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Charah Solutions (CHRA)

Participants
Steve Brehm Vice President, Legal Affairs and Corporate Secretary
Scott Sewell President and CEO
Roger Shannon Chief Financial Officer and Treasurer
Michael Hoffman Stifel
Call transcript
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Operator

Good morning, ladies and gentlemen. And welcome to Charah Solutions, Inc.’s Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After today’s presentation, we will conduct a question-and-answer session, and instructions will be given at that time if you would like to ask a question. I would now like to hand the conference over to Steve Brehm, Vice President of Legal Affairs and Corporate Secretary for Charah Solutions. ahead. go Please

Steve Brehm

sharing Good chance investor us follow the Operator. release fourth and you that we forward thank XXXX as your and closed. Thank We our questions. can We you not, press morning, on press appreciate joining hope section to look issued we today. call release, had our market prepared the may ir.charah.com. your for review of at remarks find earnings as well presentation answering a prepared remarks you, you’ve and everyone, supplemental our our to participation quarter a If during www.charah.com yesterday after you the Investors the in or website

President Shannon, and and Chief on me Joining Executive Chief Officer Sewell, Roger and Treasurer. our call Scott Financial Officer; are

their Following the remarks, conduct will prepared session. customary question-and-answer we

we We earnings Form in include, calls. on on these forward-looking XX-Q described conference obligation releases including quarterly the Commission, matters our reports filings like press press Securities statements. actual I Solutions within you Before be and any uncertainties Private the include annual would cause XX-K. our reports Securities Act. to in that are risks could materially that Form and and to subject among our with to others, in Charah the are release, our that statements our we to those forward-looking statements as disclosed These Those our as risks forward-looking from Litigation have remarks disclaim earnings of regarding well different statements update results remind begin, Reform meaning and that Exchange

us measures. GAAP supplemental to reconciliations our refer press measure We joining thank provide today. applicable and the During this to conference call, will Again, for release certain earnings you in nearest presentation. non-GAAP we financial

CEO. would President to to Sewell, call turn over the Now, and Scott Scott? I like our

Scott Sewell

to provide This I’ll be and an our our call and again speaking you have happy providing Steve, end review XXXX today. performance and guidance. join call with an I’ll an developments It’s the update business to our our everyone. morning, good update financial then performance. earnings year you accomplishments, our current of briefly on you, our and on us for update I’m opportunities. transition you Thank review the during to pipeline morning, on on great Roger update to year XXXX

release, a in highlighted As we new XXXX, a of press million year in with record had awards. $XXX

business Our pick new XX% quarter previous in new awards our the awards begin has up $XXX new today, as Energy activity booked $XXX beneficial we and through use awards, from our new million for fourth million project. have bids that of during business approximately XXXX, $X award the the pipeline significantly underpinned over saw the fourth accelerated quarter the momentum converted up in pending We year. XXXX. of XXXX XXXX of XXXX quarter billion including fourth were just the From record we long-term of by until awarded of Dominion

including two new beyond. earnings During in utility. and we this for will remediation than growth awards southeastern million, position for long-term Solutions additional more year, first revenue, received the cash These totaling in of $XXX projects awards XXXX months Charah large a and flow strong have three business

come. services seen inaugural services, compliance and you last and environmental I issued years that was and risk continue for for Charah our have platform remediation hope environmental to one-stop We concrete environmental remediation continue to increasing services social the will for levels and and fossil believe for and the to on fly that ash governance opportunities sales, week. byproduct transfer state create emphasis report demand at the federal growing Solutions’

