Enviva Reports 2Q 2023 Results and Provides Progress Update on Cost and Productivity Improvement Initiatives
- Enviva reduced production costs related to wood pellets delivered at port by $3 per metric ton for Q2 2023 compared to Q1 2023.
- The company initiated a corporate restructuring designed to reduce cash costs by approximately $16 million on an annualized basis.
- Enviva sold two shipments to a new credit-worthy European customer for delivery into Poland, a new and emerging market for the company.
- None.
Financial Update:
-
Reported a net loss of
for second-quarter 2023, as compared to a net loss of$55.8 million for second-quarter 2022; net loss for second-quarter 2023 was in line with the previously disclosed guidance range$27.3 million
-
Reported adjusted EBITDA for second-quarter 2023 of
as compared to$26.0 million for second-quarter 2022; adjusted EBITDA for second-quarter 2023 was in line with the previously disclosed guidance range$39.5 million
-
Reaffirmed net loss guidance range for full-year 2023 of
to$186 million $136 million
-
Reaffirmed adjusted EBITDA guidance range for full-year 2023 of
to$200 million $250 million
-
Lowered full-year 2023 total capital expenditures guidance range to
to$335 million , from$365 million to$365 million , representing a decrease of$415 million 10% at the midpoint of the ranges; total capital expenditure reductions were primarily driven by updated timing of cash flow spending curves related to theEpes, Alabama (“Epes”) andBond, Mississippi (“Bond”) projects, partially offset by higher expected spending on several smaller growth projects; the lower spending does not impact the planned in-service dates ofEpes (mid-2024) andBond (mid-2025)
During second-quarter 2023, Enviva significantly heightened its focus on initiatives to improve productivity and costs across its current platform, in conjunction with progressing contract negotiations, including repricing certain legacy contracts, in a constructive pricing environment for both near-term deliveries and long-term, take-or-pay off take contracts.
Key Takeaways:
-
Reduced production costs related to wood pellets delivered at port (“DAP”) by
per metric tons ("MT") for second-quarter 2023 as compared to first-quarter 2023, with average DAP cost per MT for the month of June achieving a reduction of approximately$3 per MT as compared to first-quarter 2023$9
-
Initiated a corporate restructuring designed to reduce cash costs by approximately
on an annualized basis$16 million
-
Sold two shipments to a new credit-worthy European customer for delivery into
Poland , a new and emerging market for Enviva
“For the second quarter of 2023, Enviva delivered results in line with our expectations, and we are making progress with initiatives underway to reduce costs and improve productivity across our operations,” said Thomas Meth, President and Chief Executive Officer. “We recently initiated a corporate restructuring that is designed to reduce overhead costs to align our organization with the growth we have ahead of us today. We also reduced our delivered at port cost by
“Along with company-wide cost reductions, we are focused on working with customers to increase our sales price per MT as well as placing our
Second-Quarter 2023 Financial Results
During the second quarter of 2023, Enviva initiated a series of cost-reduction and productivity-improvement initiatives across its plant and port assets. Operating and financial performance for the month of June began to demonstrate the positive impact of these efforts, as evidenced by DAP cost per MT decreasing by approximately
The table below outlines reported second-quarter 2023 results as compared to second-quarter 2022:
$ millions, unless noted |
2Q23 |
|
2Q22 |
|
Change |
|
Net Revenue |
301.9 |
|
296.3 |
|
5.6 |
|
Net Loss |
(55.8 |
) |
(27.3 |
) |
(28.5 |
) |
Gross Margin |
10.4 |
|
16.8 |
|
(6.4 |
) |
Gross Margin $/Metric Ton |
8.02 |
|
13.19 |
|
(5.17 |
) |
Metric Tons Sold (in millions of tons) |
1.302 |
|
1.275 |
|
0.027 |
|
Non-GAAP Metrics |
|
|
|
|||
Adjusted Gross Margin* |
41.4 |
|
54.8 |
|
(13.4 |
) |
Adjusted Gross Margin $/Metric Ton* |
31.80 |
|
42.94 |
|
(11.14 |
) |
Adjusted EBITDA* |
26.0 |
|
39.5 |
|
(13.5 |
) |
*Adjusted gross margin, adjusted EBITDA, and adjusted gross margin per metric ton are non-GAAP financial measures. For a reconciliation of non-GAAP measures to their most directly comparable GAAP measure please see the Non-GAAP Financial Measures section below |
Net revenue for second-quarter 2023 was
Metric tons sold during second-quarter 2023 were 1.302 million MT, as compared to 1.275 million MT during second-quarter 2022, representing a
Production volumes achieved in June 2023 reflect the initial benefits of operational changes being made at certain of Enviva’s plants. In particular, since the latter part of second-quarter 2023, Enviva has been operating the
At Enviva’s
Net loss for second-quarter 2023 was
Gross margin was
