Infrastructure and Energy Alternatives, Inc. (IEA) Reports Q2 EPS of 14c; Announces Acquisition of Saiia and The ACC Companies

Infrastructure and Energy Alternatives, Inc. (NASDAQ: IEA) reported Q2 EPS of $0.14 vs $0.17 last year. Revenue for the quarter came in at $174.1 million, versus $106.04 million reported last year.

GUIDANCE:

Infrastructure and Energy Alternatives, Inc. sees FY2018 revenue of $685-730 million.

For the full year 2018, the Company now expects revenue of $685 million to $730 million and Adjusted EBITDA of $64 million to $70 million. This change to prior guidance primarily reflects the delay of commencement of construction on two projects from the fourth quarter of 2018 to the first quarter of 2019 and an anticipated reduction in gross margins caused by higher construction costs and compressed construction schedules. For a reconciliation of our current guidance to prior guidance, please see the accompanying tables at the end of this release. The Company projects adjusted free cash flow from operations of $40 million to $45 million. Fiscal 2018 guidance does not take into account the acquisition of ACC discussed above or any additional acquisitions that may occur in the second half of 2018.

The Company currently anticipates that the proposed transaction with ACC will close on or about the end of the third quarter and will contribute approximately $55 million - $65 million in revenue and $5 million - $7 million in Adjusted EBITDA to the Company’s fourth quarter financial results. On a combined basis not giving effect to any estimated cost savings or synergies, we estimate that the companies would have had revenue of approximately $970 million to $1 billion and Adjusted EBITDA of approximately $96 million to $106 million for fiscal year 2018, if the acquisition had occurred at the start of the year.

Backlog as of June 30, 2018 totaled $1.0 billion, up from $348.0 million at the end of the second quarter 2017. Nearly half of this backlog, or approximately $445 million, relates to revenue anticipated to be recognized in the second half of 2018. This backlog is supported by a pipeline of more than $1.2 billion of high-probability opportunities (i.e., project opportunities for which we have been shortlisted and which we believe we have a high probability of being awarded).

Acquisition of Saiia and The ACC Companies

As an important step in IEA’s long-term diversification and growth strategy, the Company is pleased to announce an agreement to acquire Saiia and the ACC Companies (together “ACC”) in an all-cash transaction for $145 million (subject to customary adjustments), which equates to a 4.3x multiple of projected Adjusted EBITDA of $34 million for 2018 (based upon the midpoint of the range of $32 million to $36 million and before giving effect to any synergy-related cost savings that may be realized following its acquisition by IEA). Saiia is a provider of environmental and industrial site services in the Southeastern U.S. The ACC Companies are providers of heavy and light civil infrastructure services in the Mountain West, Southwest and West Coast regions of the U.S. This acquisition provides the Company with a strong and established presence in the industrial and environmental engineering markets, enhanced civil construction capabilities and an expanded domestic footprint.

“We are very proud to announce the acquisition of ACC, a market leader in specialty engineering and construction, that is consistent with our stated strategy to expand IEA’s growth potential through selective, strategic M&A,” commented Mr. Roehm. “With ACC’s complementary skill set, labor, and equipment, we can leverage a scaled organization to provide full turn-key solutions to solve some of the most complex and critical environmental and infrastructure projects across the country. Saiia’s long-term, recurring contracts, combined with the ACC Companies focus on publicly-funded projects, will contribute predictable and stable revenue streams to our company. Together, we will benefit from an expanded national footprint, and we see many opportunities to grow IEA’s current heavy civil and infrastructure contracts through the addition of the ACC Company’s services.”

“We expect that, upon closing, ACC will add approximately $265 million to our total backlog, and it will contribute revenue of approximately $285 million - $300 million and Adjusted EBITDA of approximately $32 million - $36 million in 2018,” Mr. Roehm further stated. “This acquisition provides IEA with a greater opportunity than ever before for continued growth and further diversification of our end markets, customers, and geographic reach, while creating significant value for our shareholders.”

Saiia specializes in environmental remediation and industrial maintenance in the power generation, mining and mineral, and pulp and paper end-markets. The ACC Companies provide heavy and light civil infrastructure services for public and private projects, including high-altitude road and bridge construction, complex bridge rehabilitation and specialty paving as well as highly specialized engagements for the mining, energy, and waste management industries.

The Company intends to fund the transaction and repay its existing credit facility with borrowings under a new credit facility, for which it has obtained a debt commitment letter (which is subject to customary terms and conditions). The new credit facility includes a $200 million term loan available to finance the transaction and a $50 million asset based revolving credit facility. This new credit facility will refinance and replace the Company’s existing facility. The transaction is expected to close at the end of the third quarter of 2018, subject to customary closing conditions.

The Company continues to actively pursue additional M&A opportunities which, if completed, could offer the opportunity for incremental growth and diversification during 2018.

Kirkland and Ellis LLP acted as legal counsel to IEA. Jefferies Finance LLC is providing financing for the transaction on behalf of IEA. Cowen and Company, LLC acted as the financial advisor to ACC on the transaction. Hunton Andrews Kurth LLP acted as legal counsel to ACC.

For earnings history and earnings-related data on Infrastructure and Energy Alternatives, Inc. (IEA) click here.

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