Enviva (EVVAQ) 4 Nov 212021 Q3 Earnings call transcript

Good day and welcome to the Enviva’s Third Quarter of 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. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. of President Vice Walsh, Investor Relations. Kate ahead. go Please

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

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

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

performance. XXXX, provides as from we a with operating the to financial to consolidated our best their also closing to certain Company's forecast. results that will John. non-GAAP to with we call EBITDA performance GAAP, our reflects adjusted the XXXX recap guidance to in investors relevant guidance combined believe transaction, as through year of discussing XXXX disclosures for financial our concerning to may closed GAAP be through evaluate the non-GAAP and year our historical addition periods these well would performance turn are fiscal the GAAP potential We expected financial to most the transaction. when note I under simplification measures now over the basis full Information measures information does measures XX, included important also end. our reporting like standalone which other earnings presenting due comparable a directly results, and our October completed reconciliations our on in guidance the pertaining reflect not of date be to other required with release. XXXX accordance In our and It's simplification

in to our unitholders structure unlock next about balance into taken great shareholders, our same value better first maintaining significant global us that a bought dividend broadest We're sheet. and conservative our this our year pretty our of universally growth step base time, structure. Good the preserving us and evolve feedback It's everyone, been a master transformative and our be of limited a the you, partnership and thanks that were a together, us to announced transaction we convert for it's transaction a investors we been constructive really to structure meeting Thank good weeks on and from plans joining since Since morning, a our has corporation. organizational positive. our excited for guidance possible. to even moves Kate. only to been the ultimately, IDRs, to we pleasure we've today. cost to few last had where simplification makes reaction dozens growth structured investor It of corporate investible a All with the while and to market see eliminated call lowered as we've an profile, that capital, our non-taxable tremendous to business a by

on November have December corporation. conversion record which will quickly yesterday release, to press from as will date an XXth for a a XXth. unitholder And we be seen have established progressing we are afternoon, our the as our with meeting, MLP We issued you from held

sustainable corporation, Once around end participate and sector. step-change that we contract our and we This as will refined biodiesel. to a aviation European January milestone us pleased is an day intensive is Inc. of world as to ultimately is created completed and become Today, chain, with make or Monday, less through large fuels corporation to in conversion our will first we that's the the the by eligible decarbonize industrial difficult XXXX. tailwind whether gas unique important expect our inaugural a the become opportunity more processes, is training passively the One Enviva, the across for be investors the abate through into see rapidly for a greenhouse have expected only we X, our who year, not work us, the first process we in are of high-grade energy a investing our to many ahead We sustainable. exciting liquids their as biomass are to industrial supporting for announce globe ahead supply very in many inclusion. the solid decarbonizing of growth also have will indices accretion we we with which renewable customer, customers like to trading industrial and fuel but one of

Our XX initial wood per I is pellets tranche years. of metric for tons XX,XXX with contract under the a referenced year industrial tenure of

in deliveries precedent. to certain conditions commence expect XXXX, subject We to

Shai to growing As volumes our already of expected year, trains on to customer following in year, brings pellets results five line outlined in once we fully is an years, ago. contracted discuss X.X the with source per detail, will as were the each quarter forecast more customer's in wood lockstep, tons we additional ramped. right their weeks grow the several production over production sole expectations supplier third capacity our which metric financial million

at delivering the distribution Board distribution consecutive of of This our for for increase paid and over our expected a the and increase million during distribution of the maintains for you distribution landed we visibility cash quarter about the midpoint of then. As we million we declared category that year. forward, of represents between EBITDA IPO $XX and we third and per the have the I delivered call, the an going flow the our adjusted range, since conversion XXXX, same Based model million. have shared quarter, transaction our of XXth generate on of X.X% and to $X.XX business since XX% strong quarter Directors $XX with last unit $XX simplification our durability

