Enviva (EVVAQ) 29 Jul 212021 Q2 Earnings call transcript

Good morning and welcome to the Enviva Partners, LP Second Quarter 2021 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 Kate Walsh, Vice President and Investor Relations. ahead. go Please

today. morning Even, second Good your welcome the and for to in have call, Thank Keppler, Financial John XXXX everyone Officer. earnings Partners’ Chairman participating you thank quarter Partners and appreciate this conference Enviva morning’s Enviva we Shai you. CEO; and and On Chief call. interest We

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

During session, the that our our uncertainties to or forward-looking concerning some or found no in which of in subsequent course Information our remarks well as obligation differ be and subject we can Forward-Looking could statements the earnings and cause new are a changed Q&A forward-looking other risks. any risks as to making variety those SEC We our in our of statements will reflect actual be to the to events from Statements, filings. assume release materially circumstances. update results

would these GAAP, to I with the results now reporting disclosures measures and non-GAAP like are pertaining most as information The turn completed measures presenting financial our also other non-GAAP reconciliations that, directly concerning to EBITDA of over relevant release. as will earnings included their to certain comparable forecasts. John. to With GAAP in well our measures to in discussing accordance other periods it our addition and be In adjusted we

the to been I'm results the it bit the earnings stable us also quite straight thanks one which exciting delivered everyone Good We've you today. actually call. us, for very milestones, down we has where since morning come quarter, have expect. say an we last a Kate. and our major to you, joining been quarter's and it's And happy fairway while Thank communicated quarter a achieved for

call. my for prepared remarks fairly I'll this short that, keep Given

its encouraged world and remain few the we've in been see COVID-XX the strides While making headlines, reopening. last the to various over and present ever months

people and durability at allowed XX/X, business plants safe and resilience results our supply humming. have model that line The and of right financial has in Enviva, us Here keep we expectations. have the us to enabled healthy our ports chain running and and with our to remained our that deliver are built

a just That's million and with quarter first like just shared EBITDA the a in year. I EBITDA. expected As we same landed, and look recent increase in you of where adjusted lot XX% the in $XX about the that's last second quarter generating last adjusted years, we like to period over

acquisitions, capacity and for end We in throughput the strategy, contracted we $XX successful we ramped, continue million fully once two terminal at To raising equity of Part of new consistently significantly market oversubscribed the the acquisitions, quarter And of X.X% contracted as issued profile finance EBITDA, we reason, acquired portion because again, line Based current recent financial with since the we price. adjusted which million the distribution our our our delivered right and our to a in equity plants been our believe, profile XXXX, flow contracted quarter attractive increase transactions we times consistently in second a of discount X.X This units the performance, expect the past maintains fully on the transactions. and increased an terminals. production on offering IPO. These the significant into year. have our represents The unit for about a an last by was for adjusted our growth The increase of assets consecutive of multiples projected of to increase and and deep-water these translates increase cash first of quarter-over-quarter. the X.X% execute XX%. investment closing growth of $X.XXX same of growth in annual marine quarter CAGR acquisitions the capacity eight coupled our XX% enabled has Enviva's second are XX% dropdown this finance sustainably declared to distributions the by of EBITDA have accretive distribution XXth to solid Board part around different. distribution no is year. half growth half distribution fully per equity grow business, for the us over and with paid the

reaffirming also adjusted XXXX year to our $XXX guidance, XXXX range least and an at before million From expansions XXXX, guiding at or may quarter, for including to future acquisitions range Southampton, made and $XXX $XXX during XXXX, on are progress to Well, these our for Hamlet $X.XX Greenwood expansions advanced least Cottondale have full $XXX headlines, $X.XX each we our third-party unit accounting we're of acquisitions. full benefit a per our Importantly, at million. team an per plants. the our and EBITDA the guidance, at of plants, and distribution million, unit the second of capacity for tremendous dropdowns other financial including year Sampson, and adjusted Northampton, million our dominated EBITDA standpoint, multi-plant

