Breaking Down New Fortress Energy Inc. (NFE) Financial Health: Key Insights for Investors

Understanding New Fortress Energy Inc. (NFE) Revenue Streams

Understanding New Fortress Energy Inc.’s Revenue Streams

New Fortress Energy Inc. generates revenue primarily from two segments: Terminals and Infrastructure, and Ships. Below is a detailed breakdown of these revenue sources.

Breakdown of Primary Revenue Sources

• Terminals and Infrastructure Segment:
  • Total revenues for the six months ended June 30, 2024: $1,033,165,000
  • Cost of sales for the same period: $450,977,000
  • Segment Operating Margin: $564,348,000
• Ships Segment:
  • Total revenues for the six months ended June 30, 2024: $85,162,000
  • Cost of sales for the same period: $16,899,000
  • Segment Operating Margin: $68,263,000

Year-over-Year Revenue Growth Rate

The revenue for the Terminals and Infrastructure Segment increased by $35,053,000 for the six months ended June 30, 2024 compared to the same period in 2023, marking a growth rate of approximately 3.5%.

For the Ships Segment, however, total revenues decreased by $78,596,000 for the six months ended June 30, 2024 compared to the same period in 2023, reflecting a decline of approximately 48.0%.

Contribution of Different Business Segments to Overall Revenue

Analysis of Significant Changes in Revenue Streams

In the Terminals and Infrastructure Segment, the increase in revenue for the six months ended June 30, 2024 was primarily driven by a higher volume of gas delivered to downstream customers, increasing from 26.1 TBtu in 2023 to 42.1 TBtu in 2024. However, this was offset by lower average Henry Hub pricing, which decreased by 25% year-over-year.

For the Ships Segment, the decrease in revenue was attributed to the completion of contracts and reduced charter activity following the sale of certain vessels, leading to a significant drop in operating lease income from $142,364,000 in 2023 to $93,303,000 in 2024.

Summary of Revenue Trends

Overall, while the Terminals and Infrastructure Segment showed positive growth, the Ships Segment experienced a notable decline, impacting total revenue figures negatively.

A Deep Dive into New Fortress Energy Inc. (NFE) Profitability

A Deep Dive into New Fortress Energy Inc.'s Profitability

Gross Profit Margin: For the six months ended June 30, 2024, the gross margin (GAAP) was $454,707,000, compared to $568,178,000 for the same period in 2023. The gross margin percentage decreased from 49.0% in 2023 to 40.6% in 2024.

Operating Profit Margin: The segment operating margin for the Terminals and Infrastructure segment for the six months ended June 30, 2024, was $564,348,000, compared to $641,575,000 for the same period in 2023, reflecting a decrease in the margin percentage from 64.3% to 54.7%.

Net Profit Margin: The net income (loss) attributable to stockholders for the six months ended June 30, 2024, was ($86,860,000), resulting in a net profit margin of (7.8%). In contrast, the net income for the same period in 2023 was $271,666,000, with a net profit margin of 23.9%.

Trends in Profitability Over Time

For the three months ended June 30, 2024, total revenues were $428,006,000, down from $690,321,000 in the previous quarter, demonstrating a significant decrease in revenue. The cost of sales for the same period was $221,860,000, leading to a gross profit of $206,146,000.

Profitability Ratios Comparison with Industry Averages

The following table summarizes profitability ratios for New Fortress Energy Inc. compared to industry averages:

Analysis of Operational Efficiency

The company reported operations and maintenance expenses of $107,840,000 for the six months ended June 30, 2024, compared to $60,368,000 in the same period of 2023. This increase of $47,472,000 indicates rising operational costs.

Gross margin trends show a decrease in operational efficiency, with the average cost to deliver natural gas increasing to $6.65 per MMBtu for the six months ended June 30, 2024, up from $7.66 per MMBtu in the same period in 2023.

Conclusion

The financial health of New Fortress Energy Inc. shows a complex picture of declining gross and net profit margins, alongside an increase in operational costs which could impact future profitability.

