Charah Solutions, Inc. Reports First Quarter 2021 Results

Rhea-AI Summary

Charah Solutions (CHRA) reported a net loss of $3.5 million for Q1 2021, a significant improvement from $14.4 million in Q1 2020. Revenue rose by 1.6% to $52.1 million, driven by remediation services despite a decline in byproduct sales due to decreased demand linked to the COVID-19 pandemic. The company secured $527 million in new business awards so far in 2021 and completed the acquisition of the Gibbons Creek facility, expanding its environmental services capacity. Adjusted EBITDA surged to $9.5 million, marking a 562% increase year-over-year.

Positive

• Acquired Gibbons Creek Steam Electric Station, expected to enhance revenue generation.
• Secured $527 million in new awards in 2021, indicating strong growth potential.
• Adjusted EBITDA increased to $9.5 million, reflecting operational improvements and cost-cutting measures.

Negative

• Net loss attributable to common stockholders was $3.5 million, though improved from 2020.
• Revenue increase was modest at 1.6%, indicating potential challenges in growth.

$527 Million of New Business Awards in the First Quarter of 2021

New Awards Drive Growth in 2021 and Beyond

Company Closes on ERT Project and Mobilizes on New Job Awards

LOUISVILLE, KY / ACCESSWIRE / May 12, 2021 / Charah Solutions, Inc. (NYSE:CHRA) ("Charah Solutions" or the "Company,"), a leading provider of environmental services and byproduct sales to the power generation industry, today announced financial results for its first quarter ended March 31, 2021. Net loss attributable to common stockholders for the first quarter of 2021 was $3.5 million, or $0.12 per basic share, and net loss attributable to Charah Solutions, Inc. for the first quarter of 2021 was $1.3 million. Adjusted net loss attributable to common stockholders⁽¹⁾ and Adjusted loss per basic share⁽¹⁾ for the first quarter of 2021 were $2.7 million and $0.09, respectively, and Adjusted EBITDA⁽¹⁾ was $9.5 million.

Business Update

"I am very pleased with the start to our 2021 fiscal year. Building on our record year of $715 million of new awards in 2020, we have won an additional $527 million of new awards in 2021 to date, as we reported in March, and we remain laser-focused on converting additional new awards across our one-stop solution for remediation and compliance services, byproduct sales, fossil services and environmental risk transfer ("ERT") services. We have successfully mobilized operations at Dominion Energy for the beneficial use of 8.1 million tons of reclaimed ponded coal ash and at the two long-term ash pond closure by removal projects at a major Southeastern utility. Both long-term projects have now begun to contribute to our revenue and earnings," said Scott Sewell, President and Chief Executive Officer of Charah Solutions, Inc. "We also completed the acquisition of the Texas Municipal Power Agency's Gibbons Creek Steam Electric Station and Reservoir in Grimes County, Texas. As part of our ERT services, we will demolish the existing power plant and redevelop the property in an environmentally conscious manner that will expand economic activity and benefit the surrounding communities. We are very excited about the Gibbons Creek project and the opportunity to leverage our innovative ERT solutions further to meet the evolving and increasingly complex needs of our utility partners as they need to retire and decommission older or less economically viable generating assets while minimizing costs and maximizing the value of the assets and improving the environment."

"In addition to our quarterly earnings report, today we also filed a shelf registration statement with the Securities and Exchange Commission ("SEC") on behalf of our majority shareholder, Bernhard Capital Partners ("BCP"). We are registering the common stock held by BCP pursuant to an existing registration rights agreement between Charah Solutions and BCP," continued Mr. Sewell.

"We are encouraged by our results for the first quarter as our revenues and earnings came in slightly ahead of our expectations. We remain focused on expanding our customer base and building out our project pipeline with the expected next wave of utility remediation announcements. Our record growth in new awards during 2020 and thus far in 2021 provides a strong underpinning as we continue working each day to capture the multi-billion dollar ash remediation and byproduct sales opportunities. I again want to thank our dedicated Charah Solutions employees who are working every day to deliver Service Above All to our customers," concluded Mr. Sewell.