combined Japanese totals by contract partnership revenue Our fully major underpinned years. expansions production term we with yesterday. production weighted remaining a of a average agreement additional capacity trading recently executed our held When house, billion, XX.X with including with announced backlog, now are contracted $XX contracted the sponsor, by which the

remaining revenue approximately average Our term total XX.X to weighted billion and would increase $XX.X and backlog respectively. years, our

of as $X production which currently plants continues exceeds wood serve growing sponsor demand, Our to billion. develop evaluate with and backlog long-term contracts pellet to

during Epes, power yesterday for under To with evolving winter, developing contract we industrial and XX of supply completion generators we volumes and Alabama, to both in various also existing sponsor a in has to negotiation earnest wood to companies material Like facility our plant expect this MOU, our Netherlands. contracted which with years months with utility currently upcoming this stages for production around serve the in wood European the XX construction Additionally, markets. fully is demand, pellets the thereafter. sponsor in utilities, start a announced pellet

sponsor is site plant Our Bond, in evaluating a Mississippi. potential future also

our this to footprint. of be powerful sites said we've in for shortage emissions the to now, new some reduction spend close proximity cost key our time highlights. I'd carbon by meet Port more low new a of like I from progress on and and plant pipeline the detail But being opportunities actions substantial low the taken in the customer and the governments to call financial turn at later targets. the could over to outlining zero Shai commercial in quarter partnership. jurisdictions results commitments delivered decarbonisation Bond will and and growing world, Pascagoula, to binding net contract Given With industry around required production it underlying second ahead by share a governments initiatives made no markets

everyone. and John, you, morning good Thank

As John mentioned, solid quarter the our of in our right second results XXXX were with for expectations. line

net margins of and of net revenue of a increase the for volumes. the ton second care was pellets net margin of XXXX of adjusted impacted was number for increase million in $XXX was from Adjusted quarter parties, quarter also gross million of of metric of second compared second of metric revenue margin quarter and as as the Adjusted second compared a $X.X million at for deliveries purchases of quarter $XX an $X.X performed of quarter the new generated XXXX. lower margins The second produced of quarter was the our million by second to for to a income In income $X.X in to customers the we deliver adjusted the than increase increased gross represents XXXX. costs The we XX% million the quarter primarily result quarter was quarter for commence margin the Adjusted XXXX XXXX. is a was XXXX, the Adjusted sales, $X.X ton existing at incremental as million, income and over $XX.X that net quarter significant XXXX. corresponding for in million, which net expansion gross the for to commissioning volumes terms corresponding approximately project to of of louder XXXX income attributable XXXX, net $XX.XX gross for $XX.X of decrease during of in or customers. for to return XXXX. compared Net the generally third of per second as second outlets. XX.X%,

partnership the second primarily earlier, As of quarter XXXX. by EBITDA the The of generated EBITDA in the significant quarter highlighted higher driven adjusted of from for increase revenue. $XX.X an million XXXX, second was XX% adjusted increase of

$XX.X million from year. XXXX, ago, Although Partners signing starting the counterparties deliveries flow quarter just the second attributable contracts was corresponding Enviva XX% XXXX, few are really Japanese quarter increase to a which into we years and coverage times, conservatively to in sheet represents this with which cash Distributable cash million. X.XX its began facility results ramp of for which XX, ratio this consistent commitment was as in on of XXXX, distribution is partnership last managing and revolving The credit $XXX June hand time on is year. included of liquidity the availability Enviva's the to with unchanged. balance Japan

XX% lockdowns equity futures expansion using debt. major and funds the acquisitions and expect to XX% continue We

now ratio affirmed times John the We the and also to forward as full-year in looking XXXX to on coverage a we X.X mentioned, continue have outlook, of financial to guidance. a ratio leverage XXXX X.X Pivoting of basis. conservative target times, partnership distribution X our and annual

result As variances we from shipments the mix impact cost and customer said timing in of can in past, seasonality, quarter-to-quarter.

the of look materially the of this shape the first similar to for than next the year year EBITDA adjusted expect with half and half. year second our being to XXXX We higher XXXX, and

step third to fourth Additionally, be results the we quarter quarter. up from significant a expect

to margins mid-XXs. For the adjusted expect XXXX, be full we metric per ton gross within year