Debt vs. Equity: How New Fortress Energy Inc. (NFE) Finances Its Growth

Debt vs. Equity: How New Fortress Energy Inc. Finances Its Growth

As of June 30, 2024, New Fortress Energy Inc. had a total debt of $7,628,958 thousand, an increase from $6,803,148 thousand at the end of 2023. The company's debt structure includes both short-term and long-term obligations.

Overview of the Company's Debt Levels

The breakdown of the debt as of June 30, 2024, is as follows:

Debt-to-Equity Ratio and Comparison to Industry Standards

The debt-to-equity ratio stands at approximately 4.8, calculated using total debt of $7,628,958 thousand and total stockholders' equity of $1,687,268 thousand as of June 30, 2024. This ratio is significantly higher than the industry average, typically ranging from 1.0 to 2.0 for energy companies, indicating a more aggressive leverage strategy.

Recent Debt Issuances and Refinancing Activity

In March 2024, the company issued $750,000 thousand of senior secured notes maturing in March 2029, with an interest rate of 8.75%. The proceeds were primarily used to repurchase $375,000 thousand of the outstanding 2025 Notes, which reflects a proactive approach to managing debt maturity timelines. Additionally, the company entered into a BNDES Credit Agreement allowing for a total borrowing of $355,556 thousand.

Balancing Debt Financing and Equity Funding

The company balances its financing strategy through a mix of debt and equity. As of June 30, 2024, total stockholders' equity was $1,687,268 thousand. The issuance of 96,746 shares of Series A convertible preferred stock was noted, indicating a recent move towards equity financing to support growth. The company also maintains compliance with its debt covenants, which include a Debt to Capitalization Ratio of less than 0.7:1.0 and a Debt to Annualized EBITDA Ratio of less than 4.0:1.0.

Assessing New Fortress Energy Inc. (NFE) Liquidity

Assessing New Fortress Energy Inc.'s Liquidity

Current Ratio: As of June 30, 2024, the current ratio is 1.34, calculated using current assets of $1,658,900 and current liabilities of $1,238,168.

Quick Ratio: The quick ratio stands at 1.02, with quick assets totaling $1,251,900 and current liabilities remaining the same at $1,238,168.

Working Capital Trends

Working capital as of June 30, 2024, is $420,732, indicating a decrease from $500,000 as of December 31, 2023. This trend suggests increasing short-term financial pressure.

Cash Flow Statements Overview

Liquidity Concerns and Strengths

Concerns include a significant decrease in cash from operating activities, dropping from $503,877 to $162,968, indicating potential challenges in generating sufficient operational cash flow.

Strengths lie in financing activities, which increased to $735,679 from $222,583, providing necessary liquidity through debt issuances, such as the $750 million senior secured notes issued in March 2024.

Overall, the company’s liquidity position remains stable, but the reliance on financing activities highlights the need for improved operational cash flow to ensure long-term sustainability.

Is New Fortress Energy Inc. (NFE) Overvalued or Undervalued?

Valuation Analysis

As of June 30, 2024, the following valuation metrics provide insight into the financial health of the company:

• Price-to-Earnings (P/E) Ratio: The P/E ratio is approximately – as the company reported a net loss of $(86,860) for the quarter, with a diluted earnings per share of $(0.44).
• Price-to-Book (P/B) Ratio: The book value per share stands at approximately $8.23 based on total stockholders' equity of $1,687,268 divided by 205,065,328 shares.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EBITDA for the six months ending June 30, 2024, is $542,611, while the enterprise value is calculated based on total debt of $7,628,958 and market capitalization.

The stock price has experienced notable trends over the last 12 months:

Regarding dividends:

• Dividend Yield: The dividend yield is approximately 1.82% based on annual dividends of $0.10 per share and a current stock price of $5.50.
• Payout Ratio: The payout ratio is – due to the net loss for the period.

Analyst consensus on stock valuation indicates the following:

• Buy: 2 analysts
• Hold: 5 analysts
• Sell: 3 analysts

In summary, the financial metrics, stock price trends, dividend yields, and analyst ratings provide a detailed overview of the company's valuation and market perception as of 2024.