Charah one Solutions of Sustainability outstanding closure is stakeholders developing for commercial is environmental showcase a the value we reporting XX remediation need core complex coal impoundment and in the We through are growing ash, and America’s of issues and our initiative. solutions is social recycling governance we be to the are pleased We of of very that Charah stewardship. innovative recovery Together, is demonstrate Solutions best to a to years, resource and the able management ash over environmental, for on focus employees are services we and vital to and for sustainability environmental begin for Charah to this services, and Charah responsibilities believe firm our sustainability use. in betterment leader community beneficial As daily. truly that planet. pleased the for information and critical conservation redevelopment full Solutions of on and our examples believe Solutions commitment commitment utility our united of story land

increasing utilities by also see provide creative opportunities challenges our solutions services. remediation environmental We ERP compliance to to expanding and

very our on a Midwest. to project We perform utility continue upper well first ERP the in with

conscious of property turnkey ponds. its We through potential environmentally to acquisition property Leveraging surrounding and Agency’s the performing In activity remediation the Power Gibbons economic in decommissioning our redevelop and solutions of to that our ERP ash Texas a infrastructure property Station the innovative Solutions. for to site ash and begin to of Texas power environmental Creek in sustainable to immediately. restoring County, MPXXX the work and Electric air of the providing technology, environmentally Steam communities tax We intend growth Grimes that and and environmental innovative well use. we shutdown industry, work, that land we ERP put produce technology we services expand and EnviroSource utilities, and our in to remediation have while are way promotion state will and responsible responsible with Reservoir as also from be able recycling plan are all it landfills attractive creation, Charah compliance ash of recycle and the manner announced help of fossil as byproducts deliver our redevelopment Municipal through base, the as EnviroSource our improving will support be benefits opportunities the the our concrete objective and the to we coal and opportunities plant job recently remediation using believe enable We our rebranded and byproducts, returns an offerings ash the best technology. to demands. to satisfy keeping growing we happy commitment that sales our power to an recover generation to Through expand to beneficiation announce environmentally beneficiation to will

for Ash recycling preserves natural space. landfill resources reducing the need dramatically while

buildings. our leverage makes product our be marketed for excited ash reduces in a beneficiation significantly and lower optimistic to bridges, also environmental customers. use. driven and EnviroSource product the sales technology highways that We materials fly a would Portland improves so ash ash technology carbon of we atmosphere about emitted notably greater more multi-sourcing make remain reach use expand provides superior for that are This new Substituting technology add costs. EnviroSource be Our quality ability into by and can network opportunities to and Green expectations for byproduct and about created the the otherwise at ash to recycled stronger it by our infrastructure tons footprint Concrete of recycled spending the cement

remediation. discussed are calls, and have more means on regarding prescriptive states ash becoming methods the previous we pond As of

regulatory administration permanent accelerate will the beneficiation we believe ash its Protection that its guidelines new under pond deadlines. Agency the addition, requirements, on Environmental closure efforts In and and

We as for to Solutions. positive movements continue these see Charah

and ideally choice are quality, of challenges to situated partner safety we producers on complex needs. and the power most industry leader As customer’s and for their deliver compliance, closure in solving requirements environmental as empowerment an help

ability our for to add services. speaks nature new Our team’s our customers The establishes of new to during our and and our the resiliency more partners to uncertain longer times term of years awards revenue a power new awards predictable continue with stream generation essential these come. nature to

convert to add opportunities will earnings hard future revenue growth. a working that to are further into and wins more stream predictable We

We bright announcing we are our new the building business to the for over year, XXXX. expect the on and in remains announced future awards continue more successes past

have billion over pending $X Following our year-to-date proposals. of wins, we XXXX XXXX and still

We contract and additional expect on announcement soon. make we several are negotiations award official in projects to

safe, to visibility end our to have want XXXX partnered to of supporting every and who with remain XXXX. Roger, safely people dedicated of and intend our and the quarter are day our We to $X again, turn that, environmental our fourth business. growing We over XXXX. who their I’ll needs. committed help have we financial outlook will into service With of our to customers and I the our way we to and discuss on and keeping results proud working the it proposals customers for that our additional customers address recycling also opportunities submit an very continuity I’m employees now between thank, Solutions billion maintain Charah

