CCLP - Earnings call transcript Q4 2019

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Operator

Good morning, and welcome to CSI Compressco LP's Fourth Quarter 2019 Earnings Conference Call. The speakers for today's call are Brady Murphy, President for CSI Compressco LP; and Elijio Serrano, Chief Financial Officer for CSI Compressco LP; and also for TETRA Technologies Inc., which is the general partner of CSI Compressco LP; and Jacek Mucha, Vice President of Finance and Treasurer for TETRA Technologies Inc. and CSI Compressco LP. Also in attendance today is Michael Moscoso, Vice President of Finance and for CSI Compressco LP.

All participants will be in a listen-only mode. presentation, be today's ask opportunity After questions. Instructions] there an will to [Operator also is today's Instructions] note [Operator Please event being recorded.

At the conference for like to to I'd go Mucha Please opening this Mr. remarks. call time, over ahead. turn

Jacek Mucha

may Thank forward-looking. assumptions call joining Compressco's and are for that may call. would contain fourth thank which you certain These remind risks made by number statements factors. the or and on conference CSI are many are like results are statements of analysis CSI you, to Compressco, control Good of a partnership. be XXXX based of of that Jamie. based be and the and uncertainties, number I a you on deemed beyond morning, subject These to quarter this statements are to conference

that You statements from statements. performance, guarantees and differ of projected actual not in future are materially results the forward-looking may those are that cautioned such

should for a financial for considered our call, margins, press complete addition, public and financial are we flow, flow, the In measures of within backlog, morning's to distribution measures. to free or GAAP our of to non-GAAP Please coverage website this the EBITDA, net distributable period. financial EBITDA of adjusted EBITDA to refer cash results cash measure. other a ratio, for be reconciliation or accordance financial in GAAP, margins, refer may in ratio, with adjusted leverage release the non-GAAP substitute nearest context not course reconciliations the These the information prepared gross

on planned SEC February or be this Form out is filed with morning, release Friday, press our our In to addition to went that before XXXX. XX-K earlier and our posted website, XX, the on as announcement

that, will over turn I Brady. to now it With

Brady Murphy

to morning, for turn with Good Elijio you for Jacek. over thank and the performance overview everyone, I then start of our an our will financial details provide will fourth XXXX. and guidance more conference results, and call quarter and on call. Serrano, you, who our joining Thank results

outstanding another formation the of had adjusted the $XX.X the since Inc. Systems set and CSI Compressco and being Compressor of quarterly Compressco. one million most of EBITDA of quarter the another highest delivered acquisition achievements, CSI record significant

also the gross EBITDA XX.X%, our of revenue million utilization new around vast the of fleet margin gas profit the We $XX.X in equipment We $XXX,XXX being South adjusted and third customers, services an continued Compression deployed end was set strong in into clusters lift existing of with XX,XXX XX% majority the added new with of the central record with higher horsepower, focused Permian at our Texas. additions key a quarter. million. of quarter, than for Basin of at $XX the of

up and Pricing larger XX% approximately year, effort lift from of XX.X% was XXXX, XXXX, last which very remains increasingly utilizing horsepower the at at horsepower to we've operators and towards units our years, fleet XX% total gas been new all generate at lift end a business to moved utilized efficient the to our for returns the the the made investments to XX% plus over effective, equipment on The and fleet strong two year-end conscious fleet horsepower of of fleet. reshape cost additions demand growing The X,XXX as sold large our horsepower. that end multiple tremendously. of has perform the wells, is out, something our benefited continues and gas now Centralized represents fleet capital has have essentially capital. on

the over capital, flat, the can XXXX, those keeping focused we've leveraging by years, asset In we returns Since and XX% We're horsepower set XXX,XXX from from which to highest to we in added end of XX%, on predictable. our on to migrating category, from almost our where equipment currently production. horsepower our headcount utilization. of last XXXX of and the have the beginning where liquids are areas XXX,XXX at we end the have the approximately of this XXXX, horsepower, technician base nearly large fleet and geographic the XX.X% increased is all three year, obtain while Since personnel our our increased the the most XXX,XXX, by earnings the was increased XX,XXX, X,XXX footprint. horsepower

significant under X%, We've been XXX,XXX those gross and from equipment our centralized our to has core seeing been to concentrate been improvements horsepower and mid-sized move XX%, XXX,XXX by The EBITDA. and one The towards XXX,XXX small XXX,XXX. selling horsepower of well-capitalized reduced This fleet to horsepower some to of to partially additions. redistribution proceeds units, with the and the by assets lift, some been in has focus on are gas margins reduced the larger large of horsepower. or we're adding where using existing a mid-sized customers, the we XXX drivers the fund to of our and has disposing units of from equipment clusters,

