EX-99.1 3 d792661dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Charah Solutions, Inc. Reports Second Quarter 2019 Financial Results

Louisville, KY – August 14, 2019 – Charah® Solutions, Inc. (NYSE: CHRA) (“Charah Solutions” or the “Company”), a leading provider of environmental and maintenance services to the power generation industry, today announced financial results for the quarter and year to date ended June 30, 2019. Revenues for the second quarter of 2019 were $120.9 million with a net loss attributable to Charah Solutions of $(18.0) million, or $(0.61) per basic share. Adjusted net loss1 and adjusted loss per basic share1 were $(9.5) million and $(0.32), respectively. Adjusted EBITDA1 was $(2.4) million. Second quarter results include the impact of a $10 million reversal in revenue associated with the Brickhaven contract termination payment of $80 million.

“While our second quarter results were disappointing, in this transition year, we are committed to making adjustments to improve our operating efficiency, reduce our debt levels and increase our margin potential,” said Scott Sewell, President and Chief Executive Officer of Charah Solutions. “We were pleased to finalize an $80 million recovery for the Brickhaven termination, and we have secured approximately $275 million in new awards year-to-date. Additionally, we have $400 million in verbal awards currently under negotiation, and we continue to expect additional positive proposal developments in the second half of 2019 and 2020. The combination of backlog generated year-to-date and verbal awards under negotiation is trending towards one of our strongest business development years on record.”

“Going forward, we are focused on utilizing our positive cash flows to significantly reduce net debt and position the company to take advantage of the estimated $75+ billion in coal ash remediation opportunities in the U.S. and the increasing demand for coal ash by cement and concrete producers,” said Mr. Sewell. “We believe the growth potential for Charah Solutions remains very strong. More than 1,000 ash ponds and landfills still require EPA-mandated closure or remediation, and we are a leading provider of those services. With our ability to provide custom solutions that combine our market-leading ash management capabilities and our proprietary beneficiation technologies, along with a regulatory environment increasingly conducive to our business, we believe we’re ideally positioned to expand our revenue-generating potential. While our highest priority will always be our commitment to safety, we are intensely focused on capturing a significant share of profitable growth opportunities.”

Summary of Financial Results

 

     Three Months Ended June 30,  
(Unaudited, in thousands, except per share and margin data)    2019     2018  

Total revenue

    $ 120,936     $ 195,723  

Gross (loss) profit

    $ (2,065 )    $ 30,549  

Gross margin

      (1.7 )%      15.6 % 

Net (loss) income attributable to Charah Solutions, Inc.

    $ (18,026 )    $ 3,220  

(Loss) earnings per common share (basic/diluted)

    $ (0.61 )    $ 0.13  

Non-GAAP Financial Measures

     

Adjusted net (loss) income1

    $ (9,488 )    $ 7,857  

Adjusted EBITDA1

    $ (2,353 )    $ 25,999  

Adjusted EBITDA margin1

      (1.9 )%      13.3 % 

 

1

Adjusted net (loss) income, Adjusted (loss) earnings per basic/diluted share, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. A reconciliation of Adjusted net (loss) income, Adjusted (loss) earnings per basic/diluted share and Adjusted EBITDA to the most directly comparable GAAP financial measures and a calculation of the Company’s Adjusted EBITDA margin are included in the financial tables accompanying this release.

Second Quarter 2019 Results

Revenue for the second quarter of 2019 was $120.9 million, a decrease of $74.8 million, or 38.2%, from $195.7 million in the second quarter of 2018 due primarily to project completions, reduced nuclear maintenance services and a reversal of revenue related to the Brickhaven termination payment. Gross profit decreased $32.6 million, or (106.8)%, to $(2.1) million from $30.5 million in the second quarter of 2018. Gross profit as a percentage of revenue, or gross margin, declined to (1.7)% from 15.6% in the second quarter of 2018, primarily due to lower gross margin in the Company’s Environmental Solutions segment resulting from the $10 million revenue reversal associated with the Brickhaven contract payment and one project-specific issue continuing from the first quarter of 2019.