Roger Shannon

of update liquidity review provide I’ll financial a on Scott. Thanks, guidance. and XXXX our results continue and our sheet, with balance an

quarter During financial results end-to-end operating of chief to our resources. suite we reflect decision we the services segment utilities of our to the fourth and information and and how into reviews our segments generation one of offer allocate operating realigned XXXX, performance partners power maker consolidated reportable operations, evaluate assess

single report financial a our our of press statements segment on consolidated the company and XX-K. our the As required segment, Form can found all annual financial in operating release has information now and be

later. an remediation offerings, furnace two The XXXX, To stockpiles million, resulting equity ash in slag expense, sales compliance Solutions compared profit SEC in to inventory that due due fourth project previously of increase report to million Gross $XX.X at associated XX.X% our impairments by months this from the mentioned XX, work, to The change an on provide projects to was starting three due XX-K an demand in income of results December for at plants million XX, months a intangible $X.X details XX, or year refer to with two XXXX, detail profit more loss non-cash and new non-cash an activities locations for investment as of quarter by pandemic. net a loss of or related December impairment increase prior compared to attributable increased inventory in the months and granulated start as primarily result review $XX Charah the byproduct decreased are December for XXXX $X.X and was in results. our a a $XX to $XX.X sales million for COVID-XX $XX.X primarily the Our Form with annual in remediation XX, months million to Charah increase now valuation revenues in gain the the the the offset from moving XX, on in on ended as due was blast profit, to additional ended associated December December The three gross March realignment. million, associated trade our asset. XX, with partially decrease increase million, I’ll XXXX. in tax discuss offset with revenue, will to Revenue these three to ended The impairment and for believe a from expense XX, lower reductions stockpiles in months months ended to name moving partially $XX the the primarily offset ended ended reduction from reclassified $XX.X with three December XXXX, new method XX.X% contingent a XX, conform loss segment liability. due months for filed have the December three to partially our million items, loss locations, million XXXX. revenue three revenue lower payment we I compliance XXXX. details slow slow decrease of reduction our increased increase which benefit further for our regarding compared been presentation. our increased million gross primarily million lower grinding Please and on byproduct XXXX by Inc. Solutions, $XX.X $X.X our to XXXX ended three our the a an in to in in production the decrease to

We the equipment progress also our $X.X three The non-cash of certain to reevaluated as loss part XXXX certain to the contingent the the change million due tax. levels a technology-related mentioned months loss million resulting assets, acquisition, we joint of acquired Gap] of the a in before construction XXXX. December quarter to recorded investment XX, a December ended the XX, our in for as first payment our we’re how $XX.X performance achieved. grinding due impairment venture and the going reduction liability million be XX, in impairment of used and months grinding the primarily carrying increase was to future liability equity venture in investment We XXXX XXXX asset. method in intangible from a value would December using assets continuing in joint $X.X to from sales ending due [Audio compared assets grinding recorded three an of of technology the on operations gain during XXXX, a contingent previously not determine that be ended in

quarter, the as months for or XXXX. compared million million $X.X $X to adjusted million, our XX, For the EBITDA decreased to ended three $X.X XX.X% December

of for driven year for Revenue ended by XXXX our decreased the December year $XXX.X December a primarily XXXX. or XX, XX, started compared XXXX million ended in the with consumer XX, resulting the compliance XX, disrupted decrease This new increased the termination $XXX.X to full power revenue the XXXX, December the resulting during profit from million, million, believe pandemic million of due the to to revenue that million production partially and $X.X associated hurricanes plant December remediation decrease X.X% year to COVID-XX work we of footprint. turning as lower results. to $XX result from Gross Now million year in half our non-recurrence completion offset million across Brickhaven for $XX.X was demand, the and project XXXX. that ash ended compared plant in reversal a of by and X% deemed lower the operations ended second increased or to XXXX byproduct was two $XX.X the sales $XX.X year

revenue, year was December for gross compared the December percentage year a XXXX. the for XX, ended ended profit XXXX, to of X.X% As XX, X.X%

was loss XXXX year impairment million administrative XXXX. to $XX.X non-cash XXXX, million, a loss $XX partially reduction Our million in administrative decrease expense The was a fiscal in to in in general loss fiscal general due for the $X.X million The the compared increase $XX $XX.X of expenses operating increased to in XXXX. in operating primarily by offset and of expenses million related a $X.X additional facility reductions in current in our XXXX, to transaction of liability the response credit cost attributable and in the current measures in purchase cutting April measures COVID-XX saving from cost implemented period. XXXX staff to late of other the during cutting cost costs initiatives pandemic, in expense the lower implemented reduction period to expiration option and and million the

