FTAI Infrastructure Inc. — Q1 2023 Form 10-Q
Business context and period. This unaudited report covers the three months ended March 31, 2023. FTAI Infrastructure owns and operates railroads, ports and terminals, and related businesses, and holds investments in power, recycling, and sustainability ventures. It became an independent public company in August 2022. The 2022 comparative results are combined historical results from before the spin-off and are not fully comparable with standalone 2023 results.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $76.5 million | $46.1 million |
| Operating expenses | $65.2 million | $38.1 million |
| Operating loss, before other income and expense | $15.4 million | $19.7 million |
| Net loss | $35.9 million | $50.3 million |
| Net loss attributable to common stockholders | $40.6 million | $42.8 million |
| Basic loss per share | $0.39 | $0.43 |
| Adjusted EBITDA (non-GAAP) | $21.9 million | $11.6 million |
| Net cash used in operating activities | $12.1 million | $14.1 million |
| Net cash used in investing activities | $66.8 million | $51.3 million |
| Net cash provided by financing activities | $37.8 million | $43.4 million |
At March 31, 2023, total assets were $2.45 billion, total liabilities $1.65 billion, and cash and cash equivalents $40.0 million. Restricted cash was $68.5 million, bringing cash and restricted cash to $108.4 million. Current assets were $239.1 million and current liabilities $154.7 million.
Debt was $1.30 billion before $29.5 million of issuance costs ($1.27 billion net). No principal was due within one year; the company disclosed $108.7 million of interest obligations due in the next 12 months. Lease obligations totaled $171.4 million, including $8.5 million due within 12 months. The company reported compliance with debt covenants at quarter-end.
Material changes versus the prior comparable period
- Revenue rose $30.3 million, primarily from higher railroad activity and fuel surcharges, increased Jefferson Terminal volumes, and FYX roadside-services revenue following its 2022 consolidation.
- Operating expenses increased $27.1 million, including FYX costs, higher railroad compensation and operating activity, and increased terminal activity. Depreciation and amortization rose $3.1 million.
- Interest expense increased $16.8 million to $23.3 million, largely reflecting the $475.5 million average outstanding balance of 10.5% Senior Notes due 2027 issued in July 2022.
- Equity-method results improved by $26.4 million, mainly from realized and unrealized power-swap gains at Long Ridge. This materially contributed to the lower net loss; it is not equivalent to recurring operating cash generation.
- Adjusted EBITDA increased $10.3 million. The measure is non-GAAP; the company changed its definition in 2023 to exclude certain non-recurring items, including severance.
- Investing cash outflows included $39.9 million of property, plant and equipment additions, a $20.5 million Long Ridge loan investment, and $4.4 million to acquire the remaining FYX interest.
Outlook, commentary, risks, and unusual items
- Management said it believed liquidity was sufficient, while also describing efforts to limit discretionary spending and reprioritize capital projects. It expects short-term needs to be met through cash, operations, or future financing; no quantified earnings or revenue guidance was provided.
- Preferred stock carries a 14% annual dividend rate, with a 2% increase for periods in the first two years when dividends are not paid in cash. Dividends accrued before the second anniversary; cash payment is required thereafter. Failure to pay after that point can raise the rate to 18% and, following specified noncompliance, give preferred holders board-control rights. The reported carrying amount was $279.2 million; redemption value at March 31 was $448.2 million.
- Repauno reported negative revenue of $1.5 million, primarily reflecting losses on butane forward contracts and product-margin losses as it shifted toward a throughput-fee model. It recorded $4.9 million in operating expenses and $4.9 million of negative Adjusted EBITDA.
- Customer concentration remains significant: one Railroad customer represented approximately 48% of Q1 revenue and one Jefferson Terminal customer 12%. Three customers represented 50% of accounts receivable at quarter-end.
- Jefferson Terminal’s goodwill fair value exceeded carrying value by more than 10% but less than 20% in the October 2022 assessment. Management cited dependence on contract execution and volume growth; further delays could pressure valuation and potentially lead to impairment.
- Other key risks include leverage and refinancing access, variable-rate borrowing costs, infrastructure development and capital needs, environmental and regulatory exposure, customer defaults, and dependence on the external Manager. A 100-basis-point rate increase was estimated to raise interest expense by about $0.8 million over the next 12 months, assuming no hedging.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It did not expect current or threatened legal proceedings to have a material adverse effect, while noting outcomes are uncertain.
- After quarter-end, the board declared a $0.03-per-share common dividend, payable May 26, 2023. Long Ridge also agreed to sell certain assets to Transtar for $5.0 million.
Most important facts for investors to verify
- Whether operating cash flows and available liquidity can support capital spending, debt service, and required preferred-stock cash dividends.
- The timing and cash realizability of Long Ridge power-swap gains, and the underlying recurring performance of its power and gas operations.
- Progress against Jefferson Terminal contract and volume expectations, and the effect of any delays on goodwill valuation.
- Railroad and terminal customer retention, concentration, and receivable collectability.
- Debt costs, covenant capacity, refinancing options, and the substantial preferred-stock redemption value and control provisions.
- How much of Adjusted EBITDA growth reflects sustainable operating improvement versus acquisitions, non-GAAP adjustments, and market-driven valuation gains.