to part to Returning the change things We which of are simplification we our $X.XX has XXXX. corporation. a about with capital our reaffirming way full share Enviva, full going for conversion we year always our updated we structure unlike the all and the and to for conversion XXXX our discussed business, are been of standpoint, per manage XXXX reaffirming we transaction XXXX $X.XX that's From alongside guidance distribution not critical recently, and shareholders simplification also share great announcement. a a per year and

to will As Enviva, deliver dividend fundamental Inc. policy growing to a our to stable, overtime of commitment and durable our shareholders. capital we reflect have return the continue

detail Now, share financial quarter I'd like to results our Shai highlights. to more in on turn third to it over

you, Thank and good John, morning, everyone.

was revenue revenue larger corresponding net XXXX the For for million which third third deliver million by and quarter third of and was temporarily sales volume quarter This as for quarter affected revenue third to and quarter product XXXX. of adjusted we in product a generated $XX as represents income of million, customers. is down we dampened XXXX, customers in to the the believe a XXXX, to was of The was corresponding issues partner as achieved and quarter increase product million, $XX $X.X adjusted quarter net third a XXXX. in although of compared net approximately breakeven per result was The third third over COVID-related to third of net Net in XX% compared deliveries beginning in Adjusted us. XXXX. of decrease from which chain volumes income the $XXX as by $XX XXXX. we was income quarter to experienced gross $XX guidance. are was by net adjusted per metric the ton margin Adjusted issues when supply quarter these primarily our margin flat of gross relatively XXXX. behind Adjusted $XX ton be attributable our contractual of margin for XXXX the of million the income volumes for approximately the XXXX the increase increase of almost sales was a increased existing gross new net third compared X% slightly incremental ramp for metrics quarter metric the the with XXXX issues comparing that of revenue the of the to quarter Adjusted the for income XXXX. ton to sales, the

in generated EBITDA on adjusted increase for Enviva quarter of third terminal Pascagoula million quarter approximately flow EBITDA increase benefits corresponding a of for adjusted of third from mentioned approximately John XX% Lucedale cash increase an in $XX The of the XXXX. represent of million the of in due was to XXXX. quarter XXXX, earlier, XXXX, the the the quarter familiarly acquisition. the was XX% As $XX.X Distributable which third plant

Our distribution on that basis reinvestment we means units for to to a not of the the in referred XXXX coverage X.XXx. the we X coverage being basis, are was committee. When it distribution quarter a ratio positively million subject dividend are the third that cash on cash factoring cash issue transaction

XXXX, XX, of availability Our credit was million. facility included under hand revolving as which liquidity on cash September and $XXX

transitioning increasingly expect conservatively a with growth is to be from fully to new funding flow expenditures of the convert over a dependent five balance we to now its Enviva of cadence commitment We growth the to future managing capital corporation, on years, and fill a from will sheet As projects construction. generated partnership timing the cash with business unchanged. fund model next plant

an we to increase target coverage financial on is time. have Our the dividends annual long-term and flexibility ratio dividend cash X.Xx to basis, expect over

of close guidance. a with XXXX XXXX into the of and full year visibility XXXX, we're near we solid reaffirmed and XXXX, As

compare to As adjusted There take not may shareholder Kate a required more expect flow at guidance a another which yet company under just when recast increase to results our . guidance EBITDA our a going rate, from with full by by to much expect another isn't mentioned, is year to value to does compared EBITDA potential to we reflect call, to XXXX. increase the beginning doable of XXXX. we away XX%, for full profile of XXXX we have when XXXX GAAP cash more or our our that be adjusted similar And Important we due or XX% visible, historical believe we and at unlock. XXXX the this