XXXX Charah to expenses, XX, mentioned benefit. equity a on partially primarily XXXX, administrative profit XX, the loss in and from investment, increase higher and Inc. to an by offset previously method ended year the increase for December ended extinguishment income recorded debt attributable an the of loss net gross and Solutions, previously expenses The tax to and Our our discussed in loss the year in general $XX.X the reduction $XX.X attributable million to for XXXX. increased compared was million, million December impairment non-cash $XX.X

did our the that of this our XXXX December general close reflected December in January This $X.X That in to EBITDA for timing XX.X% quarter, to our and fourth quarter fourth $XX.X XXXX year results $X.X and higher broadly XXXX results, expenses for million subsidiary into could with were the For improvement the related were disposal primarily communication, Power million therefore, after first the in of results reflect to XXXX. as ended million, we a in quarter of guidance a profit. we XXXX. the lower to that previous In XX, but $XX the compared XX, or and adjusted XXXX transaction will transaction was change this year during related ERT for indicated XXXX, engaged gross transaction. the expected Allied from XXXX, Except and property year, for ended of slip line transaction due in the our that our million will accounting administrative ERT close we be related increased expectations.

our Turning and sheet balance to liquidity.

$X.X being cash delayed flow For systems free large due and our we free from issues, in million resulting December gross year accounting flow due of exceeded total for Power the December was in that our Allied At a primarily in for decrease payments customer XXXX flow was expectations. to CapEx our cash The for debt million. the of used our positive payment million. million, on XXXX, loans, operating debt $XXX to $XX.X was XX, After the of cash debt. had consolidated term XXXX, $XX.X our proceeds year is to the principal repay application of including sale during due

to as at XXXX. million compared Our approximately $XX.X liquidity December of XX, XXXX, million December was XX, $XX.X

will I address guidance. our Now XXXX

pandemic As in any regulated a to we we economic must and not previous our utilities awards. customers, diversified the of mission whom grade continue timing uncertainty, resulting generation. higher ERT to to power associated demand that There our to beyond critical of majority the the of driven disruptions through have customers level seeing startup base the are calls, provide produce significant nature current including, including are to business we’ve uncertainties COVID-XX awards, recently a business limited potential of for our of investment disruptions operations, significant announced power are created customer due Though discussed currently uncertainties not but services also further the with critical the control uncertainties. around

also the within we’re with including our uncertainties, ranges. As or impact of guidance affect could hurricanes, these XXXX excessive Considering adversely rain results, weather our providing temperatures, results. moderate following the

$XX that, back million I’ll $XX loss to of $XXX of to to Scott. million. $XXX million to adjusted and the our turn $XX net With call over attributable flow zero, now million, free to $XX cash to Inc. Solutions, expect million of $X Charah We between revenue EBITDA million million

Scott Sewell

growth long-term advantage agree to our while contract value, service environmental remain positioning cash, ourselves of expected continue hope opportunities. Thanks, committed awards, long-term take actions our will enhance of We market that closing, sheet to offerings support taking laser and and In the focus on the to for balance we Roger. position expansion in the success. sustainability company preserve to expanding you

our session. Importantly, come. again, environmental which we many growth Solutions participation. provide and interest that, you, are closely Charah your initiatives, begin generation the power let’s should for years Q&A with sustainability to for aligned significant Thank remediation Operator, and potential partners’ with And with

Operator

Michael [Operator Instructions] from Hoffman Stifel. question is Your first with

Your line open. is

Michael Hoffman

Thank a you use with questions. and If Allied, that’s difference? the you a and related Allied $XXX have level -- is to taking don’t numbers, just the awards reconciling the $XXX comparing on difference very I award your slide at had showing between what million ‘XX and the just million for start originally much you have you’re you Allied in the

Roger Shannon

Yeah. Good That’s Michael. difference… Absolutely. the morning,

Michael Hoffman

Okay.

