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spk09: Good morning, and welcome to Infrastructure and Energy Alternatives' fourth quarter and full year 2020 conference call. I'd like to note that all participants on today's call are in listen-only mode. And with that, I will now turn the call over to Kimberly Estrichan with Investor Relations. Kimberly, please go ahead.
spk01: Hello, and thank you for joining us today to discuss IEA's fourth quarter and full year 2020 financial results. With us from management are J.P. Rehm, President and Chief Executive Officer of and Pete Morbake, Executive Vice President and Chief Financial Officer. Before turning the call over to management, I would like to note that today's discussion contains forward-looking statements about IEA's future growth and financial expectations. Any forward-looking statements should be considered in conjunction with the cautionary statements in yesterday's press release and the risk factors included in the company's SEC filings. Except as required by law, IEA undertakes no obligation to update its forward-looking statements after today's call. Since management will be presenting some non-GAAP financial measurements as references, including adjusted EBITDA, the appropriate GAAP financial reconciliations can be found in yesterday's press release. And with that, I'll now turn the call over to J.P. Rehm, Chief Executive Officer.
spk00: Please go ahead, J.P.
spk03: Well, thank you, Kimberly, and good morning to everyone. We appreciate you joining our earnings conference call. While this is a call about the fourth quarter, I want to start with the full 2020 results. IEA achieved record revenues and record adjusted EBITDA in 2020. Our consolidated revenues were $1.8 billion for 2020, up 20.1% year over year, and our adjusted EBITDA was almost $128 million. of 27.2% year over year. Both revenues and adjusted EBITDA were above the high end of our guidance range. We were able to achieve these results in a year overshadowed by the COVID-19 pandemic. The services we provide are considered essential infrastructure, but we were not sheltered from the impacts of COVID-19. And we continue to see an impact to our daily workflows as we abide by increased safety protocols and practice social distancing at our project sites. It is difficult to precisely measure the inefficiencies that have resulted from these extra precautions, but they do increase costs overall. Last year, we also experienced pandemic-related delays in delivering materials and turbines at some projects, but we were able to complete our projects as scheduled. Even with the impact of the pandemic, our teams responded and we improved our safety metrics to a total reportable incident rate of just 0.61 with almost eight and a half million man hours worked. That rate is about 40% lower than the industry standard. Our backlog also remained strong and totaled 2.1 billion at the end of the year. The final approval process for some projects has been slower than expected and project start dates have been delayed by one to two quarters in many instances. Unlike the end of 2019 when we saw a push to begin wind and solar construction due to the then impending step down of the tax credits, the extension of the PTC for wind and ITC for solar this past December may reduce some of the urgency to complete renewable projects in the very near term. Bidding activity remains high and none of our projects have been canceled as renewable energy continues to expand as part of the overall power generation in the country. Enabling sustainability is a cornerstone of our business and we are committed to environmental, social, and governance, or ESG, matters and look forward to issuing our first ESG report in the coming months. IEA was added to a number of sustainability equity indices in the past year, including the Wilder Hill Clean Energy Index, the CIBC Atlas Clean Energy Index, and Ardor Global Alternative Energy Index, reflecting the fact that approximately 70% of our revenue is derived from activities that enable energy transitions. Last month, we completed a successful secondary stock offering which allowed Oak Tree affiliates to sell almost 150 million of stock, reducing their ownership percentage of common shares to less than 5%. The transaction increased our free flow, improved the trading liquidity of our stock, and allowed us to meet our goal of adding institutional holders to our shareholder base. As part of this transaction, Oak Tree's representative on our board, Peter Jonah has stepped down. I want to thank Peter for his many contributions to the success of IEA. Let me now turn to our business lines. Our renewables segment, which accounted for 65% of overall revenues in 2020, generated revenues of $1.4 billion for the year, an increase of 37% over 2019, as we successfully completed a larger number of wind and solar projects. We continue to see near-term opportunities in our wind market. For example, in the last three months since December, we secured three wind projects in the state of Illinois. In December, we were awarded a 185 megawatt contract for the Glacier Sands Wind Farm in Mason County. Then in January, we won a 300 megawatt contract for the Lincoln Land Wind Farm in Morgan County and a 118 megawatt project for the Shady Oaks II Wind Farm in Lee County. These projects will bring the state of Illinois closer to achieving its goal of sourcing 25% of its total electricity from renewables by 2025. Our solar division is also performing very well, and revenues grew to nearly $110 million in 2020, up from $3 million in 2019. Our strategy has been to grow this business to meet the burgeoning demand for solar. In January, we secured a 100-megawatt contract to construct the Lumpkin Solar Farm in Stewart County, Georgia. The Lumpkin Solar Farm is part of a portfolio of projects that will supply renewable energy to a Facebook data center in Georgia. We're seeing a growing demand from corporations for renewable generation, and interestingly, corporate off-takers were responsible for 20% of the power purchase agreements signed in the first half of 2020. Last week, we also announced the addition of a team of 10 employees from Merit SI to our solar operations. The team are experts in sustainability and energy infrastructure, and we expect them to complement our solar engineers and contractors. With the addition of this team, we now have in-house access to development support, pre-bid optimization, and added expertise in plant performance, battery storage, and SCADA controls to enhance our solar offerings to our client base. For us, a key differentiator in successfully bidding and performing solar projects is the ability to provide engineering capabilities, especially at the inception of the project. That capability is expected by our utility scale solar customers, many of whom are the same as our utility scale wind customers. In addition, as we discussed our third quarter call at the end of last year, we added a wind services business to our renewables segment to work on major component exchanges, up tower repair, and blade and composite repair. They also provide third-party commissioning and troubleshooting services. We are pleased with their rapid start and expect them to make a meaningful contribution this year. Turning now to our second segment, our specialty civil segment accounted for 35% of total revenues in 2020. or $610 million, down slightly compared to the prior year, mainly due to minor changes in the mix and timing of construction projects as compared to 2019. Our environmental remediation business line and our rail business line both experienced slight declines in annual revenues, primarily due to the impact of the pandemic. Nevertheless, we continue to win solid work in these areas of our business. For example, we added remediation work in the southern U.S., including an on-site hauling project in a quarry in Georgia and construction of a new landfill cell in Alabama. We believe that we will see new opportunities in our coal ash remediation business in 2021. Our transportation business revenues increased slightly in 2020, and during the fourth quarter, our project wins ranged from roadway and bridge rehab projects in the west and mountain west regions of the United States to drainage and structural erection projects in the Midwestern U.S. Before I get into more detail on the growth drivers for our business going forward, I'll now turn this call over to Pete Morbick, our CFO, to discuss fourth quarter 2020 financial results and 2021 guidance.
