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Ormat Technologies Reports Second Quarter 2019 Financial Results

Gross Profit Increased 13.4%; Management Increases Full-Year Adjusted Ebitda Guidance

RENO, Nev., Aug. 07, 2019 (GLOBE NEWSWIRE) -- Ormat Technologies, Inc.1 (ORA) today announced financial results for the second quarter ended June 30, 2019.

($ millions, except per share amounts)

Q2 2019

Q2 2018

Change (%)

Revenues

Electricity

129.1

122.2

5.6%

Product

52.0

54.9

(5.3%)

Other

3.0

1.2

145.3%

Total Revenues

184.1

178.3

3.2%

Gross Profit

65.1

57.5

13.4%

Gross margin (%)

Electricity

42.8%

33.5%

Product

20.6%

31.6%

Other

(29.5)%

(68.3)%

Gross margin (%)

35.4%

32.2%

Operating income

46.9

36.6

28.0%

Net income (loss) attributable to the Company’s shareholders

33.9

(0.3)

Diluted EPS

$0.66

$(0.01)

Adjusted Net income attributable to the Company’s stockholders2

20.6

16.6

24.1%

Diluted Adjusted EPS2

$0.40

$0.32

25.0%

Adjusted EBITDA2

94.9

80.8

17.4%

“Ormat delivered in the second quarter a 5.6% growth in electricity segment revenue and a 5.7% increase in generation without any contribution from our Puna power plant in Hawaii that is temporarily shut down following the Kilauea volcano eruption last year,” commented Isaac Angel, Chief Executive Officer. “We continue to make good progress in our efforts to resume operations at Puna. We expect that our plant refurbishment activities will be completed on schedule by the end of 2019 and expect that the plant will resume operations as soon as the local permitting and transmission network upgrades being undertaken by our local utility partner are completed by early 2020. Excluding Puna, which contributed gross profit of $1.8 million in the second quarter, our electricity segment produced gross margin of 41.7%, in line with expectations that margins in the second and third quarters would be lower than the first and fourth quarters due to normal seasonality in our electricity segment. This quarter benefited from minimal well field issues and a lower number of pump replacements, partially mitigating the seasonal decline typically seen in gross margins in the second and third quarters and boosted overall profitability. We expect continued growth in the electricity segment in the second half of 2019, as our 7 MW Tungsten Solar expansion is now online. We remain on track with our near-term growth target and plan to add approximately 120 MW to 135 MW to our portfolio by the end of 2021. We are also optimistic about the longer-term outlook for growth at Ormat resulting from the continuing expansion of our international geothermal portfolio, as indicated most recently by the expansion of our operations in Indonesia, where we recently acquired 49% of the Ijen project.”

Mr. Angel continued, “Timing of product segment orders led to a slight year-over-year decline in revenues, but we maintain a healthy backlog of approximately $201 million, including approximately $26 million of new orders booked during the second quarter, and a pipeline of additional opportunities around the world. Two large Turkish contracts continue to weigh on margins in this segment, but we believe this is a short-term phenomenon and we expect margin expansion in the second-half of this year.”

FINANCIAL HIGHLIGHTS FOR THE SECOND QUARTER OF 2019

  • Total revenues of $184.1 million, up 3.2% compared to the second quarter of 2018;

  • Electricity segment revenues of $129.1 million, up 5.6% compared to Q2 2018, with the growth resulting from recently expanded operations at McGuinness Hills and Olkaria, as well as contributions from recently acquired USG, combining to partially offset the loss of revenues resulting from the temporary shut down of the Puna power plant;

  • Electricity segment gross margin was 42.8% compared to 33.5% for Q2 2018. Excluding the impact from Puna, Electricity segment gross margin would have been 41.7% in Q2 2019 and 37.6% in Q2 2018;

  • Product segment backlog was approximately $201 million as of August 7, 2019;

  • Net income was $36.2 million in Q2 2019 compared to net income of $2.7 million in Q2 2018 primarily due to a decrease in income tax provision;

  • Net income attributable to the Company's stockholders in Q2 2019 was $33.9 million, or $0.66 per diluted share, compared to a loss of $0.3 million, or $0.01 per diluted share in Q2 2018;

  • Adjusted Net income attributable to the Company's stockholders3 in Q2 2019, was $20.6 million, or $0.40 per diluted share, compared to $16.6 million, or $0.32 per diluted share in Q2 2018;

  • Ormat’s second quarter effective tax rate benefit is 11.2%; Excluding a non-recurring tax benefit occurring this quarter, Ormat’s income tax provision effective tax rate would have been 31.1%;

  • Adjusted EBITDA increased 17.4% to $94.9 million from $80.8 million in Q2 20182. Adjusted EBITDA includes approximately $4.1 million and negative $0.6 million of Adjusted EBITDA related to Puna in Q2 2019 and Q2 2018, respectively. Adjusted EBITDA excluding any impact from Puna was $90.8 million in Q2 2019 and $81.4 million in Q2 2018; The Puna related EBITDA included $6.8 million of insurance proceeds received for business interruption in Q2 2019. No proceeds were received in Q2 2018;

  • The Company declared a quarterly dividend of $0.11 per share for the second quarter of 2019.