Gross margin per MT for second-quarter 2023 was
Adjusted gross margin for second-quarter 2023 was
Adjusted gross margin per metric ton for second-quarter 2023 was
Adjusted EBITDA for second-quarter 2023 was
Enviva’s liquidity was
2023 Guidance
Enviva continues to advance cost-reduction and productivity initiatives designed to improve the financial and operating performance of its fully contracted assets. To that end, Enviva executed a corporate restructuring intended to achieve a leaner operating model with narrowed priorities focused on the core of our business: producing and selling pellets safely, sustainably, and more profitably. As noted above, Enviva incurred
During second-quarter 2023, management was able to reduce DAP cost by approximately
Management expects net product sales price per MT to be within a range of
Enviva is maintaining its full-year 2023 net loss guidance range of
Third-Quarter Guidance Update:
Enviva is maintaining its net loss range for third-quarter 2023 of
As previously disclosed, Enviva is planning to expand Ahoskie’s nameplate capacity by
Fourth-Quarter Guidance Update:
Enviva is revising its net income and adjusted EBITDA guidance ranges upward for fourth-quarter 2023 to account for the shift in shiploading timing from the third quarter into the fourth quarter. Enviva also deferred higher-priced deliveries in first-quarter 2023 into the fourth quarter. Importantly, there is seasonality to Enviva’s business, whereby the fourth quarter experiences an uptick in biomass consumption due to winter heating demand coupled with seasonal impacts to the amount of solar and wind energy available to power grids. Additionally, historically, we have seen higher commercial value materialize in the fourth quarter, and there are a number of wood pellet supply and demand dynamics that are expected to be supportive of that activity this year.
Enviva’s net income for the fourth quarter is now expected to be in the range of
The expected significant step-up in revenue and margin during fourth-quarter as compared to third-quarter 2023 is also underpinned by the following factors: (i) continued improvement in DAP cost per MT, with DAP cost per MT projected to decrease by
Capital Expenditures Guidance Update:
Enviva has updated full-year 2023 expectations for total capital expenditures (inclusive of capitalized interest), and has reduced and narrowed the range to
-
Greenfield site development and construction projects: Updated range to
to$240 million , reduced from previous range of$260 million to$295 million . The lower range is primarily driven by an updated forecast related to cash flow spending curves related to$325 million Epes andBond -
Expansion and productivity improvements of existing assets: Updated range to
to$75 million , from the previous range of$85 million to$50 million in part due to the$70 million Ahoskie expansion work that is currently underway -
Maintenance capital for existing assets: Maintained expectations of approximately
$20 million
Contracting and Market Update
Enviva’s customers are renewing existing contracts and signing new contracts in large part due to the urgent need to reduce lifecycle greenhouse gas emissions from their supply chains and products while securing reliable, affordable and renewable feedstocks over the long term. There are limited large-scale alternatives available for renewable baseload and dispatchable power and heat generation, and even fewer sustainably sourced feedstocks to substitute in hard-to-abate carbon-intensive industries.
Additionally, the carbon price environment in the European Union remains strong, which reinforces the cost competitiveness of biomass. Wood pellets are currently the cheapest form of thermal energy generation in
Today, Enviva announced its first sales into the emerging biomass market in
Driven in large part by the strong contracting environment in
Pricing of Enviva’s long-term, take-or-pay off-take contracts is not generally exposed to, nor predominantly driven by, current commodity prices, but rather our customers’ longer-term view of securing a long-term, cost-competitive, and renewable, sustainable feedstock over timeframes spanning from 5 to more than 20 years.
As of July 1, 2023, Enviva’s total weighted-average remaining term of take-or-pay off-take contracts is approximately 13.4 years, with a total contracted revenue backlog of approximately
This contracted revenue backlog is complemented by a customer sales pipeline exceeding
European Union – Renewable Energy Directive Update
On June 19, 2023, EU ambassadors approved and published the Renewable Energy Directive III (“RED III”) text, pursuant to which primary woody biomass continues to be counted as
The final approval of RED III by the EU Council of Ministers and the EU Parliament is expected to take place by October 2023, after which RED III will become law and the process for national implementation will begin. Member states will have 18 months for implementation.