spk11: Pete? Thanks, JP, and thanks to everyone for listening. As we issued our earnings press release, and filed our Form 10-K yesterday, I promise not to repeat all those numbers. As expected, revenues, gross profit, and gross profit margin all decreased in the fourth quarter of 2020 compared to the fourth quarter of 2019. The decrease resulted from the timing of our renewal projects in 2020 compared to 2019. Historically, first quarter is lowest in revenue and profitability, as we begin projects and winter weather reduces construction activity. Second and third quarter revenue and profitability increase while we complete many projects in the fourth quarter and construction begins to slow down. This pattern changed at the end of 2019 as customers started projects early to ensure they would receive the benefits of the PTC, which was scheduled to step down in 2020. Earlier starts and excellent winter weather in late 2019 and early 2020 resulted in record revenue and profitability for the fourth quarter of 2019 and first quarter of 2020. This allowed us to achieve mechanical completion for many projects earlier in the calendar year than we have historically, which in effect accelerated the cycle. Our revenues and profits may fluctuate from quarter to quarter, For the year, we achieved record revenue of $1.75 billion, of 20.1% from 2019, and the gross profit margin for our renewable segment improved by 50 basis points. As a percentage of revenue, SU&A expenses were 6.6% in the fourth quarter and 6.5% for the full year. In 2019, these percentages were 6.8%, for the fourth quarter and 8.2% for the year. While our revenues have increased by almost 125% in the past two years, our SG&A expenses have risen much more slowly. We expect that we will remain reasonably close to our current run rate as we look to improve our information and technology systems to reflect a larger company. Before turning to backlog and 2021 guidance, some other financial highlights. In the fourth quarter, our cash flow from operations was a positive $116.4 million, and for the year, cash flow from operations was $57.7 million. It seems a little counterintuitive, but as we complete projects and our construction operations slow, we generate more cash as working capital needs decrease. For the year, our capital expenditures were $35.9 million, of which $26.2 million was financed through financing leases. At this point, we expect that capital expenditures will approximate 2% of our 2021 revenues. Interest expense for the quarter totaled $14.4 million, down from $15.4 million in the fourth quarter of 2019. For the year, interest expense increased to 61.7 million from 51.3 million in 2019. In the fourth quarter, we paid 6.5 million in dividends on our Series B preferred stock. And for the year, we paid 19.6 million on the Series B stock as dividends. Adjusted EBITDA for the quarter totaled $29.1 million compared to 47.1 million in Q4 2019. On a full year basis, adjusted EBITDA of 127.9 million was above the high end of our expectations and up approximately 27% year over year. As of December 31st, 2020, our balance sheet showed cash of $164 million. We had no cash drawn on our $75 million revolving credit facility but we did have outstanding letters of credit of $7.8 million, leaving $67.2 million available. Our term loan balance remains at $173.3 million, and we have no amortization payments due until December 2022. Last month, we took a first step to improve our capital structure. Given the rapid changes in the capital markets and our financial performance over the past two years, We are reviewing alternative approaches to improving our complex capital structure. Now turning to backlog. In the fourth quarter, we added $162 million to our backlog for a total of $2.1 billion, close to where we were at the end of 2019. We expect to recognize $1.6 billion of that backlog during 2021. We've seen a delay in the awarding of projects and notices to proceed. We have not experienced significant cancellations in projects, nor have we lost projects to competitors. Finally, on the guidance, let me start with a metaphor. This past Sunday, the sun was streaming into my Indianapolis apartment when I woke up. The sky was blue and it looked perfect outside. However, when I started my Sunday walk, it was 23 degrees, and that's just plain cold. Similarly, there are many positive drivers for our business, as JP will discuss in a few moments. But it is still cold. The pandemic still exists and can continue to impact our operations and contract awards. Significant delays in customer-provided wind turbine generators and other equipment could adversely impact our schedule. And as usual, severe weather events, such as the cold in Texas, can impact our performance. The potential effect of these unknowns makes us cautious at the start of this year. On our last earnings call, I said that we expected overall revenue growth in 2021, but revenues in the first quarter would be lower compared to the first quarter of 2020, and that as much as 65% of revenues will come in the second and third quarters. That remains our expectation. We now expect 2021 revenues between $1.75 billion and $1.95 billion in adjusted EBITDA in the range of $130 to $140 million. Thank you, and I'll now turn the call back to JP for his closing remarks. Well, thank you, Pete.
