Avalon Holdings Corporation (AWX) Bundle
Understanding Avalon Holdings Corporation (AWX) Revenue Streams
Understanding Avalon Holdings Corporation’s Revenue Streams
The revenue analysis of Avalon Holdings Corporation (AWX) reveals key insights into its financial health as of 2024. The company operates primarily in two segments: Waste Management Services and Golf and Related Operations.
Breakdown of Primary Revenue Sources
- Waste Management Services: This segment generated net operating revenues of approximately $36.2 million in the first nine months of 2024, compared to $34.7 million in the same period of 2023.
- Golf and Related Operations: Revenues in this segment reached about $30.0 million in the first nine months of 2024, up from $28.5 million in 2023.
Year-over-Year Revenue Growth Rate
The overall net operating revenues increased to $66.2 million in the first nine months of 2024, representing a growth of approximately 4.7% compared to $63.2 million in the first nine months of 2023.
Contribution of Different Business Segments to Overall Revenue
| Segment | 2024 Revenue (9 Months) | 2023 Revenue (9 Months) | Percentage Contribution (2024) |
|---|---|---|---|
| Waste Management Services | $36.2 million | $34.7 million | 54.7% |
| Golf and Related Operations | $30.0 million | $28.5 million | 45.3% |
| Total | $66.2 million | $63.2 million | 100% |
Analysis of Significant Changes in Revenue Streams
In the Waste Management Services segment, net operating revenues from waste disposal brokerage and management services were approximately $34.0 million for the first nine months of 2024, compared to $32.4 million in the same period of 2023. Continuous work revenues increased by about $1.0 million, while event work revenues also showed growth, rising to approximately $14.1 million from $13.5 million.
The Golf and Related Operations segment observed a slight increase in membership dues, reaching approximately $5.6 million for the first nine months of 2024 compared to $5.5 million in 2023. Room rental revenues also improved, increasing to about $5.9 million from $5.1 million.
Overall, Avalon Holdings Corporation's revenue streams reflect a positive trend, driven by growth in both segments, particularly in continuous work and event projects within waste management and enhanced operations in golf-related activities.
A Deep Dive into Avalon Holdings Corporation (AWX) Profitability
A Deep Dive into Avalon Holdings Corporation's Profitability
Gross Profit Margin: The gross profit margin for the first nine months of 2024 was approximately 43.5%, compared to 42.8% in the same period of 2023. This indicates an improvement in how efficiently the company is managing its production costs relative to its revenues.
Operating Profit Margin: The operating profit margin for the first nine months of 2024 stood at 4.8%, up from 0.7% in the first nine months of 2023. This substantial increase reflects better cost management and operational efficiency.
Net Profit Margin: The net profit margin for the first nine months of 2024 was 2.7%, in contrast to a net loss margin of (1.5%) in the same period of 2023. This turnaround indicates a significant improvement in overall profitability.
Trends in Profitability Over Time
In the third quarter of 2024, the net income attributable to shareholders was $1.8 million, or $0.47 per share, compared to $0.9 million, or $0.23 per share in the third quarter of 2023. This reflects a year-over-year increase in profitability.
| Period | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| Q3 2023 | 42.8% | 0.7% | (1.5%) |
| Q3 2024 | 43.5% | 4.8% | 2.7% |
Comparison of Profitability Ratios with Industry Averages
The industry average gross profit margin for waste management services is approximately 40%. Avalon Holdings has outperformed this benchmark with a gross profit margin of 43.5%.
For operating profit margins, the industry average is around 3%, while Avalon Holdings has achieved 4.8%, indicating superior operational efficiency.
Lastly, the average net profit margin in the industry stands at 2%, which Avalon has also surpassed with a margin of 2.7%.
Analysis of Operational Efficiency
The cost of operations related to waste management services decreased to $28.4 million in the first nine months of 2024 compared to $27.9 million in the same period of 2023, reflecting a focus on cost management.
The overall gross margin percentage for waste management services increased to 21% in the first nine months of 2024 from 20% in the previous year. This improvement is attributed to increased gross profit generated from both continuous and event work projects.
In the golf and related operations segment, net operating revenues increased to $30.0 million in the first nine months of 2024, up from $28.5 million in the same period of 2023. The total cost of operations decreased to $23.6 million compared to $24.2 million in the previous year, demonstrating effective cost control measures.
| Segment | Net Operating Revenues (2024) | Cost of Operations (2024) | Gross Margin (%) |
|---|---|---|---|
| Waste Management Services | $36.2 million | $28.4 million | 21% |
| Golf and Related Operations | $30.0 million | $23.6 million | 21.3% |
Debt vs. Equity: How Avalon Holdings Corporation (AWX) Finances Its Growth
Debt vs. Equity: How Avalon Holdings Corporation Finances Its Growth
Debt Levels: As of September 30, 2024, Avalon Holdings Corporation has a total long-term debt of $28.793 million and a current portion of long-term debt amounting to $0.565 million. The total debt consists primarily of a term loan agreement with a gross amount of $29.812 million, netting down to $29.358 million after accounting for debt issuance costs .
