Enviva (EVVAQ) 27 Feb 202019 Q4 Earnings call transcript

Good morning, and welcome to the Enviva Fourth Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.

I would now like to turn the conference over to Ray Kaszuba. Mr. ahead. go please Kaszuba,

you morning, full to conference year interest and appreciate Good fourth call. Partners, quarter your thank Partners, Enviva and XXXX in participating and you. today. Enviva welcome LP We for Thank financial results

have morning's and CEO Keppler, this Even, On John Financial Shai Chief Chairman we call, Officer. and

up yesterday questions. outlook. be update on an for will to Then agenda provide will and Shai for discuss current and business the our Our John financial we open results lines released our

Before a started, we get items. housekeeping few

statements release of the Q&A could a that our the During are our filings found our forward-looking forward-looking and differ in session, concerning with can well be we our issued uncertainties to course remarks statements, and SEC. in cause of the our will section variety subject materially some most Information and earnings subsequent of from actual website, IR risks. as be our other results making the the as risks in in which XX-K yesterday those recent our to

assume any to changed new or forward-looking or update no circumstances. obligation reflect events statements We to

are directly EBITDA addition GAAP pertaining certain Information our to in adjusted results with in other comparable other we reconciliation of press as included the disclosures In concerning our to will periods discussing most be measures non-GAAP measures financial GAAP, measures as fiscal their to also forecast. release completed accordance issued well presenting and our relevant non-GAAP yesterday. these and

to now like John. would turn it to over I

reducing we're growth, cost foundation of sustainability extending in of XXXX, on me as and well record our position, today. visible and for capital. us pipeline, drop driving IPO our quarter morning, for operational as guidance, contracted Every since focus everyone, Good track our meeting exceeding heard Ray. the our strengthening our thanks you, our excellence long-term and down diversifying Thank you or as joining

seen you've issued on over wood a close XX-K well in quarter that to and X strong earnings another tons Based XXXX, EBITDA yesterday, financial the metric published results adjusted the booking of we million on release had record sold. pellet of

and was first year, For with half laid step-up delivered the cash from a second our adjusted the flow with line significant and out guidance, distributable the profile the year. the full in in consistent earlier we we EBITDA

enabled XXth This $X.XXX the consecutive solid financial per ratio increase operating at coverage for and a to quarterly performance quarter our to distribution X.XX unit times. of us

unit, year distributions consistent full For of $X.XX per with declared totaling the now XXXX, again guidance. we've our

expected the second projects begin of the and up With plant we XXXX and growth the that a the quarters the expansion and ramping in Hamlet Northampton organic third to respectively, Southampton continued expect ramp production positioned EBITDA base incremental without out of any production to XXXX, $XXX generate or drop-downs million between and for assets us million business. of $XXX of The partnerships adjusted acquisitions. benefit the other our have

highly sponsor. a underpinned EBITDA pipeline, way drop-down in by offtake we're doubling adjusted firm Given long-term few held our in our on We visible believe to XXXX just well years. our contracts our

additional XXX,XXX We're an million X Japanese Asia. close tons our each tons The and between just to metric year. for year metric to book expected partnership in per contract With about and announced, to combined which the wood new two of we is call Europe evenly XXXX. grow contracts pellet sponsors just

backlog as our $XX XX.X billion sponsor average a weighted years almost partnership term and and to the and brings remaining This contract sales product respectively.

be the terminal these terminal opportunity discussed of partnership to can require to we assets contracts book beyond expects production sponsor associated past the by design, have additional to plans acquire the significant entry assets and develop will signed the The contracts. in our and have

stage to and for take but further balance as set the our some activities, sheet dropdowns. our of to as financing well and recent will time growth access Shai capital our discuss cost

activities it I detailed at more market the update and and some to did opportunities on the at results development sponsor. the tell partnership the discuss will long-term partnership a over about the financial quarter significant what drivers end of provide to capitalize position we Shai more place first, would to hand like you taking take last call to us. to But on our I time our in to of ahead the growth and the

Thank you, John.