spk03: With our bidding opportunities remaining high, we continue to see strong prospects for growth across both of our operating segments. In the renewable space, IEA is a direct beneficiary of the growing investment in the wind and solar markets. Despite the global pandemic, 2020 set a new high for utility scale solar projects in the United States, with total solar project counts surpassing records previously set in 2016. The U.S. Energy Information Administration, or EIA for short, anticipates this trend in renewable growth will continue in 2021 with 39.7 gigawatts of new energy to go into commercial operation this year. Solar and wind are expected to be 39% and 31% respectively. That means that 70% of the new energy will come from carbon-free generation. Further driving the renewable energy markets in December, there was a one-year extension of the 60% production tax credit for wind and a two-year extension of the investment tax credit for solar at 26% of the project's value. For both wind and solar, projects placed in the service by 2025 are eligible for these extended credits. We are hopeful that the passage of a federal stimulus bill will extend these credits. The demand for new renewable work is definitely growing. Over the next three years, the EIA believes the 54 gigawatts of fossil and nuclear energy will be retired. This retirement represents a $17 billion engineering, procurement, and construction opportunity for the renewable industry. And as a pure play utility scale wind and solar constructor, IEA expects the benefit. In addition to tax credit extensions, the current administration is also a strong catalyst for the renewable industry. President Biden campaigned on a national plan to achieve 100% clean energy by 2035. And since Biden took office, the U.S. has rejoined the Paris Climate Accord and reinstated key EPA regulations that support the growth of the renewables industry. The restoration of the Obama Clean Power Plan, or a mandate for federal agencies to procure 100% renewable energy sources, would help further drive the renewable industry forward. Beyond renewables, we are also seeing strong growth drivers for our specially civil business, In terms of environmental remediation work, IEA sees continued opportunities to increase our coal ash work, including the safe closure of coal ash ponds, the relocation of coal ash residuals, and the construction of new landfills to comply with environmental regulations. There are more than 700 coal ash impoundments and landfills in the US today, but only 15% have been closed or remediated. The coal ash remediation opportunity in this country could exceed $50 billion over the next 10 years alone, and at present, there are few companies of the scale and the experience needed to serve that market. In the rail space, aging commuter infrastructure combined with anticipated growth in freight volume of 36% over the next decade is actively driving the opportunity for additional rail improvement projects. The Association of American Railroads has stated that the railroads are three to four times more efficient than trucks as a single freight train can replace several hundred semi trucks, which would contribute to significant congestion relief on our roadways, and more importantly, a reduction of 75% in carbon emissions. With the growing trend towards improving the environmental benefits of our transportation systems nationwide, The recent approval of Pete Buttigieg, a fellow Hoosier, I should note, as Transportation Secretary, and President Biden won in his $2 trillion infrastructure bill to ensure that America has the cleanest, safest, and fastest rail system, we anticipate that the demand for rail infrastructure will grow. For transportation opportunities, the American Road and Transportation Builders Association noted in their most recent report that one-third of the U.S. bridges and highways are in need of repair, with an estimated $164 billion of work required to get our nation's bridges and highways just up to par. State departments of transportation are expected to receive $9.8 billion in funding through the COVID-19 relief measure that passed in late 2020. There is also the increased potential for highway grants and funding for larger infrastructure projects, which generally has support from both parties. Over the past two years, IEA has gone from just under $800 million in revenues to nearly $1.8 billion in revenues. We have done so through both a combination of organic and acquisitive growth. This growth supports our thesis that we are in the right end markets, supporting the right clients, at the right time in our nation's history. The political and environmental drivers for IEA's business, which is enabling the energy transition of our country and improving the U.S. transportation infrastructure could not be any stronger. Thank you again for joining us this morning for our fourth quarter call. I want to thank the contributions made by all of IEA's employees during the past year. And since this is Women in Construction Week, especially highlight those made by our incredible female employees. As we look to capitalize on our opportunities and grow our business, we look forward to continuing to deliver strong results for all of our shareholders. This concludes our prepared remarks. Operator, would you please open the call to questions?
spk09: Thank you. At this time, we'll be conducting the question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.
spk08: And once again, that's star 1 to ask a question today. Thank you. Once again, that's star one to ask a question. Thank you.
spk09: Our first question comes from the line of Brent Salmon with DA Davidson. Please proceed with your questions.
spk05: Thanks. Good morning, JP and Pete.
spk06: Hey, Brent. Good morning, Brent. I guess first question, you guys did a billion dollars in the wind business in 2020, which is extraordinary, really great year. How do you think about that business in 2021, particularly in context of the revenue outlook?
spk03: We would expect similar outcomes in 2021. The industry is expecting a similar build-out depending on who you listen to. You hear anywhere from 14 to 17 gigawatts for 2021, so I would, from the activity that we've seen, we would, you know, our analysis of the market is very similar to what we saw in 2020.
