SOURCE: Ormat Technologies, Inc.

Ormat Technologies, Inc.

November 07, 2017 18:11 ET

Ormat Technologies Reports 2017 Third Quarter Earnings

Management Affirms Full-Year Total Revenue and Adjusted EBITDA Guidance

RENO, NV--(Marketwired - November 07, 2017) - Ormat Technologies, Inc. (NYSE: ORA) today announced financial results for the third quarter ended September 30, 2017.

($ millions, except per share amounts)  Q3 2017  Q3 2016  Change
Revenues         
 Electricity  $112.3  $109.8  2.3%
 Product  $44.9  $74.8  (40.0%)
Total Revenues  $157.2  $184.6  (14.9%)
Gross margin (%)         
 Electricity  41.4%  39.4%  5.1%
 Product  28.3%  41.7%  (32.2%)
Gross margin (%)  37.7%  40.3%  (6.6%)
Operating income  $44.0  $48.2  (8.8%)
Net income attributable to the Company's shareholders  $19.2  $12.1  58.8%
Diluted EPS  $0.38  $0.24  58.3%
          
Adjusted Net income attributable to the Company's stockholders ((1))  $21.1  $28.1  (24.9%)
Adjusted Diluted EPS (1)  $0.42  $0.56  (25.0%)
Adjusted EBITDA  $76.4  $85.4  (10.5%)

(1) Adjusted Net income attributable to the Company's stockholders and diluted EPS for the third quarter of 2017 excludes $1.9 million or $0.04 per diluted share, attributable to a one-time make whole premium paid in connection with the prepayment of OFC Senior Secured Notes and DEG loan. Adjusted Net income attributable to the Company's stockholders and diluted EPS for the third quarter of 2016 excludes $16.0 million or $0.32 per diluted share, related to $11.0 million of expenses related to the settlement of a previously outstanding claim and $5.0 million in one-time prepayment fees.

Third quarter 2017 highlights and recent developments:

  • Total revenues of $157.2 million, down 14.9% compared to the third quarter of 2016;
  • Electricity segment revenues of $112.3 million, up 2.3% compared to the third quarter of 2016, mainly due to higher performance of our Puna plant in Hawaii, our Bouillante power plant in Guadeloupe and partial contribution of the recently commenced Platanares power plant in Honduras, as well as revenue generated from our demand response and storage activity;
  • Product segment revenues of $44.9 million, down 40.0% compared to the third quarter of 2016, mainly due to near-completion of our Sarulla contract; Revenue for the full year 2017 are expected to remain on track with our full year guidance;
  • Electricity generation decreased 2.2%, compared to the third quarter of 2016, from 1.26 million MWh to 1.23 million MWh;
  • Gross margin was 37.7% of total revenues compared to 40.3% in the third quarter of 2016, due to lower revenues and lower margins in the Product segment, as expected; Electricity segment gross margin increased to 41.4% from 39.4%;
  • Operating income decreased 8.8% to $44.0 million compared to $48.2 million in the third quarter of 2016;
  • Net income attributable to the company's shareholders was $19.2 million, or $0.38 per diluted share, compared to $12.1 million, or $0.24 per diluted share, in the third quarter of 2016;
  • Adjusted net income attributable to the company's shareholders of $21.1 million, or $0.42 per diluted share, compared to $28.1 million, or $0.56 per diluted share, in the third quarter of 2016;
  • Adjusted EBITDA of $76.4 million, down 10.5% compared to $85.4 million in the third quarter of 2016;
  • Declared a quarterly dividend of $0.08 per share for the third quarter of 2017;
  • Commenced commercial operation of the 35 MW Platanares power plant, the first geothermal power plant in Honduras that is expected to generate approximately $33 million of annual revenues; and
  • Commenced commercial operation of the second unit of the Sarulla geothermal power plant, located in Indonesia's North Sumatra and expanded its generating capacity to 220 MW (28 MW Ormat's share);