The final language of RED III includes: additional sustainability criteria for woody biomass, with which Enviva is compliant; assurances that electricity-only plants already receiving subsidies will continue to do so, meaning Enviva’s existing off-take contracts are not impacted; continuing availability of financial support to electricity-only installations where Bioenergy with Carbon Capture and Storage (BECCS) is used (this is a pivotal technology for reaching net zero and a key focus for many of Europe’s power generators); and the availability of financial support for all other end uses of woody biomass, which should provide further tailwinds to Enviva’s growth in combined heat and power, hard-to-abate sectors, and advanced biofuels.
Sustainability Update
In June 2023, we commemorated the first anniversary of the Enviva Heirs Property Fund, launched to assist families in the
Enviva is committed to making a positive impact in the communities we call home. Recognizing that there are well-established groups who have been working in this space for decades, Enviva has formalized partnerships over the past year with the Sustainable Forestry and Land Retention Project and other regional organizations like the Winston County Self Help Cooperative, the Roanoke Electric Cooperative, and the Black Family Land Trust. With the help of these organizations, we have invested more than
Asset Update
Construction of
In addition to
Because Enviva’s top financial priority is effectively managing liquidity and leverage to achieve our targets, we are monitoring the progress we make with the cost profile and improving production rates of our existing asset fleet. To the extent we are not on pace with reaching our targets, we have the opportunity to defer the build timing of
We continue to project that average cost per plant for the next four greenfield projects (including
Enviva recently submitted applications for both
Second-Quarter 2022 Earnings Call Details
Enviva will host a webcast and conference call on Thursday, August 3, 2023 at 10:00 a.m. Eastern Time to discuss second-quarter results and the Company’s outlook. The conference call number for North American participation is +1 (877) 883-0383, and for international callers is +1 (412) 902-6506. The passcode is 8363501. Alternatively, the call can be accessed online through a webcast link provided on Enviva’s Events & Presentations website page, located at ir.envivabiomass.com.
About Enviva
Enviva Inc. (NYSE: EVA) is the world’s largest producer of industrial wood pellets, a renewable and sustainable energy source produced by aggregating a natural resource, wood fiber, and processing it into a transportable form, wood pellets. Enviva owns and operates ten plants with a combined production capacity of approximately 6.2 million metric tons per year in
To learn more about Enviva, please visit our website at www.envivabiomass.com. Follow Enviva on social media @Enviva.
Financial Statements |
|||||||
ENVIVA INC. AND SUBSIDIARIES |
|||||||
Condensed Consolidated Balance Sheets |
|||||||
(In thousands, except par value and number of shares) |
|||||||
|
June 30, 2023 |
|
December 31, 2022 |
||||
|
(Unaudited) |
|
|
||||
Assets |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
2,342 |
|
|
$ |
3,417 |
|
Accounts receivable |
|
146,434 |
|
|
|
169,847 |
|
Other accounts receivable |
|
16,267 |
|
|
|
8,950 |
|
Inventories |
|
198,546 |
|
|
|
158,884 |
|
Short-term customer assets |
|
27,244 |
|
|
|
21,546 |
|
Prepaid expenses and other current assets |
|
11,541 |
|
|
|
7,695 |
|
Total current assets |
|
402,374 |
|
|
|
370,339 |
|
Property, plant, and equipment, net |
|
1,641,753 |
|
|
|
1,584,875 |
|
Operating lease right-of-use assets |
|
98,463 |
|
|
|
102,623 |
|
Goodwill |
|
103,928 |
|
|
|
103,928 |
|
Long-term restricted cash |
|
153,280 |
|
|
|
247,660 |
|
Long-term customer assets |
|
111,839 |
|
|
|
118,496 |
|
Other long-term assets |
|
41,203 |
|
|
|
23,519 |
|
Total assets |
$ |
2,552,840 |
|
|
$ |
2,551,440 |
|
Liabilities and Shareholders’ Equity |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
40,939 |
|
|
$ |
37,456 |
|
Accrued and other current liabilities |
