Q2’20 results exceeded expectations; Solid market position and portfolio strength to successfully navigate near-term challenges
ST. LOUIS, July 29, 2020 (GLOBE NEWSWIRE) --
A PDF accompanying this release is available at: http://ml.globenewswire.com/Resource/Download/188bedbc-da35-4bdb-979a-c40f5370795b
- Q2’20 earnings per diluted share were $0.12 compared to a loss per diluted share of $0.27 in Q2’19. Q2’20 adjusted (non-GAAP)1 earnings per diluted share were $0.25 compared to $0.37 in the prior year.
- Revenues in the quarter were $245 million. Despite year-over-year COVID-related disruptions and revenue declines across much of the business, the flagship Insituform North America business successfully grew revenues, new orders and backlog, underpinned by our leading position combined with the strength and stability of the North American municipal water and wastewater markets.
- Contract backlog as of June 30, 2020, was $669 million. Excluding exited or to-be-exited businesses, backlog increased 4% over the prior year, driven by increases across all segments and providing confidence in future earnings and cash flow stability.
- Year-to-date operating cash flows as of June 30, 2020, were $60 million, an increase of more than four times the prior-year level, which enabled more than $40 million in debt reduction in Q2’20 and drove a global ending cash balance of $96 million.
- The Company is targeting Q3’20 adjusted EPS of $0.25 to $0.35.
1Adjusted (non-GAAP) results exclude certain charges related to the Company’s restructuring activities, acquisition and divestiture-related expenses, goodwill and indefinite-lived intangible asset impairment, impairment of assets held for sale, project warranty accruals, credit facility amendment fees and impacts from the Tax Cuts and Jobs Act. Reconciliation of adjusted results is included below.
- Exceptional Infrastructure Solutions performance and strong cost and cash management across the business drove results higher than expectations and enabled an accelerated repayment of $2.5 million of temporary wage reductions to a portion of the North American workforce.
- Infrastructure Solutions strength helped offset a sharp decline in volumes and profitability at Energy Services as a result of COVID-related disruptions.
- Despite top-line disruptions across much of the business, the Company delivered a 50 basis point increase in adjusted gross margins and held adjusted operating margins flat compared to the prior year.
“Our ability to exceed performance expectations in the quarter amid unprecedented market disruption is a testament to the success of our efforts in reshaping Aegion to deliver improved earnings stability and cash flow generation in all market cycles. Our scale, unmatched North American market reach and focus on maintaining and rehabilitating critical infrastructure continue to be key differentiating factors in navigating COVID disruptions.
While the near-term outlook remains choppy, primarily in our Energy Services business, our long-term fundamentals are sound, underpinned by significant exposure to the more stable and resilient North American municipal water and wastewater markets, where we’ve seen double-digit growth year to date. Our balance sheet is in great shape and we are well positioned to emerge stronger from this period of uncertainty.”
Charles R. Gordon, President and Chief Executive Officer
Selected Consolidated Financial Highlights
|Quarter Ended June 30, 2020||Quarter Ended June 30, 2019|
|(in thousands, except earnings per share)||As Reported|
|Cost of revenues||191,442||79||191,521||251,303||(396||)||250,907|
|Definite-lived intangible asset impairment||957||(957||)||—||—||—||—|
|Impairment (gain) of assets held for sale||(658||)||658||—||11,946||(11,946||)||—|
|Acquisition and divestiture expenses||657||(657||)||—||804||(804||)||—|
|Restructuring and related charges||664||(664||)||—||2,974||(2,974||)||—|
|Other income (expense)||(3,511||)||(508||)||(4,019||)||(4,320||)||941||(3,379||)|
|Income (loss) before taxes on income||5,216||5,257||10,473||(3,861||)||19,289||15,428|
|Taxes on income (loss)||1,220||1,219||2,439||4,286||(747||)||3,539|
|Net Income (loss)|
(attributable to Aegion Corporation)
|Diluted earnings (loss) per share||$||0.12||$||0.13||$||0.25||$||(0.27||)||$||0.64||$||0.37|
Net income (loss) and diluted earnings (loss) per share includes non-controlling interest
(1) Q2’20 non-GAAP pre-tax adjustments:
- Restructuring: Gains for cost of revenues of $79 primarily related to recoveries of inventory write offs; charges for operating expenses of $2,966 primarily related to wind-down costs, reserves for potentially uncollectible receivables, fixed asset disposals and other restructuring-related charges; goodwill and definite-lived intangible asset impairment charges of $1,258 and $957, respectively, related to restructured operations; charges of $664 related to employee severance, extension of benefits, employment assistance programs and contract termination costs; and income for other income/expense of $933 related to net gains on disposal of certain restructured operations and the release of cumulative currency translation adjustments.