corresponding the quarter net revenue for the $XXX.X compared XXXX. $XXX product of million, to Product increase sales fourth XX.X% over revenue fourth XXXX, was representing quarter was million of $XXX revenue of quarter For as an of million XXXX. sales of the

million pellets sales pellet XXXX. fourth For sold X.XXX approximately the quarter, of wood to metric about the XXX,XXX tons of quarter of metric tons we as compared in

million $XX.X fourth for the quarter million the XXXX. as million fourth of XXXX. the of was quarter $XX.X margin gross corresponding compared quarter million period margin to margin XXXX of XXXX Gross gross for the for fourth was Adjusted as $XX.X for compared of to $XX of

for margin adjusted pricing sales ton and compared the $XX.XX XXXX fourth wood per the to customer production was increase margin due and principally for of mix, gross gross was as in margin lower cost. volume, quarter slower due of $XX.XX contract The Adjusted metric fiber higher XXXX. cost, gross to fourth quarter higher to

compared income, quarter Adjusted like of $X items is fourth quarter fourth net was income XXXX associated million Net which income $X.X the for net notes income with compared was adjusted $X.X as for MSA to XXXX for the Waivers early as fourth the for million million XXXX. and of benefit quarter XXXX the $XX.X of Fee million net XXXX. retirement of adjusted $XX.X our for of of to million of the due senior

For $XX.X same in compared by adjusted fourth XXXX. of as gross in million $XX.X of quarter margin. million, the to the adjusted EBITDA The in generated for the adjusted ever of highest primarily was resulted increase the factors partnership driven fourth that increase our EBITDA XXXX, quarter the

fourth quarter to X.XX our XXXX the to in distribution general distribution incentive of attributable flow partner paid coverage which cash prior million, ratio Distributable $XX.X any results rights was distribution times. to

revenue year XX.X% was to of year, representing Reaching full for the increase an XXXX. million net $XXX.X over the XXXX,

Product compared sales product to million, revenue $XXX.X $XXX year. revenue was of million as sales last

compared metric about X X.X wood million to tons the pellet, XXXX. of as we sale in tons sales approximately For million metric pallet year,

$XX.X million. Gross approximately margin XXXX as as XXXX, to margin million, was gross XXXX, million of gross in full XXX.X Adjusted the $XX.X full compared XXXX. an full to increase $XX.X year of for year margin million year the the million was for $XXX.X compared for

production for metric $XX.XX XXXX. Adjusted costs. customers primarily adjusted fiber XXXX, gross and lower wood pricing due ton gross was margin higher higher increase lower to volume, gross were as They margin to to sales in contract compared per $XX.XX margin, and for due costs mix,

$X associated in was XXXX compared X the MSA million net with income, $XX.X for as which early Net million, Fee retirement for $X.X XXXX adjusted XXXX, XXXX. to Senior as like, income million net XXXX. compared for the loss Adjusted was $XX.X net items adjusted income benefit of to million the of the Note. Waivers for And of is the million of

by resulted in year partnership compared $XXX.X $XXX.X adjusted driven, factors in EBITDA gross year full million, primarily million, increase in EBITDA of the the for adjusted to as generated adjusted that was same For XXXX, increase full that the XXXX. margin. the The

distributions our million was attributable any XXXX. general flow, full year incentive the $XX.X paid for to partner, cash prior Distributable distribution to rights, to

transaction, did, realizing the As needed capital the portion we the the expansion of a we of Mid-Atlantic to XXXX, unit to this benefits for tend on, file the drop-down in full and Drop-Down like issuance reminder, focus the the of first with and for half equity Hamlet Expansions.

capacity basis, looking target of the expected times, and in Plant, the annual distribution through shifting now and at year forward expansion Southampton on the second X.X coverage the increases and Hamlet respectively. the So guidance, The production production business. with plant, third organic the of growth the quarter Northampton ratio a base continued to XXXX we in at ramp-up

be The the general range $XX.X filed to XXXX, income payment range to flow of partnership million. EBITDA million the expects to to to distributable, XX.X million to $XXX million distributions rights, partner. range year incentive $XXX $XXX distribution full in Adjusted any to attributable, of the the $XXX to cash in of net be and in million, million

unit Based on partnership prior between the $X.XX expectations, and these to full-year per our for guidance distribute common reaffirm $X.XX XXXX.