Our a expansion. confidence recent Greenwood to and the with in in with respect benefit by guidance is acquisitions realize tandem for underpinned Mid-Atlantic achieving our

contribution projected XXXX, and accounting delivery half acquired the weighted Additionally, quarters for many to Similar the we flow. next to adjusted the assets, of the slightly European to of about the of UK two our half an of and schedules additional resulting benefit our the XX% our adjusted very back up newly before of year year. strong annual XXXX in to shaping million EBITDA $XX second the are contribute expect EBITDA customer from

Enviva the macro turn we supply at insulated fairly the When want to being John, from comment current to of chain, back are I inflationary on pressures. look fortunate we Before in trends. I position the inflation call

supply escalator have for are which and driving our the lower contracts, of in see seen inflation. From compensate benefits cost designed and productions as quarter. We to of fourth an seasonality annual side, to we have part the third expect

to John. like back I'd turn Now, to

XXXX. dioxide carbon biomass as XX targets, released its to aggressive commission may importance the EU from A is Commission levels ago, key EU a a neutrality you From XX% the reduction in reach needed for development XXXX. Thanks in have intended emissions to carbon of Shai. for Fit plays the and which market emissions recognize perspective, weeks indispensable sustainable two reduction role the seen by milestone to meeting package, The mitigating in XXXX climate by change. continues biomass deliver

under with RED as generation countries portfolio. heightened also generally the As drafted, proposed, III RED Energy such proposals the refinements biomass, of proposals share to in the renewables, the Renewable III, obligations the further for practices. and outlined energy or as sustainability member Enviva’s criteria biomass line increase in to they're latest Directive their

have that renewable intensive is energy direct prices there has gas, coal feedstocks more This biomass be developed. allowing carbon to environment carbon natural more than or like even November the the markets no energy incentives generation. for is by XXXX, that are in profitable highlighting price in and EU generated constructive where doubled, than subsidies EU Trading advancement Emissions Another System worth

last long biomass their Europe, cement adoption and we provide utilities contracts of operations. seen underway heating biomass support into global industrial German an of to the dedicated alternatives, as users with backdrop, multiple Utilities piloting this expected is year, Law, mills, the fuel convert consumers scale long-term these on have are quarter conversions biomass that steel to fuel Germany, decisions, this of for decarbonize Coal with should long-term support and for emerging been planned biomass. power following potentially thereafter. in less In market their plants as supply frameworks solution producers subsidy a to formal momentum coal Given biomass the usage. of discussions large with district Enviva, regulations plants prime for commercial transitions during industrial path Exit biomass chemical the of generators finalization where evaluating manufacturers, a expected decarbonisation a have increased becoming to influential the to sector test but to regulations switching for to renewable Enviva switching. decisions number become third major around are end financial the large networks, has including The power finalized line cargoes European regulations that are be year's customers delivered heating

the combined track proprietary ensure With we see sourcing with inventories industry leading sustainably have and trace time. over grow remain our our continue and to what produced whose pellets tremendous wood system to ahead, continued growth have like achieved, our we will tools from policy forests responsible that

As subject you are independent continue may SDP. pleased standards sustainability our we recall, report globally PEFC, to audits. recognized and stringent we certified as SFI be third-party we under like also to operations to And annual leading FSC,

reinforce environmental further we progress the sustainability. on making that reputation to expect our We net commitments and leadership for own were our zero

onsite adjacent XXXX Scope emissions, in a to with X substitutions which mitigate renewable efforts fully our immediately exciting changes XX% X XXXX. also and and have underway generating we by progressing energy number by to We're connection and several offset or of our alternatives mitigate manufacturing all by in evaluating emissions cut of input Scope are process have and committed facilities. our We we

additional grow make zero valuable Finally, of chain that climate have value in displace fight core the Scope manufacture in supply and measurable our emissions. product more we partnerships advancements more development trees, change. the our our we previously, effort our proposition, we X to net maritime help and our at make only initiatives in addition coal, in progress much to several have is Sustainability partners shipping described the