Additionally, are because our fabricating units others putting of new than our lower at vertical units, industry. we're out in our integration, own cost where we

year, sequentially, year. last X%. increasing with million, up of same the Comparing from each third increasing compression to of $X.X XXXX the and $XXX,XXX. XX% service quarter revenue business XXXX, revenue by by adjusted the of period or $X.X last $X.X aftermarket drop million, revenue million Fourth increasing segments revenue increased sales services our and XX% quarter EBITDA modestly is equipment by revenue increased three of $XX.X by despite revenue million quarter XXX,XXX Sequentially, fourth improved from

strong, aftermarket that X.X expected to sales and orders promise. customer equipment parts aftermarket we've As given the saw guided we strong for delivered quarter and the for services million. we demands end quarter, new on Fourth and last were backlog, the services the you we year services

the was quarter. million, Our of fourth $XX backlog as $XX December of million shipments XX reflecting in

unit opportunities. new sales of pipeline healthy a see to continue We

are have pushed out. be and order several a packages, decreased the components quarter that We However, has XXXX. that projects delays expected XXXX to since expect half delayed likely not times still of XXXX. but second were which compressor those of orders, to some materially large key also of manufacture fourth come receive on to down been We the the awarded until function believe in lead

I'd rig up $XX our improve been $X. improved financial performance, adjusted has performance like the our ending year, the CSI driving XX% to an XXXX, falling last XX% and the continued million year a Throughout that spend year some Now, the U.S. and total below for prices in a recapturing months, the industry very the employees key year financial this in few the commitment accomplishments very it's with minutes successful we from performance, $XXX million, EBITDA year-over-year safety Compressco. of XXXX, year, to our in of over XX increase. by the from to as total I'm of of proud and dropping in count onshore natural seen effort success gas a

revenue from utilization the million, end to from year and year the XXXX. $XXX X% total at levels ended our XXXX of Our increased up XX.X% XX%, at

of in improved gross the related the fourth of Our XXXX. to quarter fourth services, in gross up XX.X% XXXX, XX.X% margins, from compression quarter and

six This the from in XXXX, at improved X the also quarters. a X.X net in only high at year-end a X.X of is and leverage times we tremendous second times year, the improvement ratio XXXX. During to times quarter

are X.X ratio. good towards goal We leverage of our making progress

distributable we redeemed avoid this, our convertible to with $XX of We of last unit the allocated million dilution also towards Series in money units XXXX. August payment will In achieve further the XXXX, preferred fully A holders, the quite we Series A that cash units the redemption. common differently. completed to allocate To flow

Now, the I'll over turn Elijio. to call

Elijio Serrano

cash sale equipment. The approximately Thank of were XX,XXX fourth you, Brady. million our horsepower for received the for quarter, $XX we used Capital capital operating net to expenditures fleet. growth of added

$XX.X almost horsepower of All for for drive the over from XX% fourth we quarter-to-quarter. demand cash flow expenditures. XXXX equipment year in from additions in improved maintenance unit were last gas and of to capital growing are was XX% Distributable quarter, the centralized million to per $X.X million address flat liquid's essentially production. and set invested up for the Also lift size, quarter the

quarter was decision the distribution our XXx. the to Series Our cash XXXX Preferred Units. XXXX - flow the Also, third reduce reflects to and essentially of redeem XXXX coverage distributable December A ratio of cash in unchanged from

With the final redemption completed X, XXXX. in August

end of from by third quarter, flow the In cash payable Series approximately for from million $XX flow $XX in distributable accounts in a with of in activities redemption of $XXX,XXX million debt million the $X.XX our earned timing XXXX, Distributions and XX, to due A firearms was slightly primarily was per computing operating XXXX, we the accrued a quarter sales. new positive expenses driven income invested Net cash of units. Cash decrease negative down at the of equipment leverage metrics the shipments as $XX,XXX. when paid $XXX,XXX or were such unit. XXX December the

not do covenant we maintenance reminder, a have with. As to any comply

Our we leverage distribution and September high disciplined another Investor X.Xx ratio significantly leverage a achieve our goal the our end When of would at the end debt limiting been X.Xx capital Xx reduce at that ratio improvement. Conference our leverage of QX, improved additional XXXX, the to in we leverage our committed X.Xx approaching operating the has representing end the plans adjusted to our results. our to May metrics. sequential of EBITDA reiterated - Compared was fourth XXXX. was improved our annualizing at ratio given December quarter at of When to have of improve policy

XXXX This morning, guidance. issued we

be $XX We expect XXXX total capital expenditures and $XX million. million between to

between $XX horsepower XXX,XXX addition almost last We expenditures the expect and of to years. to capital $XX over reflect million, maintenance be the million X

capital to reducing limit midpoint flow and expect capital XXXX in targeting to than cash growth XXXX million to between less million. our of growth comparing XXXX. $XX.X We expenditures When be guidance million from taking of expenditures in approximately $XX million XX% capital be $XX.X to to into we and be will $XX XXXX the account, growth in distributable our

to reducing be the in fleet in amount from We XX,XXX to horsepower horsepower XX,XXX the we're approximately XXXX. XXXX will of approximately adding