|
143,949 |
|
|
|
146,497 |
|
Customer liabilities |
|
33,903 |
|
|
|
75,230 |
|
Current portion of interest payable |
|
35,880 |
|
|
|
32,754 |
|
Current portion of long-term debt and finance lease obligations |
|
16,130 |
|
|
|
20,993 |
|
Deferred revenue |
|
46,190 |
|
|
|
32,840 |
|
Financial liability pursuant to repurchase accounting |
|
194,350 |
|
|
|
111,913 |
|
Total current liabilities |
|
511,341 |
|
|
|
457,683 |
|
Long-term debt and finance lease obligations |
|
1,392,321 |
|
|
|
1,571,766 |
|
Long-term operating lease liabilities |
|
110,856 |
|
|
|
115,294 |
|
Deferred tax liabilities, net |
|
2,100 |
|
|
|
2,107 |
|
Long-term deferred revenue |
|
130,047 |
|
|
|
41,728 |
|
Other long-term liabilities |
|
67,821 |
|
|
|
76,106 |
|
Total liabilities |
|
2,214,486 |
|
|
|
2,264,684 |
|
Commitments and contingencies |
|
|
|
||||
Shareholders' equity: |
|
|
|
||||
Preferred stock, |
|
— |
|
|
|
— |
|
Common stock, |
|
74 |
|
|
|
67 |
|
Additional paid-in capital |
|
726,786 |
|
|
|
502,554 |
|
Accumulated deficit |
|
(341,050 |
) |
|
|
(168,307 |
) |
Accumulated other comprehensive income |
|
191 |
|
|
|
197 |
|
Total Enviva Inc.’s shareholders’ equity |
|
386,001 |
|
|
|
334,511 |
|
Noncontrolling interests |
|
(47,647 |
) |
|
|
(47,755 |
) |
Total shareholders’ equity |
|
338,354 |
|
|
|
286,756 |
|
Total liabilities and shareholders’ equity |
$ |
2,552,840 |
|
|
$ |
2,551,440 |
|
ENVIVA INC. AND SUBSIDIARIES |
|||||||||||||||
Condensed Consolidated Statements of Operations |
|||||||||||||||
(In thousands) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Product sales |
$ |
288,150 |
|
|
$ |
293,615 |
|
|
$ |
548,398 |
|
|
$ |
524,527 |
|
Other revenue |
|
13,755 |
|
|
|
2,706 |
|
|
|
22,589 |
|
|
|
4,776 |
|
Net revenue |
|
301,905 |
|
|
|
296,321 |
|
|
|
570,987 |
|
|
|
529,303 |
|
Operating costs and expenses: |
|
|
|
|
|
|
|
||||||||
Cost of goods sold, excluding items below |
|
260,143 |
|
|
|
250,276 |
|
|
|
513,358 |
|
|
|
461,312 |
|
Loss on disposal of assets |
|
3,177 |
|
|
|
2,282 |
|
|
|
6,806 |
|
|
|
3,183 |
|
Selling, general, administrative, and development expenses |
|
21,987 |
|
|
|
27,704 |
|
|
|
52,941 |
|
|
|
61,395 |
|
Restructuring inclusive of severance expenses |
|
13,585 |
|
|
|
— |
|
|
|
13,585 |
|
|
|
— |
|
Depreciation and amortization |
|
29,965 |
|
|
|
28,833 |
|
|
|
64,639 |
|
|
|
51,392 |
|
Total operating costs and expenses |
|
328,857 |
|
|
|
309,095 |
|
|
|
651,329 |
|
|
|
577,282 |
|
Loss from operations |
|
(26,952 |
) |
|
|
(12,774 |
) |
|
|
(80,342 |
) |
|
|
(47,979 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
||||||||
Interest expense |
|
(17,272 |
) |
|
|
(13,959 |
) |
|
|
(40,665 |
) |
|
|
(23,929 |
) |
Interest expense on repurchase accounting |
|
(11,558 |
) |
|
|
— |
|
|
|
(51,931 |
) |
|
|
— |
|
Total interest expense |
|
(28,830 |
) |
|
|
(13,959 |
) |
|
|
(92,596 |
) |
|
|
(23,929 |
) |
Other income (expense), net |
|
17 |
|
|
|
(611 |
) |
|
|
326 |
|
|
|
(727 |
) |
Total other expense, net |
|
(28,813 |
) |
|
|
(14,570 |
) |
|
|
(92,270 |
) |
|
|
(24,656 |
) |
Net loss before income taxes |
|
(55,765 |
) |
|
|
(27,344 |
) |
|
|
(172,612 |
) |
|
|
(72,635 |
) |
Income tax expense (benefit) |
|
11 |
|
|
|
(2 |
) |
|
|
23 |
|
|
|
14 |
|
Net loss |
$ |
(55,776 |
) |
|
$ |
(27,342 |
) |
|
$ |
(172,635 |
) |
|
$ |
(72,649 |
) |
ENVIVA INC. AND SUBSIDIARIES |
|||||||
Condensed Consolidated Statements of Cash Flows |
|||||||
(In thousands) |
|||||||
(Unaudited) |
|||||||
|
Six Months Ended June 30, |
||||||
|
2023 |
|
2022 |
||||
Cash flows from operating activities: |
|
|
|
||||
Net loss |
$ |
(172,635 |
) |
|
$ |
(72,649 |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
||||
Depreciation and amortization |
|
64,952 |
|
|
|
51,392 |
|
Interest expense pursuant to repurchase accounting |
|
51,931 |
|
|
|
— |
|
Amortization of debt issuance costs, debt premium, and original issue discounts |
|
1,297 |
|
|
|
1,260 |
|
Loss on disposal of assets |
|
6,806 |
|
|
|
3,183 |
|
Deferred taxes |
|
23 |
|
|
|
— |
|
Non-cash equity-based compensation and other expense |
|
32,136 |
|
|
|
20,023 |
|
Fair value changes in derivatives |