spk06: Okay. And, JP, the wind maintenance business, you know, I know it's starting sort of from scratch here. Maybe could you just talk about what you're anticipating from the business in 2021, particularly any sort of targets you're hoping the business can get to?
spk03: Well, we haven't guided to a certain target for that segment of our business, Brent, but what I can tell you is management's extremely happy with how that's getting out of the ground, so to speak, and very pleased with the management team that we brought together. I think as we said in our remarks, we do believe that it'll be a meaningful contributor to both revenue and the bottom line for this year, but We're not prepared to come out with specific guidance for that business segment.
spk06: Okay. On the civil side, JP, I just want to come back to that. What areas are you most optimistic about for growth in 2021? I mean, assuming we get some sort of an infrastructure bill, I can't imagine it's necessarily a benefit this year, but certainly into the out years. But maybe what do you see that you're most excited about in that business? you know, for this year in particular?
spk03: Especially civil, you know, I do think that, you know, as a benefit of the energy transition, you know, our environmental business, which is embedded in our especially civil segment is ripe for growth. You know, we believe we're at the kind of infant stage of that market. As we talked in the commentary, only 15% of the coal ash to date has been remediated. in this country. We believe that it's in excess of a $50 billion addressable market over the next decade. So we do see some opportunities of relatively decent size coming in that market this year. We hope to get our fair share of those. But that doesn't diminish areas of our other business. Obviously, rail business, we continue to see quite a bit of opportunities as we continue to not only service our freight rail customers, but expand our reach into passenger rail. And quite frankly, as we kind of wind up that segment in the transportation highway and bridge side, we've been cautiously optimistic all along about what kind of spins out of the COVID pandemic in regards to the consumption taxes and such that drives that market. But, you know, so far, we're still seeing brisk bidding opportunity. And I know, I think we've experienced some assistance in the COVID relief legislation that was passed back in December for that industry. So, you know, so far, so good as far as opportunities going forward and especially civil.
spk06: Okay. Last one for me, just the, you know, you talked about it, Pete, the cold across the country and all the stuff that's been going on. Any major disruptions to some of your ongoing projects? I know seasonally this is a pretty slow period for you anyway, but anything out of the ordinary we should be aware of?
spk03: Well, you know, just like probably most anybody that's working in Texas, we did see, you know, slow down of work during that period. climactic event that I think everybody's well aware of a few weeks ago.
spk02: So certainly we were short-term impacted by that, but other than that, no. Okay.
spk06: Thank you, guys.
spk09: Thank you, Brent. Our next question is from the line of Noel Dills with Stiefel. Pleased to see with your question.
spk07: Hi, guys. Congrats on a great year and thanks for taking my questions. Good morning. Good morning. So first, I just wanted to ask about, you know, these delayed awards. You know, obviously, a lot of positive things are on the horizon in terms of, you know, what I think Biden is looking to do with renewable energy. But, you know, sometimes ahead of, you know, anticipation of stimulus or some sort of support for the market, you can see awards slow. Do you think any of that is going on, or do you think this is more related to, you know, COVID and that sort of thing? That would be helpful. Thanks.
spk03: We think it's almost entirely related to COVID. You know, just everything works a little slower in today's world. You know, it takes a little longer for our clients to get permits up front, but I don't know of a client of ours yet, particularly in the renewable side of our business that's back in the office like we are. So, you know, their internal processes for approvals and such just work a lot slower. And, of course, our, you know, our clients require financing. So, you know, the finance market's moving just a little slower. So nothing alarming, but, you know, and today we're in that kind of new COVID normal where where things just come into backlog just a little slower.
spk07: Okay, great. That's really helpful. Thanks. And then, you know, second, obviously a lot of optimism across the contracting industry as it relates to the solar opportunities. Could you just kind of remind us of, you know, some of the kind of key differentiators you have as it relates to the solar market and, you know, why you believe you're the contractor of choice as more and more of this work starts to come out?
spk03: Well, good question. Certainly, that market lags the wind market as far as maturation. It is reaching kind of the stage now where the wind market reached what I would personally say was a decade ago, where now you'll see the largest developers or builders of solar in the country are much the same as our wind customers, large IPPs or large investor-owned utilities. And, you know, it's quite frankly not lost on any of us that if you look at the largest solar contractors today, utility scale in the United States, it remarkably looks, the list looks remarkably similar to our wind list or the wind competitors. So, You know, certainly having a familiarity with those customers and how they want projects delivered, the methodology, the safety, the quality that they want the projects delivered are very important. And I think, as you know, Noelle, while price is important in renewables, it's a very relationship-based business. given the short time span and the large capex involved with these projects. And, you know, our clients want contractors who have demonstrated time and time again the ability to get these projects in the ground on time.
spk07: Okay. That's perfect. Thanks so much. Appreciate it.
spk09: Thank you. At this time, we've reached a lot of time for question and answer session, and I will turn the floor back to J.P. Rehm, CEO of IEA, for closing remarks.
spk03: Well, thank you, Operator, and it's been a pleasure to spend some time with you all today, and we welcome you back here just a few short weeks away in early May when we report on our first quarter results. Everybody stay safe and healthy and look forward to seeing you then. Thank you.
spk09: Thank you. This concludes today's conference.
