatt hour and increase our generation by 4.9%.
1.4 million megawatt hour.
The increase was due to the addition of digging into phase three.
Seven megawatts other units that are.
It came online in July this quarter.
The increase from these to talk to augment suspicious partially offset by planned outages perforation only repowering market momentum as with two deals done by wholesale hi, hopefully you catch.
We are still missing the generation of Oh. This is all clients since the war corruption in Hawaii.
May last year.
Turning to slide 25.
Let me spend a few moments providing an update on situation.
The restart reconstruction efforts will on schedule and we expect our refurbishment activity will be completed by the end of the year, enabling us to deliver energy from the blend on the temporary line.
To support.
We expect to be able to send electricity produced.
As soon as the relevant terminals required for local authority from development. So do you.
The operational to substation and transmission network upgrades being undertaken by our partners Hawaiian.
Our receipt.
These are affected by the end of Q1 2020 .
And we expect to be able to bring the power back to operation.
Roster.
On the field side, we recently.
On the production area and have already one production were available.
In addition, we have record several injection, where do you knew our recovery.
Which include reducing redrilling remote clean outs and drilling with me.
We expect to gradually increase department generation capacity as we complete well be drilling we're targeting gain cooperation by the end of the cyclical growth when.
Let me speak of the insurance situation, where moments on slide 27.
We maintain coverage were property business interruptions.
Provided back on so simo insurers.
All of the issuers has now started paying the costs the to rebuild the damage.
However, certain insurance rejected our glencore business interruption coverage and we have filed a lawsuit lawsuit in non insurers.
These low to learn impact our plan for restart in safety.
In parallel with our recovery work will now be continuing negotiations the telco on the BP a that were instructed by the organic reduction in 2018.
The PPA you know expired at the end of 2020 .
In the energy price or 25 megawatt hour and 38 megawatts are linked to be avoided cost the hell CLO.
Our negotiations with local includes reaching a mutual century PVA growth in the range.
Yes, we replaced the remaining.
Right.
And treat spoke to structure extended terms, we do see pricing structure and extending inserts moving to slide 28.
We recently announced portion of our first ever Joe terminal.
Part, we added seven megawatt PV solar Boston.
The mountain Jerusalem pounds in.
Bringing our total generation capacity, so 970 megawatts.
We remain on track with our Newseum growth was between 120 935 megawatts by the end of 20.
This target is supported by this.
Project essentially bonds.
In sequence here.
Which is part of our seem more complex, we are replacing all of the old power equipment with our new advanced technology equipment that will eventually increase.
Youre conflict.
Proximately 16 megawatts in review maintenance.
Equipment is being delivered to the site construction onward, we expect commercial operation 2020 .
He recalled that California, where in the process of Repowering Thats. The one you talked about.
We are planning to replace steam turbine and other old equipment is our advanced technology equipment.
Net capacity or 11.
For lower total windows enhancements, we accepted big steps that you have the complex reach 92.
Permitting engineering procurement downward.
Any factoring of equipment is Glenn to commence in the fourth quarter 2019, we'd expected commercial operation early 2020 what is most valley.
Following exploration activity, we are reviews, the expected generation capacity due to indication injections stage isn't you continue to date.
We plan to expand beginning tier journal complex content.
Additional eight megawatt in blend to duplicate our successful hybrid system.
Also to mitigate conflict ending 14 megawatts so okay.
Turning to slide 29 for an update on our backlog as of September 32018, prior product segment backlog was $167 million.
We continue to see opportunities in Turkey, but recent threats of use sanctions on the Turkish across them and the straining of U.S. Turkish Turkey diploma relation may impact potential demand and price competitiveness and do so we may see continuation of the slowdown.
Mark.
We're working on new opportunity Dylan, Indonesia, the Philippines, diversify and grow our.
As we discussed in previous calls the New Zealand markets remained stable in attractive markets for growth that we are excited to extend our currency.
The Philippines currently have Joe to feel the supply about 10% niche energy is a long term plan to increase the capacity are 25% vitamin D for.
In Indonesia, well to larger geothermal market in the word there are numerous new opportunity that we're currently evaluating.
He is already with the segment continues to grow the impact of the volatility of the product segment, and especially margin volatility will have relatively level and move on our overall financial results.
Turning to slide 30 for an update on our soldiers.
In the storage side of our business, we continue to leverage former core capability with unique IP network Operation Center intelligent workforce to extend our could be footprint and build the wrong project pipeline for the third quarter.
We reported an increase in revenue on the segment as the mission to project in New Jersey.
We are successfully creating diversified storage portfolio in the market spanning multiple regions in the us building PJM.
California, ISO and I assume you new England, we were we connected behind.