Environmental Solutions Segment: Environmental Solutions generated revenue of $37.0 million, a decrease of $53.2 million, or 59.0%, from the second quarter of 2018, primarily driven by the project completions within our remediation and compliance services business and the $10.0 million revenue reversal associated with the Brickhaven contract payment, and one project-specific issue continuing from the first quarter, which was completed in the second quarter. Gross profit declined to $(9.2) million from $22.1 million in the second quarter of 2018 primarily due to a combination of the project-specific issue, which resulted in unanticipated cost increases, the reversal in revenue related to the Brickhaven contract, and the delay in anticipated new business awards. Gross margin declined to (24.9)% from 24.5% in the second quarter of 2018.

Maintenance and Technical Services Segment: Maintenance and Technical Services generated revenue of $84.0 million, a decrease of $21.6 million, or 20.5%, from the second quarter of 2018. The decrease was primarily attributable to lower revenues in the Company’s nuclear services business, which resulted from fewer nuclear refueling outage services. Gross profit decreased $1.3 million, or 15.7%, to $7.1 million from $8.5 million in the second quarter of 2018. Gross margin rose to 8.5% from 8.0% in the second quarter of 2018.

Net loss attributable to Charah Solutions was $(18.0) million, while Adjusted EBITDA1 for the second quarter of 2019 was $(2.4) million, a decrease of $28.4 million from $26.0 million in the second quarter of 2018. Interest expense declined during the second quarter of 2019 by $1.4 million to $4.1 million from $5.5 million in the second quarter of 2018, primarily as a result of a reduction in the cost of debt associated with the refinancing of our term loan in September 2018, partially offset by a non-cash $0.4 million mark-to-market expense associated with the change in value of the Company’s interest rate swap during the period.

Brickhaven Payment Update

On May 29, 2019, the ash remediation contract for Charah’s Brickhaven location was deemed terminated, consistent with the Company’s previously communicated expectations. Per the terms of this contract, the customer is obligated to pay Charah for the recovery of project development costs, expected site closure costs, and post-maintenance costs upon deemed termination. After negotiations to date with customer, the Company expects the amount of the recovered costs will be approximately $80 million and expects the payment of these costs to be received by the payment deadline of August 27, 2019.

Credit Agreement Amendment

On August 13, 2019, the Company entered into an amendment to its existing credit agreement that provided for a financial covenant holiday through December 31, 2019, and amends the financial covenants for the period beginning March 31, 2020, through September 29, 2020. In recognition of the covenant relief, the amendment provides for scheduled debt reductions and reprices the borrowing rates.

 

2

2019 and 2020 Guidance

Our current guidance for 2019 and our outlook for 2020 have been lowered to reflect delays in new awards and the loss of a significant international business opportunity. Our current expectations for 2019 and our outlook for 2020 include incremental revenue that is mostly represented by booked projects, contract renewals, verbal awards and only a modest amount of new prospective awards. Our current 2020 outlook reflects a level of conservatism based on high confidence projections. The outcome in 2020 could be better than the upper end of our range in the event we are awarded one or more large prospective contracts from current or future proposals. Our current 2019 guidance has been revised as follows:

 

  •  

Revenues of $510 million to $560 million

 

  •  

Net (loss) of $(27) million to $(20) million

 

  •  

Adjusted EBITDA2 of $25 million to $30 million

 

  •  

Free cash flow positive

Our 2020 outlook has been revised as follows:

 

  •  

Revenues of $560 million to $610 million

 

  •  

Net income of $9 million to $14 million

 

  •  

Adjusted EBITDA2 of $45 million to $50 million

 

  •  

Free cash flow positive

Business Update

Delays in new work awards coupled with unanticipated cost increases at one remediation site led to disappointing results in the second quarter of 2019. The pace of new awards in 2019 has not been sufficient to offset the impact of projects rolling off during the year due to an increase in the size, scope, and complexity of remediation and compliance projects. As these projects have become larger and more complex, utility customers are seeking regulatory clarity as well as cost recovery through rate relief. Though this delay is impacting our 2019 results, we expect demand for our remediation and compliance services to grow as more than 1,000 ash ponds and landfills still require EPA-mandated closure or remediation. Our success rate in winning awards for the three and six months ended June 30, 2019, has been in line with the three and six months ended June 30, 2018, though the size of projects awarded has been smaller than anticipated. We have signed approximately $275 million in new contracts year-to-date and are in exclusive negotiations on approximately $400 million in additional contracts. Though the timing of future awards is difficult to determine, we believe we are well-positioned to capture a significant portion of a large and growing addressable market.