Key Risks Facing New Fortress Energy Inc. (NFE)

Key Risks Facing New Fortress Energy Inc.

The financial health of New Fortress Energy Inc. is influenced by various internal and external risks that could impact its operations and profitability. Below is a detailed overview of these risk factors.

Industry Competition

The energy sector is characterized by intense competition, particularly in the liquefied natural gas (LNG) market. The company faces competition from both established players and new entrants, which can affect pricing and market share.

Regulatory Changes

Changes in regulations regarding environmental standards, energy policies, and trade agreements can pose significant risks. Compliance with these regulations incurs costs and may affect operational flexibility.

Market Conditions

Fluctuations in natural gas prices significantly impact revenue. For instance, the average Henry Hub index pricing decreased by 25% for the six months ended June 30, 2024, compared to the same period in 2023.

Operational Risks

Operational challenges, such as delays in project developments or failures in equipment, can hinder the company’s ability to meet contractual obligations. The recent construction commitments for projects like the Fast LNG units and power plants add pressure on operational efficiency.

Financial Risks

As of June 30, 2024, total debt stood at $7.63 billion, with significant obligations due in the coming years, including:

Liquidity Risks

The company requires sufficient working capital to support its growth. Cash flows from operating activities decreased to $163 million for the six months ended June 30, 2024, down from $504 million in the same period of 2023. This decline indicates potential liquidity challenges that could impact growth initiatives.

Customer Dependency

The company's revenue generation relies heavily on long-term contracts with customers. Any financial instability or operational issues faced by major customers, such as PREPA in Puerto Rico, could adversely affect revenue streams.

Market Risks

Commodity price fluctuations pose a risk to profitability. The company does not currently use derivative instruments to hedge against price changes, exposing it to potential revenue volatility. A significant decrease in LNG demand could adversely affect its financial performance.

Mitigation Strategies

To counteract these risks, the company is exploring various strategies, such as:

• Securing long-term contracts to stabilize revenue streams.
• Diversifying supply sources to minimize dependency on single suppliers.
• Implementing cost control measures to enhance operational efficiency.

In addition, the company is actively seeking to raise capital through strategic partnerships and financing arrangements to bolster its liquidity and support ongoing projects.

Future Growth Prospects for New Fortress Energy Inc. (NFE)

Future Growth Prospects for New Fortress Energy Inc.

Analysis of Key Growth Drivers

The company has identified several key growth drivers that are expected to propel its future expansion:

• Product Innovations: The ongoing development of Fast LNG technology is anticipated to reduce costs and enhance operational efficiency.
• Market Expansions: The company is actively pursuing opportunities in new geographical markets, particularly in Latin America and the Caribbean, where demand for LNG is growing.
• Acquisitions: Strategic acquisitions, such as the PortoCem and Barcarena Power Plant projects, are expected to enhance the company's asset base and revenue streams.

Future Revenue Growth Projections and Earnings Estimates

Projected revenue growth for the upcoming years indicates a significant upward trend:

• 2024 Revenue Projections: Estimated at approximately $2.2 billion.
• 2025 Revenue Projections: Expected to reach around $3 billion.
• Earnings Estimates: Anticipated earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2024 are projected to be around $800 million.

Strategic Initiatives or Partnerships That May Drive Future Growth

The company has entered into several strategic partnerships to enhance its growth potential:

• Collaboration with PREPA: Providing operations and maintenance services, which generated $109.6 million in revenue for the six months ended June 30, 2024.
• Partnerships for Infrastructure Development: Collaborating with local governments to enhance LNG distribution networks.

Competitive Advantages That Position the Company for Growth

The company holds several competitive advantages that are likely to support its growth initiatives:

• Robust Infrastructure: A strong portfolio of terminals and infrastructure facilities, with total assets amounting to $10.76 billion as of June 30, 2024.
• Cost Efficiency: The ability to produce LNG at a significantly lower cost once the Fast LNG units are fully operational.

In summary, the strategic focus on expanding market reach, leveraging innovative technologies, and forming key partnerships positions the company well for future growth. With projected revenues and EBITDA showing significant increases, investors may find promising opportunities in the evolving energy landscape.