Enviva Partners (EVA) Q2 2020 Earnings Call Transcript

Enviva Partners (EVA)
Q2 2020 Earnings Call
Aug 06, 2020, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Enviva Partners, L.P. second-quarter 2020 conference call. All participants will be in listen-only mode. [Operator instructions] After today's presentation, we will have an opportunity to ask questions.

Please note this event is being recorded. I would now like to turn the call over to Wush Ma, vice president and treasurer. Please go ahead.

Wushu Ma -- Vice President and Treasurer

Thank you. Good morning, and welcome to the Enviva Partners, L.P., second-quarter 2020 financial results conference call. We appreciate your interest in Enviva partners and thank you for participating today. On this morning's call, we have John Keppler, chairman and CEO; and Shai Even, chief financial officer.

Our agenda will be for John and Shai to discuss our financial results released yesterday and provide an update on our current business outlook. Then we will open up the phone line for questions. Before we get started, a few housekeeping items. During the course of our remarks and the subsequent Q&A session, we will be making some forward-looking statements, which are subject to a variety of risks.

Information concerning the risks and uncertainties that could cause our actual results to differ materially from those in our forward-looking statements can be found in our earnings release issued yesterday in the IR section of our website, as well as in our most recent 10-K and our other filings with the SEC. We assume no obligation to update any forward-looking statements to reflect new or changed events or circumstances. In addition to presenting our financial results in accordance with GAAP, we will also be discussing adjusted EBITDA and certain other non-GAAP measures pertaining to the completed fiscal periods as well as our forecasts. Information concerning the reconciliation of these non-GAAP measures to their most directly comparable GAAP measures and other relevant disclosures are included in our press release issued yesterday.

I would like to now turn it over to John.

John Keppler -- Chairman and Chief Executive Officer

Thank you, Wush. Good morning, everyone, and thanks for joining us today. While COVID-19 continues to dominate news headlines, we are very proud of what we have been able to accomplish in the last few months here at Enviva. First, we've kept our people healthy and safe.

This has enabled us to keep our plants and ports running 24/7 and our supply chain humming. The durability and resilience of the business model we have built ensured that we delivered operating and financial results that are right on track with our expectations, including recording a 39% increase in adjusted EBITDA over the same period of last year. We also continued to execute on our growth strategy, closing two transformative acquisitions and completing the associated equity and debt financing activities despite heightened market volatility. Based on the expected adjusted EBITDA run rate of $56 million to $60 million by 2024, the combined price for the Greenwood and Georgia Biomass acquisitions implies an attractive 6.5x EBITDA multiple.

Based in part on the expected accretion from these transactions, our board declared a distribution of $0.765 per unit for the second quarter, which represents our 20th consecutive distribution increase and is 16% higher than the distribution for the same quarter of last year. In addition, we reaffirmed our full-year 2020 adjusted EBITDA and distributable cash flow guidance, as well as our expectation that we will distribute at least $3 per unit for full-year 2020, which would maintain the 13% distribution CAGR we've delivered since our IPO over five years ago.The recent acquisitions increased the partnership's production capacity by one-third and extends the partnerships fully contracted revenue backlog to $15.3 billion, with a weighted average remaining contract term of 12.7 years. Recognizing that there is still tremendous opportunity ahead of us, our sponsor, which has played a highly supportive and critical role underwriting the growth profile of the partnership, has recently completed a recapitalization transaction with a diverse group of global investors. As a result, it now has $300 million of new equity available to finance future growth, including construction of its significant pipeline of additional wood pellet production plants and deepwater marine terminals to meet the growing demand in our existing markets and fast emerging demand in new markets.

By design, the partnership expects to have the opportunity to acquire these fully contracted assets and the associated long-term offtake agreements in future drop-down transactions. Enviva is leading an industry that plays an increasingly critical role in the global fight against climate change. Climate benefits of sustainably produced wood pellets and the transparency of our sustainability and supply chain practices, really our ESG attributes, are garnering international recognition by regulators, policymakers, academics, researchers and investors alike. Notably, Jeff Ubben's ValueAct Spring Fund, now Inclusive Capital, a leading ESG-dedicated fund, anchored our recent equity issuance, and we are delighted to add Jeff to the partnership's board of directors.