"This was a strategically important quarter in our electricity segment, as we increased revenue and gross margin mainly due to the performances of our Bouillante power plant in Guadeloupe, and our Puna plant in Hawaii," commented Isaac Angel, Chief Executive Officer. "Our revenues and gross margin from our electricity segment continue to benefit from our ongoing efforts to improve efficiencies, and we expect further improvements in 2018 and beyond. Our Platanares power plant in Honduras commences operation toward the end of the third quarter and contributed to the electricity segment results as well. We are very excited about the long-term potential in Honduras and with Platanares, our first facility in the region. We expect the Tungsten Mountain project in Nevada to come online by the end of 2017. Tungsten Mountain will increase our portfolio to 800 MW and will further strengthen our results and contribute to our innovative portfolio PPA with SCPPA."

"Product segment revenue for the full year 2017 is expected to remain strong," added Mr. Angel. "As we have previously indicated, quarterly fluctuations in our product segment do occur based on the status and timing of our sales orders, delivery of raw materials and the completion of manufacturing of such orders. Such fluctuations may cause lower revenues and profitability on a quarterly basis as it did in the quarter. Our efforts to secure new orders bore fruit and we reached a backlog of $182 million as of November 7, 2017, strengthening and supporting our product segment revenue in 2018."

Guidance

Mr. Angel added, "We remain confident in our full-year outlook, and are narrowing our guidance range, and slightly increasing the expectations for the total revenue and Adjusted EBITDA, based on increasing visibility into our fourth quarter results.

We reiterate our guidance and we expect full-year 2017 total revenues between $686.0 million and $696.0 million with electricity segment revenues between $463.0 million and $468.0 million and product segment revenues between $223.0 million and $228.0 million. We expect 2017 Adjusted EBITDA between $343.0 million and $348.0 million for the full year. We expect annual Adjusted EBITDA attributable to non-controlling interest to be approximately $23.0 million."

Third Quarter 2017 Financial Results

For the three months ended September 30, 2017, total revenues were $157.2 million, down from $184.6 million for the three months ended September 30, 2016, a decrease of 14.9%. Electricity segment revenues increased 2.3% to $112.3 million for the three months ended September 30, 2017, up from $109.8 million for the three months ended September 30, 2016. Product segment revenues decreased 40.0% to $44.9 million for the three months ended September 30, 2017, from $74.8 million for the three months ended September 30, 2016.

General and administrative expenses for the three months ended September 30, 2017 were $10.9 million, or 6.9% of total revenues, compared to $19.1 million, or 10.3% of total revenues, for the three months ended September 30, 2016. The decrease was primarily attributable to $11.0 million expenses in the three months ended September 30, 2016, related to a settlement of a previously outstanding claim. The decrease was partially offset by general and administrative expenses attributable to the demand response and storage activity that we acquired on March 15, 2017.

The company reported net income attributable to the company's shareholders of $19.2 million, or $0.38 per diluted share, compared to net income attributable to the company's shareholders of $12.1 million, or $0.24 per diluted share, for the same period last year. This increase in net income was primarily attributable to a decrease of $5.4 million in interest expense, net, related to the early repayment of two higher interest loans and a decrease in other non-operating expense of $4.0 million, partially offset by a decrease in operating income of $4.3 million. Adjusted net income attributable to the company's shareholders was $21.1 million, or $0.42 per diluted share, which excludes $1.9 million or $0.04 per diluted share of attributable to the make whole premium associated with the full prepayment of the OFC Senior Secured Notes and DEG loan.

Adjusted EBITDA for the three months ended September 30, 2017 was $76.4 million, compared to $85.4 million for the three months ended September 30, 2016, a decrease of 10.5%. The reconciliation of GAAP net cash provided by (used in) operating activities and net income to EBITDA and Adjusted EBITDA and additional cash flow information is set forth below in this release.

Backlog

Ormat's Product segment backlog, as of November 8, 2017, was $182.0 million, which included revenues for the period between October 1, and November 8, 2017.

Dividend

On November 7, 2017, the Company's Board of Directors approved and authorized payment of a quarterly dividend of $0.08 per share pursuant to the company's dividend policy. The dividend will be paid on December 5, 2017 to shareholders of record as of the close of business on November 21, 2017.