|
(1,916 |
) |
|
|
4,519 |
|
Unrealized loss (gain) on foreign currency transactions, net |
|
77 |
|
|
|
(95 |
) |
Change in operating assets and liabilities: |
|
|
|
||||
Accounts and other receivables |
|
19,381 |
|
|
|
(13,573 |
) |
Prepaid expenses and other current and long-term assets |
|
(1,093 |
) |
|
|
(21,687 |
) |
Inventories |
|
(8,164 |
) |
|
|
(14,399 |
) |
Finished goods subject to repurchase accounting |
|
(29,389 |
) |
|
|
— |
|
Derivatives |
|
1,188 |
|
|
|
(3,983 |
) |
Accounts payable, accrued liabilities, and other current liabilities |
|
(25,476 |
) |
|
|
(10,852 |
) |
Deferred revenue |
|
101,669 |
|
|
|
(178 |
) |
Accrued interest |
|
3,126 |
|
|
|
(1,123 |
) |
Other long-term liabilities |
|
(14,134 |
) |
|
|
(10,729 |
) |
Net cash provided by (used in) operating activities |
|
29,779 |
|
|
|
(68,891 |
) |
Cash flows from investing activities: |
|
|
|
||||
Purchases of property, plant, and equipment |
|
(136,871 |
) |
|
|
(97,405 |
) |
Payment for acquisition of a business |
|
— |
|
|
|
(5,000 |
) |
Net cash used in investing activities |
|
(136,871 |
) |
|
|
(102,405 |
) |
Cash flows from financing activities: |
|
|
|
||||
Principal payments on senior secured revolving credit facility, net |
|
(281,500 |
) |
|
|
(36,000 |
) |
Proceeds from debt issuance |
|
102,900 |
|
|
|
31,270 |
|
Proceeds from capital contribution of New Market Tax Credit financing |
|
— |
|
|
|
12,763 |
|
Principal payments on other long-term debt and finance lease obligations |
|
(16,089 |
) |
|
|
(16,474 |
) |
Cash paid related to debt issuance costs and deferred offering costs |
|
(1,769 |
) |
|
|
(5,308 |
) |
Support payments received |
|
9,821 |
|
|
|
4,197 |
|
Proceeds from sale of finished goods subject to repurchase accounting |
|
23,545 |
|
|
|
— |
|
Proceeds from issuance of Series A Preferred Stock, net, which was converted into common stock |
|
247,924 |
|
|
|
— |
|
Proceeds from issuance of Enviva Inc. common shares, net |
|
— |
|
|
|
333,009 |
|
Cash dividends |
|
(57,020 |
) |
|
|
(105,646 |
) |
Payment for withholding tax associated with Long-Term Incentive Plan vesting |
|
(16,175 |
) |
|
|
(16,577 |
) |
Net cash provided by financing activities |
|
11,637 |
|
|
|
201,234 |
|
Net (decrease) increase in cash, cash equivalents, and restricted cash |
|
(95,455 |
) |
|
|
29,938 |
|
Cash, cash equivalents, and restricted cash, beginning of period |
|
251,077 |
|
|
|
18,518 |
|
Cash, cash equivalents, and restricted cash, end of period |
$ |
155,622 |
|
|
$ |
48,456 |
|
ENVIVA INC. AND SUBSIDIARIES |
|||||
Condensed Consolidated Statements of Cash Flows (continued) |
|||||
(In thousands) |
|||||
(Unaudited) |
|||||
|
Six Months Ended June 30, |
||||
|
2023 |
|
2022 |
||
Non-cash investing and financing activities: |
|
|
|
||
Property, plant, and equipment acquired included in accounts payable and accrued liabilities |
$ |
15,286 |
|
$ |
12,843 |
Supplemental information: |
|
|
|
||
Interest paid, net of capitalized interest |
$ |
36,884 |
|
$ |
23,432 |
Non-GAAP Financial Measures
In addition to presenting our financial results in accordance with accounting principles generally accepted in
The estimated incremental adjusted EBITDA that can be expected from Enviva’s development of new wood pellet plant capacity is based on an internal financial analysis of the anticipated benefit from the incremental production capacity and cost savings we expect to realize. Such estimates are based on numerous assumptions and are inherently uncertain and subject to significant business, economic, financial, regulatory, and competitive risks that could cause actual results and amounts to differ materially from such estimates. A reconciliation of the estimated incremental adjusted EBITDA expected to be generated by a new wood pellet production plant constructed by Enviva to the closest GAAP financial measure, net income (loss), is not provided because net income (loss) expected to be generated is not available without unreasonable effort, in part because the amount of estimated incremental interest expense related to the financing of such a plant and depreciation is not available at this time.