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

been has Thanks brighter Shai. for The Enviva. future truly never

billion, are is similarly We of revenue a which customer growing backlog pipeline XXXX $XX by a quality customer This high contracted complimented diverse. and pipeline. is with and over entering large

to the and sizeable European the Kingdom for of union, and generation heat markets our United Germany for us. We addressable a in Poland in have power opportunities healthy where traditional represent biomass-fired markets number continue and notably

source of maturing only like We sustainable demand from steel, call, lime, and layer material a picture. in verticals. addressable demand opportunities the South potential is offer fuels in emerging growth, fraction which Taiwan industrial biodiesels, Asia the and on if decarbonizing in demand that the for the industries about includes is a burgeoning to industrial The continues truly for incremental Japan, Korea. specifically earlier potential of full aviation exponential you chemical when market cement, and talked the

expect in months, continue Over binding understanding. addition number record and memorandum our contracts, into to we long-term of successful exclusive to a the affirming of track a previously convert signed pipeline next opportunities our XX

terminal. growing demand Pascagoula robust year, were our plant Earlier aggressively physician acquired also Lucedale the we and this growing our contracted we capacity. in production Given profile,

the each plant XX%. to production expect half Lucedale by roughly be capacity of production during We our up XXXX. ramping increases first The

a of Additionally, the with completion, the expansion. nearing similar These a have Multi-Plant, and increase when highly to expansion we represent a accretive capacity and Greenwood combined projects new underway plant. mid-size Mid-Atlantic, projects series the namely

out stages we various products, all One growing as part under XX of and fully transactions, demand of plant to development. look at As our plant, is acquired further development. evaluation meet which our for is the the simplification projects sites currently we Epes contracted in

of would and XXX,XXX plant think most XXXX. tons for than in We and production world. Bond We produce make million wood Mississippi, wood pellet metric the expect year pellets, X is next to largest tons in million we the permitted Greenfield designed pellets. than more between year which commence are more of metric plant mid construction date wood scheduled in-service with per which likely produce Epes designing is in our X to to an early XXXX it per

respected be of at sustainable timing Shaping expect expedited is and of negotiation opportunities to market very commence an week energy continues once makers And construction COPXX We the bioenergy and to climate delivery the that plays Bond at schedule the conditions. global Epes secure requirements policy the to well-recognized to next additional modern the around about from the authorities to but accepted future energy construction important and of to off-take solution depending present be world could contract global forefront and of and and part excited a the energy a dialogue. role I'm operational, climate upon general have change. under invitation of as

expect renewable their to help meet zero products reputation we targets and net and our our reinforce Our commitments our further net customers environmental zero own for sustainability. leadership

to operations. are in We only natural contract announced operations. an have in from to very our emissions related with fortunate a built provider integrated by own GreenGasUSA of own that generates natural decarbonize We business solutions our modest position a level a a gas emissions recently design gas XX-year renewable

delivering of. with range big step contract zero current it expected X of on commitment. our a track is something towards net to proud since an And, then renewable on our We display stakeholders. a have of are making natural This them we annual it and gas important broad Scope commitments of basis, a XX% particularly is built is record emissions,

to Enviva, for want year an recap our team and made I close, we our XXXX you has such Before for for what incredible stakeholders.

our sizable acquisition expansions completed we a successful concurrently equity the and in First, terminal, Mid-Atlantic, Pascagoula with all plant with the of offering underway. Greenwood and Multi-Plant Lucedale simultaneously

by the simplification and Second, a milestone transaction we to expect we to completed convert a to corporation, our commenced process complete year-end.

of first delivering the as could purely exponential sector, many, industrial for expand the we expected a us. drive our inaugural signed customer growing accomplished that our to just return base we contracts, all into which our be of to this, finally, one we Third, And rapidly sector industrial equity while growth we holders.

to and terms. continues to fortunate The cost-effectively, our that's are offer. more define world exactly what quickly in more able relatively want company less carbon, We be and to simple we

are at a delivering to generating sustainably a climate was all build and continue privileged corporation and consistently, great superior We even opportunity benefits and safely as incredibly to partnership our a to today, better of returns as that have platform company be stakeholders. the will a real while for unique change

call questions. for let's the Now, up open

John [Operator Instructions] And Sachs. from Mackey first the go with Goldman question will come ahead. Please