Conference Call Details

Ormat will host a conference call to discuss its financial results and other matters discussed in this press release at 10 a.m. ET on Wednesday, November 8, 2017. The call will be available as a live, listen-only webcast at investor.ormat.com. During the webcast, management will refer to slides that will be posted on the website. The slides and accompanying webcast can be accessed through the New & Events in the Investor Relations section of Ormat's website.

An archive of the webcast will be available approximately 30 minutes after the conclusion of the live call.

Please ask to be joined into the Ormat Technologies, Inc. call.

Participant telephone numbers
Participant dial in (toll free): 1-877-511-6790
Participant international dial in: 1-412-902-4141
Canada Toll Free 1-855-669-9657

Conference replay
US Toll Free: 1-877-344-7529
International Toll: 1-412-317-0088
Replay Access Code: 10113007

About Ormat Technologies

With over five decades of experience, Ormat Technologies, Inc. is a leading geothermal company and the only vertically integrated company engaged in geothermal and recovered energy generation (REG), with the objective of becoming a leading global provider of renewable energy. The company owns, operates, designs, manufactures and sells geothermal and REG power plants primarily based on the Ormat Energy Converter - a power generation unit that converts low-, medium- and high-temperature heat into electricity. With 73 U.S. patents, Ormat's power solutions have been refined and perfected under the most grueling environmental conditions. Ormat has 530 employees in the United States and 720 overseas. Ormat's flexible, modular solutions for geothermal power and REG are ideal for the vast range of resource characteristics. The company has engineered, manufactured and constructed power plants, which it currently owns or has installed to utilities and developers worldwide, totaling over 2,200 MW of gross capacity. Ormat's current 776 MW generating portfolio is spread globally in the U.S., Guatemala, Guadeloupe, Honduras, Indonesia and Kenya. Ormat also intends to expand its operations and provide energy management and energy storage solutions, by leveraging its core capabilities and global presence as well as through its Viridity Energy Solutions, Inc. subsidiary, a Philadelphia-based company with nearly a decade of expertise and leadership in demand response, energy management and storage.

Ormat's Safe Harbor Statement

Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to Ormat's plans, objectives and expectations for future operations and are based upon its management's current estimates and projections of future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, see "Risk Factors" as described in Ormat Technologies, Inc.'s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2017.

These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Ormat Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Three and Nine-Month Periods Ended September 30, 2017 and 2016
(Unaudited)

                      
  Three Months Ended September 30  Nine Months Ended September 30  
  2017  2016  2017  2016  
                      
  (In thousands, except per share data)  (In thousands, except per share data)  
Revenues:                     
 Electricity $ 112,273  $ 109,795  $ 339,826  $ 321,664  
 Product   44,912    74,822    186,621    174,408  
  Total revenues   157,185    184,617    526,447    496,072  
Cost of revenues:                     
 Electricity   65,774    66,481    197,249    192,410  
 Product   32,218    43,647    125,102    99,504  
  Total cost of revenues   97,992    110,128    322,351    291,914  
Gross profit   59,193    74,489    204,096    204,158  
Operating expenses:                     
 Research and development expenses   716    1,086    2,368    2,030  
 Selling and marketing expenses   3,630    4,793    12,083    12,136  
 General and administrative expenses   10,877    19,093    33,027    36,625  
 Write-off of unsuccessful exploration activities   -    1,294    -    2,714  
  Operating income   43,970    48,223    156,618    150,653  
Other income (expense):                     
 Interest income   255    266    861    831  
 Interest expense, net   (11,692 )  (17,137 )  (41,155 )  (51,561 )
 Derivatives and foreign currency transaction gains (losses)   (1,001 )  (222 )  2,040    (2,592 )
 Income attributable to sale of tax benefits   3,506    3,463    14,019    12,380  
 Other non-operating expense, net   (1,592 )  (5,546 )  (1,678 )  (5,306 )
  Income before income taxes and equity in                     
  losses of investees   33,446    29,047    130,705    104,405  
Income tax provision (benefit)   (11,003 )  (11,988 )  (28,258 )  (29,387 )
Equity in losses of investees, net   337    (2,653 )  (1,690 )  (4,734 )
                      