RECENT DEVELOPMENTS

  • Commenced commercial operation of our first-ever geothermal and solar hybrid project, a 7MW AC solar expansion of our Tungsten Mountain geothermal project in Churchill County, Nevada.

  • Completed the acquisition of 49% ownership in the Ijen geothermal project, which is under development in Indonesia.

  • Closed a $23.5 million non-recourse loan to refinance the Plumsted and Stryker projects, two 20 MW each battery energy storage assets located in New Jersey.

2019 GUIDANCE

Mr. Angel added, “Excluding Puna, we expect full-year 2019 total revenues of between $720 million and $742 million with Electricity segment revenues between $530 million and $540 million. We expect Product segment revenues of between $180 million and $190 million. Revenues from our energy storage services business are expected to be between $10 million and $12 million. We are increasing our 2019 Adjusted EBITDA guidance and expect between $375 million and $385 million for the full year. We expect annual Adjusted EBITDA attributable to minority interest to be approximately $25 million. This guidance with regard to revenues, Adjusted EBITDA and Adjusted EBITDA attributable to minority interest excludes any contribution and/or impact from Puna.”

The Company provides a reconciliation of Adjusted EBITDA, a non-GAAP financial measure for the three and six months ended June 30, 2019. However, the Company is unable to provide a reconciliation for its Adjusted EBITDA guidance range due to high variability and complexity with respect to estimating forward looking amounts for impairments and disposition and acquisition of business interests, income taxes expense related to still evolving effects of the tax law reform in the United States and other non-cash expenses and adjusting items which are excluded from the calculation of Adjusted EBITDA.

SECOND QUARTER 2019 FINANCIAL RESULTS (COMPARING THE QUARTER ENDED JUNE 30, 2019 TO THE QUARTER ENDED JUNE 30, 2018)

Total revenues for the quarter were $184.1 million, up 3.2% compared to the same quarter last year. Electricity segment revenues increased 5.6% to $129.1 million, up from $122.2 million last year. The increase was mainly attributable to the MGH phase 3 and Olkaria III expansion, which came online in the second half of 2018, as well as the USG acquisition, partially offset by the temporary shut down of the Puna plant. Product segment revenues decreased 5.3% to $52.0 million, down from $54.9 in the same quarter last year. Other segment revenues were $3.0 million compared to $1.2 million in the same quarter last year.

General and administrative expenses were $14.2 million, or 7.7 % of total revenues, compared to $15.9 million, or 8.9% of total revenues. This decrease was mainly related to high expenses in Q2 2018 associated with our identification of a material weakness related to taxes in the fourth quarter of 2017 and the restatement of our second, third and fourth quarter financial statements and our full-year 2017 financial statements.

In the second quarter of 2019, Ormat recorded a non-recurring tax benefit of $13.3 million from its tax strategy plan to refile tax returns net of change in accrued withholding taxes given the Company's decision to no longer reinvestment its earnings in foreign locations ("APB 23 assertion "). In the second quarter of 2018 Ormat recorded a non-recurring tax expense of $16.9 million for the reduction of the valuation allowance related to foreign tax credits and production tax credits.

Inclusive of this non-recurring income tax benefit, Ormat reported net income attributable to the Company’s shareholders of $33.9 million, or $0.66 per diluted share, compared to net loss attributable to the Company’s shareholders of $(0.30) million, or $(0.01) per diluted share. Adjusted Net income attributable to the Company's stockholders was $20.6 million, or $0.40 per diluted share, compared to $16.6 million or, $0.32 per diluted share in the same quarter last year.

Adjusted EBITDA4 was $94.9 million, compared to $80.8 million. The increase in Adjusted EBITDA is mainly related to the increase in gross profit primarily as a result of lower maintenance expenses. The reconciliation of GAAP net income to EBITDA and Adjusted EBITDA is set forth below in this release.