I will take some time at the end of this call to provide more details on the recent acquisitions, the long-term market drivers, our sustainability practices and development activities taking place at the partnership and our sponsor, but I would like to now turn it over to Shai to discuss our financial results for the second quarter.

Shai Even -- Chief Financial Officer

Thank you, John. For the second quarter of 2020, net revenue was $167.7 million, as compared to $168.1 million for the corresponding quarter of 2019. The modest change was mainly attributable to an increase in sales volume of wood pallets produced by the partnership's facilities and a similar reduction in sales volume of wood pallets procured from third parties. During the second quarter of 2020, we also recorded $12.1 million of other revenue, which included $8.9 million in payments from customers associated with modifying shipments under our take-or-pay offtake contracts, which otherwise would have been presented in product sales.

For the second quarter of 2020, gross margin was $27.7 million, as compared to gross margin of $16.5 million for the corresponding period of 2019. Adjusted gross margin was $42 million for the second quarter of 2020, as compared to $28 million for the second quarter of 2019. Adjusted gross margin per metric ton was $49.55 for the second quarter of 2020, as compared to $32.26 for the second quarter of 2019. The increase in adjusted gross margin per metric ton was primarily due to favorable customer contract mix as well as an increase in sales of pellets produced by the partnership and a similar reduction in sales of pellets procured from third parties.

Sales of pellets produced by our own facilities is higher margins than sales of pellets procured from third parties. Net income for the second quarter of 2020 was $8.5 million, as compared to net loss of $3.8 million for the second quarter of 2019. Adjusted net income was $8.7 million for the second quarter of 2020, as compared to adjusted net income of $7 million for the corresponding quarter of 2019. For the second quarter of 2020, the partnership generated adjusted EBITDA of $37.4 million, an increase of 38.7% from the second quarter of 2019.

The increase in adjusted EBITDA was primarily driven by the same factors that contributed to the higher adjusted gross margins. Distributable cash flow prior to any distribution attributable to incentive distribution rights paid to our general partners was $25.9 million, which results in a second quarter of 2020 distribution coverage ratio of 0.61 times. At the end of the second quarter, as a result of the successful equity issuance John just mentioned, we had approximately $98 million of cash on hand, with no balance outstanding under our $350 million revolving credit facility. On the heels of our solid second-quarter financial results and the successful closing of the Greenwood and Georgia Biomass acquisitions, the partnership reaffirms the increased full-year 2020 guidance we provided in June.

We continue to expect full-year 2020 adjusted EBITDA to be in the range of $185 million to $195 million and distributable cash flow to be in the range of $134 million to $144 million prior to any distributions attributable to incentive distribution rights paid to our general partners. The partnership also reaffirms our June guidance to distribute at least $3 per common unit for full-year 2020. The guidance amounts do not include the impact of any additional acquisitions or drop-downs. As we have said in the past, seasonality and the mix in timing of customer shipments can impact results, which may vary from quarter to quarter.

Consistent with prior years, we expect the second half of 2020 to be a significant step up from the first half, even before accounting for post-acquisition contributions from our recently acquired Greenwood and Waycross plants. We have remained largely unaffected by the impacts of the COVID-19 pandemic on the global economy and capital markets. In fact, we were able to successfully use $200 million of equity at a tight discount and a $150 million tack-on to our existing 2026 bond at a strong premium in an extremely volatile market. We believe we were able to execute these transactions because of the increasing recognition of the fully contracted and fast-growing nature of our business, which has no material exposure to the price of crude oil, natural gas or other energy commodities.

As demonstrated with the Greenwood and Georgia Biomass acquisitions, we remain focused on financing growth with the 50/50 equity debt split in order to maintain a conservative leverage ratio of 3.5 times to four times and a distribution coverage ratio of 1.2 times on a forward-looking annual basis, and we expect our full-year 2020 distributable cash flow to cover 2019 distributions by at least 1.2 times. Now I would like to turn it back to John.

