NRC Group Holdings Corp. (NRCG) Misses Q4 EPS by 4c, Revenues Miss; Offers FY19 Revenue Guidance Above Consensus

NRC Group Holdings Corp. (NYSE: NRCG) reported Q4 EPS of $0.09, $0.04 worse than the analyst estimate of $0.13. Revenue for the quarter came in at $107.3 million versus the consensus estimate of $108.96 million.

• Revenue increased 15% to $107.3 million.
• Net loss was $45.8 million, or $(1.83) per share1, compared to net income of $7.7 million, or $0.35 per share.
• Adjusted net income2, which is adjusted for one-time deal related costs, was $2.2 million, or $0.09 per share.
• Adjusted EBITDA2 increased 30% to $31.4 million.

“We ended 2018 on a strong note, capping a very transformative year for our company,” said NRCG Chief Executive Officer Chris Swinbank. “We generated strong revenuegrowth in 2018 and exceeded our previously communicated pro forma revenue and Adjusted EBITDA targets for the full year. This growth in revenue and earnings was driven by organic growth in our core business as well as contributions from recently completed acquisitions.”

“In 2018, we were focused on executing our growth strategy and achieved several important milestones. First, we merged legacy NRC, which is comprised of a uniquely positioned standby business and a diverse environmental services business, with my former company, Sprint Energy, which contributed high margin waste disposal assets to the combined company. We also executed and integrated several strategic acquisitions including Progressive Environmental Services (SWS), which expanded our geographic reach across both environmental services and emergency response services, Quail Run, which expanded our high margin well-site wastewater treatment capabilities within our Sprint business, and Clean Line, which broadened our recurring services offering across the U.K. Lastly, in October 2018, we became a public company through our transaction with Hennessy Capital Acquisition Corp. III. These transactions, along with our legacy businesses, have uniquely positioned NRCG, providing us the ability to drive strong organic growth across a base of diversified end-markets while generating industry-leading Adjusted EBITDA margins,” Swinbank added.

Swinbank continued, “Construction on both our Pecos County and Reagan County, TX waste disposal facilities is progressing according to plan, and we expect to commence operations starting in the second quarter of 2019 as previously communicated. Additionally, we refiled our permits for the Andrews County facility and expect to receive that permit in the second quarter of 2019. We believe the investments being made in waste disposal expansion will drive strong returns on invested capital, generate relatively rapid payback periods and quickly be accretive to EBITDA margins, as evidenced by the outstanding results for our Karnes County facility.”

“We also continue to execute the growth strategy in our Standby segment including expansion into Mexico. We expect to announce additional Mexico retainer contract wins soon, adding to the six retainer contracts already won in the region and further expanding our market leading position for retainer-based, emergency oil response services,” said Swinbank.

“Our environmental services business saw strong demand and double-digit organic revenue growth for 2018. Additionally, we are rolling out our new National Emergency Response capabilities. This program effectively outsources a customer’s emergency response capabilities to NRCG. We believe this is a natural fit given our existing global footprint, proven independent contractor network, existing 24/7 call center capabilities, and long-standing market expertise and safety record. Customers have been very receptive to this expanded service offering, which we hope to continue to grow and expand over time,” Swinbank added.

“Looking ahead to 2019, we anticipate continuing the momentum we started in 2018 and expect to drive strong organic revenue and robust Adjusted EBITDA growth in the coming year,” concluded Swinbank.

GUIDANCE:

NRC Group Holdings Corp. sees FY2019 revenue of $420-460 million, versus the consensus of $437.41 million.

• The Company continues to expect revenue in 2019 to be in the range of $420-$460 million compared to pro forma revenue3 of $389 million in 2018, an increase of 8%-18%, respectively.
• Adjusted EBITDA in 2019 is still expected to be in the range of $105-$115 million compared to $91 million in 2018, an increase of 15%-26%, respectively.
• Capital expenditures in 2019 are now expected to be in the range of $55-$60 million, compared to the $45 million previously anticipated and $25 million incurred in 2018.
• The increase in expected capital expenditures for 2019 is primarily due to shifting certain capital expenditures originally planned for 2018 into 2019.
• The Company also expects blasting and construction costs to increase to complete the Reagan facility, however, solid returns and rapid payback on invested capital are still anticipated.
• Approximately 55% of the expected capital expenditures for 2019 are related to initial waste disposal build-outs.

For earnings history and earnings-related data on NRC Group Holdings Corp. (NRCG) click here.

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