Summary of Financial Results

		Three Months Ended
		March 31,
(Unaudited, in thousands, except per share and margin data)		2021				2020
Revenue		$	52,107			$	51,277
Gross profit			5,585				4,895
Gross margin			10.7%				9.5%
Net loss attributable to Charah Solutions, Inc.			(1,287	)			(14,250	)
Net loss attributable to common stockholders			(3,501	)			(14,361	)
Loss per common share (basic / diluted) to common stockholders		$	(0.12	)		$	(0.48	)

Non-GAAP Financial Measures
Adjusted net loss attributable to common stockholders(1)		$	(2,726	)		$	(8,583	)
Adjusted loss per basic/diluted share(1)		$	(0.09	)		$	(0.29	)
Adjusted EBITDA(1)			9,520				1,438
Adjusted EBITDA margin(1)			18.3%				2.8%

(1) This is a non-GAAP financial measure; see explanation and reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure below.

Three Months Ended March 31, 2021 Results

Revenue increased $0.8 million, or 1.6%, for the three months ended March 31, 2021 to $52.1 million as compared to $51.3 million for the three months ended March 31, 2020, primarily driven by an increase of $7.5 million in remediation and compliance and fossil services revenue from the commencement of new project and time and materials work, partially offset by a decrease of $6.7 million in byproduct sales offerings due to lower plant production that we believe was due to lower demand as a result of the COVID-19 pandemic. Gross profit increased $0.7 million, or 14.1%, for the three months ended March 31, 2021 to $5.6 million as compared to $4.9 million for the three months ended March 31, 2020, primarily driven by an increase in remediation and compliance revenue from the commencement of new project work and increase in gross profit margin on byproduct sales, partially offset by the decrease in byproduct sales offerings. As a percentage of revenue, gross profit was 10.7% and 9.5% for the three months ended March 31, 2021 and 2020, respectively.

Net loss attributable to Charah Solutions, Inc. decreased $13.0 million, or 91.0%, for the three months ended March 31, 2021 to $1.3 million as compared to $14.3 million for the three months ended March 31, 2020. The decrease was primarily due to the absence of $8.6 million of expenses incurred as a result of the Company's Amendment No. 3 to Credit Agreement of our existing Credit Facility during the three months ended March 31, 2020, a gain on a sales-type lease of $5.6 million recognized during the three months ended March 31, 2021, a decrease in general and administrative expenses resulting from reductions in staff and other cost-cutting measures implemented in April 2020 in response to the COVID-19 pandemic, gains and losses on sales of fixed assets and other operating income from ERT services of $0.5 million resulting from the commencement of operations at the Gibbons Creek ERT project, and the previously mentioned increase in gross profit. These changes were partially offset by the absence of income from discontinued operations, net of tax of $3.0 million during the three months ended March 31, 2021 due to the Company's sale of its Allied subsidiary in November 2020, an increase in transaction-related expenses and other items of $0.8 million and other operating expenses from ERT services of $0.3 million during the three months ended March 31, 2020.

Adjusted EBITDA⁽¹⁾ increased $8.1 million, or 562.0%, to $9.5 million for the three months ended March 31, 2021 compared to $1.4 million for the three months ended March 31, 2020. The increase was primarily due to the previously mentioned gain on sales-type lease, decrease in general and administrative expenses and gains and losses on sales of fixed assets and other operating income from ERT services, partially offset by the previously mentioned absence of income from discontinued operations, net of tax.