John Keppler -- Chairman and Chief Executive Officer

Thanks, Shai. The Greenwood and Georgia Biomass acquisitions significantly expanded the partnership's production footprint, which now includes assets and operations in the robust fiber baskets in the states of South Carolina and Georgia. The partnership now owns and operates 9 fully contracted plants and exports from our wholly owned terminals in Chesapeake, Virginia, and Wilmington, North Carolina, in addition to our contracted terminal capacity in Savannah, Georgia, Panama City, Florida, and Mobile, Alabama. By adding the Port of Savannah terminal to our portfolio, we will benefit from greater redundancy in our export capabilities and heightened ability to mitigate business interruption risks.

We are also exploring developing another cluster of production facilities around this strategic asset in a new fiber basket. With the two acquisitions and 1.4 million metric tons per year of Japanese contracts assigned by the sponsor that match the combined production capacity of the Waycross and Greenwood plants, our total contract backlog also increased by approximately $5.3 billion. These two plants come into the partnership fully contracted through 2035, with contracted volumes well into the 2040s. Our sponsor also recently executed a firm 10-year, 120,000-metric-ton-per-year take-or-pay offtake contract with a major, credit-worthy electric utility in Japan.

This contract, which adds a new customer to an increasingly diversified sales book, brings the partnership and the sponsor's combined offtake contract backlog to almost $20 billion, with a weighted average remaining term of 13.6 years. This tremendous growth in our business continues to be driven by the commitment and significant progress made by regulators, policymakers, utilities and power generators around the globe to phase out coal, limit the impact of climate change, and cut greenhouse gas emissions to achieve net zero by 2050. We believe these tailwinds will continue to lead strong growth and global demand for our product. The importance and impact we can have is demonstrable.

For instance, in June, the United Kingdom completed a record-breaking 67-day period without coal-fired power. During this period, which was the longest period without coal since the dawn of the Industrial Revolution, Biomass provided approximately 11% of the U.K.'s electricity on average, and up to 16% on days when the availability of wind and solar were limited. In Germany, in July, passed a coal exit law to end coal-fired power generation by 2038. The coal exit law lays out a rapid timetable, requiring an unprecedented shutdown of 43.9 gigawatts of currently operating coal capacity.

The coal exit law also explicitly recognized the use of sustainable biomass as part of the transition and established a framework in a EUR40 billion program to support power plant owners seeking to convert their plants from coal to alternative fuels, including biomass. In Asia, Japan's METI announced in early July that the Japanese government would set policies aimed at the closure or suspension of low-efficiency coal-fired power plants by 2030 following the establishment of a framework expected by the end of this year. It is estimated that approximately 100 power plants may be targeted for such closure or suspension, creating new potential opportunities for recycling this infrastructure into biomass bio-renewable, power-generating assets. In addition to international policymaking and action plans, the call for increased usage of biomass to reduce fossil fuel-fired generation, investors and the research community are also increasingly recognizing the carbon benefits of sustainably produced biomass.

A few weeks ago, we shared an independent study by Boundless Impact Investing, a third-party research firm specializing in climate analytics for investors. In its recently peer-reviewed and then published report, Boundless Impact estimated that in the United Kingdom, power generation with wood pellets sustainably produced in the U.S. results in an 87% reduction in greenhouse gas emissions versus coal and 71% versus natural gas. The impact is even more pronounced in combined heat and power applications, reducing lifecycle greenhouse gas emissions by as much as 94%.

Part of a global opportunity at Enviva is to help stakeholders around the world better understand these carbon benefits. To that end, our Chief Sustainability Officer, Dr. Jennifer Jenkins, recently led the publication of a white paper that provided a well-received overview of the scientific basis for using bio energy to mitigate climate change followed by two webinars on this subject, including during the EU Sustainability Week in late June. To meet demand for sustainably produced biomass, within the partnership we have begun commissioning several of the fully constructed new process islands as part of the Northampton plant expansion and expect to similarly begin commissioning the Southampton plant expansions over the next several months.