- Acquisition and Divestiture Expenses: Expenses of $657 incurred primarily in connection with the Company’s divestitures of Australia and Spain and its planned divestiture of its held for sale operations; gains of $658 related to recoveries of previously reserved customer receivables in our held for sale operations; and a working capital adjustment of $244 for the divestiture of Spain.
- Credit Facility Fees: Expenses of $669 related to certain out-of-pocket expenses and acceleration of certain unamortized fees associated with amending the Company’s credit facility.
(2) Q2’19 non-GAAP pre-tax adjustments:
- Restructuring: Charges for cost of revenues of $396 primarily related to inventory write offs; charges for operating expenses of $2,205 primarily related to wind-down expenses, reserves for potentially uncollectible receivables, fixed asset disposals and other restructuring-related charges; charges of $2,974 related to employee severance, extension of benefits, employment assistance programs and contract termination costs; charges for other expense of $941 related to net losses on disposal of certain restructured operations and the release of cumulative currency translation adjustments; and charges for foreign withholding taxes of $2,073 on the repatriation of foreign earnings.
- Acquisition and Divestiture Expenses: Charges of $11,946 related to the impairment of held for sale operations (CIPP operations in Australia and the Netherlands, Corrpower and United Mexico); and expenses of $804 incurred primarily in connection with the Company’s planned divestiture of its held for sale operations.
- Tax Cuts and Jobs Act: Expenses of $23 related to professional fees resulting from the Tax Cuts and Jobs Act.
Selected Segment Financial Highlights
|Quarter Ended June 30, 2020||Quarter Ended June 30, 2019|
|(in thousands)||As Reported (GAAP)||Adjustments|
|As Adjusted (Non-GAAP)||As Reported (GAAP)||Adjustments|
|As Adjusted (Non-GAAP)|
|Gross Profit Margin||26.0||%||26.0||%||25.0||%||25.0||%|
|Gross Profit Margin||25.4||%||25.2||%||21.5||%||22.1||%|
|Gross Profit Margin||7.3||%||7.3||%||13.9||%||13.9||%|
|Total Gross Profit||$||53,575||$||(79||)||$||53,496||$||67,437||$||396||$||67,833|
|Gross Profit Margin||21.9||%||21.8||%||21.2||%||21.3||%|
|Operating Income (Loss):|
|Total Operating Income||$||8,727||$||5,765||$||14,492||$||459||$||18,348||$||18,807|
(1) Includes non-GAAP adjustments related to:
- Infrastructure Solutions - (i) pre-tax restructuring charges associated with severance and benefit related costs, contract termination costs, wind-down costs, fixed assets disposals and other restructuring charges; and (ii) expenses incurred in connection with the divestitures of Australia and Spain.
- Corrosion Protection - pre-tax restructuring charges associated with severance and benefit related costs, contract termination costs, wind-down costs, fixed asset disposals and other restructuring charges.
- Energy Services - pre-tax restructuring charges associated with severance and benefit related costs, reserves for potentially uncollectible receivables, goodwill and definite-lived intangible asset impairment charges, and other restructuring charges.
- Corporate - (i) pre-tax restructuring charges primarily associated with severance and benefit related costs and legal expenses; and (ii) divestiture expenses related to Australia and Spain and other acquisition and divestiture activities.