_______________________________________________

1 Ormat Technologies, Inc. is also referred to herein as the “Company”, “Ormat”, “we” or “us”

2 Reconciliation is set forth below in this release

3 Reconciliation is set forth below in this release

4 Reconciliation is set forth below in this release

DIVIDEND

On August 7, 2019, the Company’s Board of Directors declared, approved and authorized payment of a quarterly dividend of $0.11 per share pursuant to the Company’s dividend policy. The dividend will be paid on August 27, 2019 to shareholders of record as of the close of business on August 20, 2019.

CONFERENCE CALL DETAILS

Ormat will host a conference call to discuss its financial results and other matters discussed in this press release on Thursday, August 8, at 10 a.m. ET. 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 News & Events in the Investor Relations section of Ormat’s website.

An archive of the webcast will be available approximately 60 minutes after the conclusion of the live call.

Investors may access the call by dialing:

Participant dial in (toll free):

1-877-511-6790

Participant international dial in:

1-412-902-4141

Conference replay

US Toll Free:

1-877-344-7529

International Toll:

1-412-317-0088

Replay Access Code:

10133346


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 77 U.S. patents, Ormat’s power solutions have been refined and perfected under the most grueling environmental conditions. Ormat has 584 employees in the United States and 762 overseas. Ormat’s flexible, modular solutions for geothermal power and REG are ideal for 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 2,900 MW of gross capacity. Ormat’s current 917 MW generating portfolio is spread globally in the U.S., Kenya, Guatemala, Indonesia, Honduras, and Guadeloupe. Ormat expanded its operations to provide energy storage and energy management solutions, by leveraging its core capabilities and global presence as well as through its Viridity Energy Solutions Inc. subsidiary.

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’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 1, 2019 and from time to time, in Ormat’s quarterly reports on Form 10-Q that are filed with the SEC.

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 Statement of Operations
For the Three- and Six-Month Periods Ended June 30, 2019 and 2018
(Unaudited)

Three Months Ended June 30

Six Months Ended June 30

2019

2018

2019

2018

(In thousands, except per share data)

(In thousands, except per share data)

Revenues:

Electricity

$

129,079

$

122,179

$

271,987

$

254,668

Product

52,030

54,915

104,158

103,587

Other

2,956

1,205

6,958

4,067

Total revenues

184,065

178,299

383,103

362,322

Cost of revenues:

Electricity

73,775

81,236

151,318

154,718

Product

41,316

37,573

83,422

71,299

Other

3,827

2,028

9,037

5,471

Total cost of revenues

118,918

120,837

243,777

231,488

Gross profit

65,147

57,462

139,326

130,834

Operating expenses:

Research and development expenses

810

1,251

1,710

2,359

Selling and marketing expenses

3,276

3,712

7,141

7,411

General and administrative expenses

14,181

15,866

29,870

29,719

Write-off of unsuccessful exploration activities

119

Operating income

46,880

36,633

100,605

91,226

Other income (expense):

Interest income

420

189

713

302

Interest expense, net

(21,517

)

(15,846

)

(42,740

)

(30,190

)

Derivatives and foreign currency transaction gains (losses)

19

(529

)

491

(2,128

)

Income attributable to sale of tax benefits

4,637

3,556

12,401

10,917

Other non-operating expense, net

1,027

7,373

1,118

7,353

Income before income taxes and equity in losses of investees

31,466

31,376

72,588

77,480

Income tax (provision) benefit

3,529

(29,105

)

(10,510

)

(2,163

)

Equity in losses of investees, net

1,202

388

2,249

1,598

Net income

36,197

2,659

64,327

76,915

Net income attributable to noncontrolling interest

(2,259

)

(3,002

)

(4,443

)

(7,750

)

Net income attributable to the company Company's stockholders

$

33,938

$

(343

)

$

59,884

$

69,165

Earnings per share attributable to the Company's stockholders - Basic and diluted:

Basic:

Net Income

$

0.67

$

-0.01

$

1.18

$

1.37

Diluted:

Net Income

$

0.66

$

(0.01

)

$

1.17

$

1.36

Weighted average number of shares used in computation of earnings per share attributable to the Company's stockholders:

Basic

50,800

50,623

50,757

50,618

Diluted

51,094

50,958

51,058

51,001


Condensed Consolidated Balance Sheet
For the Periods Ended June 30, 2019 and December 31, 2018
(Unaudited)

June 30,

December 31,

2019

2018

(In thousands)

ASSETS

Current assets:

Cash and cash equivalents

$

110,665

$

98,802

Restricted cash and cash equivalents

70,974

78,693

Receivables:

Trade

135,756

137,581

Other

19,499

19,393

Inventories

38,880

45,024

Costs and estimated earnings in excess of billings on uncompleted contracts

27,352

42,130

Prepaid expenses and other

9,225

51,441

Total current assets

412,351

473,064

Investment in an unconsolidated company

71,047

71,983

Deposits and other

20,281

18,209

Deferred income taxes

130,461

113,760

Property, plant and equipment, net

1,963,086

1,959,578

Construction-in-process

306,810

261,690

Operating lease right of use

58,921

Financing lease right of use

15,469

Deferred financing and lease costs, net

1,988

3,242

Intangible assets, net

193,142

199,874

Goodwill

20,225

19,950

Total assets

$

3,193,781

$

3,121,350

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable and accrued expenses

$

115,011

$

116,362

Short-term revolving credit lines with banks (full recourse)

53,100

159,000

Billings in excess of costs and estimated earnings on uncompleted contracts

14,130

18,402

Current portion of long-term debt:

Limited and non-recourse:

Senior secured notes

37,343

33,493

Other loans

34,181

29,687

Full recourse

9,368

5,000

Operating lease liabilities

9,906

Finance lease liabilities

3,555

Total current liabilities

276,594

361,944

Long-term debt, net of current portion:

Limited and non-recourse:

Senior secured notes

355,151

375,337

Other loans

334,384

320,242

Full recourse:

Senior unsecured bonds

353,554

303,575

Other loans

73,336

41,579

Operating lease liabilities

15,296

Finance lease liabilities

13,000

Liability associated with sale of tax benefits

66,999

69,893

Deferred lease income

44,040

48,433

Deferred income taxes

79,837

61,323

Liability for unrecognized tax benefits

14,478

11,769

Liabilities for severance pay

18,058

17,994

Asset retirement obligation

43,094

39,475

Other long-term liabilities

5,499

16,087

Total liabilities

1,693,320

1,667,651

Redeemable non-controlling interest

8,820

8,603

Equity:

The Company's stockholders' equity:

Common stock

51

51

Additional paid-in capital

906,366

901,363

Retained earnings (accumulated deficit)

470,880

422,222

Accumulated other comprehensive income (loss)

(7,736

)

(3,799

)

1,369,561

1,319,837

Noncontrolling interest

122,080

125,259

Total equity

1,491,641

1,445,096

Total liabilities and equity

$

3,193,781

$

3,121,350

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
Reconciliation of EBITDA and Adjusted EBITDA
For the Three- and Six-Month Periods Ended June 30, 2019 and 2018
(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 costs, (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 table reconciles net income to EBITDA and Adjusted EBITDA for the three and six-month periods ended June 30, 2019 and 2018.

Three Months Ended June 30

Six Months Ended June 30

2019

2018

2019

2018

(in thousands)

(in thousands)

Net income

$

36,197

$

2,659

$

64,327

$

76,915

Adjusted for:

Interest expense, net (including amortization of deferred financing costs)

21,097

15,657

42,027

29,888

Income tax (benefit) provision

(3,529

)

29,105

10,510

2,163

Adjustment to investment in unconsolidated company:

our proportionate share in interest, tax and depreciation and amortization

2,579

4,454

5,240

7,984

Depreciation and amortization

35,751

31,859

70,617

61,296

EBITDA

$

92,095

$

83,734

$

192,721

$

178,246

Mark-to-market gains or losses from accounting for derivatives

(370

)

537

(1,579

)

1,499

Stock-based compensation

2,643

2,116

5,003

3,823

Insurance proceeds in excess of assets carrying value

(7,150

)

(7,150

)

Merger and acquisition transaction cost

500

1,571

500

2,670

Write-off of unsuccessful exploration activities

119

Adjusted EBITDA

$

94,868

$

80,808

$

196,645

$

179,207


ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
Reconciliation of Adjusted Net Income attributable to the Company's stockholders
For the Three-Month Periods Ended June 30, 2019 and 2018
(Unaudited)

Adjusted net income attributable to the Company's stockholders and Adjusted EPS are adjusted for one-time expense items that are not representative of our ongoing business and operations. The use of Adjusted Net income attributable to the Company's stockholders and Adjusted EPS is intended to enhance the usefulness of our financial information by providing measures to assess the overall performance of our ongoing business.

The following table reconciles Net income attributable to the Company's stockholders and Adjusted EPS for the three-month periods ended June 30, 2019 and 2018.

Three Months Ended June 30

2019

2018

(in millions)

Net income attributable to the Company's stockholders

$

33.9

$

(0.3

)

One-time tax items

(13.3

)

16.9

Adjusted Net income attributable to the Company's stockholders

$

20.6

$

16.6

Weighted average number of shares diluted used in computation of earnings per share attributable to the Company's stockholders:

51.1

51.0

Adjusted EPS

0.40

0.32

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

FNK IR

646-415-8972

rob@FNKIR.com