The anticipated benefit from these projects in 2020 is included in the partnership's updated guidance. And consistent with prior guidance, beginning in 2021, we expect the expansions to deliver approximately $28 million to $32 million in adjusted EBITDA on an annualized basis. In Greenwood, procurement and detailed engineering activities associated with that plant's expansion are well under way, and the project remains on track for completion by year end 2021, subject to receiving the necessary permits. Finally, our sponsor also continues to progress the construction of the fully contracted Lucedale plant and the Pascagoula terminal, as civil work is under way and construction activities are ramping up at each site.

Our sponsor expects the construction of both projects to be completed mid-year 2021. In addition, our sponsor expects to make a final investment decision and commence pre-construction activities around the end of 2020 for the fully contracted Epes plant. In summary, we had a very busy and exciting quarter. As I mentioned during our last earnings call, we are a business built to weather many storms, and we have certainly proven that again.

Amid a global pandemic that continues to evolve, we delivered a significant step-up in adjusted EBITDA over the same period of last year, generating $37.4 million, we increased our distribution for the 20th consecutive quarter, and we completed two transformative acquisitions and raised the associated debt and equity consistent with our conservative financial policies. Finally, we reaffirmed our recently increased guidance for the year. And with the critical role we play in the effort to fight climate change, we are really just getting started. As I close, I want to thank the great people at Enviva for their hard work, continued dedication and ingenuity in coming up with new processes, procedures and work practices to ensure we keep our people healthy and operate our business uninterrupted while, at the same time, helping our communities as we work through the Coronavirus pandemic together.

I'm privileged to be a part of a company with a strong business model, safe and stable operations, and colleagues who will continue to make sure we can deliver on the promises we have made well into the future. Thank you. Operator, can you please open the line for questions?

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Elvira Scotto of RBC Capital Markets. Please go ahead.

Elvira Scotto -- RBC Capital Markets -- Analyst

Hey. Good morning, everyone. Can you maybe talk a little bit more about the potential opportunity for biomass in Germany? And how do you see that opportunity potentially playing out for Enviva? And have you been in discussions with any potential German customers?

John Keppler -- Chairman and Chief Executive Officer

Elvira, thank you very much. Great question. As we've described previously, Germany is a very important potential market for us. They have been under way with some time for having made the commitment to fully phase out coal.

As part of that process, naturally, the regulatory framework to shut down coal has come into pretty dramatic relief, including most recently the finalization of the coal exit law that defines a very specific program of elimination of coal as a generating resource across the German landscape, including shutting down about 44-gigs of coal that are operating on the grid today. That's quite a significant opportunity for us. And so the framework, like you've seen elsewhere in other jurisdictions, initially provides for the mechanisms by which major generators can begin to evaluate conversions of these coal-fired assets into alternative fuels like biomass. And so in parallel with that process, which has been under way for about the last 12 or 18 months, we've worked quite closely and collaborative with a number of the major power generators and utilities in the German market to assess those important assets that are not only condensing power stations, but also combined heat and power stations that are very difficult to replace with intermittent renewables, and so biomass provides a remarkable opportunity for many of these generators.

So we're pretty excited about it. The market is developing kind of right on path. And yes, we continue to remain in direct dialogue with several major generators and utilities in the market and look forward to being an important part of their conversion plans.

Elvira Scotto -- RBC Capital Markets -- Analyst

Great. Thank you for that. Another question I have is in the U.S., if Biden were to win the election and if the Democrats take the House and Senate. Biden has been pretty vocal about a transition to green energy.

Do you think there would be a bigger opportunity for biomass growth here in the U.S.?

John Keppler -- Chairman and Chief Executive Officer

Well, it's quite an interesting question, right? So as I read the Biden plan, and I think that we should all acknowledge it's still pretty early in the overall cycle, but as I read the Biden plan, they're essentially calling for the same net-zero targets that we see in Europe today. So to the extent that that policy framework and that commitment to a net zero outcome remains a part of the platform, I think biomass, like all renewables, should see a benefit.

Elvira Scotto -- RBC Capital Markets -- Analyst

Great. Thank you. And then just my last question is, Enviva has done a great job. You did drop down and the third-party acquisition in this challenging market, able to raise equity and debt.