spk08: May this connect your lines at this time. Thank you for your participation. you Thank you. you Thank you.
spk09: Good morning, and welcome to Infrastructure and Energy Alternatives' fourth quarter and full year 2020 conference call. I'd like to note that all participants on today's call are in listen-only mode. And with that, I will now turn the call over to Kimberly Estrican with Investor Relations. Kimberly, please go ahead.
spk01: Hello, and thank you for joining us today to discuss IEA's fourth quarter and full year 2020 financial results. With us from management are J.P. Rehm, President and Chief Executive Officer of and Pete Morbake, Executive Vice President and Chief Financial Officer. Before turning the call over to management, I would like to note that today's discussion contains forward-looking statements about IEA's future growth and financial expectations. Any forward-looking statements should be considered in conjunction with the cautionary statements in yesterday's press release and the risk factors included in the company's SEC filings. Except as required by law, IEA undertakes no obligation to update its forward-looking statements after today's call. Since management will be presenting some non-GAAP financial measurements as references, including adjusted EBITDA, the appropriate GAAP financial reconciliations can be found in yesterday's press release. And with that, I'll now turn the call over to J.P. Rehm, Chief Executive Officer.
spk00: Please go ahead, J.P.
spk03: Well, thank you, Kimberly, and good morning to everyone. We appreciate you joining our earnings conference call. While this is a call about the fourth quarter, I want to start with the full 2020 results. IEA achieved record revenues and record adjusted EBITDA in 2020. Our consolidated revenues were $1.8 billion for 2020, up 20.1% year over year, and our adjusted EBITDA was almost $128 million. up 27.2% year over year. Both revenues and adjusted EBITDA were above the high end of our guidance range. We were able to achieve these results in a year overshadowed by the COVID-19 pandemic. The services we provide are considered essential infrastructure, but we were not sheltered from the impacts of COVID-19, and we continue to see an impact to our daily workflows as we abide by increased safety protocols and practice social distancing at our project sites. It is difficult to precisely measure the inefficiencies that have resulted from these extra precautions, but they do increase costs overall. Last year, we also experienced pandemic-related delays in delivering materials and turbines at some projects, but we were able to complete our projects as scheduled. Even with the impact of the pandemic, our teams responded and we improved our safety metrics to a total reportable incident rate of just 0.61 with almost eight and a half million man hours worked. That rate is about 40% lower than the industry standard. Our backlog also remained strong and totaled 2.1 billion at the end of the year. The final approval process for some projects has been slower than expected and project start dates have been delayed by one to two quarters in many instances. Unlike the end of 2019 when we saw a push to begin wind and solar construction due to the then impending step down of the tax credits, the extension of the PTC for wind and ITC for solar this past December may reduce some of the urgency to complete renewable projects in the very near term. Bidding activity remains high and none of our projects have been canceled as renewable energy continues to expand as part of the overall power generation in the country. Enabling sustainability is a cornerstone of our business and we are committed to environmental, social, and governance, or ESG, matters and look forward to issuing our first ESG report in the coming months. IEA was added to a number of sustainability equity indices in the past year, including the Wilder Hill Clean Energy Index, the CIBC Atlas Clean Energy Index, and Ardor Global Alternative Energy Index, reflecting the fact that approximately 70% of our revenue is derived from activities that enable energy transitions. Last month, we completed a successful secondary stock offering which allowed Oak Tree affiliates to sell almost 150 million of stock, reducing their ownership percentage of common shares to less than 5%. The transaction increased our free float, improved the trading liquidity of our stock, and allowed us to meet our goal of adding institutional holders to our shareholder base. As part of this transaction, Oak Tree's representative on our board, Peter Jonah has stepped down. I want to thank Peter for his many contributions to the success of IEA. Let me now turn to our business lines. Our renewables segment, which accounted for 65% of overall revenues in 2020, generated revenues of $1.4 billion for the year, an increase of 37% over 2019, as we successfully completed a larger number of wind and solar projects. We continue to see near-term opportunities in our wind market. For example, in the last three months since December, we secured three wind projects in the state of Illinois. In December, we were awarded a 185-megawatt contract for the Glacier Sands Wind Farm in Mason County. Then in January, we won a 300-megawatt contract for the Lincoln Land Wind Farm in Morgan County and a 118-megawatt project for the Shady Oaks II Wind Farm in Lee County. These projects will bring the state of Illinois closer to achieving its goal of sourcing 25% of its total electricity from renewables by 2025. Our solar division is also performing very well, and revenues grew to nearly $110 million in 2020, up from $3 million in 2019. Our strategy has been to grow this business to meet the burgeoning demand for solar, In January, we secured a 100-megawatt contract to construct the Lumpkin Solar Farm in Stewart County, Georgia. The Lumpkin Solar Farm is part of a portfolio of projects that will supply renewable energy to a Facebook data center in Georgia. We're seeing a growing demand from corporations for renewable generation, and interestingly, corporate offtakers were responsible for 20% of the power purchase agreements signed in the first half of 2020. Last week, we also announced the addition of a team of 10 employees from Merit SI to our solar operations. The team are experts in sustainability and energy infrastructure, and we expect them to complement our solar engineers and contractors. With the addition of this team, we now have in-house access to development support, pre-bid optimization, and added expertise in plant performance, battery storage, and SCADA controls to enhance our solar offerings to our client base. For us, a key differentiator in successfully bidding and performing solar projects is the ability to provide engineering capabilities, especially at the inception of the project. That capability is expected by our utility scale solar customers, many of whom are the same as our utility scale wind customers. In addition, as we discussed on our third quarter call, at the end of last year, we added a wind services business to our renewables segment to work on major component exchanges, uptower repair, and blade and composite repair. They also provide third-party commissioning and troubleshooting services. We are pleased with their rapid start and expect them to make a meaningful contribution this year. Turning now to our second segment, our specialty civil segment accounted for 35% of total revenues in 2020. or $610 million, down slightly compared to the prior year, mainly due to minor changes in the mix and timing of construction projects as compared to 2019. Our environmental remediation business line and our rail business line both experienced slight declines in annual revenues, primarily due to the impact of the pandemic. Nevertheless, we continue to win solid work in these areas of our business. For example, we added remediation work in the southern U.S., including an onsite hauling project in a quarry in Georgia and construction of a new landfill cell in Alabama. We believe that we will see new opportunities in our coal ash remediation business in 2021. Our transportation business revenues increased slightly in 2020, and during the fourth quarter, our project wins ranged from roadway and bridge rehab projects in the west and mountain west regions of the United States to drainage and structural erection projects in the Midwestern U.S. Before I get into more detail on the growth drivers for our business going forward, I'll now turn this call over to Pete Mormack, our CFO, to discuss fourth quarter 2020 financial results and 2021 guidance.