incentive of expected the annual aggregate Partnership’s full on cover to not a of distribution cash to the guidance with consistent X.XX drop-down net impact target the acquisitions coverage forward-looking year XXXX basis. rights, do The for year attributable amount, any flow, XXXX is full distributable distribution times or declared amounts The distribution of include

can the and we've mix impact results, past, of As said quarter-to-quarter. vary shipments customer may which from in and timing the seasonality

below As expect XXXX was first quarter's such, distribution XXXX the including like while one significant the from previous years, a step-up half some coverage look half to back time. and in a lot we

annual an described previously, issued Issuance bonds evidenced initial a and of our million up-sizing $XXX the well due received December followed Board of million which $XXX basis. tech community, by by Partnership as the early unsecured by evaluate offering. the on then issuance on our successful the million were $XXX term $XX As to was In coverage senior distribution XXXX. million, from we've invested

fully new the million XXX we points revolving use our to more credit our borrowing paid from existing lowering XXXX, proceeds than X.X% by and the of bond net The basis debt $XXX term redeem cost the facility. under

under million at with the revolver. As on result, $X outstanding cash had approximately balance of of we XXXX, hand a end no

our we growth are under well Going while employing strategy financial into our XXXX on positioned with to policies. available full execute revolver, conservative further capacity our

distribution we to forward-looking split expansion, for balanced acquisition annual any XX-XX times ratio Specifically, expect X on X.X continue and equity times to a the capital for a of drop-down leverage structure, to of X.X debt major ratio coverage maintain basis XXXX.

strong as on serve our cash will our well and we conservative balances sheet flow believe positive scale. policy growing with focus We the financial combined as

want credit to the our cost reduce also capital. further update We rating will potential of and long-term next seek

like back would it John. to I Now, to turn

balanced XXXX. partnerships least book well through to Thanks, be Shai. at The contract continues

Equis With recently term at average per the a biomass investment years. the The partnerships sponsored fire Group, year weighted in metric stands addition with of plant power the off-take tons largest contract manager Asia. executed infrastructure by remaining independent contracts of XX.X XXX,XXX the the now

including backlog billion, firming and held trading $XX.X major the under including joint contract volumes sponsor another with Japanese contracts And venture, house. the development is newly by our our its contingent revenue executed

product to almost extend remaining years would $XX backlog average term contract weighted and sales XX.X Our billion, respectively. and

globe strong and the demand our to climate of phase net incremental the change, around These out increased commitments, growth cut plans, to This by driven coal, the the global in gas push policies achieve product expected biomass. action XXXX. continued significant for efforts impact greenhouse corresponding underpin limit commitments demand and for zero the firm for by emissions is and

and European first climate-neutral the continent example. announced into XXXX the our support a Against manager the to we which in customer recently for a backdrop, organization to Green EU a fulfillment aims Union's European continent country decarbonize recently The in hired efforts Europe. entire sales great the Deal, and our by growth our strengthen transform this Germany economy, and general manager accelerate in is of

More Dutch technologies by XXXX. to have are the has program both within to upper participate lower specifically now a SDE program. power phase energy, in eligible of fired out generation new for EU, government ++, the coal law passed this the Dutch the and the incentive confirmed houses biomass-based and committed new renewable to The government that

regional coal of In well targets, many the have XXXX mandate the progress from XXXX, ranging ahead to Frankfurt, set Munich continues XXXX. phase-out German Hamburg, the implementation of Berlin, cities and national commission's Germany, including recommendations the of to in government full

off-take market contracts and those long-term what drivers incremental sponsor expect our signed. to We beyond already yield have we

leadership And the signed over off-take with market as the has brand sustainability long-term our practices and reliability Enviva substantial our and demonstrated contracts last recognition pipeline increasing year. robust with and the development we've scale in sponsors the earned the

diversifies to and expect As which acquire. backlog develop additional with have opportunity facilities, in production both expands sponsor contract in growth in continues markets to the our Asia, our and Terminal continued to Europe we

for our As make underway at construction investment the currently Pascagoula activities plant and you to is the a Terminal, decision Epes first the half know, Lucedale is and XXXX. final expects plans and of sponsor the and completing development

production filed tons metric year. XXX,XXX permit currently has plant capacity, to to sponsor application In operating Greenwood require addition, our and increase it's per

held We've by assets that said assets, partnership with needed made sponsor for all will to to of fulfill to the be drop-down. these be the that backlog along our available the contract

growing transparency, focused efforts, conserving our have grow, more a to for remain not and meaningful continue we driving areas we the which only to impact in on the operate. provide As sustainability in to but also on trees forests we

