Charah Solutions, Inc. (CHRB) is a leading national service provider of mission-critical environmental services and byproduct recycling to the power generation industry. The company's comprehensive suite of offerings enables its customers to address complex environmental challenges while maintaining continuous power generation operations.
Business Overview
Charah Solutions operates as a single segment, providing a diverse range of services to its utility partners. The company's remediation and compliance services focus on designing, constructing, managing, remediating, and closing ash ponds and landfills on customer-owned sites. Its byproduct services include recycling recurring and contracted volumes of coal-fired power generation waste byproducts, such as fly ash, bottom ash, IGCC slag, and gypsum, which can be used for various industrial purposes. Additionally, the company's byproduct services include the management of coal ash, which is mission-critical to power plants' daily operations, including silo management, on-site ash transportation and capture, and disposal of combustion byproducts from coal-power operations. Charah Solutions' raw material sales provide customers with essential raw materials while also offering sourcing, logistics, and management services to facilitate these transactions globally.The company's innovative Environmental Risk Transfer (ERT) services represent a unique solution designed to meet coal-fired plant energy providers' evolving and increasingly complex plant closure and environmental remediation needs. These services allow customers to retire and decommission older or underutilized assets while maximizing the assets' value and improving the environment.
Financials
Financial Performance
Charah Solutions' financial performance has been impacted by the challenging market conditions in recent years. For the fiscal year ended December 31, 2023, the company reported annual revenue of $293,167,000, a decrease from the prior year's revenue of $320,456,000. The company's annual net income for the same period was a loss of $127,843,000, compared to a loss of $92,456,000 in the previous year.The company's annual operating cash flow for the fiscal year ended December 31, 2023, was a negative $77,134,000, while its annual free cash flow was a negative $82,286,000. These declines in financial performance can be attributed to a combination of factors, including project delays, increased costs, and the ongoing impact of the COVID-19 pandemic on the company's operations.
Quarterly Performance
In the latest quarter ended March 31, 2024, Charah Solutions reported revenue of $70,913,000, an increase of 7.4% compared to the same period in the prior year. However, the company continued to struggle with profitability, reporting a net loss of $6,086,000 for the quarter, an improvement from the $12,043,000 net loss in the same quarter of the previous year.The company's quarterly operating cash flow was a negative $19,794,000, while its quarterly free cash flow was a negative $16,683,000. These declines in cash flow can be attributed to the company's ongoing challenges in managing project timelines and costs, as well as the impact of the COVID-19 pandemic on its operations.
Liquidity
As of March 31, 2024, Charah Solutions had a working capital deficit of $8,343,000, compared to a deficit of $4,673,000 as of December 31, 2023. This increase in the net working capital deficit was primarily due to decreases in cash and cash equivalents, as well as an increase in the outstanding balances on the company's asset-based lending credit agreement.The company's primary sources of liquidity and capital resources include cash on the balance sheet, cash flows generated by operating activities, borrowings under its senior notes, and availability under its asset-based lending credit agreement. However, the company's long and complex projects have required significant working capital, and delays in payment receipts, project commencement, or project completion have adversely affected its financial position and cash flows.
Risks and Challenges
Charah Solutions faces several risks and challenges that have impacted its financial performance. These include:1. Project Delays and Execution Challenges: The company's long and complex environmental remediation projects have experienced delays in commencement and completion, leading to fluctuations in revenue recognition and cash flow.
2. Inflationary Pressures: The company is experiencing the general impact of inflationary market pressures in its supply chain, labor, and subcontractor markets, which have put pressure on its profitability.
3. Competitive Labor Market: Charah Solutions' continued success depends on its ability to attract and retain qualified personnel, which has become increasingly challenging in the current labor market environment.
4. Supply Chain Disruptions: The company is experiencing supply chain disruptions related to delays in receiving materials and equipment, as well as increased logistics costs, which have impacted its project execution and financial performance.
5. Going Concern Uncertainty: The company's recurring losses, negative operating cash flows, and lack of available liquidity raise substantial doubt about its ability to continue as a going concern.