 Net income   22,780    14,406    100,757    70,284  
 Net income attributable to noncontrolling interest   (3,599 )  (2,326 )  (11,228 )  (4,584 )
 Net income attributable to the Company's stockholders $ 19,181  $ 12,080  $ 89,529  $ 65,700  
                      
Earnings per share attributable to the Company's stockholders - Basic and diluted:            
Basic:                     
 Net Income $ 0.38  $ 0.24  $ 1.79  $ 1.33  
                      
Diluted:                     
 Net Income $ 0.38  $ 0.24  $ 1.77  $ 1.31  
                      
Weighted average number of shares used in computation of earnings per share attributable to the Company's stockholders:                     
 Basic   50,367    49,599    49,942    49,410  
 Diluted   50,867    50,289    50,669    50,097  
                      

Ormat Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
As of September 30, 2017 and December 31, 2016
(Unaudited)

          
  September 30,  December 31,
  2017  2016
          
    (In thousands)
ASSETS
Current assets:         
 Cash and cash equivalents $ 77,212  $ 230,214
 Restricted cash, cash equivalents and marketable securities   42,559    34,262
  Receivables:         
   Trade   98,384    80,807
   Other   11,591    17,482
  Inventories   18,685    12,000
  Costs and estimated earnings in excess of billings on uncompleted contracts   42,087    52,198
  Prepaid expenses and other   41,727    45,867
   Total current assets   332,245    472,830
Investment in an unconsolidated company   25,367    -
Deposits and other   17,371    18,553
Deferred charges   43,972    43,773
Property, plant and equipment, net   1,621,012    1,556,378
Construction-in-process   350,872    306,709
Deferred financing and lease costs, net   5,426    3,923
Intangible assets, net   86,806    52,753
Goodwill   20,667    6,650
   Total assets $ 2,503,738  $ 2,461,569
LIABILITIES AND EQUITY
Current liabilities:         
 Accounts payable and accrued expenses $ 103,335  $ 91,650
 Short-term revolving credit lines with banks (full recourse)   33,900    -
 Billings in excess of costs and estimated earnings on uncompleted contracts   6,015    31,630
 Current portion of long-term debt:         
  Limited and non-recourse:         
   Senior secured notes   27,847    32,234
   Other loans   21,495    21,495
 Full recourse   864    12,242
   Total current liabilities   193,456    189,251
Long-term debt, net of current portion:         
 Limited and non-recourse:         
  Senior secured notes   322,299    350,388
  Other loans   247,401    261,845
 Full recourse:         
  Senior unsecured bonds   203,715    203,577
  Other loans   48,957    57,063
Accumulated losses of unconsolidated company in excess of investment   -    11,081
Liability associated with sale of tax benefits   46,803    54,662
Deferred lease income   52,273    54,561
Deferred income taxes   54,495    35,382
Liability for unrecognized tax benefits   6,188    5,738
Liabilities for severance pay   20,364    18,600
Asset retirement obligation   24,740    23,348
Other long-term liabilities   19,121    21,294
   Total liabilities   1,239,812    1,286,790
          
Redeemable non-controlling interest   6,481    4,772
          
Equity:         
 The Company's stockholders' equity:         
  Common stock   51    50
  Additional paid-in capital   896,005    869,463
  Retained earnings (accumulated deficit)   289,561    216,644
  Accumulated other comprehensive income (loss)   (5,634)    (7,732)
    1,179,983    1,078,425
Noncontrolling interest   77,462    91,582
  Total equity   1,257,445    1,170,007
  Total liabilities and equity $ 2,503,738  $ 2,461,569
          

Ormat Technologies, Inc. and Subsidiaries
Reconciliation of EBITDA, Adjusted EBITDA and Additional Cash Flows Information
For the Three and Nine-Month Periods Ended September 30, 2017 and 2016
(Unaudited)