The maintenance and technical services segment results for the three and six months ended June 30, 2019, were in line with our expectations but were lower than the results for the three and six months ended June 30, 2018, primarily as a result of fewer nuclear refueling outages and a reduction in the scope of work. A substantial portion of our nuclear services operations is driven by scheduled nuclear maintenance outages, which are typically planned for every 12 to 24 months.

 

2

The forward looking measures of 2019 and 2020 Adjusted EBITDA are non-GAAP financial measures that cannot be reconciled to net income as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking measures.

 

3

Within our byproduct sales offerings, which is a part of our environmental solutions segment, the roll-out of our technology initiatives, including our MP618 thermal beneficiation technology and our grinding technology, has been slower than previously anticipated, resulting in a lower than expected contribution to operating results. Customer interest in our MP618 technology has been strong, and contracts are currently under negotiation.

Management continues to see regulatory and public policy trends as increasingly driving customer needs for creative remediation solutions, including where beneficiation, or recycling of ash, plays a significant role. The EPA recently finalized the Affordable Clean Energy regulations and released proposed amendments to the 2015 Coal Combustion Residuals regulations that clarify issues identified by ash producers and the ash management and recycling industry. In each case, management believes the EPA will continue to extend its support for the beneficial use of coal ash consistent with its objective of reducing the carbon footprint in the U.S.

CONFERENCE CALL

Charah Solutions will host a conference call at 8:30 a.m. ET today to discuss the second quarter results. Information contained within this press release will be referenced and should be considered in conjunction with the call.

Participants may access the conference call live via webcast on the Investors section of the Charah Solutions website at ir.charah.com. To participate via telephone, please dial (877) 273-7219 within the United States or (647) 689-5395 outside the United States, approximately 15 minutes prior to the scheduled start time. The conference ID for the call is 4583919.

A webcast replay will be available on the Investors section of the Charah Solutions website at ir.charah.com after 11:30 a.m. ET on Wednesday, August 14, 2019. In addition, an audio replay will be available for one week following the call and will be accessible by dialing (800) 585-8367 within the United States or (416) 621-4642 outside the United States. The replay ID is 4583919.

A supplementary presentation will also be available on the Investors section of the Charah Solutions website at ir.charah.com.

ABOUT CHARAH SOLUTIONS

With 30 years of experience, Charah® Solutions, Inc. is a leading provider of environmental and maintenance services to the power generation industry, with operations in fossil fuel and nuclear power generation sites across the country. Based in Louisville, Kentucky, Charah Solutions assists utilities with all aspects of managing and recycling ash byproducts generated from the combustion of coal in the production of electricity as well as routine power plant maintenance and outage services for the fossil fuel and nuclear power generation industry. The company also designs and implements solutions for ash pond management and closure, landfill construction, fly ash and slag sales, and structural fill projects. Charah Solutions is the partner of choice for solving customers’ most complex environmental challenges, and as an industry leader in quality, safety, and compliance, the company is committed to reducing greenhouse gas emissions for a cleaner energy future. For more information, please visit www.charah.com.

 

4

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” and similar terms and phrases. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

NON-GAAP FINANCIAL MEASURES

Adjusted net (loss) income and Adjusted (loss) earnings per basic/diluted share are not financial measures determined in accordance with GAAP. Charah Solutions defines Adjusted net (loss) income as Net (loss) income attributable to Charah Solutions plus, on a post-tax basis, non-recurring legal and start-up costs and expenses, and transaction-related expenses and other items. Adjusted (loss) earnings per basic/diluted share is based on Adjusted Net (loss) income.

