Ormat Technologies, Inc. 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Hosting the call today are Doron Blachar, Chief Executive Officer, Assi Ginzburg, Chief Financial Officer, and Smadar Lavi, Vice President of Investor Relations and ESG Planning Reporting. Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts, and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives, and expectations for future operations and are based on management's current estimates and projections, future results, or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties.

For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies' annual report on Form 10-K and quarterly reports on Form 10-Q that are filed with the SEC. In addition, during the call, the company will present non-GAAP financial measures such as adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management's reasons for presenting such information is set forth in the press release that was issued last night, as well as in the slides posted on the website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP.

Before I turn the call over to management, I'd like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at ormat.com under the presentation link that's found on the Investor Relations tab. With all that said, I would now like to turn the call over to Ormat's CEO, Doron Blachar.

Doron? Thank you, Josh. Good morning, everyone, and thank you for joining us today.

Let me begin with the key highlights from the second quarter, starting on slide four. The first half of 2026 reflects accelerating momentum across all three business segments. Second quarter revenue increased 10.6%, gross profit increased 20.8%, and adjusted EBITDA increased 6.9% compared with the prior year-period. On the strength of these results, we are raising our full-year revenue and adjusted EBITDA guidance. In our electricity segment, Blue Mountain's contribution, stronger performance at Olkaria and Puna, and lower curtailment in the U.S. drove continued growth. In energy storage segment, revenue nearly tripled year-over-year, supported by new capacity additions, high asset availability, and favorable merchant pricing in PJM.

Taken together, these results demonstrate the strength and balance of our three-segment model and the returns available when long-term contracted revenues are paired with selective merchant exposure. On the development side, we added 155 megawatts to our generating portfolio since the beginning of the year, including the Juco Solar and Storage acquisition, the Shirk storage facility, and the commencement of commercial operation at our 10-megawatt Dominica geothermal power plant. On the EGS front, we advanced both the SLB and Sage pilot program toward field execution and introduced Ormega100, our new 100-megawatt binary unit designed for large-scale conventional geothermal and EGS applications, both of which I will discuss in more detail shortly. I will now turn the call over to Azi to review our financial results.

Azi? Thank you, Doron. I will begin my review of the financial results on slide six.

Second quarter revenue was $258.8 million, an increase of 10.6% compared with the prior year-period, led by strong energy storage performance and continued growth in the electricity segment. Gross profit increased 20.8% to $68.7 million, and consolidated gross margin expanded by 220 basis points to 26.5%, reflecting the strong performance and margin contribution of our storage assets in PJM. Net income attributable to the company stockholders was $27.1 million, or $0.43 per diluted share, compared with $28 million, or $0.46 per diluted share in the prior year-period. The year-over-year decrease reflects a $6.6 million write-off storage project we decided not to pursue, partially offset by stronger underlying operating performance.

Adjusted net income attributable to company stockholders in the second quarter of 2026 increased 6.5% to $31 million, or $0.50 per diluted share, compared with $29.1 million, or $0.48 per diluted share in the second quarter of 2025. Adjusted EBITDA increased 6.9% to $143.9 million, led by energy storage performance. Slide seven provides additional details on our segment performance. Electricity segment revenue during the second quarter increased 5.8% to $169.3 million. The increase reflects a full quarter contribution for Blue Mountain, higher energy rates, and improved performance at Puna, stronger generation at Olkaria following well field optimization, and lower curtailments at McGinnis Hills, Dixie Valley, and Tungsten, partially offset by planned maintenance activities. Product segment revenue decreased 21.6% to $46.7 million, reflecting the timing of manufacturing and construction progress.

Product segment gross margin was 9.7%, down from prior year period, mainly due to increased construction costs related to a project in Europe and the impact of foreign exchange fluctuation on manufacturing costs. We expect product segment gross margin for the second half of the year to be approximately 15% and for the full year gross margin to be approximately 18%. Energy storage segment revenue increased 195.1% to $42.8 million. High asset availability enabled us to capture strong merchant pricing in PJM, while capacity addition completed over the past 12 months contributed incremental revenue. The segment generated a gross margin of 56.2%, reflecting our strategy of optimizing the mix of contracted and merchant revenues. We expect energy storage gross margin to normalize to 30%-40% in the second half of the year and for the full year to be approximately 40%-50%.

Slides eight and nine summarize our first half results. Revenue increased 42.9% to $662.7 million, driven by substantial growth across all three segments. Adjusted EBITDA increased 18.9% to $338.8 million, and adjusted diluted EPS increased 54.3% to $1.79 per share. Turning to slide 10. During the first half of 2026, we collected approximately $52 million of proceeds from tax credit monetization transaction. For the full year, we continue to expect approximately $90 million in proceeds, including approximately $70 million related to ITCs and approximately $20 million related to PTC transfers. During the second quarter, we recorded a $9.5 million ITC benefits. For the full year, we expect to record approximately $59.9 million in ITC benefits, which we expect will result in an effective income tax benefit rate of approximately 15% in the second half of the year, excluding changes, of course, in law and other one-time items.

Slide 11 presents the change in our cash position during the first half of the year. Cash and cash equivalent and restricted cash totaled approximately $658 million as of June 30, 2026, compared with approximately $281 million at year-end 2025. The increase reflects the proceeds from our convertible notes offering and other financing activities, cash generated from operations, tax credit monetization, and the proceeds from the Topp 2 sale, partially offset by capital expenditures, debt repayments, acquisitions, and investments. Our total debt as of June 30, 2026, was approximately $3.4 billion, excluding deferred financing costs, and the weighted average interest rate on our debt portfolio was approximately 3.9%. Turning to slide 12. Total liquidity was approximately $1.1 billion as of June 30, 2026. Net debt was approximately $2.7 billion, equivalent to 4.3 times net debt to adjusted EBITDA. Net debt represented approximately 50% of total capitalization.