spk11: Pete? Thanks, JP, and thanks to everyone for listening. As we issued our earnings press release, and filed our Form 10-K yesterday, I promise not to repeat all those numbers. As expected, revenues, gross profit, and gross profit margin all decreased in the fourth quarter of 2020 compared to the fourth quarter of 2019. The decrease resulted from the timing of our renewal projects in 2020 compared to 2019. Historically, first quarter is lowest in revenue and profitability, as we begin projects and winter weather reduces construction activity. Second and third quarter revenue and profitability increase while we complete many projects in the fourth quarter and construction begins to slow down. This pattern changed at the end of 2019 as customers started projects early to ensure they would receive the benefits of the PTC, which was scheduled to step down in 2020. Earlier starts and excellent winter weather in late 2019 and early 2020 resulted in record revenue and profitability for the fourth quarter of 2019 and first quarter of 2020. This allowed us to achieve mechanical completion for many projects earlier in the calendar year than we have historically, which in effect accelerated the cycle. Our revenues and profits may fluctuate from quarter to quarter, For the year, we achieved record revenue of $1.75 billion, of 20.1% from 2019, and the gross profit margin for our renewable segment improved by 50 basis points. As a percentage of revenue, SG&A expenses were 6.6% in the fourth quarter and 6.5% for the full year. In 2019, these percentages were 6.8%, for the fourth quarter and 8.2% for the year. While our revenues have increased by almost 125% in the past two years, our SG&A expenses have risen much more slowly. We expect that we will remain reasonably close to our current run rate as we look to improve our information and technology systems to reflect a larger company. Before turning to backlog and 2021 guidance, some other financial highlights. In the fourth quarter, our cash flow from operations was a positive $116.4 million, and for the year, cash flow from operations was $57.7 million. It seems a little counterintuitive, but as we complete projects and our construction operations slow, we generate more cash as working capital needs decrease. For the year, our capital expenditures were $35.9 million, of which $26.2 million was financed through financing leases. At this point, we expect that capital expenditures will approximate 2% of our 2021 revenues. Interest expense for the quarter totaled $14.4 million, down from $15.4 million in the fourth quarter of 2019. For the year, interest expense increased to 61.7 million from 51.3 million in 2019. In the fourth quarter, we paid 6.5 million in dividends on our Series B preferred stock. And for the year, we paid 19.6 million on the Series B stock as dividends. Adjusted EBITDA for the quarter totaled $29.1 million compared to 47.1 million in Q4 2019. On a full year basis, adjusted EBITDA of 127.9 million was above the high end of our expectations and up approximately 27% year over year. As of December 31st, 2020, our balance sheet showed cash of $164 million. We had no cash drawn on our $75 million revolving credit facility but we did have outstanding letters of credit of $7.8 million, leaving $67.2 million available. Our term loan balance remains at $173.3 million, and we have no amortization payments due until December 2022. Last month, we took a first step to improve our capital structure. Given the rapid changes in the capital markets and our financial performance over the past two years, We are reviewing alternative approaches to improving our complex capital structure. Now turning to backlog. In the fourth quarter, we added $162 million to our backlog for a total of $2.1 billion, close to where we were at the end of 2019. We expect to recognize $1.6 billion of that backlog during 2021. We've seen a delay in the awarding of projects and notices to proceed. We have not experienced significant cancellations in projects, nor have we lost projects to competitors. Finally, on the guidance, let me start with a metaphor. This past Sunday, the sun was streaming into my Indianapolis apartment when I woke up. The sky was blue and it looked perfect outside. However, when I started my Sunday walk, it was 23 degrees, and that's just plain cold. Similarly, there are many positive drivers for our business, as JP will discuss in a few moments. But it is still cold. The pandemic still exists and can continue to impact our operations and contract awards. Significant delays in customer-provided wind turbine generators and other equipment could adversely impact our schedule. And as usual, severe weather events, such as the cold in Texas, can impact our performance. The potential effect of these unknowns makes us cautious at the start of this year. On our last earnings call, I said that we expected overall revenue growth in 2021, but revenues in the first quarter would be lower compared to the first quarter of 2020, and that as much as 65% of revenues will come in the second and third quarters. That remains our expectation. We now expect 2021 revenues between 1.75 billion and $1.95 billion in adjusted EBITDA in the range of $130 to $140 million. Thank you, and I'll now turn the call back to JP for his closing remarks. Well, thank you, Pete.