Roger Shannon

That’s the what previously we reported. difference from

Michael Hoffman

when so to almost suggestion as us of duration to about -- all I then and the $XXX And what’s it in we billion adding that revenues? billion. years, the and $X.X that of cadence we your last if make burn the the How Great. modeling? What’s living think million a $XXX two million, rate the or change $X.X off have into peels

Scott Sewell

Yeah.

say, years two we mean, are that’s it’s years would years been had I to brought years, in is longer previously. majority contracts of were -- previous excited term The awards so we I nature than that historic or the that eight about that really been three on winning a these we’ve more So longer their I nature. XX awards things the that term think we’ve one of with versus

a seven So would seven -- burn with I from I go years, maybe Michael. think perspective,

Michael Hoffman

about mean, by math I you seven to I this, simple growing the just and stacking And divided is the then keep right? it, Okay. that’s way think keep up. it if

Scott Sewell

to the and these -- Yeah. seven be we’re reach going flat Absolutely. year mean, years. this pretty next we’re ramp for they’re projects to going a once they of kind And through I plateau

Michael Hoffman

percentage byproduct right Right. and -- a and fossil before points use that? $XX-ish again, million day-to-day about That’s talked together, that, year. about few way obviously, a think nuclear, of remediation, was is a the sort And a now, we the but about why done business growing aggregated you’ve to to had the fossil operations everything still you

Scott Sewell

Yeah.

we So you of in that haven’t some can that? K. want much. There’s discussed where Roger, you find too some information to really the discuss

Roger Shannon

Yeah.

the down break by we of -- from revenue service. So types the

$XX can in million. million And sales -- -- were about see, million so $XX and at the contracts services like, $XX cust product X from the byproduct look construction Note XXXX, K, we you for sales about

So you your that gets to million. $XXX

Scott Sewell

a Yes. to be you’re That continue, to Michael. at basis, look going remediation grow. it, our see work on when to continue a would go is you mix, historical But about forward think remediation think going the I

Roger Shannon

Yeah.

Michael Hoffman

remediation And be that’s -- would would go contracts? that the into construction

Scott Sewell

Yes. Yeah.

Roger Shannon

Yes.

Scott Sewell

two… well As as sales, byproduct those

Roger Shannon

Yeah.

Scott Sewell

areas our lot now, think in we’ve the a spoken right growth remarks, just both prepared …and it’s to here in I our of it around excitement opportunities pretty those tremendous.

Michael Hoffman

Right.

drivers will two the kick sales when award, in. the starts Dominion so that to product the in be And

up So there there’s show in ‘XX, in ‘XX, but some in mobilization selling number right? dollars that byproduct real up shows then the

Scott Sewell

That’s correct.

Michael Hoffman

Okay.

Scott Sewell

our ‘XX, we grow stop byproduct this going right as to spend our is to see to ability be to us. well just side going the infrastructure sales of significant now, the network That’s for business very in multi-source as with use that

Michael Hoffman

while it to take a And me stop saying MPXXX. will

Scott Sewell

No. No. No.

Michael Hoffman

do I But using well, so -- it. got got you to it expunge still -- now me you

Scott Sewell

Yeah.

Michael Hoffman

those this of one cite to expect year? you Do

Scott Sewell

That’s our goal.

of on in us up an little past, spoken opportunities. I think, I know there. with talks delayed now time interest EnviroSource just We’re all about that and high customer a is but right significant getting see for the in just here, some we it bit and COVID at some some kind financing difficulties really the set have the

Roger Shannon

So are… we

Michael Hoffman

ahead, Go Okay. sorry.

Roger Shannon

customer as specific some progress of do have we we financing about feel of Michael, the I’m are significant talking and road pretty we on the agreement farther that sorry, we kind are are like to getting about down conversations talked with -- advancing in we before still made the like getting well. So a we

one in announce So, I able to these think, we do of to be XXXX. expect

Michael Hoffman

so project source follow that and would rest a to you your to you it is a somewhat project -- Okay. up project financing, found normal of that to is, have XX% similar finance the financing was look my where And of XX% to be going equity?