Hey, I that contracts maybe taking but morning. about bit your just to I build bit of, needing color if on you on getting and kind Thank the little that of to any just depends gave technology it? on that everyone. dig the more. little a appreciate to it comfortable into that on the industrial you Good they million question. a tons? my you X.X really wanted of can a curious chemistry for a path congratulate you Can John, is how talk the more to Or just the or matter capacity? just customer ramp, get of with quickly the

are sector in and John, great Look, the this the see thanks number would talk is on cement, the you industrial going expect that different question. approach in a a generators targeting we well. morning see for well of what think lime, adopters power have replicated is biomass I I of and this you as we what way with to much phased-in verticals the the migrated would strategy a heat as early and steel that we to same that

full the continue five-year expectation transfer the stamp And construction. online out with of to year-over-year those for coming is initial customer so, and an we've our got that, period

It's metric I life the to forward appropriate per year. X.X our and to appropriate its phased and contract diligence ramping full approach think of tons to construction, we million an it's from perspective. an look

know XX,XXX I follow-up. can us give any gallons some By or day And of on, be? kind of barrels per could don't chance year guidance per tons maybe quick SAS like you a

Obviously, so. do couldn't quite our customers I out of that's piece for information a important confidential there.

just I'm then and shifting it understand. over. one Maybe last back I'll more Totally gears turn

that already prices, whether be gas, what in then some some into and contracts customers, existing and recontracting Just coal, you're those spike your or given years cetera, not on couple could curious power, driving on their your contracts from carbon recent are new that hearing last? also of maybe the of better et

highlights is John. we to tailwinds market, more supply. is what are biomass. do a we market supply on market product your right to continued potentially, constructive short we of I power supplier, the grow. the comments, question market that our driving well adoption fuels, Yes, pretty the in an we as for amount going be traditional which now, only that continues complemented the fossil do global in continues given to good the term And on now. and a see Great It the of think as demand emphasis we prices where see right world's now right the of compelling by actually prepared structurally of pressure in largest highlighted have certainty renewables that position on a and important baseload is remarks, what as complex increase we this in and longer pressure pricing up us, our exponentially with upward think on dispatchable set energy for And pretty a combined of basis which means for

JP come Please will Mark question ahead. Morgan. next Strauss go The with from

a Thank there? bit go about down be kind metric what hoped is unchanged, just expecting the our were going ton does And that And better per gross questions. year we to was color that than next through could for so Yes, tonnage? the you're I what your bit guidance and given for target whatnot. very being that expecting. Can back a forward? on obviously leaving you're follow much you flow on issues then your mentioned us and the you metric the How good kind you morning. taking we some should give of to that how tons of just metric thinking profit you sold COVID more

that Mark. you. to and opportunity talk with for thanks No, Great, had call. Always glad the the I

we of highlighted knock the labor couple what our of we effects saw quarter some the and related a and of call, contractors. on our As of the in ago was challenges chain weeks sort third on within supply COVID-XX

I largely course COVID-XX, we the out of insulated immune. important of from that ultimately point been think to but have not impacts it's

to Our workforce. operate and a continued facilities very safe have healthy in

This Day. team area continue rates by of an could our country the they of is rates health of are from we actually availability folks and that and supply Our otherwise roughly with case we sort to of significantly our within and labor Southeast that until is in work bring the hit maintenance operate result Labor a some that U.S. the and COVID partners, as their were vaccination on and downtime they of the pretty they challenges that's free. period those about up had in which demonstrate pretty impacted got couldn't That we would've that sites that longer What chain up additional hard saw July created on and ensure considerably work folks than pretty significantly, that we of our the workforce, through meant lot also COVID-XX of Xth expected. pretty going the outages to

the saw profile and that quarter. a And as widely certainly lower these reported result, generally which days. a decrease pretty case is in We rates, see abating in so, the you production