I'm curious, when do you think Enviva would be in a position where the partnership itself actually constructs the facilities versus drop-downs from the sponsor?

John Keppler -- Chairman and Chief Executive Officer

So really, really good question and something that we think a lot about, and naturally, heretofore, we've been absolutely fastidious in ensuring that we've insulated the partnership from the development risk, from the construction risk and the commissioning risk of new, large-scale assets. During the course of the last year, we've begun to dip our toe a little bit in the water, as we had described as part of the Northampton and Southampton expansions, and those we're very, very pleased with. And as we described in our prepared remarks, we're really beginning the commissioning of these assets and the pulse of EBITDA potential that we see coming out of those is quite remarkable. As we think about the enterprise and the partnership, we want to make sure that we are of sufficient scale, that we don't inadvertently change the risk profile of the underlying business, and so we remain very committed to kind of sticking to our knitting, but we are very mindful of the opportunity and the potential to continue to develop as our scale gets bigger.

And we tend to look at that from a free cash flow basis and a DGF basis. That correlates to around the time that we're in the sort of $300 million-plus EBITDA range, but we're still a little ways away from that yet.

Elvira Scotto -- RBC Capital Markets -- Analyst

Great. Thank you very much.

Operator

Our next question comes from Marshall Carver of Heikkinen Energy Advisors. Please go ahead.

Marshall Carver -- Heikkinen Energy Advisors -- Analyst

Thank you. So there was a drop in volumes with some revenue impact between the first quarter and the second quarter. I understand from looking at the Q that that was mostly third-party volumes that fell off. Are those third-party plants back online, and were those the same plants that you purchased, so they would now be internal plants?

Shai Even -- Chief Financial Officer

Thank you very much for the questions. So just to clarify, there is not really much of a change in our total product sales. It's just that this quarter, during the second quarter of 2020, the preponderance of our sales were out of our procured — out of our, sorry, produced pellets that we're producing throughout our production plant, as opposed to last year that we had kind of like more on average in line with the previous periods. We had volumes of procured volumes from third parties that substantially were eliminated during this quarter.

So the procured volume for third parties are more designed to take opportunities when existing in the market, and we typically deliver them into more of like a short-term sales agreement as opposed to our normal portfolio of long-term offtake type of payer contracts. As you know, we have a much higher margin on produced volumes as opposed to third-party procured volumes, which is now driving this quarter the higher adjusted gross margin per metric ton in overall our total adjusted gross margin as a result, higher EBITDA for this quarter compared to the same quarter last year.

Marshall Carver -- Heikkinen Energy Advisors -- Analyst

So as you move to the third quarter, would the procured volumes step back up, or do you think those opportunities have dropped off with the change in the market?

John Keppler -- Chairman and Chief Executive Officer

No. I think, as Shai mentioned, this is a part of our business on the sort of longitudinal basis. Annualized, it's 10%, 15%, so we'll have some greater volumes in some quarters and some smaller in the others, but it does feel consistent on an annual basis, so you should see some reversion to that.

Marshall Carver -- Heikkinen Energy Advisors -- Analyst

OK. And on the take-or-pay agreements, have all of the customers continued to take, or have there been any deferrals or any cancellations of anything? Does that continue to be 100% taking of the volumes?

John Keppler -- Chairman and Chief Executive Officer

So it's a mix across our customer footprint. As you may be familiar with, we work with all of our customers under long-term take-or-pay offtake contracts, and in some cases they want to accelerate shipments, in some cases they want to delay, and in some cases they may choose to cancel a vessel. But as the take-or-pay concept suggests, we're paid a fee for the scheduling adjustments, and we're paid a cost of cover in the case of a cancellation. That cost of cover accounts for the difference between what the price of that customer's contract was compared to what we would have otherwise sold into a different customer.

And so on any given period, we'll have a mix of those or sometimes none of them.

Marshall Carver -- Heikkinen Energy Advisors -- Analyst

OK. And last question would be I know your net income is expecting to step up significantly in the back half of the year, as per your guidance. Do you have any color between the third and fourth quarters? Is there a similar net income in 3Q and 4Q, or would there be a major or would one be higher than the other?