Business Developments:

New Business Awards

To date in 2021, we have won $527 million of new awards, including two long-term ash pond closure by removal projects at a major Southeastern utility; the acquisition of the Texas Municipal Power Agency's Gibbons Creek Steam Electric Station and Reservoir in Grimes County, Texas, as part of our ERT services; an ash marketing contract with a new customer in Nevada, and sales and operations contract extensions with Luminant. Approximately $26 million of this total was awarded since our fourth quarter and year-end 2020 earnings release in March. These 2021 awards, coupled with our record $715 million of new awards in 2020, will have a meaningful contribution in 2021 and beyond and position Charah Solutions well for growth in revenue, earnings and cash flow. We remain focused on expanding our customer base and converting our project pipeline with the expected next wave of utility remediation announcements. With the increasing emphasis at the federal and state levels on environmental remediation and the opportunities for expanding byproduct sales afforded by growth in demand for fly ash in concrete, we continue to see increasing opportunities for Charah Solutions' one-stop solution for remediation and compliance services, byproduct sales, fossil services and ERT services. Though the timing of future awards is difficult to determine, we believe these recent awards demonstrate we are well-positioned to benefit from the momentum for responsibly recycling and remediating coal ash and that we will capture a significant portion of this growing market opportunity.

ERT Services

In February 2021, we completed the acquisition of the Texas Municipal Power Agency's Gibbons Creek Steam Electric Station and Reservoir in Grimes County, Texas, and began remediation and redevelopment of the property. Through our subsidiary, Gibbons Creek Environmental Redevelopment Group, LLC ("GCERG"), we now own the 6,166-acre area, which includes the closed power station and adjacent property, the 3,500-acre reservoir, dam and spillway. GCERG plans to redevelop the property in an environmentally conscious manner that will expand economic activity and benefit the surrounding communities through job creation, promotion of industry, and support of the tax base, and to restore the property to a state that will enable it to be put to its best potential use. GCERG will be responsible for the shutdown and decommissioning of the coal power plant and all environmental remediation work for the site landfills and ash ponds. Potential redevelopment uses for the property include solar, battery, and energy storage options which utilize the existing transmission system, maximization of the reservoir's potential, re-use of the vast rail system, and other industrial uses. We expect the Gibbons Creek project will continue to contribute positively to our 2021 results. We continue to evaluate opportunities to leverage our innovative ERT solutions further to meet the evolving and increasingly complex needs of our utility partners as they need to retire and decommission older or less economically viable generating assets while minimizing costs and maximizing the value of the assets and improving the environment.

Shelf Registration Filing

Our majority shareholder, Bernhard Capital Partners, recently notified Charah Solutions that, pursuant to the registration rights agreement with the Company, dated as of June 18, 2018, as amended by Amendment No. 1, dated March 16, 2020, it desires to have its common shares of Charah Solutions, Inc. registered for potential resale. On May 12, 2021, we filed a shelf registration statement on Form S-3 with the SEC. The shelf registration and related prospectus relate to the offer and sale of 15,455,921 shares of our common stock held by BCP affiliates.

The shelf registration statement has been filed with the SEC but has not yet been declared effective by the SEC. The securities being registered may not be sold, nor may offers to buy be accepted, until the registration statement becomes effective. This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under its securities laws. Any offering of the securities covered under the shelf registration statements will be made solely by means of the prospectus included in the relevant registration statement and any applicable prospectus supplement issued with respect to any offering.

ESG Reporting

During the first quarter of 2021, we issued our first annual Environmental, Social and Governance ("ESG") Report to showcase Charah Solutions' significant leadership in fulfilling our ESG commitments and sustainably preserving our natural resources for the betterment of our planet, our communities, and our customers. We have been very pleased with the positive reception and response to our ESG Report. Charah Solutions is truly one of America's best examples of resource conservation and recovery through the beneficial recycling of coal ash, ash impoundment closure services, and the remediation and redevelopment of land for community and commercial use. Sustainability is a Charah Solutions core value, and our focus is on developing innovative solutions to complex environmental issues for the betterment of the planet. We believe reporting on sustainability is critical for our stakeholders' growing need for information, and we look forward to continuing to report on our progress toward our goals.