the expect behind for the through With XXXX gave obviously but for first a think year be mid we've don't tried being a production for is year that year beginning to backed guide to basis. provisions half margin so only to little and to think continued year not that in this bit full you that of result, us stronger. I year profile, more we're full XXXX, the make overall the then as as reaffirm traditionally to full would to back in tailwind XXs I the now. to us the And And off to optimistic it a profiles confidence see which XXXX, into do the right produce and subject and generally on increase of should year, quarter a a seasonality our costly respect the then second we've us. As there, guide that carry well. go

metrics bringing new coming Multi-Plant projects than time the Mid-Atlantic, And the add from also with the the next have size size tons can combining new see we the mid deal about plant, when that XXXX. expansion the with and of facility. for the -- extension more expansion online you're of extension the volume XXX,XXX begin Altogether, mid to you -- a

Okay. closing? XX have you forward? that not potential on a then, this you near other Thanks but you over for similar just that. the here, pipeline should customers, months probability have specifics for indicative of of the in a follow-up John's do of is on of your size the this asking expecting it good deals of question think what Obviously signed to And industrial of those customer. And kind deal is we next kind going maybe be size comment kind that term

serving, We the of that similar many in operate will trains multiple just I certainly we're industrial customers believe that announced. the processes to contract that production so. we've And industrial application, the think given

we notional obviously I lot us. that the contract whole to verticals you the within from But and expect up size value that sector. segments us industrial So similarly of as a that from for hear open sense structured markets, think a new new makes contracts can new

will from The come Please Ryan next Levine go ahead. with question Citi.

to of around pellets the the morning. application here. needed the dynamics. handle good may feedstock? the this on complexity could questions Hi, And refiners industrial you any is of color be share of Couple for there What type

There gasification proven are aviation and applications. production, pathways fuel a both sustainable process of various that biofuels others including number host in different of are for

of one those. using of customer Our course is

a the making that the different we be we front the around of But ultimately into from it's a of courses to are that delivering product, the fuel the deliver And spec that material offer solid basis, we're delivered end product. perspective that's so handling plant, world. same going

that case? fuel And through this more is certain it pellets centric conducive use markets there there is or credits this any are selling or your wins other U.S. that help application? enable to any Are

for depending upon question, particular this different I it market European of Great are and drivers markets adoption. the there Ryan. worldwide plant. are there mean, case, certainly, this it's jurisdiction, a In

so, and fuels And demand European a biodiesels. they're from aviation for benefiting sustainable

And others. carbon structures, to the wins U.S. that so we fuel low that and in, is in number in customer participating announced Certainly, they're also standards particular market regulatory but forces has just Clearly, a contract based customer. participate European as market. different a an emerging set seeking of the locales

dynamics European to assume of any [indiscernible] that's program any the centric don't So, type rates of this comparable fuel credit Is helps more the investment? U.S. that there on or type the

right Well, existing contracted so but own structures an mean, players market. over time, downstream position a see customer lot today different in of I I obviously topic COPXX can its think announced contract we a that the that's has with we important at of this emerging. number now,

Our next Please Elvira Markets. Instructions] go [Operator question will Scotto ahead. from RBC come Capital with

morning everyone. Hi. Good

industrial the of around contract. questions Just a follow-up couple

have escalators, and contract does to isn't structure a basically? testers, have Is similar et price Does similar it it the your First, cost margins contracts? existing cetera?

is. Yes, Elvira, and the great segments, to alternatives to By we flow think the that it make sure new new cash design, geographies, similar profile about contract you, we we talk have. underlying customers, is new to want when of yes, that the to

the characteristics, same contract the escalators and expect should same the same the structure. profile, credit you margin same so, And

that is. contract on That's you. I second helpful. that have Thank so And then, the question

a tranche years. over you five the of a so per XX,XXX tons next the metric said, I year initial plan think So annum,

you to mean, get ratable X.X So should by assume to from kind X.X do of I we just that get how to additions or million? million XXXX, XX,XXX

for in five addition those customer. of a for So, production sort year it at be our trains will each function stepped a based linearly years stepped additional

your Got question. Thanks. mean, And just do a quickly it. Perfect. you, up of of the industrial if that discussions think having from aggressively customers? discussions those that market and you're what type are you kind can I percent you traditional grow? globally, customers versus to were how to then, is, with previous of compare follow potential various number the And are of industrial