(2) Includes non-GAAP adjustments related to:
- Infrastructure Solutions - (i) pre-tax restructuring charges associated with severance and benefit related costs, contract termination costs and other restructuring charges; (ii) expenses incurred in connection with the divestiture of the CIPP business in Australia; and (iii) impairment of assets held for sale.
- Corrosion Protection - (i) pre-tax restructuring charges associated with severance and benefit related costs, contract termination costs and other restructuring charges, (ii) acquisition and divestiture expenses; and (iii) impairment of assets held for sale.
- Energy Services - pre-tax restructuring charges associated with severance and benefit related costs and other restructuring charges.
- Corporate - (i) pre-tax restructuring charges primarily associated with severance and benefit related costs and legal expenses; and (ii) acquisition and divestiture expenses.
About Aegion Corporation (NASDAQ: AEGN)
Aegion combines innovative technologies with market-leading expertise to maintain, rehabilitate and strengthen infrastructure around the world. For nearly 50 years, the Company has played a pioneering role in finding innovative solutions to rehabilitate aging infrastructure, primarily pipelines in the wastewater, water, energy, mining and refining industries. Aegion also maintains the efficient operation of refineries and other industrial facilities. Aegion is committed to Stronger. Safer. Infrastructure.® More information about Aegion can be found at www.aegion.com.
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Aegion’s forward-looking statements in this news release represent its beliefs or expectations about future events or financial performance. These forward-looking statements are based on information currently available to Aegion and on management’s beliefs, assumptions, estimates or projections and are not guarantees of future events or results. When used in this document, the words “anticipate,” “estimate,” “believe,” “plan,” “intend, “may,” “will” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Such statements are subject to known and unknown risks, uncertainties and assumptions, including those referred to in the “Risk Factors” section of Aegion’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 2, 2020, and in subsequently filed documents, and, in particular, the impact of the current COVID virus outbreak and the evolving response thereto both on the Company generally and on other risks described therein. In light of these risks, uncertainties and assumptions, the forward-looking events may not occur. In addition, Aegion’s actual results may vary materially from those anticipated, estimated, suggested or projected. Except as required by law, Aegion does not assume a duty to update forward-looking statements, whether as a result of new information, future events or otherwise. Investors should, however, review additional disclosures made by Aegion from time to time in Aegion’s filings with the Securities and Exchange Commission. Please use caution and do not place reliance on forward-looking statements. All forward-looking statements made by Aegion in this news release are qualified by these cautionary statements.
Information regarding the impact of the Tax Cuts and Jobs Act consists of estimates which are forward looking and subject to change. The Company anticipates additional guidance, both at the federal and state level, to be forthcoming in 2020. As such, the impacts of the legislation may differ from our current estimates, interpretations and assumptions, possibly materially, and the amount of the impact on the Company may accordingly be adjusted over the course of 2020.
About Non-GAAP Financial Measures
Aegion has presented certain information in this release excluding certain items that impacted income, expense and earnings per share. The adjusted earnings per share in the quarters and six months ended June 30, 2020 and 2019 exclude charges related to the Company’s restructuring activities, acquisition and divestiture-related expenses, goodwill and indefinite-lived intangible asset impairment, impairment of assets held for sale, project warranty accruals, credit facility amendment fees and impacts related to the Tax Cuts and Jobs Act.
Aegion management uses such non-GAAP information internally to evaluate financial performance for Aegion’s operations because Aegion’s management believes such non-GAAP information allows management to more accurately compare Aegion’s ongoing performance across periods. As such, Aegion’s management believes that providing non-GAAP financial information to Aegion’s investors is useful because it allows investors to evaluate Aegion’s performance using the same methodology and information used by Aegion management.
Aegion® and Stronger. Safer. Infrastructure.® and the associated logos are the registered trademarks of Aegion Corporation and its affiliates.
David F. Morris, Executive Vice President and Chief Financial Officer