Adjusted EBITDA and Adjusted EBITDA margin are not financial measures determined in accordance with GAAP. Charah Solutions defines Adjusted EBITDA as net (loss) income before interest expense, income taxes, depreciation and amortization, equity-based compensation, non-recurring legal and start-up costs and expenses, Brickhaven termination revenue reversal, and transaction-related expenses and other items. Adjusted EBITDA margin represents the ratio of Adjusted EBITDA to total revenues.

Management believes Adjusted EBITDA and Adjusted EBITDA margin are useful performance measures because they allow for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. Management excludes the items listed above from net (loss) income in arriving at Adjusted EBITDA because these amounts are either non-recurring or can vary substantially within Charah Solutions’ industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net (loss) income determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Charah Solutions’ presentation of Adjusted EBITDA should not be construed as an indication that the Company’s results will be unaffected by the items excluded from Adjusted EBITDA. Charah Solutions’ computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies. Charah Solutions uses Adjusted EBITDA margin to measure the success for the Company’s business in managing its cost base and improving profitability. A reconciliation between Adjusted EBITDA to net (loss) income, Charah Solutions’ most directly comparable financial measure calculated and presented in accordance with GAAP, along with a calculation of the Company’s Adjusted EBITDA margin is included in the supplemental financial data attached to this press release.

 

5

Investor Contact

Tony Semak, Head of Investor Relations

Charah Solutions, Inc.

ir@charah.com

(502) 245-1353

Media Contact

Katrina Gallagher

PriceWeber Marketing

media@charah.com

(502) 472-6003

 

6

CHARAH SOLUTIONS, INC.

Condensed Consolidated Balance Sheets

(dollars in thousands except per share data)

(Unaudited)

 

     June 30,
2019		     December 31,
2018		  
Assets     

Current assets:

     

Cash

    $ 9,581     $ 6,900  

Trade accounts receivable

      47,706       60,742  

Receivable from affiliates

      828       894  

Costs and estimated earnings in excess of billings

      90,375       86,710  

Inventory

      22,306       25,797  

Prepaid expenses and other current assets

      3,946       5,133  
  

 

 

    

 

 

  

Total current assets

      174,742       186,176  

Property and equipment:

     

Plant, machinery and equipment

      73,482       74,896  

Structural fill site improvements

      55,760       55,760  

Vehicles

      19,726       17,407  

Office equipment

      2,322       1,623  

Buildings and leasehold improvements

      262       262  

Structural fill sites

      7,110       7,110  

Construction in progress

      9,596       3,488  
  

 

 

    

 

 

  

Total property and equipment

      168,258       160,546  

Less accumulated depreciation

      (80,969 )      (71,605 ) 
  

 

 

    

 

 

  

Property and equipment, net

      87,289       88,941  

Other assets:

     

Trade names, net

      34,850       34,920  

Customer relationships, net

      59,951       63,898  

Technology, net

      1,753       1,853  

Non-compete and other agreements, net

      108       180  

Other intangible assets, net

      —         22  

Goodwill

      74,213       74,213  

Other assets

      —         891  

Deferred tax asset

      9,136       2,747  

Equity method investments

      5,218       5,060  
  

 

 

    

 

 

  

Total assets

    $ 447,260     $ 458,901  
  

 

 

    

 

 

  

 

7

CHARAH SOLUTIONS, INC.

Condensed Consolidated Balance Sheets

(dollars in thousands except per share data)

(Unaudited)

 

     June 30,
2019		     December 31,
2018		  
Liabilities and stockholders’ equity     

Current liabilities:

     

Accounts payable

    $ 29,273     $ 24,821  

Billings in excess of costs and estimated earnings

      160       1,352  

Notes payable, current maturities

      18,722       23,268  

Accrued payroll and bonuses

      11,588       15,480  

Asset retirement obligation, current portion

      14,126       14,704  

Purchase option liability, current portion

      7,110       10,017  

Accrued expenses

      20,628       22,473  

Other liabilities

      905       —    
  

 

 

    

 

 

  

Total current liabilities

      102,512       112,115  

Long-term liabilities:

     

Contingent payments for acquisitions

      11,349       11,214  

Asset retirement obligation, less current portion

      6,819       11,361  

Line of credit

      35,174       19,799  

Notes payable, less current maturities

      217,837       211,022  
  

 