Track transparency tools. program. Our Trace this is our & to program chain supply innovate continue And of industry leading signature one in we

way immutable auditable specific technology the the goes feedstock forest. to in that blockchain of provide wood to harvest testing and to the provide begun an point around of ledger, verification all with we've certainty the instance, suppliers For back our origin our incremental

Following first stakeholder our and through impact and reported we our policy, which progress made on end report transparency the have putting the published our year commitment responsible yesterday, engagement, to in the we've policy sourcing we under into action. impact on

partners, several our with in significant the each provisions collaboration we Through of progress under RSP. implementing made

then launched specific collaboration X,XXX more with pine and program, to program than For associated expanded wood partners its a longleaf enable In instance order harvests in high-quality and of in wildlife landscape. forest we rolling tracts restoration close restoration low-grade to and our community, and the longleaf environmental the this XXXX, that acres. from habitat challenged conservation pilot

hand-in-hand to program Conservation biodiversity. to create and work is protect bottomland So combined our This via environmental, Fund, stakeholders the our Enviva enables better for Forest sensitive ecosystems ongoing forests, work, and to this start. only with outcomes carbon state, us community the restoration with

on developed In also through monitoring XX,XXX methodology and land our wood. first greatly more of health which addition, remote post-harvest satellite long-term ability FSC for we we which receive the sustainable and for landowners and into plans to analyze publish time, a helps we forest enhances our for regeneration technology, sensing Group. acres enrolled from And This develop the Forest tracts forest than their forestland. Management forest forest Certified

pretty to growing on greatest direct change, asset and the important is we improving This climate a is has healthy, in impact the forests. which have effort fight natural

for continue quarter we focused and and our we accomplishing company and those call, going goals goals, clearly a would a exited out delivering doing the year full maybe on be results out the XXXX, even year the out said We we to laying Close better. then fourth exactly little by as

expect opportunities, and a $X.XX million we before EBITDA and fully to distribute $XXX between contracted the per imports plants acquisition from any million to XXXX, made we $XXX unit, sponsor. benefit of our between considering adjusted expect be to For deliver that $X.XX and drop-down available

third over last has With a almost stronger. positioned in just a We're year, next combined and contract backlog balance than sheet years. to by billion doubled a $XX that at never more well that's XXXX EBITDA grown the standing been now the few adjusted

in and like conclusion, In people in all beyond. for continued their the XXXX you. in and to I'd work for thank Thank great XXXX Enviva their dedication hard

line open Operator, for the can you please questions.

Thank you.

from the question-and-answer The Sachs. We first question Maguire Please will [Operator Brian now comes with go Goldman begin Instructions] today session. ahead.

on is Hey, this Derrick Laton for Brian.

Hey, good morning, Derrick.

EBITDA the Hey, good guidance And details. sense. think makes morning. I on Thanks XXXX for all the

the for think mentioned I think and right you between to expansion medium-term maybe through million Hamlet $XXX that previously assuming in Is million, range, you guys the there. just coming the kind guys? XXXX EBITDA that growth way expect have $XXX Mid-Atlantic of about projects get the opportunity could maybe you you

much. So you very Derrick, thank

to uptick in $X.XX in EBITDA path talk our $X.XX trajectory has the as articulated we guidance nothing and mapped for about our exciting. And a EBITDA business we've being reaffirm consistent the us the trajectory of on out, very and pretty of double remarks adjusted clearly, is to changed. As you you the heard in the XXXX we gave did prepared with