spk03: With our bidding opportunities remaining high, we continue to see strong prospects for growth across both of our operating segments. In the renewable space, IEA is a direct beneficiary of the growing investment in the wind and solar markets. Despite the global pandemic, 2020 set a new high for utility scale solar projects in the United States, with total solar project counts surpassing records previously set in 2016. The U.S. Energy Information Administration, or EIA for short, anticipates this trend in renewable growth will continue in 2021 with 39.7 gigawatts of new energy to go into commercial operation this year. Solar and wind are expected to be 39% and 31% respectively. That means that 70% of the new energy will come from carbon-free generation. Further driving the renewable energy markets in December, there was a one-year extension of the 60% production tax credit for wind and a two-year extension of the investment tax credit for solar at 26% of the project's value. For both wind and solar, projects placed in the service by 2025 are eligible for these extended credits. We are hopeful that the passage of a federal stimulus bill will extend these credits. The demand for new renewable work is definitely growing. Over the next three years, the EIA believes the 54 gigawatts of fossil and nuclear energy will be retired. This retirement represents a $17 billion engineering, procurement, and construction opportunity for the renewable industry. And as a pure play utility scale wind and solar constructor, IEA expects the benefits. In addition to tax credit extensions, the current administration is also a strong catalyst for the renewable industry. President Biden campaigned on a national plan to achieve 100% clean energy by 2035. And since Biden took office, the U.S. has rejoined the Paris Climate Accord and reinstated key EPA regulations that support the growth of the renewables industry. The restoration of the Obama Clean Power Plan or a mandate for federal agencies to procure 100% renewable energy sources would help further drive the renewable industry forward. Beyond renewables, we are also seeing strong growth drivers for our specially civil business, In terms of environmental remediation work, IEA sees continued opportunities to increase our coal ash work, including the safe closure of coal ash ponds, the relocation of coal ash residuals, and the construction of new landfills to comply with environmental regulations. There are more than 700 coal ash impoundments and landfills in the U.S. today, but only 15% have been closed or remediated. The coal ash remediation opportunity in this country could exceed $50 billion over the next 10 years alone, and at present, there are few companies of the scale and the experience needed to serve that market. In the rail space, aging commuter infrastructure combined with anticipated growth in freight volume of 36% over the next decade is actively driving the opportunity for additional rail improvement projects. The Association of American Railroads has stated that the railroads are three to four times more efficient than trucks as a single freight train can replace several hundred semi trucks, which would contribute to significant congestion relief on our roadways. And more importantly, a reduction of 75% in carbon emissions. With the growing trend towards improving the environmental benefits of our transportation systems nationwide, The recent approval of Pete Buttigieg, a fellow Hoosier, I should note, as transportation secretary, and President Biden won in his $2 trillion infrastructure bill to ensure that America has the cleanest, safest, and fastest rail system, we anticipate that the demand for rail infrastructure will grow. For transportation opportunities, the American Road and Transportation Builders Association noted that in their most recent report that one-third of the U.S. bridges and highways are in need of repair, with an estimated $164 billion of work required to get our nation's bridges and highways just up to par. State departments of transportation are expected to receive $9.8 billion in funding through the COVID-19 relief measure that passed in late 2020. There is also the increased potential for highway grants and funding for larger infrastructure projects, which generally has support from both parties. Over the past two years, IEA has gone from just under $800 million in revenues to nearly $1.8 billion in revenues. We have done so through both a combination of organic and acquisitive growth. This growth supports our thesis that we are in the right end markets, supporting the right clients, at the right time in our nation's history. The political and environmental drivers for IEA's business, which is enabling the energy transition of our country and improving the U.S. transportation infrastructure could not be any stronger. Thank you again for joining us this morning for our fourth quarter call. I want to thank the contributions made by all of IEA's employees during the past year. And since this is Women in Construction Week, especially highlight those made by our incredible female employees. As we look to capitalize on our opportunities and grow our business, we look forward to continuing to deliver strong results for all of our shareholders. This concludes our prepared remarks. Operator, would you please open the call to questions?
spk09: Thank you. At this time, we'll be conducting the question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.
spk08: And once again, that's star 1 to ask a question today. Thank you. Once again, that's star one to ask a question. Thank you.
spk09: Our first question comes from the line of Brent Salmon with DA Davidson. Please proceed with your questions.
spk05: Thanks. Good morning, JP and Pete.
spk06: Hey, Brent. Good morning, Brent. I guess first question, you guys did a billion dollars in the wind business in 2020, which is extraordinary, really great year. How do you think about that business in 2021, particularly in context of the revenue outlook?
spk03: We would expect similar outcomes in 2021. The industry is expecting a similar build-out depending on who you listen to. You hear anywhere from 14 to 17 gigawatts for 2021, so I would, from the activity that we've seen, we would, you know, our analysis of the market is very similar to what we saw in 2020.