 

    

 

 

  

Total liabilities

      373,691       365,511  

Commitments and contingencies (see Note 11)

     

Stockholders’ equity:

     

Retained (losses) earnings

      (11,632 )      9,414  

Common Stock, $0.01 par value; 200,000,000 shares authorized; 29,586,165 and 29,082,988 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively

      296       291  

Additional paid-in capital

      83,882       82,880  
  

 

 

    

 

 

  

Total stockholders’ equity

      72,546       92,585  

Non-controlling interest

      1,023       805  
  

 

 

    

 

 

  

Total equity

      73,569       93,390  
  

 

 

    

 

 

  

Total liabilities and equity

    $ 447,260     $ 458,901  
  

 

 

    

 

 

  

 

8

CHARAH SOLUTIONS, INC.

Condensed Consolidated & Combined Statements of Operations

(dollars in thousands except per share data)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,
2019		     June 30,
2018		     June 30,
2019		     June 30,
2018		  

Revenue

    $ 120,936     $ 195,723     $ 284,194     $ 351,252  

Cost of sales

      123,001       165,174       270,880       301,605  
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross (loss) profit

      (2,065 )      30,549       13,314       49,647  

General and administrative expenses

      17,400       18,937       31,385       33,319  
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating (loss) income

      (19,465 )      11,612       (18,071 )      16,328  

Interest expense, net

      (4,102 )      (5,543 )      (9,154 )      (9,674 ) 

Income from equity method investment

      663       699       1,217       1,286  
  

 

 

    

 

 

    

 

 

    

 

 

  

(Loss) income before income taxes

      (22,904 )      6,768       (26,008 )      7,940  

Income tax provision

      (5,628 )      2,906       (6,389 )      2,906  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net (loss) income

      (17,276 )      3,862       (19,619 )      5,034  

Less income attributable to non-controlling interest

      750       642       1,226       1,009  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net (loss) income attributable to Charah Solutions, Inc.

    $ (18,026 )    $ 3,220     $ (20,845 )    $ 4,025  
  

 

 

    

 

 

    

 

 

    

 

 

  

(Loss) earnings per common share:

         

Basic

    $ (0.61 )    $ 0.13     $ (0.71 )    $ 0.17  

Diluted

    $ (0.61 )    $ 0.13     $ (0.71 )    $ 0.16  

Weighted-average shares outstanding used in (loss) earnings per common share:

         

Basic

      29,558,752       24,477,829       29,374,295       24,096,186  

Diluted

      29,558,752       25,347,887       29,374,295       24,942,199  

Pro forma net (loss) income information (see Note 1):

 

Net (loss) income attributable to Charah Solutions, Inc. before provision for income taxes

    $ (23,654 )    $ 6,126     $ (27,234 )    $ 6,931  

Pro forma provision for income taxes

      (5,628 )      1,517       (6,389 )      1,720  
  

 

 

    

 

 

    

 

 

    

 

 

  

Pro forma net (loss) income attributable to Charah Solutions, Inc.

    $ (18,026 )    $ 4,609     $ (20,845 )    $ 5,211  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

9

CHARAH SOLUTIONS, INC.

Condensed Consolidated & Combined Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 

     Six Months Ended  
     June 30, 2019     June 30, 2018  

Cash flows from operating activities:

     

Net (loss) income

    $ (19,619 )    $ 5,034  

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

     

Depreciation and amortization

      11,635       17,135  

Amortization of debt issuance costs

      342       784  

Deferred income tax provision

      (6,389 )      1,919  

Loss on sale of assets

      1,305       582  

Income from equity method investment

      (1,217 )      (1,286 ) 

Distributions received from equity investment

      1,059       938  

Non-cash share-based compensation

      1,007       1,403  

Loss (gain) on interest rate swap

      1,796       (2,228 ) 

Interest accreted on contingent earnout liability

      135       —    

Changes in cash due to changes in:

     

Trade accounts receivable

      13,036       (5,289 ) 

Receivable from affiliates

      66       (82 ) 

