Excelerate Energy, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Excelerate provides LNG regasification and terminal services, operates FSRUs, and sells LNG and natural gas internationally.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $211.1 million | $591.7 million |
| Operating income | $49.6 million | $39.1 million |
| Net income | $30.7 million | $12.8 million |
| Net income attributable to Excelerate shareholders | $6.8 million | $0 |
| Adjusted EBITDA (non-GAAP) | $79.9 million | $62.7 million |
| Adjusted Gross Margin (non-GAAP) | $97.1 million | $78.3 million |
| Cash from operating activities | $46.8 million | $(31.4) million |
| Capital expenditures | $14.9 million | $11.0 million |
Revenue fell 64% year over year, while operating income and net income increased. Gas sales revenue declined to $92.5 million from $494.1 million; FSRU and terminal services revenue rose to $118.6 million from $97.6 million. The company reported gross margin of $71.9 million and an effective tax rate of 19.8%. Adjusted EBITDA and Adjusted Gross Margin are non-GAAP measures and should be considered alongside GAAP results.
At March 31, unrestricted cash and cash equivalents were $530.4 million; cash, cash equivalents, and restricted cash totaled $553.1 million. Current assets were $761.9 million and current liabilities were $310.4 million. Debt was $214.9 million before unamortized issuance costs, plus $186.4 million of related-party debt; finance lease liabilities were $492.1 million. The filing reports $308 million of undrawn revolver capacity after $42 million of letters of credit, with debt covenants in compliance.
Changes and business developments
- Higher service revenue reflected new Finland and Germany charters, a vessel returning from suspension, and additional New England capacity sales; the Israel charter ended in Q4 2022.
- Lower gas sales largely reflected reduced Brazil and New England LNG sales compared with the prior-year quarter. Management said direct gas-sales margin was higher, supported by Brazil and new Finland activity.
- SG&A increased $9.7 million to $22.3 million, primarily from public-company transition costs and business development. Cost of revenue and vessel operating expenses increased $8.7 million, mainly due to maintenance and crewing.
- In March, Excelerate amended its credit agreement to provide a $350 million revolver and a $250 million term loan, extend facility maturity to March 2027, and revise leverage terms. The $250 million term loan was drawn in April to help fund the $265 million Sequoia purchase; cash on hand funded the balance. Interest-rate swaps were entered into to hedge the term loan’s SOFR exposure.
- Operating cash flow improved from use of cash to generation of cash, but was affected by timing of LNG-related payables, receivable collections, and deferred customer revenue. Investing cash outflow was $14.9 million; financing cash outflow was $16.4 million.
Outlook, risks, and unusual items
The filing provides no specific full-year earnings or revenue guidance. Management believes cash, operating cash flows, and available borrowing capacity will be sufficient for the next 12 months, including operations, planned capital expenditures, debt service, taxes, and announced dividends. Management described LNG demand and prices as affected by geopolitical shifts, weather, storage levels, and competing fuels; it noted that LNG prices had retreated in Q1 2023 but that European winter storage replenishment could bring market volatility.
Material commitments include a 20-year Venture Global LNG purchase agreement for 0.7 million metric tons per year, with an estimated average annual commitment of approximately $280 million at March 31, 2023 futures prices. The commitment depends on the facility becoming operational and was not expected to start within the following 12 months. A new FSRU is expected to be delivered in 2026 under a shipbuilding agreement with estimated payments of approximately $330 million, subject to adjustment.
Customer concentration remains notable: one customer represented 40% of Q1 revenue, another 16%, and a third 10%. The company disclosed that disclosure controls were ineffective at March 31, 2023 because previously identified material weaknesses in internal control over financial reporting remained unremediated. Remediation work was ongoing, and timing was uncertain. The filing also identifies risks involving customer performance and termination rights, vessel operations, project execution, financing and covenants, commodity and foreign-exchange exposure, and geopolitical and regulatory conditions. Management said pending ordinary-course legal matters were not expected to have a material adverse effect.
Most important facts for investors to verify
- How much of the increase in earnings and Adjusted EBITDA is repeatable, given lower gas-sales volumes, changing LNG margins, new charters, and the prior-year comparison.
- Pro forma debt, interest expense, liquidity, and covenant headroom after the April 2023 term-loan draw and Sequoia acquisition; March 31 balances predate those transactions.
- Progress and independent validation of remediation of the disclosed material weaknesses and ineffective disclosure controls.
- Execution and funding implications of the Venture Global LNG purchase commitment, the 2026 newbuild, and other growth plans.
- Exposure to concentrated customers and to LNG market, foreign-exchange, interest-rate, operational, and geopolitical risks.