Ormat Technologies(ORA) - 2024 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements Ormat reported strong Q1 2024 financial results with revenues up 21% to $224.2 million and net income increasing to $38.6 million Condensed Consolidated Balance Sheets Total assets grew to $5.52 billion by March 31, 2024, driven by acquisitions and increased property, plant, and equipment Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $609,235 | $646,003 | | Property, plant and equipment, net | $3,220,246 | $2,998,949 | | Goodwill | $151,122 | $90,544 | | Total assets | $5,516,844 | $5,208,279 | | Total current liabilities | $546,254 | $537,012 | | Total long-term debt, net | $1,817,473 | $1,568,680 | | Total liabilities | $3,030,213 | $2,756,693 | | Total equity | $2,476,519 | $2,440,987 | Condensed Consolidated Statements of Operations and Comprehensive Income Total revenues increased 21.0% to $224.2 million in Q1 2024, with net income rising 32.9% to $38.6 million Q1 2024 vs. Q1 2023 Performance (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues | $224,166 | $185,232 | | Electricity Revenue | $191,253 | $170,310 | | Product Revenue | $24,832 | $10,042 | | Energy Storage Revenue | $8,081 | $4,880 | | Gross profit | $78,810 | $76,069 | | Operating income | $52,583 | $53,166 | | Net income attributable to Company's stockholders | $38,587 | $29,029 | | Diluted EPS | $0.64 | $0.51 | Condensed Consolidated Statements of Cash Flow Operating cash flow more than doubled to $115.2 million, while investing activities increased due to a $274.6 million acquisition Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $115,209 | $56,456 | | Net cash used in investing activities | ($377,834) | ($111,177) | | Cash paid for business acquisition, net of cash acquired | ($274,631) | $0 | | Capital expenditures | ($103,386) | ($106,877) | | Net cash provided by financing activities | $273,944 | $350,381 | Notes to Condensed Consolidated Financial Statements Notes detail the $274.6 million Enel acquisition, new debt, customer concentration, and a disputed $79.0 million tax demand - On January 4, 2024, the Company acquired a portfolio of geothermal and solar assets from Enel Green Power North America for a total cash consideration of $274.6 million. The acquired assets contributed $9.4 million to revenues for the period[25][32] - To finance the Enel acquisition and other purposes, the company entered into several new loan agreements in Q1 2024: a $75 million loan with Hapoalim Bank, a $125 million loan with HSBC Bank, and issued $135.1 million in Mammoth Senior Secured Notes[35][36][38] - The company faces significant customer concentration risk, with SCPPA (24.7%), Sierra Pacific/Nevada Power (16.8%), and KPLC (12.2%) accounting for a combined 53.7% of total revenues in Q1 2024[49] - Subsequent to the quarter end, on April 23, 2024, the Company's Kenyan branch received a preliminary demand for approximately $79.0 million in back taxes from the Kenya Revenue Authority (KRA), which the Company believes is without merit[105] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights 21% revenue growth, Adjusted EBITDA of $141.2 million, and planned $472.0 million capital expenditures Results of Operations Q1 2024 total revenues increased 21.0% to $224.2 million, driven by segment growth, though gross margin declined to 35.2% Revenue by Segment - Q1 2024 vs Q1 2023 (in millions) | Segment | Q1 2024 | Q1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Electricity | $191.3 | $170.3 | 12.3% | | Product | $24.8 | $10.0 | 147.3% | | Energy Storage | $8.1 | $4.9 | 65.6% | | Total | $224.2 | $185.2 | 21.0% | - The increase in Electricity segment revenue was mainly due to the Enel acquisition ($9.4 million), the Heber 1 plant resuming operations ($6.2 million), the new North Valley plant ($3.6 million), and higher generation at Puna ($4.2 million)[147] - Cost of revenues for the Electricity segment increased by $22.0 million, partly due to $6.7 million in business interruption insurance proceeds that benefited the prior-year period but were absent in 2024[153] - Net interest expense increased by $7.3 million to $31.0 million, primarily due to new loans taken out to finance acquisitions and growth[161] Liquidity and Capital Resources Strong liquidity with $201.5 million cash and $324.3 million unused capacity supports $635.3 million in projected capital needs - As of March 31, 2024, the company had $201.5 million in cash and cash equivalents and $324.3 million in unused borrowing capacity[170] - Estimated capital needs for the rest of 2024 total approximately $635.3 million, comprising $472.0 million for capital expenditures and $163.3 million for debt repayment[171] - The company is subject to financial covenants, including maintaining equity of at least $750 million (actual: $2,476.5 million) and a net debt to Adjusted EBITDA ratio below 6.0 (actual: 4.13)[177] Non-GAAP Measures: EBITDA and Adjusted EBITDA Adjusted EBITDA increased to $141.2 million in Q1 2024, reflecting adjustments for non-cash items and M&A costs Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income | $40,350 | $33,461 | | Interest expense, net | $29,129 | $21,780 | | Income tax provision (benefit) | ($147) | $8,885 | | Depreciation, amortization and accretion | $61,676 | $52,396 | | Other adjustments | $3,352 | $2,982 | | EBITDA | $134,360 | $119,504 | | Mark-to-market (gains) or losses | $813 | $993 | | Stock-based compensation | $4,769 | $2,990 | | Merger and acquisition transaction costs | $1,299 | $0 | | Adjusted EBITDA | $141,241 | $123,487 | Quantitative and Qualitative Disclosures About Market Risk The company manages market risks including electricity price volatility, interest rate fluctuations, and foreign currency exposure - The company's exposure to electricity price volatility is limited because the majority of its long-term PPAs have fixed or escalating rates. However, energy storage projects are exposed to merchant market prices[212] - As of March 31, 2024, 100% of consolidated long-term debt was at fixed interest rates, but $100.0 million in short-term commercial paper bears a variable rate (SOFR + 1.1%)[214] - The company is exposed to foreign currency risk, particularly the U.S. dollar versus the New Israeli Shekel (NIS) and the Euro. It uses forward contracts and cross-currency swaps to mitigate this exposure[216] Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures as of March 31, 2024, with no material changes - Based on an evaluation as of March 31, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[232] - There were no material changes to the company's internal control over financial reporting during the first quarter of 2024[233] PART II — OTHER INFORMATION Legal Proceedings The company is involved in ordinary legal proceedings and an ongoing anti-corruption investigation, cooperating with authorities - The company is involved in ordinary course legal proceedings, which management does not expect to have a material impact[95] - A Special Committee continues to investigate claims from a short seller's report concerning anti-corruption compliance, and the company is providing information to the SEC and DOJ[96] Risk Factors No material changes to the company's risk factors were reported during the quarter compared to the 2023 Annual Report - During the quarter, there have been no material changes in the company's risk factors from those disclosed in the 2023 Annual Report on Form 10-K[237] Other Part II Items No unregistered equity sales, defaults on senior securities, or mine safety disclosures were reported for the period - No unregistered sales of equity securities, defaults upon senior securities, or mine safety disclosures were reported for the period[238][239][240]