2021 Guidance

We provide mission-critical services to a diversified base of customers, a majority of whom are investment-grade regulated utilities that must continue to produce power through the current economic uncertainties. Though we are not currently seeing any significant disruptions to our business due to the critical nature of our customers' operations, the COVID-19 pandemic and resulting potential for significant business disruptions beyond our control have created a high level of uncertainty, including but not limited to further uncertainties around demand-driven power generation. There are also timing uncertainties associated with the startup of recently announced customer awards, including ERT awards. As with our 2020 results, the impact of weather, including hurricanes, excessive rain or moderate temperatures, could adversely affect our results.

We are reaffirming our 2021 outlook, initially provided on March 24, 2021, as follows:

• Revenues of $260 million to $300 million
• Net loss attributable to Charah Solutions, Inc. of $5 million to $0 million
• Adjusted EBITDA⁽²⁾ of $35 million to $40 million
• Adjusted free cash flow⁽²⁾ of $33 million to $38 million

This guidance is based on our current expectations of no material worsening of the COVID-19 pandemic, specifically including, but not limited to, no material customer work stoppages, no significant employee absences, and no government-mandated quarantines. Any worsening of the COVID-19 pandemic could materially affect our 2021 outlook.

(2) The forward-looking measures of 2021 Adjusted EBITDA and Adjusted free cash flow are non-GAAP financial measures that cannot be reconciled to net loss attributable to Charah Solutions, Inc. and cash flows from operating activities, respectively, as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking measures.

CONFERENCE CALL
Charah Solutions will host a conference call at 8:30 a.m. ET on Thursday, May 13, 2021 to discuss its first quarter 2021 financial results. Information contained within this press release will be referenced and should be considered in conjunction with the call.

To register to participate live on this conference call, please register at directeventreg.com using conference ID 5895303. A confirmation email will be sent after registering, including dial-in details and a unique code for entry. We recommend registering a day in advance or, at a minimum, 15 minutes before the scheduled start time of the call. Participants may also listen to the conference call via webcast by visiting the Investor Relations section of the Charah Solutions website at ir.charah.com.

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 Thursday, May 13, 2021. Also, 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 5895303.

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 services and byproduct sales to the power generation industry. Based in Louisville, Kentucky, Charah Solutions assists utilities and independent power producers with all aspects to sustainably manage and recycle ash byproducts generated from the combustion of coal in the production of electricity. The Company also designs and implements solutions for ash pond management and closure, landfill construction, fly ash 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, please visit www.charah.com.

Investor Contact
Roger Shannon, Chief Financial Officer and Treasurer
Charah Solutions, Inc.
ir@charah.com
(502) 245-1353

Media Contact
Tamara Davis
PriceWeber Marketing
media@charah.com
(270) 202-8516

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. See the Company's Form 10-K for the fiscal year ended December 31, 2020 and other periodic reports as filed with the Securities and Exchange Commission for further information regarding risk factors.

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 EBITDA and Adjusted EBITDA margin are not financial measures determined in accordance with GAAP. Charah Solutions defines Adjusted EBITDA as net loss attributable to Charah Solutions, Inc. before income from discontinued operations, net of tax, loss on extinguishment of debt, impairment expense, interest expense, income taxes, depreciation and amortization, equity-based compensation and transaction-related expenses and other items. Adjusted EBITDA margin represents the ratio of Adjusted EBITDA to total revenue.

Management believes Adjusted EBITDA and Adjusted EBITDA margin are useful performance measures because they allow for an effective evaluation of our operating performance compared to our peers, without regard to our financing methods or capital structure. Management excludes the items listed above from net loss attributable to Charah Solutions, Inc. 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 attributable to Charah Solutions, Inc. determined according to 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' Adjusted EBITDA presentation 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 Company's business's success in managing its cost base and improving profitability. A reconciliation between Adjusted EBITDA to net loss attributable to Charah Solutions, Inc., 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.