I that's the think look way So, right at. to

double distribution the Okay. increase about that for you think the implies XXXX there Is about relative a or XX% the midpoint last sizable reaffirmed of our is distribution in And I guidance forward the digit to you Thank you that to growth? then, digits in distribution of that. pretty way maybe years. to high couple single right grow think the even continue the going as that kind of low

historically historically, forward. think reasonable and a you I if with what look in line we've going that's trajectory that's done right Certainly,

then any Okay. in the pricing from commentary a increases? there leverage sizable around the mentioned the expansion long that on other just increases the thinking nicely for I'm outlook, guys is for, year? like related margin savings. Is one just Looks are a out you did expectation more are just opportunities quarter. offset me, And pretty You margin opportunity contracts. typical there EBITDA last the you this for pretty the XXXX? some additional about cost and in for in fourth Or just areas term price inflationary operating benefiting the is

organic position And year-on-year. the talked that at the when inside the XX%. headline we price So, X% that's One term really is about business, in growth in look we the we long contracted to buckets. three that increases range roughly driven our occur see is,

inside drive improvements our leverage where a capital and at low on that we the very really capacity continuous look that well, production plant operating very targets cost specific expansions teams improvement basis. additional As productivity inside have

the we as uplift. continued business important the margin down given scale unique ability of our and of just those specific there's three really There's pricing That business. then, the this out, the to though. Those year. buckets see are costs that the pointed And and you is drive cost are reduction the nothing to part overall

turn guys. Okay. I'll it. it Thanks, over. Got

Thanks, Derrick.

Pavel The Please Molchanov question comes with Raymond ahead. James. from next go

the Thanks for question. taking

referenced So, power a we And plan? been companies? you actual since German haven't Germany surprise with phase from approved out? contracts for really bit you the that Does pallets still it's seen coal coal it any little XX yet, the again the parliament months

at Actually, all. not

what the XXXX see where setting like exit Parliament be Hamburg advance about Berlin mandate, well hard national to we've around in that of to will consistent being we is prepared the remarks focus be on the continue level market sort in even of And the of that. little we and tried pretty and targets aggressive and the their bit more talk our a think excited And that exit. aggressive we what even more pretty cities are frankly tried the I expectations cities see development. to in you assets

with of the we've of we country strategy in And conversions the test their similar deliveries ahead XX, on executions as utilities XX notation Japan. the into thereafter. made how exactly build And out. in that's market that previously, going -- being we and Germany, contract think development to months next Very major product people I in putting we're Germany. expect or had dialogue got begin the right over to months we've we for initial remain stopped Germany; change direct a deliveries for plans XX deliver and that XX, we'd got many for

of following you kind then Japanese quarterly And near on into If do kind aspect, are Okay. helpful. on when term of begin can perspective? guidance deliveries the you market? remind And can us the Japan just up be the that you the what volumes most in would provide

at firm. $X.X XXXX that Pavel. XXXX, we contract as run between $X.X in $X execute But a the these continue of talked as -- question, million. And go XXXX, out deliveries XXXX the XXXX, to a by to go pointed into we'll it number million look if -- Material we'll million is, what ramp about, that in Shai so So, Japan you provide, great XXXX. rate continue begin do and will zero to we to XXXX,

to just right $X.X planned the the essentially clarify, forth, five, Japan then, that of And have in approach? million backlog, that terms you in that

the some of hanging we more have the expansions that some our existing we got tons roughly actually constructed because I got the facility, little around -- plant Hamlet is facilities. that, that a underway think in XXX. XXX,XXX The about got and most it's we recently at than bit hoop existing you've then assets as

end As at it its the year. the gets this ramp year, through full XXX of

XXXs more And is really of then a Lucedale plant.

expectation. that's so really the And

operating -- plant size what's is that we're excited Lucedale bit a pretty see and grow, range the pretty So you'll as we that the have But continues new a leverage, and represents the little is. again, backlog so significant get as bigger to

done. That's great. Thank you Well guys.

it, Appreciate Thank you. Pavel.

the our over turn This would session. John concludes any now remarks. question-and-answer conference closing to Keppler I like to back for

certainly you joining we Well, time today. Thank appreciate us. for everyone's

and that again next to is still the chatting we you. just fond that getting are started know, you look quarter. case. As I'm We saying of Thank forward

now attending conference presentation. This Thank concluded. is you today's for

may disconnect. now You