[noise] our projects that moved that obligation boating meter is what is behind the combination of contracted revenues and merchant.
Our efforts in the battery storage activity I directed both towards Greenfield development as well for M&A in joint development cheat turning to slide 31.
Our estimated capital needs or not go to 2019 include approximately $54 million for construction of new projects and enhancement of our existing.
In addition, we estimate approximately $17 million.
Images for the maintenance costs operating.
For our exploration development activity, we plan to invest approximately five hours in additional dreaming glencore our storage activities.
For our prediction production.
Plan to invest approximately $3 million.
Also so where is there a news release.
And to see what rich.
Regional 38 megawatt generating capacity, we expect between 30 million.
In dollar of which eight will be invested in the fourth.
2019.
We expect controller with insurance proceeds to recover part of cooling that.
In the aggregate, we estimate total capital expenditures would look ARPU quarter of 2019 and approximately $90 million.
In addition.
We paid $84.8 million, while long term debt repayment last quarter 2019.
All of which $50 million for repayment of short term commercial paper it with you won't be extend.
Please turn to slide 32.
For a discussion of our 2000 in guidance.
We are raising our 2019 when reacted to the upper end range and increasing adjusted EBITDA.
In summary, Ormat is operating as expected successfully overcoming the continued absence of revenue and EBITDA open up.
By the end of 2090.
Aspect to complete our work on the cost have it's ready for operation now which ones.
We continue to work closely with telco and local agencies to expedite the work to enable us assuming the operational.
Before we open the call for questions.
Wanted to give you an update on the special shareholder we have yet due mainly to the classify our core.
This initiative in special meeting was put forward by poor based on feedback it receives one but.
We see directly from stockholders, leading into 2019 annual generally.
We successfully reached required to call to support our proposal declassified or board structure, and however, our directors to be reelected every year.
Ormats Board of management more and the management team.
Committed to transparency in the highest level of governance we.
We believe that transitioning to a decline declassified bore inland Beth corporate governance practices and better serve the interests of all our stockholders.
And this concludes our prepared remarks on on Battle over question, So operating fleet.
Okay.
Thank you.
We will now begin the question and answer session.
To ask a question you May press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys.
Withdraw your question. Please press star and then too.
At this time, we will pause momentarily to assemble our roster.
Yes.
[noise]. Okay. The first question comes from Noah Kaye of Oppenheimer. Please go ahead.
Good morning, good afternoon, thank for taking the questions.
Let me first to start I appreciate the update on corner and I understand you may not want to get too much into specifics of ongoing PPA negotiations.
But the regulatory filings seem to imply the PSC would like you in utility the utility to file and amended PT application.
Before they approve the transmission upgrade.
Also again just from the filing it seems to us like an amended TPH could actually allow you to increase total capacity and potentially pet revenue.
So when I guess can you confirm that's your understanding of the regulators intent.
You know how likely is it in your view that you know these developments will allow you to potentially increase total revenues and profits over time from Qunar.
No as you mentioned before.
[noise] its dividend is talk about this issue we are in mid two of the negotiation and I just explained during the call I'm very optimistic that did.
Negotiations will.
Positively very soon.
I'm not aware off the fact that the PPA negotiations.
And the.
Hello.
To start the transmission lines are connected I led to believe that it's not the gate.
But.
In this regard that.
We will I as I said before.
And.
Positive do given also the fact that.
Why.
On the present not yet.
Yes.
BTA will be on soon we should also.
Increase timeframe.
With another 25 years from 2020 seven.
And then obviously.
Eliminate.
The price differences.
Connected to the both coasts.
And.
And.
An increase the capacity of the positive as suggested before.
I hope is answers your question.
Yes, thank you for that.
You mentioned, a number of geographies for growth opportunity in products.
In addition to the ones you mentioned that I guess, Kenya can Jan just published in our Q.
Bernie PSPC contract for 140 megawatt project at all carry out with a 20 year PA.
Kprc I would assume.
It could be a significant APC opportunity for your products pipeline.
Can you comment on this development in your your appetite to do.
Do we did see work in Kenya.
No as you as we know each other for long time, you know that is.
It is a double edged sword for us which means that in one hand, we are increasing electricity revenues and profitability in.
Not the same rate very good enough for that.
Revenue and profit.
But fortunately or unfortunately, there are numerous opportunities that you mentioned in Kenya, New Zealand.
Philippines and also another country.
So I'm expecting that the product revenues in Europe and you.
We'll be at least two.
Great that they were before.
And as you mentioned the net.
Numerous.
And we should also forget the Turkish market, which is.
On the one gigawatt in their expectation is to increase if we doubled.