Scott Sewell

correct. I mean, are think, those probably finance. I project say, Yeah. to I’d XX% more, roughly XX% numbers

Board XX% XX% to needed Our area. equity

I couple is opportunities a contract liquidity. finance. are a course -- I our that year, on of say numbers for on made of as yet honed leverage significant think We But you’ve -- seen in project sheet, that. signed over in good can’t our improvement we’ve we’ve we’ve the balance and the

lot when those well easier are So talking conversations we’re to have some a as now, just about project finance structures. as, opportunities, other

we relationships Now, financing, additional of opportunities but are type from seeing we more is ready interest some that to kind customers customer that to there bit. thing not to through starting a see as once -- new in of where yet, we’re little announce again, sort

Michael Hoffman

some add I us my decision that I modeling, -- do the for base made need of if a like, of had you capital then Can enough. help -- do would number? and things own think what with what revenue use to that we one what’s we Fair as to number these, should starting

Scott Sewell

Yeah. Michael, from shared a and vary CapEx to perspective that’s from perspective. for for reasons some as haven’t revenue going also we and from that -- probably, something a site-to-site, well competitive

about a XX-month impact think wouldn’t time. ‘XX, But -- if we to I let’s So construction there it we lead is about one ‘XX year, on because any the be to sign really, model let even think, were way right us as that. to this think

beyond right in sure So XXXX there. get advance year enough we’ll anything information would far impact that and make this and you we the do we

Michael Hoffman

any enough. of Fair call, is Chesterfield? on Okay. visibility then, portion want Dominion it, work the remediation they And that what releasing they to that do there

Scott Sewell

for not one would -- expect going a prior year. Dominion. ask, to am awarded and so Well, position in calendar be have say it’s yes, I would it to I would to Chesterfield ship be would you able to in to really being But contract -- speak this not our

Michael Hoffman

pretty in they a basis When practical your to ‘XX. that to soon it and to ash on of have contract order deliver supposed by for work you based happen doing that whoever be actually you’re beginning getting ash? start And on enough can gets

Scott Sewell

I be. would. that mean, It again, would

Michael Hoffman

about of logical it? to sort That’s way think

Scott Sewell

way to the It will be logical it. about think

Michael Hoffman

Okay.

Scott Sewell

for can’t Dominion. But, again, I speak

Michael Hoffman

accounting And when the then, was down of Roger, Got an intangibles Allied that? versus goes? it. able What to goodwill be some why behind issue, walk not

Roger Shannon

We did.

of that that up me can of of did We discontinued the operations. so over separation, you the have X let section look made a K, at goodwill in to part carve-out so Note Allied. We pull

So it’s like million of goodwill, Michael, to up was out, in went with part with $XX million carved and discontinued over $XX as so went operations. over goodwill Allied the

Michael Hoffman

on assuming the That’s Thanks. to one, yeah, well, Okay. is repay last my all Oh, cash am to part. all used debt? I free going be

Roger Shannon

Yeah. Yeah.

Michael Hoffman

Yeah.

Okay.

you you midpoint the of debt. So that your puts pay at the slide, guidance, if down your take

cash I wrong? free sub flow the with Just -- cash are math you X that did times. Am -- I did

Roger Shannon

wrong. that did math You not do

Michael Hoffman

Okay.

Roger Shannon

Yeah.

Michael Hoffman

thought. That’s I what

Okay.

Roger Shannon

Great.

Michael Hoffman

Okay. Thanks.

Scott Sewell

continued it. the appreciate your business. for Michael. in Thank Yeah. Much interest you, Thanks

Michael Hoffman

a you Well, got nice business.

to fun do. it’s So

Roger Shannon

Yeah.

Scott Sewell

Thank you.

Operator

questions I remarks. the time. no further will We presenters call have for this closing turn at to back

Scott Sewell

and everyone’s We look Okay. everyone listening great for appreciate Great. to Operator, a XXXX. Thank you, interest Charah today. thanks and in forward

to everybody in get back couple a here lot We report able being excited and get months a on phone the out and have QX. about momentum of on

thank So you.

Operator

today’s concludes This conference.

disconnect. now may You