I close, made take Enviva we want whole we moment thank the to Before for tremendous the past a to progress team quarter. this

our do healthy day-in With each to focus safely in making our and continue communities. positive other day-out impact a and reliably. jobs unrelenting on colleagues and Our an keeping

recognition, where corporate their We for support embedded we contributions. a the as in neighbor. efforts receive our communities we the needs serve operate, are to and to and deeply thankful and proud citizen continue good I'm And

about With and renewable excited the incredible effectively. for to across globe what for want the world more carbon comes very less The quickly team. next more momentum I'm cost continues energy, our

of that reliably we're our model foundation unit intend for our And you quarter over next fully business questions? to delivering the with quarterly we've per thank of build just I demonstrates results time. uninterrupted power one for more track performance again really markets, to the open This to but same financial getting and can look quarter. started. is the solid listening. contracted Until we progress This significantly over the period you built those increased upon, continuing sharing and please serve forward then, Operator, about year, line our record stable last distributions increase

question We Elvira will with Instructions] first Markets. now the from Scotto question-and-answer [Operator begin RBC And session. the Capital go Please ahead. comes

comment shortages? on about talked from you can know you impact you any seeing But labor I inflationary So labor? inflation, some pressures. Are

are tend to we you know, So few in build not lots generally people. plants trees Elvira, as of directly where there

Where right entry like stay little is, our four at the relatively people have bit a this And of to given stable is level some you sort people But facility. is at facilities, frankly, wage and paying the we workforce. of is believe home. at it or effective the seen unemployment the a we so to have have of three position kind margins government benefits, what rate of for of the is per and what we some

begun and think terms level of entry reasonably seen that to But applicants are have enforced. that that abate, number have people the We as recruiting, in returned in that, of I of apply. terms has those

you opportunity how power that generation And big an to Germany aggregate you provide contracts, major And discussions those utility give commercial Can there? into in discussions? I us about that know Enviva? Germany in then any more remarks, operators been for in your of you prepared we've or granularities heating and convert has networks multiple underway a with in discussions on note you those update Enviva before if facilities. then, while. Can And talked commercial had were

to excited about we in Yes, that absolutely, Germany. And continue pretty progress the we're think I Elvira. make

As way similar itself you to it country very, made a decarbonisation. as a to put nuclear. path and eliminate they've And commitments the that the resource know, to done substantive very so some on coal and that on generating strong

also incremental that how exactly specificity I Fit they're think and decarbonization. some looking how They're passage you'll note in for of that when the the and massive German of announcements to and the Court. package reason XX to deliver the going on Supreme from

it. come heating the and like been things now things Coal the the have like now working have has promulgate fired we're district what to but places so towards runway biomass fuels, draft clear And enable long regulations we're Frankly, pretty Law operators basis not base of out. that principally on heat over the will they excited renewable is generating at both a load regulation forward. And of that number convert so into only have converting, a for fossil about that the customers with force, within Exit biomass going networks, believe and to pretty is to time now like

component this We be power expect those of later year. to the sort regulations issued of

I range, maintain you X market we're position, of market million in to translate a the we to market, remain per probably decarbonization. a noise us that we X timing tons bit of sort tons into able would on firmly couple addressable year year, overall if which again, that. for addressable our these believe election, see the million total total Enviva. million But given to should, on at the election think an given And the pieces little track around look Germany's there's you've as all commitment

emerging for your global just Enviva. mentioned can could elsewhere opportunity any way market an in in the And is you quantify or opportunity well? that that is how Is like in U.S. opportunity sector And industrial prepared remarks then, big that there also is be? then the you that Europe as

think as opportunities around the jurisdictions I for carbon the activity. that up that mechanisms industrial excuse Lots intensity of world. understand begin world, will pricing to Well, around the -- me, the really of open