I'd mind as a decarbonization say wouldn't of world. around I in the Well, difficult it behind top is industries characterize and the that, momentum What decarbonization necessarily deep percentage. just is

As code and environment we today for a this is think about implications. the and can for undertaking theme the mitigate COPXX priority. Climate activities red the first COPXX and is that dramatically and major is, foremost the change impact

utilization biomass and ways tremendous is low own the applications customer of certainty to. on and one rates biomass the up a we're and customer of doing around customer driving adoption proven cost interest amount of their and so, And what in that of interest biomass is so, long-term

are several talked calls, aviation difficult verticals sustainable As about like cement, we on the last there fuels some key fuel. lime, abate in industries those to

honestly, multinational decarbonization interest And contract with so, companies what in dozens we have an driving that is quite are incremental of discussions.

What fairly in traditional These sector. heat quickly. And the are from a power order, relatively can proud and so, is that contract different move more we that pretty accomplish basis. to say able cycle to I'd are tend very of what we short counterparties are than

looked us in a weeks serve relatively we ago, And a Germany, to that. sales another And we so that time, of just of of ago industrial cycle for today about means And too. of couple work a growth happy really markets we and like so, on emerging see very market large were rapidly the to that We the it is sales the announce occupying that sector? start don't contract, Japan. the segments mean, continue a started course, while major I excited shorter, contract, did and initially we seen back. in that's continued Japanese shortening. Taiwan, we've we to grows teams core Poland, may marketing about that How lot long talking course, course, pretty and of be

is give Germany you was quickly brought Great. just I did that And industrial final something, fun kind a me, congratulations since think Thanks. very where of contracts, then on update for any regulation? government on you you the just especially can One think the announced. announce it question when you up can and

place like now the that the contracts How this faster? of momentum heat has do settling shortly legislation parties of pieces? are How in bunch the a whether this subsidy in and means all around XXXX. in a SPB, coalition the government, focus it focus approval Expectation industrial these coalition you has momentum Obviously, means been But that their that more on. there's only just greens, the year of do the down. the do there's sector, Obviously, coalition activities and completed, on forming remember quicker, it's which should it's we reflects SPD, the the that the focus that you Germany frankly a is end government been to in starting of momentum the is Yes. tailwinds. and about thereafter. more talk of about directly. accelerate The accelerating the market, and They're this itself which similar industrial

the Germany is expect rapidly this counterparties given in is our and we certainty what So, that given to the across range, that the with now that additional very, a conversations industrials and election grow completing. tailwind very whole that to with of continue power, we heat have going cycle market

you much. very Thank

always great it's Elvira, talk to you.

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

a really back on the that together. around we the for real world actually short But fact appreciate time the us. hopping discussion that momentum think we last markets exist Well, I is with do in phone opportunities today's been only efforts the serve, that since generating highlights, I incremental about I realize us. it's everyone to time really as we're to in the decarbonize COPXX excited continues the were that

position you've you've the we quite strong before, me deliver important we execution believe that have in. to privileged from to say to as that, we're last responsibility so, over us years. And consistent we're And really with a and the really, the continue in heard be seen that several

And And growing so, to going reliably thank a you the working going have stabilize progress fighting whole we're as a range every continue do hard our job joining the about looking trees we're quarter. we're day. to forward safely we we to And do change. by meantime, talking displaced applications. across get more of certainly and the day for to coal and through next us. And do to again, In the that climate great

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

disconnect. may now You