Debt-to-Equity Ratio: The debt-to-equity ratio stands at approximately 0.75 as of September 30, 2024. This is calculated using total liabilities of $51.587 million and total equity of $37.659 million . This ratio is below the industry average of 1.0, indicating a relatively conservative approach to leveraging debt .
Recent Debt Issuances: In August 2022, Avalon entered a loan agreement for $31 million to refinance previous borrowings and fund renovations at The Grand Resort. The proceeds included $20.2 million for refinancing existing debts .
Credit Ratings: As of the latest reports, the company has not publicly disclosed a specific credit rating; however, it maintains compliance with its debt covenants .
Balancing Debt and Equity Financing: Avalon Holdings Corporation balances its financing strategies by utilizing both debt and equity. The company has issued 3,899,431 shares of common stock, contributing to its equity base of $38.531 million . The management aims to fund growth through a mix of operational cash flows and strategic borrowing, allowing for flexibility in capital allocation .
| Debt Type | Gross Amount (in millions) | Net Amount (in millions) | Current Portion (in millions) |
|---|---|---|---|
| Term Loan Agreement | $29.812 | $29.358 | $0.625 |
| Line of Credit | $3.200 | $3.200 | N/A |
| Obligations under Finance Leases | $0.634 | $0.634 | $0.189 |
Future Debt Maturities: For the twelve months ending September 30, 2024, future maturities of long-term debt are structured as follows:
| Year | Amount (in thousands) |
|---|---|
| 2025 | $625 |
| 2026 | $3,864 |
| 2027 | $705 |
| 2028 | $748 |
| 2029 | $794 |
| Thereafter | $26,276 |
Assessing Avalon Holdings Corporation (AWX) Liquidity
Assessing Avalon Holdings Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 0.97, calculated as total current assets of $17.2 million divided by total current liabilities of $17.7 million.
Quick Ratio: The quick ratio is approximately 0.56, derived from current assets minus inventories ($15.5 million) divided by current liabilities ($17.7 million).
Working Capital Trends
At September 30, 2024, the company reported a working capital deficit of approximately $0.5 million, an improvement from a deficit of $3.9 million at December 31, 2023. This change was driven by an increase in cash and cash equivalents, which rose to $3.9 million from $1.2 million.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flows from operating activities totaled $3.95 million, compared to $2.18 million for the same period in 2023. The cash flow from investing activities was ($1.70 million), while cash flow from financing activities was ($0.62 million).
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $3,952 | $2,178 |
| Investing Activities | ($1,705) | ($3,211) |
| Financing Activities | ($619) | $118 |
Potential Liquidity Concerns or Strengths
The company has been utilizing cash generated from operations effectively to meet its obligations. However, the current working capital deficit and low quick ratio raise potential liquidity concerns. The line of credit agreement, with approximately $3.2 million outstanding as of September 30, 2024, provides some cushion, although it is secured by business assets including accounts receivable and inventory.
Management believes that anticipated cash provided from future operations will be sufficient to meet operating requirements, despite the current liquidity ratios indicating potential risks.
Is Avalon Holdings Corporation (AWX) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key valuation metrics including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated based on the latest earnings data:
- Net Income for Q3 2024: $1.8 million
- Shares Outstanding: 3,899,431
- Earnings Per Share (EPS): $0.47
Assuming a stock price of $6.00:
- P/E Ratio: 12.77
Price-to-Book (P/B) Ratio
To calculate the P/B ratio, we need the book value per share:
- Total Shareholder's Equity (as of September 30, 2024): $38.5 million
- Book Value Per Share: $9.87
Thus, the P/B ratio is:
- P/B Ratio: 0.61
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
Calculating the EV/EBITDA involves the following:
- Market Capitalization: $23.4 million (calculated from a stock price of $6.00 and shares outstanding)
- Total Debt: $29.4 million
- Cash and Cash Equivalents: $3.9 million
- EBITDA (for the last twelve months): $5.2 million
Calculating EV:
- Enterprise Value (EV): $29.4 million + $23.4 million - $3.9 million = $49.9 million
Therefore, the EV/EBITDA ratio is:
- EV/EBITDA Ratio: 9.58
Stock Price Trends
Over the last 12 months, the stock price has fluctuated:
- 12-Month High: $8.50
- 12-Month Low: $5.00
- Current Price: $6.00
Dividend Yield and Payout Ratios
As of now, the company does not pay dividends, thus:
- Dividend Yield: 0%
- Payout Ratio: Not applicable
Analyst Consensus
According to recent analyst ratings:
- Analyst Consensus: Hold
- Price Target: $6.50
| Metric | Value |
|---|---|
| P/E Ratio | 12.77 |
| P/B Ratio | 0.61 |
| EV/EBITDA Ratio | 9.58 |
| 12-Month High | $8.50 |
| 12-Month Low | $5.00 |
| Current Price | $6.00 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Avalon Holdings Corporation (AWX)
Key Risks Facing Avalon Holdings Corporation
Overview of Internal and External Risks
Avalon Holdings Corporation faces significant internal and external risks that could impact its financial health. Key risks include:
- Industry Competition: The waste management and recreational services sectors are highly competitive, with numerous players impacting pricing and market share.