Of reducing historically, adjacencies. oftentimes in is industrial remarkable is have opportunity as that and course, leading, they the Europe

you've in any company the steel You've in talk and line, heard single even sugar, steel, of getting generation me heard ago. those a the demand, reference power as markets. few markets, coal frankly us customers of previously, one consumes frankly market those years Like existed chemicals, about one heat for industrial it of wood as pellet much equivalent Europe as and existed those

very So you've successfully look market industries got been with growth the very of potential, not step processed in at obviously as cargos and just for decarbonisation, that we're of difficult sort but to have to the functions of a are that happy industrial or around really test generally in see customers utility a tend those decarbonize. world. very, We market areas potential number robust industry

that again, tremendous customers And multiple today. dwarf pellet stands so opportunity, market in segments, it as industrial multiple at wood differently scale

my see And I question, on provide can evolving? that a BECCS? economics the work Specifically, you you little how how detail for do Enviva? then last more does promise, And then

for put chain focus used generation, sure or characterize and the for time does, part pencil available heat like folks And customers' right as coalition in be Yes, would zero, deliver to But solutions sequestration favorably and emission as to very so things power partner. are approaches, effectively. and out going from the we're the market for alternative quickly customers basis if industrial which good world investing research scale, and continues at of fueled probably and that. really place negative I need And there negative that's at right the that's making ultimately of itself. you're on our who that that's those the carbon is if capture the a carbon now can too opportunities it we range, the in or Again, as very and at executed power net right where world, on net in that our we're prices basis now. I displaced are the heavily supply in the right given that's of the XXX think from that the best something it product pound and is of emissions think power carbon activities, prices pricing. away ultimately out on not think, around that far If sort effects pretty are I from we that's more

[Operator next with question Instructions] Raymond comes Pavel from Molchanov The James.

appreciate XX. and detail about you Thanks for the for taking the providing Fit question guys

As four agreement small relates saw going country in be Netherlands. that European the for market? off-take Is Enviva to I to in Europe, number a the

to great Pavel, you, thanks. talk So, to and

Netherlands, in And scale really a As large just we've on MOU the Netherlands, matter, yesterday, the new a on practical an that has generating segment focus announced for delivery are area some time. that intensely Netherlands the segment. The a is. that's utility into delivered market again, country into industrial focused and been focused we on particular the in that

the recall, growing to they of of the field you resource in gases nation. of utilization and essentially As fracking across industrial the customers and most a may the have as announced end natural the

the to course number And activities for that steam across do is decarbonize subsidy applications, to heat and sector on for temperature intensely of high to generation generation thermal loads and need decarbonizing. the industrial own And for on there, XX-year industries, so, today, your profitable a the exists a both focus alternative biomass so they very opportunities. of attractive that looking of industrial

entry in market grow in another we very us as the point going for to well And so Netherlands as across think, I believe that Europe. that's, both segment is elsewhere the rapidly

closed. just Japan, of relatively be you year, how be I the will will drop think slide revenue a realized mix that of revenue in for modest helpful. do your much 'XX? But because course, this down That's

terms revenue this zero think profile two if ago, years growth growing of you've you of percentage XXXX. look linear I by from, So relatively to about got in a XX%

expect deliveries you begun XXXX year, in growth last ramping between his linearly this curves continue to contracts And as those we've come And that substantive occur year, can and effectively Shai and so remarks, mentioned XXXX. to to as really life.

Okay, roughly? or next so, XX% year this year, XX%

little than hitting that I think bit XX%, of XX%, I XX. it's you're more sort think of a next that XX% year,

we instance, heading Japan ships XX to For have year. this

that in needless it's any situation impact been rather COVID worse to Japan, from you're And say, better? the which getting noticing than

have around to customers uninterrupted the continued deliveries world. our No,

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

time everybody for the Thanks join taking be again We're privileged have record. in believe to we're us the today. in we track we a responsibility to to and position very continue that strong

and team displacing trees You hope we on to change. great have more soon. day. so can much. fighting count every hard and stay us, to healthy, and a Thanks frankly, And continued forward growing much talking safely look very guys entire you again work the Enviva day, coal, And very reliably and climate

now presentation. The Thank today's conference attending concluded. has for you

now may disconnect. You