The problem over there are I like to lead only turnover rate. Eventually a also the local economy will some are somehow reward so.
And as we mentioned capabilities or local investors.
The will be in place.
Okay. That's helpful.
I guess as a follow up you mentioned there was a curtailment at all Korea.
Can you just explain what drove that.
And then I guess sort of as it related I mean in the past.
Quarters, you know you've disclosed or kind of receivables outstanding.
From some customers a national customers saw the receivables balance went up again.
Financially.
Can you just give us some color on you know what.
With that continued headwind this quarter you know can you help us make sense of this trend.
Okay first while we have a 150 megawatt facility operating in Kenya, which was gradually build into last in new.
And with the PVA called score.
Asset in energy payments.
There there is a trend in the last few months on that we are we are being curtailed on the energy par.
Especially as nights.
We understand that this is.
Due to the fact that they are still missing transmission lines, where.
In the which will be is being built on when that will be a rational.
Spec that this curtailment.
We'll be finished.
In any case as I mentioned before as the PPH both for.
Capacity in energy with the larger part being capacity at the end of today.
It is a.
Is more.
And let's say.
No problem to your revenues, but it's not something severe and I believe it's only temper.
On the.
Second part of your question.
You mentioned that there are I don't recall that we talked about.
Payments issues GTN is today, we are operating in the country, we're not in U.S.
And we are even not even if you're not exactly do no payments.
We don't have a payment issue over there so far.
Our next week.
Any of those big part of the.
Hey capacity.
Impact obviously only the.
The energy pop and not the.
Okay. That's very helpful. Maybe I'll turn it over and follow up with the rest topline, but appreciate that thank you.
Thank you know.
Yes.
Again, if you have a question. Please press star and then one.
The next question comes from Jeff Osborne of Cowen and company. Please go ahead.
Yeah good afternoon.
Maybe just following up I noticed question I think it was the 10-Q that actually flag that a there were some play payments from Kenya and endorse can you just talk about those.
I believe the the outstanding balance was Kevin.
For for both those countries as of August when I was last published.
Okay. Thank you.
Hi, I'm, asking are things getting better or worse and those two countries.
And all.
Let me read our first again on Kenya.
I don't recall the exact do today, but in Kenya, we are being basis, even late.
We say okay.
And they are covered.
As the doors, telling you now and they all new era, we headed we ended series issue.
Until.
Just real mine.
2019.
And because of.
You know that there is a very large financing facility.
In Honduras that they are.
Putting together you know today not only to us the two others, but since that rule, we are being paid carbon.
We expect the med.
The order payment that is I don't know we have the number on.
On the 10-Q, but.
It's a significant number the spirit the truth is sitting facility to longer endeavor.
Got it that's helpful. I appreciate that.
Two other quick ones on my end I'm can you just talked about what the drivers were on the upward revision of guidance to the higher end of the prior range what were the words there.
Mcginness Hills three for example, or tungsten did those come online faster than you originally planned or just trying to understand what the moving pieces where.
Jeff all the books, which means that if you if you're probably not as did our gross margins unit segment is.
It is growing faster than we expected.
Due to timing issues, we are building much faster than before due to the fact that the efficiency so could probably growing we develop the during the last year.
A much more efficient.
Turbines and and solution.
Which is the which are increasing.
The ability of then bombing mega work and decreasing the only NIM.
Most often altogether.
We feel confident we increased the guidance on the EBITDA as I said before which are coming mainly from the electricity segments.
Got it that's good to hear it in the last question I had is can you just touch on the the M&A environment I think you've been highlighting M&A as a strategy for the past two years other than the U.S. geothermal.
You know there hasn't been much coming across the finish line I didn't know it would you say that the activity there is.
Higher than it was six or nine months ago are about the same I'm just trying to get a sense of your appetite for that.
Jeff said we are.
Negotiating with more than one part the Saab and the.
That said desire, even whether unfortunately nothing.
Vivid.
As we said before meaning management, we're not going to perform M&A for the sake of doing it should be accretive to warm up.
And then you probably know that there are few opportunity obviously.
Released in the market.
Unfortunately, one of them.
Yeah.
So because of the fire than the BG any issues Fournier.
Overall.
I don't have any any let's say.
Okay News I won't say, even good or bad at this stage, but we have work.
I appreciate it. Thank you that's all I have.
Thanks Jack.
Once again, if you have a question. Please press star and then what.
[noise]. Okay. This concludes our question and answer session I would now like to turn the conference back over to Mr., Isaac Angel for any closing remarks.
Thank you operator, thank you everybody for joining us this morning or evening in another country.
And then as usual I am remaining very optimistic and there.
We are in the right path.
To take the company for the next steps.
And I think you'll for your own support thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.