Costs and estimated earnings in excess of billings

      (3,665 )      (22,305 ) 

Inventory

      3,491       (825 ) 

Prepaid expenses and other current assets

      1,187       (2,126 ) 

Accounts payable

      4,452       8,587  

Billings in excess of costs and estimated earnings

      (1,192 )      (8,783 ) 

Accrued payroll and bonuses

      (3,892 )      1,946  

Asset retirement obligation

      (5,120 )      14  

Accrued expenses

      (1,845 )      2,396  
  

 

 

    

 

 

  

Net cash used in operating activities

      (3,428 )      (2,186 ) 

Cash flows from investing activities:

     

Proceeds from the sale of equipment

      1,507       1,102  

Purchases of property and equipment

      (11,491 )      (8,233 ) 

Payments for business acquisitions, net of cash received

      —         (19,983 ) 

Purchase of intangible assets

      —         (31 ) 
  

 

 

    

 

 

  

Net cash used in investing activities

      (9,984 )      (27,145 ) 

Cash flows from financing activities:

     

Net proceeds on line of credit

      15,375       —    

Proceeds from long-term debt

      9,994       8,400  

Principal payments on long-term debt

      (8,067 )      (45,547 ) 

 

10

     Six Months Ended  
     June 30, 2019     June 30, 2018  

Repurchases of shares

      (201 )      —    

Payments of offering costs

      —         (8,622 ) 

Issuance of common stock

      —         59,241  

Distributions to non-controlling interest

      (1,008 )      (721 ) 

Distributions to members

      —       (686 ) 
  

 

 

    

 

 

  

Net cash provided by financing activities

      16,093       12,065  
  

 

 

    

 

 

  

Net increase (decrease) in cash

      2,681       (17,266 ) 

Cash, beginning of period

      6,900       32,264  
  

 

 

    

 

 

  

Cash, end of period

    $ 9,581     $ 14,998  
  

 

 

    

 

 

  

Supplemental disclosures of cash flow information:

     

Cash paid during the year for interest

    $ 4,889     $ 11,163  

Cash paid during the year for taxes

    $ —       $ —    

 

11

CHARAH SOLUTIONS, INC.

Segment Results and Adjusted EBITDA

(dollars in thousands unless otherwise indicated)

 

     Three Months Ended              
     June 30,     Change  
     2019     2018     $     %  
     (dollars in thousands)  

Revenues:

         

Environmental Solutions

    $ 36,950     $ 90,113     $ (53,163 )      (59.0 )% 

Maintenance and Technical Services

      83,986       105,610       (21,624 )      (20.5 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total revenue

      120,936       195,723       (74,787 )      (38.2 )% 

Cost of sales

      123,001       165,174       (42,173 )      (25.5 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross (Loss) Profit:

         

Environmental Solutions

      (9,188 )      22,096       (31,284 )      (141.6 )% 

Maintenance and Technical Services

      7,123       8,453       (1,330 )      (15.7 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total gross (loss) profit

      (2,065 )      30,549       (32,614 )      (106.8 )% 

General and administrative expenses

      17,400       18,937       (1,537 )      (8.1 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating (loss) income

      (19,465 )      11,612       (31,077 )      (267.6 )% 

Interest expense, net

      (4,102 )      (5,543 )      1,441       26.0 % 

Income from equity method investment

      663       699       (36 )      (5.2 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

(Loss) income before taxes

      (22,904 )      6,768       (29,672 )      (438.4 )% 

Income tax provision

      (5,628 )      2,906       (8,534 )      (100.0 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net (loss) income

      (17,276 )      3,862       (21,138 )      (547.3 )% 

Less income attributable to non-controlling interest

      750       642       108       16.8 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net (loss) income attributable to Charah Solutions, Inc.

      (18,026 )      3,220       (21,246 )      (659.8 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA(1)

    $ (2,353 )    $ 25,999     $ (28,352 )      (109.1 )% 

Adjusted EBITDA margin(1)

      (1.9 )%      13.3 %      (15.2 )%      N/A  

 

(1)

Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures.

 

12

CHARAH SOLUTIONS, INC.

