Enviva Inc.

Third-quarter 2023 net revenue decreased approximately 2% year over year. Net loss was $85 million versus $18 million in the third quarter of 2022. Adjusted EBITDA was $36.6 million versus $60.6 million a year ago. Sales volumes increased 14% year over year and 10% sequentially, and delivered-at-port costs were $152 per metric ton versus $161 in Q2. Liquidity at September 30, 2023 was $440 million, including $315 million of unrestricted cash and about $125 million restricted for Epes and Bond, and the company had drawn the full amount under its $570 million senior secured revolver. Management withdrew prior guidance for sales price per metric ton, net loss, adjusted EBITDA, total capital expenditures, and future years. For Q4, the company said results excluding the Q4 2022 transactions could potentially be weaker than Q3, and it is evaluating a possible 6- to 12-month deferral of Bond construction.

Glenn Nunziata said the quarter was “very disappointing” and blamed weak spot wood pellet pricing, operational issues earlier in the year, and the negative impact of the Q4 2022 transactions. He emphasized urgent actions: improving contract profitability, reviewing the capital structure with outside advisers, and reshaping leadership so he can focus on restoring credibility and navigating the turnaround. Despite the near-term stress, he said the long-term outlook for the business and industrial biomass industry remains compelling.

As CFO, Nunziata highlighted that the company is under pressure from lower profitability and cash flow, putting covenants and liquidity at risk. He pointed to $21 million of asset impairment charges tied to the Southampton dryer-line shutdown, $22 million of interest expense on repurchase accounts, $6 million of severance-related restructuring costs, and higher SG&A from advisers. He also said the company is being very disciplined on capital spending, has invested about 40% of Epes to date, and is considering delaying Bond by six to 12 months while maintaining focus on cash management.

There was no live Q&A session. Management instead preemptively addressed likely investor concerns by explaining that the company may be in breach of senior secured credit facility covenants as early as the end of Q4 2023 absent a cure. It also said the Q4 2022 transactions are materially hurting profitability, cash flow, and liquidity through 2025 unless wood pellet pricing improves significantly.