APTIM management guided to a pullback in revenue for 2021 during the company’s 4Q20 earnings call earlier this month, according to two sources familiar with the situation. The projected softness comes amid delays in engineering and construction projects and as COVID-19 maintenance contracts come to an end, they said. 

Based on back-of-the-envelope calculations, some investors expect revenue this year to fall to USD 1bn at the midpoint, both sources noted.

For comparison, the industrial services company reported USD 1.25bn in revenue for 2020, compared to USD 1.28bn in 2019, one of the sources and a third source familiar said. For 4Q20 ended 31 December, APTIM’s sales grew 13% to USD 304m, from USD 269m generated in the same period the prior year, the sources added. 

The Veritas Capital-backed company also posted an uptick in adjusted EBITDA for 4Q20 as it benefited from a rise in engineering and construction service work and an increased backlog in its operations and maintenance segment, the same two sources continued.

Historically, the borrower has included heavy addbacks to its adjusted EBITDA related to cost savings initiatives, so much so that it implemented a cap on the adjustments, with APTIM reporting both pre-cap and post-cap adjusted EBITDA. However, for 2020 and 4Q20, the engineering and construction services company’s adjusted EBITDA before and after factoring in the cap on the addbacks was the same.

In 4Q20, pre-cap and post-cap adjusted EBITDA totaled USD 13.8m, compared to pre-cap adjusted EBITDA of USD 9.4m and post-cap adjusted EBITDA of USD 1.3m booked in 4Q19, the sources said.

For the year, pre-cap and post-cap adjusted EBITDA amounted to USD 57.7m in 2020, compared to pre-cap adjusted EBITDA of USD 71.8m and post-cap adjusted EBITDA of USD 25.5m in 2019, they added.

On an unadjusted basis, EBITDA turned positive in 2020, with the issuer generating USD 21m for the year, versus negative USD 27.1m reported in 2019, the sources continued.

Despite facing business interruption from the COVID-19 pandemic, APTIM in its earnings release also disclosed that its contract backlog held steady in 2020 versus 2019, with the company finishing the year with USD 1.6bn in backlog, the sources said. In addition, the company received USD 245m in new awards during 4Q20, bringing the total amount of new contracts awarded for the year to USD 1.34bn, they noted.

While the quarterly number of new awards came in slightly softer than USD 260m in 3Q20, the total amount of new contracts awarded in 2020 rose compared to the USD 1.18bn recorded in 2019.

As of 31 December, liquidity amounted to USD 190m, with USD 172m of cash and roughly USD 18m of ABL availability, the sources went on. APTIM’s leverage shrank to 8.9x through USD 515m of total debt and USD 57.7m of post-cap adjusted LTM EBITDA. That compares to 10.4x in leverage recorded at 3Q20-end.

APTIM has struggled with contract losses since Veritas acquired the business from Chicago Bridge & Iron in 2017. The USD 755m deal was partly financed with a USD 515m secured bond issue. Leverage ballooned to 19.7x in 2020, with the company’s bonds trading in the 30s. But the USD 515m 7.75% senior secured notes due 2025 have caught a bid since the March onset of the pandemic.

The notes last traded in size at 85.5 to yield 12.256% yesterday (30 March), according to MarketAxess. Prior to the earnings report, released on 10 March, the bonds traded at 86.5 to yield 11.834%.

Officials from APTIM did not respond to a request for comment. Veritas declined to comment.

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