Adjusted Net Income (Loss)
We define adjusted net income (loss) as net income (loss) excluding acquisition and integration costs and other, effects of COVID-19 and the war in
Adjusted Gross Margin and Adjusted Gross Margin per Metric Ton
We define adjusted gross margin as gross margin excluding loss on disposal of assets and impairment of assets, non-cash equity-based compensation and other expense, depreciation and amortization, changes in unrealized derivative instruments related to hedged items, cash-based restructuring expense, acquisition and integration costs and other, effects of COVID-19 and the war in
Adjusted EBITDA
We define adjusted EBITDA as net income (loss) excluding depreciation and amortization, total interest expense, income tax expense (benefit), early retirement of debt obligation, non-cash equity-based compensation and other expense, loss on disposal of assets and impairment of assets, changes in unrealized derivative instruments related to hedged items, cash-based restructuring inclusive of severance expense, acquisition and integration costs and other, effects of COVID-19 and the war in
Limitations of Non-GAAP Financial Measures
Adjusted net income (loss), adjusted gross margin, adjusted gross margin per metric ton, and adjusted EBITDA are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures provides useful information to investors in assessing our financial condition and results of operations. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Each of these non-GAAP financial measures has important limitations as an analytical tool because they exclude some, but not all, items that affect the most directly comparable GAAP financial measures. You should not consider adjusted net income (loss), adjusted gross margin, adjusted gross margin per metric ton, or adjusted EBITDA in isolation or as substitutes for analysis of our results as reported in accordance with GAAP.
Our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
The following tables present a reconciliation of adjusted net loss, adjusted gross margin, adjusted gross margin per metric ton, and adjusted EBITDA to the most directly comparable GAAP financial measures, as applicable, for each of the periods indicated.
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
(in thousands) |
||||||||||||||
Reconciliation of net loss to adjusted net loss: |
|
|
|
|
|
|
|
||||||||
Net loss |
$ |
(55,776 |
) |
|
$ |
(27,342 |
) |
|
$ |
(172,635 |
) |
|
$ |
(72,649 |
) |
Acquisition and integration costs and other |
|
— |
|
|
|
3,591 |
|
|
|
— |
|
|
|
14,369 |
|
Effects of COVID-19 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,189 |
|
Effects of the war in |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,051 |
|
Support Payments |
|
— |
|
|
|
6,236 |
|
|
|
2,050 |
|
|
|
14,085 |
|
Adjusted net loss |
$ |
(55,776 |
) |
|
$ |
(17,515 |
) |
|
$ |
(170,585 |
) |
|
$ |
(23,955 |
) |
|
Three Months Ended
|
|
Six Months Ended
|
|||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||||
|
(in thousands, except per metric ton) |
|||||||||||||
Reconciliation of gross margin to adjusted gross margin and adjusted gross margin per metric ton: |
|
|
|
|
|
|
|
|||||||
Gross margin(1) |
$ |
10,444 |
|
|
$ |
16,816 |
|
|
$ |
(10,291 |
) |
|
$ |
16,555 |
Loss on disposal of assets and impairment of assets |
|
3,177 |
|
|
|
2,282 |
|
|
|
6,974 |
|
|
|
3,183 |
Non-cash equity-based compensation and other expense |
|
363 |
|
|
|
567 |
|
|
|
3,618 |
|
|
|
1,301 |
Depreciation and amortization |
|
28,141 |
|
|
|
26,948 |
|
|
|
61,114 |
|
|
|
48,254 |
Changes in unrealized derivative instruments |
|
(726 |
) |
|
|
2,145 |
|
|
|
(728 |
) |
|
|
535 |
Acquisition and integration costs and other |
|
— |
|
|
|
(244 |
) |
|
|
— |
|
|
|
2,557 |
Effects of COVID-19 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,942 |
Effects of the war in |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,051 |
Support Payments |
|
— |
|
|
|
6,236 |
|
|
|
2,050 |
|
|
|
14,085 |
Adjusted gross margin |
$ |
41,399 |
|
|
$ |
54,750 |
|
|
$ |
62,737 |
|
|
$ |
105,463 |
Metric tons sold |
|
1,302 |
|
|
|
1,275 |
|
|
|
2,492 |
|
|
|
2,371 |
Gross margin per metric ton |
$ |
8.02 |
|
|
$ |
13.19 |