Shai Even -- Chief Financial Officer

Yes, I think it's a good question. So overall, as we discussed, we're expecting the second half of the year to be a significant step up compared to the first half of the year, kind of like consistent with prior years. And in general, we're expecting the fourth quarter to be stronger compared to the third quarter.

Marshall Carver -- Heikkinen Energy Advisors -- Analyst

All right. Thank you.

Operator

Our next question comes from Pavel Molchanov of Raymond James. Please go ahead.

Pavel Molchanov -- Raymond James -- Analyst

Thanks for taking the question. I know you guys touched on Germany already, obviously an important topic. I actually wanted to ask about opportunities to the east of Germany, in places like Poland, Slovakia, Bulgaria, very coal-centric electricity mixes. And now, of course, the EU just approved the big stimulus, including the energy transition funding, and I'm curious if you anticipate kind of eastern Europe becoming an emerging market for pellets from the standpoint of decarbonization as we've seen in the west.

John Keppler -- Chairman and Chief Executive Officer

So look, Pavel, you're spot on. Poland is a market that has historically had an important role from biomass to play to mitigate the overall, as you point out, the overall preponderance of coal as its generating resource. So we tend to think that their participation in the EU and their commitment to favorably impacting climate change, biomass is going to play an increasingly important part of that. Coal firing exists there today.

We expect that to continue. There's obviously an important election coming up there. And as we look across both Czech and Slovakia and some of the other regions, as you point out, are so dependent upon coal that the convergence of the sort of green recovery with these countries' participation in the greater importance as they contribute to mitigating the impacts of climate change and achieving a net-zero impact, we tend to think the biomass opportunities will continue to emerge there. Obviously, in some of those jurisdictions it's a little bit further off than what we see in Germany and perhaps Poland, but we're very mindful of those, and with the European team we have in place and folks in Berlin today, they're paying attention there too.

Pavel Molchanov -- Raymond James -- Analyst

That's helpful. You also kind of flagged the ESG attributes. This is a bit of a conceptual question. Can you just address the pushback that, as you're well aware, oftentimes gets raised regarding pellets, which is they're not green enough because it involves forestry, essentially chopping down trees, for lack of a better word? What's your response to that kind of common criticism?

John Keppler -- Chairman and Chief Executive Officer

Yes, Pavel, look, it's a good point, right? There are folks in the environmental community that really are of what I would consider to be more of the purist approach and say it's not green enough. I think every time that question has been asked, it's been answered in a highly pragmatic way, which whether it was red 1, red 2 when you look at jurisdictions like the Netherlands where you've undertaken a really deep dive into the science, into the mechanics and into how countries around the world are going to achieve their climate change objectives. You've got the Netherlands, the PBL, which is their equivalent of the U.S. EPA, undertook a very extensive consultation with a broad range of stakeholders, including many of those that you would characterize as critics, and their conclusion was, well, there may be some inquiry into this.

Not only can we not meet our long-term climate change objectives without biomass, we actually have to use a lot more of it, and we have to do it in a way that is sustainably produced. And it was quite interesting. They actually said and in a way that tracks and traces every ton of wood fiber, kind of just the way Enviva does today. And so we're encouraged by that.

Obviously, it's very consistent with what the UN IPCC has concludes about the holistic cycle between healthy grown forests that yield a steady stream of products that provide for everything from permanent carbon stores in the sense of dimensional lumber and things like that, but also the byproducts. And again, no one is cutting down a tree for Enviva. We're the byproducts of that harvest that find a high degree of utility in the aggregation and utilization of that resources as a displacement for coal. So I think every time the question has and continues to be answered, it's pretty favorable to the immediate impact that we can have to the benefit of climate change on the environment.

Pavel Molchanov -- Raymond James -- Analyst

Last question from my end is you guys did a rare acquisition of a third-party asset, and I'm sure you're very selective when you do these things. Are you aware of any other kind of one-offs like this that might be for sale beyond the traditional drop-downs from their parent?