spk06: Okay. And, JP, the wind maintenance business, you know, I know it's starting sort of from scratch here. Maybe could you just talk about what you're anticipating from the business in 2021, particularly any sort of targets you're hoping the business can get to?
spk03: Well, we haven't guided to a certain target for that segment of our business, Brent, but what I can tell you is management's extremely happy with how that's getting out of the ground, so to speak, and very pleased with the management team that we brought together. I think as we said in our remarks, we do believe that it'll be a meaningful contributor to both revenue and the bottom line for this year, but We're not prepared to come out with specific guidance for that business segment. Okay.
spk06: On the civil side, JP, I just want to come back to that. What areas are you most optimistic about for growth in 2021? I mean, assuming we get some sort of an infrastructure bill, I can't imagine it's necessarily a benefit this year, but certainly into the out years. But maybe what do you see that you're most excited about in that business? for this year in particular?
spk03: Especially civil. I do think that as a benefit of the energy transition, our environmental business, which is embedded in our especially civil segment, is ripe for growth. We believe we're at the infant stage of that market. As we talked in the commentary, only 15% of the coal ash to date has been remediated. in this country. We believe that it's in excess of a $50 billion addressable market over the next decade. So we do see some opportunities of relatively decent size coming in that market this year. We hope to get our fair share of those. But that doesn't diminish areas of our other business. Obviously, rail business, we continue to see quite a bit of opportunities as we continue to not only service our freight rail customers, but expand our reach into passenger rail. And quite frankly, as we kind of wind up that segment in the transportation highway and bridge side, we've been cautiously optimistic all along about what kind of spins out of the COVID pandemic in regards to the consumption taxes and such that drives that market. But, you know, so far, we're still seeing brisk bidding opportunity. And I know, I think we've experienced some assistance in the COVID relief legislation that was passed back in December for that industry. So, you know, so far, so good as far as opportunities going forward and especially civil.
spk06: Okay. Last one for me, just the, you know, the, you talked about it, Pete, the cold across the country and all the stuff that's been going on. Any major disruptions to some of your ongoing projects? I know seasonally this is a pretty slow period for you anyway, but anything out of the ordinary we should be aware of?
spk03: Well, you know, just like probably most anybody that's working in Texas, we did see, you know, slow down of work during that period. climactic event that I think everybody's well aware of a few weeks ago.
spk02: So certainly we were short-term impacted by that, but other than that, no. Okay.
spk06: Thank you, guys.
spk09: Thank you, Brent. Our next question is from the line of Noel Dills with Stiefel. Please proceed with your question.
spk07: Hi, guys. Congrats on a great year and thanks for taking my questions. Good morning. Good morning. So first, I just wanted to ask about, you know, these delayed awards. You know, obviously, a lot of positive things are on the horizon in terms of, you know, what I think Biden is looking to do with renewable energy. But, you know, sometimes ahead of, you know, anticipation of stimulus or some sort of support for the market, you can see awards slow. Do you think any of that is going on, or do you think this is more related to COVID and that sort of thing? That would be helpful. Thanks.
spk03: We think it's almost entirely related to COVID. Just everything works a little slower in today's world. It takes a little longer for our clients to get permits up front. I don't know of a client of ours yet, particularly in the renewable side of our business that's back in the office like we are. So, you know, their internal processes for approvals and such just work a lot slower. And, of course, our clients require financing. So, you know, the finance market's moving just a little slower. So nothing alarming, but, you know, and today we're in that kind of new COVID normal situation. where things just come into backlog just a little slower.
spk07: Okay, great. That's really helpful. Thanks. And then, you know, second, obviously a lot of optimism across the contracting industry as it relates to the solar opportunities. Could you just kind of remind us of, you know, some of the kind of key differentiators you have as it relates to the solar market and, you know, why you believe you're the contractor of choice as more and more of this work starts to come out?
spk03: Well, good question. Certainly, that market lags the wind market as far as maturation. It is reaching kind of the stage now where the wind market reached what I would personally say was a decade ago, where now you'll see the largest developers or builders of solar in the country are much the same as our wind customers, large IPPs or large investor-owned utilities. And, you know, it's quite frankly not lost on any of us that if you look at the largest solar contractors today, utility scale in the United States, it remarkably looks, the list looks remarkably similar to our wind list or the wind competitors. So, You know, certainly having a familiarity with those customers and how they want projects delivered, the methodology, the safety, the quality that they want the projects delivered are very important. And I think, as you know, Noelle, while price is important in renewables, it's a very relationship-based business. given the short time span and the large capex involved with these projects. And our clients want contractors who have demonstrated time and time again the ability to get these projects in the ground on time.
spk07: Okay. That's perfect. Thanks so much. Appreciate it.
spk09: Thank you. At this time, we've reached our allotted time for question and answer session, and I will turn the floor back to J.P. Rehm, CEO of IEA, for closing remarks.
spk03: Well, thank you, Operator, and it's been a pleasure to spend some time with you all today, and we welcome you back here just a few short weeks away in early May when we report on our first quarter results. Everybody stay safe and healthy and look forward to seeing you then. Thank you.
spk09: Thank you. This concludes today's conference.
spk03: May this connect your lines at this time. Thank you for your
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