- Regulatory Changes: Changes in environmental regulations could affect operational costs and service offerings.
- Market Conditions: Economic downturns can lead to decreased demand for services, impacting revenues.
Operational, Financial, or Strategic Risks
Recent earnings reports indicate various risks:
- Interest Rate Risk: The weighted average interest rate on outstanding borrowings was approximately 6.26% in the first nine months of 2024.
- Credit Risk: Economic challenges may result in payment defaults by customers, affecting cash flow and profitability.
- Legal Matters: Ongoing lawsuits and investigations may lead to fines or penalties that could adversely impact financial conditions.
Mitigation Strategies
The company has implemented several strategies to mitigate risks:
- Cost Control Measures: Avalon has focused on reducing employee-related costs and improving operational efficiencies, leading to a decrease in operating costs to $18.9 million in the first nine months of 2024.
- Diversification: Expanding service offerings in both waste management and recreational sectors to reduce dependency on a single revenue stream.
- Enhanced Marketing Strategies: Actively promoting membership and services to attract and retain customers, crucial for the golf and related operations.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | High competition in waste management and recreational services. | Pressure on pricing and market share. | Diversification of services. |
| Regulatory Changes | Potential changes in environmental laws affecting operations. | Increased operational costs. | Compliance and monitoring of regulations. |
| Market Conditions | Economic downturns leading to reduced demand. | Decreased revenues. | Enhanced marketing strategies. |
| Interest Rate Risk | Borrowing costs impacted by rising interest rates. | Increased interest expenses. | Fixed-rate borrowing where possible. |
| Credit Risk | Potential defaults by customers. | Negative cash flow impact. | Continuous credit risk assessment. |
| Legal Matters | Involvement in lawsuits and investigations. | Possible fines and penalties. | Legal compliance and risk management strategies. |
Financial Overview
In the first nine months of 2024, net operating revenues increased to $66.2 million compared to $63.2 million in the same period of 2023. The waste management services segment accounted for approximately $36.2 million of revenues, while golf and related operations contributed $30 million.
Future Growth Prospects for Avalon Holdings Corporation (AWX)
Future Growth Prospects for Avalon Holdings Corporation
Analysis of Key Growth Drivers
The company's growth is driven by several factors, including:
- Product Innovations: Introduction of new services in the waste management and golf operations segments.
- Market Expansions: Plans to expand waste management services into new geographic areas.
- Acquisitions: Exploration of strategic acquisitions to enhance service offerings and market position.
Future Revenue Growth Projections and Earnings Estimates
For the first nine months of 2024, net operating revenues from waste management services were approximately $36.2 million, up from $34.7 million in the same period of 2023. The golf and related operations segment reported net operating revenues of approximately $30.0 million in the first nine months of 2024, compared to $28.5 million in 2023.
Analysts project a continued growth trajectory with estimated revenue growth rates of around 4-6% annually over the next five years.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is actively pursuing partnerships to enhance operational efficiencies and expand service offerings. Key initiatives include:
- Joint Ventures: Collaborations with local governments for waste management contracts.
- Service Diversification: Expanding service lines in the golf segment to include more recreational activities.
Competitive Advantages That Position the Company for Growth
Several competitive advantages are evident:
- Established Brand: A strong reputation in waste management and golf operations.
- Operational Expertise: Experienced management team with industry knowledge.
- Financial Stability: Improved net income attributable to common shareholders of $1.8 million in the first nine months of 2024 compared to a net loss of $0.9 million in 2023.
Financial Overview
| Financial Metric | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Net Operating Revenues (Waste Management) | $36.2 million | $34.7 million |
| Net Operating Revenues (Golf Operations) | $30.0 million | $28.5 million |
| Net Income Attributable to Common Shareholders | $1.8 million | ($0.9 million) |
| Weighted Average Interest Rate on Borrowings | 6.26% | 6.15% |
| Capital Expenditures (Projected) | $2.5 - $3.5 million | N/A |
Conclusion
The company is well-positioned for future growth with a combination of strong revenue performance, strategic initiatives, and competitive advantages that will facilitate continued expansion in both the waste management and golf operations segments.
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Updated on 16 Nov 2024
Resources:
- Avalon Holdings Corporation (AWX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Avalon Holdings Corporation (AWX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Avalon Holdings Corporation (AWX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.