John Keppler -- Chairman and Chief Executive Officer

Well, Pavel, you're right, we're highly selective in the way that we think about acquisitions. When we contemplate those, they really do have to be something special, because the proven track record that we have of developing assets upstairs at a defined build-and-copy basis, fully contracting those and dropping them into the partnership, we have such high fidelity on the financial outcomes about how those plants work. It really takes something special, and so we are selective. Obviously, I can't comment on any in process that we would have under way, but we do those pretty rarely, and I think that when we think about the pillars of our growth, which are, of course, the underlying organic growth within the partnership, the drop-down acquisitions, that third leg of the stool is just much less frequent.

Pavel Molchanov -- Raymond James -- Analyst

Thanks very much, guys.

Operator

[Operator instructions] Our next question comes from Brian Maguire of Goldman Sachs. Please go ahead.

Derrick Laton -- Goldman Sachs -- Analyst

Good morning. It's Derrick Laton on for Brian. Thanks for taking my questions. I just had one just kind of tagging onto the growth prospects.

I appreciate all the detail that you've given about what's going on in Europe. It's sort of related to that. One of our large customers announced yesterday some plans to significantly accelerate the investments in the renewable side of their business. I just wonder if you had any thoughts around that and maybe what the implications for just overgrowth in the wood products market as a result of that.

John Keppler -- Chairman and Chief Executive Officer

Obviously, we've been very proud of the growth profile we've been able to continue to generate, and I don't think that anything except tailwinds is the way that we would look at that right now. The markets that we see around the world, Japan and elsewhere in Asia, as well as our proven markets of the United Kingdom, Belgium, Denmark, obviously the Netherlands, and then the really interesting opportunities that we've just spent some time on, including Germany, Poland and some of the other places, we're pretty bullish. Clearly, the commitment around the world to a net zero, to fundamentally changing what has historically been a very difficult equation to solve, that between energy and the environment. Our ability to make a meaningful impact today in the customer inbounds and the pipeline that we've assembled lead us to believe that we're right on track and don't see any diminishing of those opportunities.

Derrick Laton -- Goldman Sachs -- Analyst

Great. Thanks for that. And then just maybe more around the quarter, the $9 million payment that you got from the customers. I'm just curious if you incurred any additional logistics costs or anything associated with those modifications, or did that effectively drop to the bottom line? And then related to that, just if you guys could give some sense for maybe the tons that were impacted in the quarter, whether it was the take or the pay on that, and how we should be thinking about volumes in the back half of the year.

Was it maybe 100,000, 150,000 tons the right way to frame the lost tons here that you just got compensated for?

John Keppler -- Chairman and Chief Executive Officer

Yes. And I think as Shai commented earlier and I think we answered in one of our previous questions, the scheduling line and when you look at that in the other revenue line, that's a mix of payments from customers, including those that accelerate or delay and, as you point out, in some cases cancel. But that take-or-pay component means that really what we're doing is it's a cost to cover payment relative to volumes that we then sold into existing customers. It's the delta of that that you see reflected there.

So you would not have any incremental costs, nor do we necessarily see a volume trade-off against that.

Derrick Laton -- Goldman Sachs -- Analyst

OK. Great. Thanks for the detail there. Good luck on the quarter, guys.

Operator

There are no more questions at this time. This concludes the question-and-answer session. I would like to turn the conference back over to John Keppler for any closing remarks.

John Keppler -- Chairman and Chief Executive Officer

Well, thanks, everybody, for taking the time to join us again today. We're privileged to be in the position that we are in, and we believe we have a responsibility to keep it up. I'm looking forward to connecting again next quarter, and I would ask that in the meantime, we all continue to please stay safe and please stay healthy. We are all in this together, and together we will all get through this.

Thank you so much.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

Wushu Ma -- Vice President and Treasurer

John Keppler -- Chairman and Chief Executive Officer

Shai Even -- Chief Financial Officer

Elvira Scotto -- RBC Capital Markets -- Analyst

Marshall Carver -- Heikkinen Energy Advisors -- Analyst

Pavel Molchanov -- Raymond James -- Analyst

Derrick Laton -- Goldman Sachs -- Analyst

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