We calculate EBITDA as net income before interest, taxes, depreciation and amortization. We calculate Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, adjusted for (i) termination fees, (ii) impairment of long-lived assets, (iii) write-off of unsuccessful exploration activities, (iv) any mark-to-market gains or losses from accounting for derivatives, (v) merger and acquisition transaction cost, (vi) stock-based compensation, (vii) gain from extinguishment of liability, and (viii) gain on sale of subsidiary and property, plant and equipment. EBITDA and Adjusted EBITDA are not a measurement of financial performance or liquidity under accounting principles generally accepted in the United States of America and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net earnings as indicators of our operating performance or any other measures of performance derived in accordance with accounting principles generally accepted in the United States of America. EBITDA and Adjusted EBITDA are presented because we believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of a company's ability to service and/or incur debt. However, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do.

The following tables reconcile net cash provided by (used in) operating activities and net income to EBITDA and Adjusted EBITDA for the three-month and nine months periods ended September 30, 2017 and 2016.

  Three Months Ended September 30  Nine Months Ended September 30
  2017  2016  2017  2016
                    
  (in thousands)  (in thousands)
Net cash provided by operating activities $ 52,375  $ 38,454  $ 166,533  $ 158,027
Adjusted for:                   
Interest expense, net (excluding amortization                   
of deferred financing costs)   10,515    15,977    37,186    47,269
Interest income   (255)    (266)    (861)    (831)
Income tax provision   11,003    11,988    28,258    29,387
Adjustments to reconcile net income or loss to net cash                   
provided by operating activities (excluding                   
depreciation and amortization)   (2,667)    2,259    15,234    (10,178)
EBITDA $ 70,971  $ 68,412  $ 246,350  $ 223,674
                    
Mark-to-market gains or losses from accounting for derivatives 1,663    (1,697)    (800)    797
Stock-based compensation   1,861    1,724    7,204    3,383
Gains or losses on sale of subsidiary and property, plant and equipment -    (686)    -    (686)
Gains or losses from extinguishment of debt   1,950    5,780    1,950    5,780
Termination fees   -    11,000    -    11,000
Merger and acquisition transaction cost   -    (412)    1,700    235
Write-off of unsuccessful exploration activities   -    1,294    -    2,714
Adjusted EBITDA $ 76,445  $ 85,415  $ 256,404  $ 246,897
                    
                    
Net cash used in investing activities $ (67,465)  $ (69,900)  $ (261,570)  $ (125,189)
Net cash provided by (used in) financing activities $ (26,088)  $ (71,045)  $ (57,965)  $ (128,692)
     
     
     
   Three Months Ended September 30  Nine Months Ended September 30
   2017  2016  2017  2016
                     
   (in thousands)  (in thousands)
Net income  $ 22,780  $ 14,406  $ 100,757  $ 70,284
Adjusted for:                    
Interest expense, net (including amortization                    
of deferred financing costs)    11,437    16,871    40,294    50,730
Income tax provision    11,003    11,988    28,258    29,387
Depreciation and amortization    25,751    25,147    77,041    73,273
EBITDA  $ 70,971  $ 68,412  $ 246,350  $ 223,674
                     
Mark-to-market gains or losses from accounting for derivatives 1,663    (1,697)    (800)    797
Stock-based compensation    1,861    1,724    7,204    3,383
Gains or losses on sale of subsidiary and property, plant and equipment -    (686)    -    (686)
Gains or losses from extinguishment of debt    1,950    5,780    1,950    5,780
Settlement expenses    -    11,000    -    11,000
Merger and acquisition transaction cost    -    (412)    1,700    235
Write-off of unsuccessful exploration activities    -    1,294    -    2,714
Adjusted EBITDA  $ 76,445  $ 85,415  $ 256,404  $ 246,897
                     

Contact Information

  • Ormat Technologies Contact:
    Smadar Lavi
    VP Corporate Finance and Head of Investor Relations
    775-356-9029 (ext. 65726)
    slavi@ormat.com

    Investor Relations Agency Contact:
    Rob Fink
    Hayden - IR
    646-415-8972
    rob@haydenir.com