|
|
$ |
(4.13 |
) |
|
$ |
6.98 |
Adjusted gross margin per metric ton |
$ |
31.80 |
|
|
$ |
42.94 |
|
|
$ |
25.18 |
|
|
$ |
44.48 |
(1)Gross margin is defined as net revenue less cost of goods sold (including related depreciation and amortization and loss on disposal of assets).
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
|
(in thousands) |
||||||||||||||
Reconciliation of net loss to adjusted EBITDA: |
|
|
|
|
|
|
|
|
||||||||
Net loss |
|
$ |
(55,776 |
) |
|
$ |
(27,342 |
) |
|
$ |
(172,635 |
) |
|
$ |
(72,649 |
) |
Add: |
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization (1) |
|
|
30,278 |
|
|
|
28,833 |
|
|
|
64,952 |
|
|
|
51,392 |
|
Total interest expense |
|
|
28,830 |
|
|
|
13,959 |
|
|
|
92,596 |
|
|
|
23,929 |
|
Income tax expense (benefit) |
|
|
11 |
|
|
|
(2 |
) |
|
|
23 |
|
|
|
14 |
|
Non-cash equity-based compensation and other expense (2) |
|
|
17,223 |
|
|
|
9,763 |
|
|
|
33,229 |
|
|
|
20,917 |
|
Loss on disposal of assets and impairment of assets (3) |
|
|
3,393 |
|
|
|
2,282 |
|
|
|
7,190 |
|
|
|
3,183 |
|
Changes in unrealized derivative instruments |
|
|
(726 |
) |
|
|
2,145 |
|
|
|
(728 |
) |
|
|
535 |
|
Cash-based restructuring inclusive of severance expense |
|
|
2,725 |
|
|
|
— |
|
|
|
2,725 |
|
|
|
— |
|
Acquisition and integration costs and other |
|
|
— |
|
|
|
3,592 |
|
|
|
— |
|
|
|
14,370 |
|
Effects of COVID-19 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,189 |
|
Effects of the war in |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,051 |
|
Support Payments |
|
|
— |
|
|
|
6,236 |
|
|
|
2,050 |
|
|
|
14,085 |
|
Adjusted EBITDA |
|
$ |
25,958 |
|
|
$ |
39,466 |
|
|
$ |
29,402 |
|
|
$ |
76,016 |
|
(1) |
Includes |
(2) |
Includes |
(3) |
Includes |
The following table provides a reconciliation of the estimated range of adjusted EBITDA to the estimated range of net income (loss) for Enviva for the quarters ending September 30, 2023 and December 31, 2023 (in millions):
|
Three Months Ending
|
Three Months Ending
|
Estimated net income (loss) |
(25) - (5) |
40 - 60 |
Add: |
|
|
Depreciation and amortization |
35 |
35 |
Interest expense |
20 |
20 |
Interest expense on repurchase accounting |
15 |
15 |
Income tax expense |
— |
— |
Non-cash equity-based compensation expense |
10 |
10 |
Loss on disposal of assets |
— |
— |
Changes in unrealized derivative instruments |
— |
— |
Cash-based restructuring inclusive of severance |
5 |
— |
Support Payments |
— |
— |
Estimated adjusted EBITDA |
60 - 80 |
120 - 140 |
The following table provides a reconciliation of the estimated range of adjusted EBITDA to the estimated range of net income (loss) for Enviva for the twelve months ending December 31, 2023 (in millions):
|
Twelve Months Ending
|
|
Estimated net income (loss) |
|
(186) - (136) |
Add: |
|
|
Depreciation and amortization |
|
140 |
Interest expense |
|
80 |
Interest expense on repurchase accounting |
|
95 |
Income tax expense |
|
0 |
Non-cash equity-based compensation expense |
|
55 |
Loss on disposal of assets |
|
7 |
Changes in unrealized derivative instruments |
|
0 |
Cash-based restructuring, inclusive of severance expense |
|
7 |
Support Payments |
|
2 |
Estimated adjusted EBITDA |
$ |
200 - 250 |
Cautionary Note Concerning Forward-Looking Statements
The information included herein and in any oral statements made in connection herewith include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included herein, regarding Enviva’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, and objectives of management are forward-looking statements. When used herein, including any oral statements made in connection herewith, the words “could,” “should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” the negative of such terms, and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Enviva disclaims any duty to revise or update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date hereof. Enviva cautions you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Enviva. These risks include, but are not limited to: (i) the volume and quality of products that we are able to produce or source and sell, which could be adversely affected by, among other things, operating or technical