Adjusted net loss and Adjusted loss per basic/diluted share are not financial measures determined in accordance with GAAP. Charah Solutions defines Adjusted net loss as net loss attributable to common stockholders less, on a post-basis basis, income from discontinued operations, net of tax plus, on a post-tax basis, loss on extinguishment of debt, impairment expense and transaction-related expenses and other items. Management excludes the items listed above to provide a more meaningful comparison of the Company's operating performance when compared to prior periods. Adjusted net loss and Adjusted loss per basic/diluted share should not be considered as an alternative to, or more meaningful than net loss attributable to common stockholders. or loss per basic/diluted share determined in accordance with GAAP. A reconciliation of Adjusted net loss and Adjusted loss per basic/diluted share to the most directly comparable financial measure calculated and presented in accordance with GAAP is provided in the supplemental financial data attached to this press release.

Adjusted free cash flow is not a financial measure determined in accordance with GAAP. We define Adjusted free cash flow as cash flows from operating activities and cash and restricted cash received from ERT transaction, less cash used for capital expenditures, net of proceeds. We include cash and restricted cash received from ERT transactions and exclude capital expenditures because we consider them to be a necessary component of our ongoing operations. We consider Adjusted free cash flow to be a measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for investing in our business and strengthening our balance sheet, but it is not intended to represent the amount of cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from this measure.

The Company uses non-GAAP measures internally as a key performance measure of the results of operations for purposes of evaluating performance. These measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of the Company by excluding certain items that may not be indicative of the Company's core business or operating results. The Company believes the use of these measures enables management and investors to evaluate and compare, from period to period, the Company's operating performance in a meaningful and consistent manner. The non-GAAP measures are a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP and should not be considered as an alternative to, or more meaningful than, net income or earnings per basic/diluted share (as determined in accordance with GAAP) as a measure of our operating results.

CHARAH SOLUTIONS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except par value amounts)
(Unaudited)

		March 31, 2021				December 31, 2020
Assets
Current assets:
Cash		$	24,429			$	24,787
Restricted cash			47,909				4,424
Trade accounts receivable, net			39,526				46,609
Receivable from affiliates			-				182
Contract assets			18,920				18,329
Inventory			6,790				5,917
Income tax receivable			29				260
Prepaid expenses and other current assets			6,020				5,287
Total current assets			143,623				105,795
Property and equipment, net			61,189				49,470
Goodwill			62,193				62,193
Intangible assets, net			64,648				61,426
Equity method investments			40				831
Other assets			6,969				1,245
Non-current assets held for sale			356				-
Total assets		$	339,018			$	280,960
Liabilities, mezzanine equity and stockholders' equity
Current liabilities:
Accounts payable			15,137				15,613
Payables to affiliates			2				-
Contract liabilities			30,796				6,295
Capital lease obligations, current portion			2,483				2,199
Notes payable, current maturities			22,896				22,308
Asset retirement obligation, current portion			18,729				2,043
Accrued liabilities			15,961				34,937
Other current liabilities			815				935
Total current liabilities			106,819				84,330
Deferred tax liabilities			525				368
Contingent payments for acquisitions			1,950				1,950
Asset retirement obligation			35,383				3,116
Line of credit			19,085				12,003
Capital lease obligations, less current portion			4,487				4,485
Notes payable, less current maturities			120,811				124,969
Other liabilities			3,845				2,000
Total liabilities			292,905				233,221
Commitments and contingencies

FAQ

What was Charah Solutions' revenue for Q1 2021?

Charah Solutions reported revenue of $52.1 million for Q1 2021.

How much new business did CHRA secure in 2021?

Charah Solutions secured $527 million in new business awards in 2021.

What was the net loss for Charah Solutions for Q1 2021?

The net loss attributable to common stockholders for Q1 2021 was $3.5 million.

What is the significance of the Gibbons Creek acquisition for CHRA?

The acquisition of Gibbons Creek is expected to enhance revenue and expand the company's environmental services.

What is the projected revenue guidance for Charah Solutions in 2021?

Charah Solutions reaffirmed its revenue guidance for 2021 to be between $260 million and $300 million.