Non-GAAP Reconciliation: Net (Loss) Income to Adjusted EBITDA

(dollars in thousands)

 

     Three Months Ended  
     June 30,  
     2019     2018  

Net (loss) income attributable to Charah Solutions, Inc.

    $ (18,026 )    $ 3,220  

Interest expense, net

      4,102       5,543  

Income tax provision

      (5,628 )      2,906  

Depreciation and amortization

      5,378       8,704  

Elimination of certain non-recurring legal costs and expenses(1)

      —         2,489  

Elimination of certain non-recurring start-up costs(2)

      —         688  

Equity-based compensation

      799       1,292  

Brickhaven termination revenue reversal

      10,000       —    

Transaction related expenses and other items(3)

      1,022       1,157  
  

 

 

    

 

 

  

Adjusted EBITDA

    $ (2,353 )    $ 25,999  
  

 

 

    

 

 

  

Adjusted EBITDA margin(4)

      (1.9 )%      13.3 % 

 

(1)

Represents non-recurring legal costs and accruals associated with outstanding or settled legal claims, which amounts are not representative of legal costs that we historically incur in the ordinary course of our business.

(2)

Represents non-recurring start-up costs associated with the startup of Allied Power Management, LLC (“Allied”) and our nuclear services offerings, including the setup of financial operations systems and modules, pre-contract expenses to obtain initial contracts and the hiring of operational staff. Because these costs are associated with the initial setup of the Allied business to initiate the operations involved in our nuclear services offerings, these costs are non-recurring in the normal course of our business.

(3)

Represents SCB transaction expenses, executive severance costs, IPO-related costs and other miscellaneous items.

(4)

Adjusted EBITDA margin is a non-GAAP financial measure that represents the ratio of Adjusted EBITDA to total revenues. We use Adjusted EBITDA margin to measure the success of our businesses in managing our cost base and improving profitability.

 

13

CHARAH SOLUTIONS, INC.

Non-GAAP Reconciliation: Net (Loss) Income to Adjusted Net (Loss) Income and

Adjusted (Loss) Earnings per Diluted Share

(dollars in thousands except per share data)

(Unaudited)

 

     Three Months Ended
June 30,		  
(in thousands, except per share data)    2019     2018  

Net (loss) income attributable to Charah Solutions, Inc.

    $ (18,026 )    $ 3,220  

Income tax provision

      (5,628 )      2,906  

Elimination of certain non-recurring legal costs and expenses(1)

      —         2,489  

Elimination of certain non-recurring start-up costs(2)

      —         688  

Brickhaven termination revenue reversal

      10,000       —    

Transaction-related expenses and other items(3)

      1,022       1,157  

Adjusted (loss) income before income taxes attributable to Charah Solutions, Inc.

      (12,632 )      10,460  

Adjusted income tax provision(4)

      3,144       (2,603 ) 

Adjusted net (loss) income attributable to Charah Solutions, Inc.

      (9,488 )      7,857  

Weighted average basic / diluted share count(5)

      29,559       25,348  

Adjusted (loss) earnings per diluted share

    $ (0.32 )    $ 0.31  

 

(1)

Represents non-recurring legal costs and expenses, which amounts are not representative of legal costs that we historically incur in the ordinary course of our business. Negative amounts represent insurance recoveries related to these matters.

(2)

Represents non-recurring start-up costs associated with the startup of Allied and our nuclear services offerings, including the setup of financial operations systems and modules, pre-contract expenses to obtain initial contracts and the hiring of operational staff. Because these costs are associated with the initial setup of the Allied business to initiate the operations involved in our nuclear services offerings, these costs are non-recurring in the normal course of our business.

(3)

Represents SCB transaction expenses, executive severance costs, IPO-related costs and other miscellaneous items.

(4)

Represents the statutory income tax rate of 24.89%, multiplied by adjusted income before income taxes attributable to Charah Solutions, Inc.

(5)

As a result of net loss per share for the three months ended June 30, 2019, the inclusion of all potentially dilutive shares would be anti-dilutive. Therefore, dilutive shares (in thousands) of 1,413 were excluded from the computation of weighted-average shares.

 

14