difficulties at our wood pellet production plants or deep-water marine terminals; (ii) the prices at which we are able to sell or source our products; (iii) our ability to capitalize on higher spot prices and contract flexibility in the future, which is subject to fluctuations in pricing and demand; (iv) the possibility that current market prices may not continue and therefore, in the future, we may not be able to make spot sales and may need to make spot purchases at higher prices; (v) our ability to successfully negotiate, complete, and integrate acquisitions, including the associated contracts, or to realize the anticipated benefits of such acquisitions; (vi) failure of our customers, vendors, and shipping partners to pay or perform their contractual obligations to us; (vii) our inability to successfully execute our project development, capacity, expansion, and new facility construction activities on time and within budget; (viii) the creditworthiness of our contract counterparties; (ix) the amount of low-cost wood fiber that we are able to procure and process, which could be adversely affected by, among other things, disruptions in supply or operating or financial difficulties suffered by our suppliers; (x) changes in the price and availability of natural gas, coal, or other sources of energy; (xi) changes in prevailing economic and market conditions; (xii) inclement or hazardous environmental conditions, including extreme precipitation, temperatures, and flooding; (xiii) fires, explosions, or other accidents; (xiv) changes in domestic and foreign laws and regulations (or the interpretation thereof) related to renewable or low-carbon energy, the forestry products industry, the international shipping industry, or power, heat, or combined heat and power generators; (xv) changes in domestic and foreign tax laws and regulations affecting the taxation of our business and investors; (xvi) changes in the regulatory treatment of biomass in core and emerging markets; (xvii) our inability to acquire or maintain necessary permits or rights for our production, transportation, or terminaling operations; (xviii) changes in the price and availability of transportation; (xix) changes in foreign currency exchange or interest rates, and the failure of our hedging arrangements to effectively reduce our exposure to related risks; (xx) risks related to our indebtedness, including the levels and maturity date of such indebtedness; (xxi) our failure to maintain effective quality control systems at our wood pellet production plants and deep-water marine terminals, which could lead to the rejection of our products by our customers; (xxii) changes in the quality specifications for our products that are required by our customers; (xxiii) labor disputes, unionization, or similar collective actions; (xxiv) our inability to hire, train, or retain qualified personnel to manage and operate our business and newly acquired assets; (xxv) risks related to our restructuring plan, the primary components of which are reductions in our workforce and corporate and other costs; (xxvi) the possibility of cyber and malware attacks; (xxvii) our inability to borrow funds and access capital markets; (xxviii) viral contagions or pandemic diseases; (xxix) changes to our leadership and management team; (xxx) overall domestic and global political and economic conditions, including the imposition of tariffs or trade or other economic sanctions, political instability or armed conflict, including the ongoing conflict in
Should one or more of the risks or uncertainties described herein and in any oral statements made in connection therewith occur, or should underlying assumptions prove incorrect, actual results and plans could different materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact Enviva’s expectations and projections can be found in Enviva’s periodic filings with the SEC. Enviva’s SEC filings are available publicly on the SEC’s website at www.sec.gov.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230802982698/en/
Kate Walsh
Vice President, Investor Relations
Investor.Relations@envivabiomass.com
Source: Enviva Inc.
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