FTAI Infrastructure Inc. quarterly report, Q2 FY2022

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Business context and reporting period

FTAI Infrastructure Inc. filed this Form 10-Q for the quarter ended June 30, 2022. The financial statements primarily present the historical combined infrastructure business of FTAI, rather than results of a company operating independently throughout the periods shown. The business includes Jefferson Terminal, Ports and Terminals, Transtar, and other activities including FYX, containers, and energy-transition investments. FTAI completed the spin-off on August 1, 2022; FIP began trading on Nasdaq after the distribution.

Financial results and key metrics

Unless noted otherwise, amounts below are for the combined business and in U.S. dollars.

  • Revenue: Q2 2022 revenue was $65.9 million, up $50.5 million from $15.3 million in Q2 2021. First-half revenue was $112.0 million, up $76.1 million from $35.9 million.
  • Earnings: Q2 net loss was $38.0 million, including $29.5 million attributable to Parent; first-half net loss was $88.2 million, including $72.3 million attributable to Parent. Parent-attributable loss per share was $0.30 for Q2 and $0.73 for the first half.
  • Adjusted EBITDA: Non-GAAP Adjusted EBITDA was $21.6 million for Q2 and $33.1 million for the first half, versus losses of $1.8 million and $4.6 million, respectively, in 2021. This equals approximately 32.7% and 29.6% of revenue; the measure is not a substitute for GAAP earnings or cash flow.
  • Cash flow and investment: First-half operating cash use was $55.4 million; investing cash use was $121.2 million, including $113.9 million of property, plant and equipment purchases. Financing provided $121.1 million, including $111.4 million of net transfers from Parent. Cash and restricted cash totaled $246.4 million at June 30, including $68.5 million of unrestricted cash and $178.0 million restricted.
  • Balance sheet and debt: Total assets were $2.56 billion and equity was $1.35 billion. Debt carrying value, net of issuance costs, was $729.4 million (gross borrowings $749.5 million); no principal was due within one year under the debt schedule. Current assets were $427.6 million and current liabilities $174.9 million, though restricted cash is not freely available for general purposes.
  • Other financial items: First-half equity-method losses were $35.9 million, principally reflecting Long Ridge power-swap losses. Comprehensive loss attributable to Parent was $217.0 million for the first half, including $144.7 million of other comprehensive loss related to equity-method investees.

Changes versus the prior comparable periods

  • Transtar, acquired in July 2021, contributed $38.1 million of Q2 revenue and $72.1 million for the first half of 2022; it was not in the 2021 comparable periods. This materially limits year-over-year comparability.
  • FYX became consolidated after the purchase of an additional 51% interest in May 2022, contributing $10.1 million of revenue from acquisition through June 30.
  • Higher Jefferson Terminal volumes lifted first-half terminal-services revenue by $5.5 million. Across the company, operating expenses rose $53.2 million and depreciation and amortization rose $12.5 million in the first half, primarily reflecting Transtar, FYX, and assets placed in service.
  • First-half interest expense increased $7.9 million, mainly due to Jefferson Terminal’s 2021 bond issuance and additional EB-5 borrowings. Equity-method losses increased $28.6 million, primarily due to Long Ridge power swaps.
  • Capital spending increased: property, plant and equipment additions were $111.4 million in the first half. Cash and restricted cash declined by $55.4 million from year-end.

Outlook, financing, risks, and unusual items

  • Outlook: Management said Jefferson Terminal activity was normalizing and expected crude throughput to move toward pre-pandemic levels during 2022; it also expected the segment to generate positive Adjusted EBITDA in future years. Certain customer contracts and anticipated volumes had been delayed. The filing provides no clear numerical earnings or revenue guidance.
  • Spin-off financing: After quarter-end, the company issued $500 million of 10.5% senior secured notes due 2027 at 94.585% of principal. It also agreed to a $300 million preferred-stock-and-warrants investment, net of a $9 million discount. The filing states the net proceeds from these financings were distributed to Parent; the notes and subscription agreements became effective with the spin-off. These post-quarter financings are not included in June 30 debt balances.
  • Preferred stock and dilution: Series A preferred dividends accrue before the second anniversary; thereafter the stated cash dividend rate is 14% annually, with potential increases under the terms. The company also issued 10.9 million options to its Manager in connection with the spin-off and adopted an equity plan reserving up to 30 million common shares.
  • Liquidity and distributions: Management said it expected to meet short-term requirements through cash, unused borrowing capacity, financing, and operating cash flow. However, first-half operating cash flow was negative and FAD, a non-GAAP measure, was negative $7.7 million. Management’s stated long-term dividend goal is a 50–60% payout of FAD; dividends remain discretionary and subject to financing restrictions.
  • Key risks and contingencies: Risks include new standalone-company costs and execution, dependence on the Manager, customer concentration (one Transtar customer represented 54% of Q2 and 61% of first-half revenue), interest rates and refinancing, COVID-19 and macroeconomic conditions, and environmental, regulatory, operating, and project-development exposures. Repauno has up to $10 million of remaining contingent payments subject to conditions; Jefferson Terminal has a minimum $9.2 million pipeline marketing-fee commitment for the next 12 months. Management did not expect current or threatened legal proceedings to have a material adverse effect, while acknowledging outcomes remain uncertain.
  • Controls: Management concluded disclosure controls were effective as of June 30 and reported no material change in internal control over financial reporting during the quarter.

Important facts for investors to verify

  1. Confirm the post-spin capital structure, including the notes’ final outstanding amount, preferred-stock terms and dividend accrual, warrant dilution, and the fact that financing proceeds were remitted to Parent.
  2. Assess underlying cash generation: reconcile GAAP operating cash flow, capital spending, restricted cash, and management’s non-GAAP Adjusted EBITDA and FAD measures.
  3. Track Jefferson Terminal contract execution, volume ramp-up, and any further delays; review the assumptions supporting goodwill valuations, particularly for Transtar and Jefferson Terminal.
  4. Evaluate customer concentration and Transtar’s reliance on its major customer, including the terms and performance of its rail-services agreement.
  5. Monitor Long Ridge power-swap exposure and the financial condition of equity-method investees, as well as environmental remediation and project-development obligations at Repauno and Long Ridge.
  6. Review the standalone cost base, Manager fees and conflicts, potential equity issuance under the incentive plan, and any future dividend capacity in light of negative first-half FAD.