FTAI Infrastructure Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. The company became an independent public company on August 1, 2022. Accordingly, pre-spin periods are combined historical results and post-spin results reflect standalone operations; year-over-year comparisons are not fully like-for-like. All financial figures below are in U.S. dollars.
Business context
FTAI owns and operates freight railroads, ports and terminals, and related infrastructure businesses, alongside equity-method investments in power, recycling and sustainability ventures. Its five reportable segments are Railroad, Jefferson Terminal, Repauno, Power and Gas, and Sustainability and Energy Transition. Corporate and Other includes corporate costs, debt, preferred stock, shipping-container investments and FYX, a roadside assistance business consolidated beginning in May 2022.
Key financial metrics
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $78.6 million | $36.8 million | $190.6 million | $72.7 million |
| Net loss | $43.2 million | $34.6 million | $131.4 million | $81.0 million |
| Net loss attributable to stockholders and Former Parent | $44.1 million | $27.3 million | $116.4 million | $62.1 million |
| Loss per share, basic and diluted | $(0.43) | $(0.27) | $(1.13) | $(0.62) |
| Adjusted EBITDA, non-GAAP | $26.1 million | $9.2 million | $59.2 million | $4.5 million |
| Net cash used in operating activities | Not provided by quarter in the cited cash flow statement | $37.7 million | $69.8 million |
For the nine months, cash used in investing activities was $194.9 million, including $172.2 million for property, plant and equipment. Financing provided $127.3 million. Cash and cash equivalents were $69.5 million at quarter-end, with a further $127.2 million of restricted cash; combined cash and restricted cash was $196.6 million.
At September 30, 2022, total assets were $2.525 billion, total liabilities $1.718 billion, and debt, net of issuance costs, $1.192 billion, up from $718.6 million at December 31, 2021. The company also reported $252.0 million of redeemable preferred stock, with a stated redemption amount of $450 million at quarter-end. The $500 million aggregate principal 2027 Senior Notes carry a 10.5% coupon and were issued at a discount. The company reported compliance with debt covenants.
Material changes versus prior comparable periods
- Revenue increased $41.8 million in Q3 and $117.9 million for the nine months. Transtar, acquired in July 2021, drove much of the Railroad increase; higher Jefferson Terminal volumes also contributed. FYX consolidation contributed $20.3 million of Q3 and $30.4 million of nine-month revenue.
- Despite higher revenue and Adjusted EBITDA, net losses increased. Higher operating costs, depreciation, interest expense and losses from equity-method investments offset revenue growth. Interest expense rose to $19.2 million in Q3 and $32.1 million for nine months, from $4.4 million and $9.4 million, respectively, primarily reflecting the 2027 Notes.
- Equity in losses of unconsolidated entities increased to $12.1 million in Q3 and $48.0 million for nine months, primarily reflecting realized and unrealized power-swap losses at Long Ridge. Long Ridge accounted for $43.6 million of the nine-month equity-method loss.
- Property, plant and equipment, net, rose to $1.641 billion from $1.518 billion at year-end, reflecting development and equipment additions, primarily at Jefferson Terminal. Nine-month comprehensive loss was $318.1 million, including $186.7 million of other comprehensive loss related to equity-method investees.
Segment performance and management commentary
- Railroad: Adjusted EBITDA was $18.4 million in Q3 and $50.8 million for nine months, primarily reflecting the inclusion of Transtar. One Railroad customer represented approximately 44% of Q3 revenue and 54% of nine-month revenue.
- Jefferson Terminal: Adjusted EBITDA was $6.0 million in Q3 and $14.0 million for nine months. Higher terminal volumes increased revenue. Management said crude throughput had returned to pre-pandemic levels during 2022 and expects the segment to generate positive Adjusted EBITDA in future years, while noting delays in some contracts and expected volumes.
- Repauno: Adjusted EBITDA was negative $2.5 million in Q3 and negative $10.8 million for nine months. Results reflected commodity-contract gains in Q3, but losses and margin compression over the nine-month period.
- Power and Gas: Adjusted EBITDA was $11.3 million in Q3 and $24.7 million for nine months, while GAAP equity-method losses were substantial, largely because of Long Ridge power swaps.
- Sustainability and Energy Transition: Adjusted EBITDA was negative $1.3 million in Q3 and negative $1.6 million for nine months. The investments are described as development-stage businesses.
Management said it believes liquidity is sufficient and expects to meet near-term requirements through cash, borrowing capacity, financing and operating cash flows. It is evaluating potential transactions and financings, but none were definitive or included in planned liquidity needs. No numerical earnings or revenue guidance was provided. The board declared a $0.03-per-share common dividend on October 31, 2022, payable November 28, 2022.
Risks, contingencies and unusual items
- Preferred financing: The Series A preferred stock carries a 14% annual dividend rate, with potential increases if dividends are not paid in cash or are not paid when required. Cash dividends become mandatory after the second anniversary; specified noncompliance events can give preferred holders rights to elect a board majority. The filing states that redemption at September 30 would have required $450 million.
- Liquidity and leverage: The company had $1.192 billion of net debt, including high-coupon 2027 Notes. It disclosed $89.6 million of interest payments due within the next twelve months and no debt principal due in that period. It also cited $171.5 million of operating and finance lease obligations, including $7.8 million due within twelve months, and a $6.4 million minimum pipeline marketing-fee obligation over the next twelve months.
- Customer concentration: Railroad revenue concentration is significant, as noted above. Two customers accounted for 44% of accounts receivable at quarter-end.
- Project and environmental risks: Jefferson Terminal results depend on contract execution, volumes, rail capacity and commodity-market conditions. Repauno and Long Ridge redevelopment depends in part on environmental investigation, remediation and regulatory approvals; seller indemnities and insurance may not cover all costs or delays.
- Other exposures: The filing highlights standalone-company execution, dependence on the external Manager and potential conflicts, interest rates and access to capital, COVID-19 and broader economic conditions, regulation, hazardous-material transport, environmental liabilities, and the risk of maintaining the Investment Company Act exemption. Management did not expect current or threatened legal proceedings to have a material adverse effect, but noted outcomes are uncertain.
- The company reported effective disclosure controls and procedures as of quarter-end and no material quarterly change in internal control over financial reporting. No goodwill impairment was recorded for the periods presented.
Important facts for investors to verify
- How much of reported growth reflects acquired businesses—especially Transtar and FYX—rather than organic volume, pricing or margin improvement.
- Whether Jefferson Terminal contract delays resolve and its projected volumes and positive Adjusted EBITDA materialize.
- The size, duration and cash consequences of Long Ridge power-swap exposure and whether equity-method losses continue.
- Available unrestricted liquidity after separating the $127.2 million of restricted cash from cash available for general purposes, and the ability to service debt and preferred dividends.
- The preferred stock’s cumulative cost, redemption terms and potential governance consequences, as well as dilution from warrants, Manager options and the equity incentive plan.
- The sustainability of customer relationships and the effect of Railroad’s dependence on a single major customer.