XXXX almost of the in was order. million to XX,XXX Tetra. expect add $XX.X horsepower capital of growth by currently in million only The on that XXXX, XX,XXX excludes $XX Out we is funded

very investments equipment on threshold are the will of order commitments. our returns and in diligent capital being We only committing XX% and maintain to customer back we

investments technology continue in towards $X reliability efficiencies expect million We and improvement fleet allocate to to expenditures drive million margin to business. in to our capital of XXXX through $X

of real-time better drive to data business further improve cost we and improve and to to drive We functionality in our our our system telemetry both expect this enhancing continue which utilize best-in-class industry. units, amount reduce remote the we are and our we of decisions our Through increase ERP maintenance fleet and from for units runtime investment, be system, monitoring believe to predictably of further to the capture efficiencies.

time, this do any to in At have provide we did in general partner as to capital anticipate our we like fund not XXXX. to investments Tetra XXXX

We million $XXX adjusted $XXX expect between $XXX be total and to adjusted million EBITDA and EBITDA to year and for XXXX guidance million and be already $XXX between revenue million.

quarter of fourth also timing to We services. the softer be and expect of to equipment the quarter XXXX this sales aftermarket due first than year of the

First $XXX quarter million million be and EBITDA and adjusted is $XX and $XX revenue XXXX expected million to between $XX million. between

revenue expect customers with gasoline. We by and our for weaker balance built-in activity. will strong that to and market see sheets higher build core aftermarket expect services, program new softer a replaced equipment strength The units sales in be for continued and drilling strong higher of revenue centralized aftermarket margins see sale services but to have at well-defined the from

Using EBITDA we million $XX guidance $X million distributable of approximately of net XXXX of of $XX $XXX.X of million cash expenditures our maintenance taxes, flow. million for expect interest cash after and capital and full-year million to approximately generate accounting expense, cash midpoint the $XX of

capital expect the of use previously $XX debt. flow distributable primarily distributable to remaining balance million growth flow cash expenditures As of for mentioned, use outstanding the we to $XX reduce to cash and million

leverage significant Our on decision focus a year made progress. our to we've has been over metrics improving and consistent for

growth debt. in cash generate to are investment capital our reduce We reducing to

and have capital the as we soon ourselves August markets We beyond, maturities positioned priorities. attractive revisit we our rates into the are have metrics XXXX all as or our of XXXX in improvement will bonds unsecured refinancing complete in significant to leverage allocation believe the seen open. bonds Once unsecured a we our push refinance and

at and Q&A. some a for few before hit aiming open of equipment Number EBITDA our key we're expect summarize to XXXX despite new To we orders. indicates, we the that running in utilization. XXXX up X, delays points X, target are it in XX% midpoint we Number be for we the better guidance

we obtaining with are to some we the best and towards that fleet holding centralized equipment growth are all lift. our number are we capital customers returns and gas monthly comfortable rates with horsepower obtained XXXX new discipline on reducing firm we the areas the this in are outlook metrics. the leverage We are energy In highest in all our in XX% are Number on margins. the improved investments. entire And large environment focus in given capital All on units the pricing X, are X, producing and progress pleased fleet materially capital shipping in customer from migrating we are the in our XXXX very concentration, instances, of larger sector.

open we'll it for questions. that, With

Operator

your with today begin from the we Please Praveen gentlemen, now comes session. and Ladies first will from Our Raymond James. ahead question-and-answer question go Narra question. Instructions] [Operator

PraveenNarra

rate X-quarter walk imply. decline XQ there? this, or I at like XQ the guidance, then the bit would apologize softer through remainder the guys. what's morning a is than that run year missed versus us but coming the XQ the good step you ramp through seems from Hey, your when full Can guidance up I year advance quarter-over-quarter looking if was and it in I of why driving from

Brady Murphy

Praveen. fleet uptrend. steady Three and and Number points. an revenue data been consistent the question, very from X, the Good margin on has

sales, move downward timing larger to of QX and is keep a new QX units. continue projects of had that then A had were then in also had services. equipment were and we're high floor the we same quarter delivered and of also while - more the role QX, to that seeing the the be left saw movement you especially refurbishing incredibly lot we really peak. shipments that from to was we we expect In That strong as We completed that All customers. lot deploying a equipment good way sales. that shift. the got trend, all quarter to And equipment that we a an aftermarket of some in part fourth

to in and aftermarket backlog expect We we to QX. of the for expect the on and new down have or sales rebound slow equipment based we for that services beginning those timing that either projects, then projects

sales So around equipment of and it's all aftermarket timing the services and those.

Praveen Narra

Right, okay.

second slated the which onwards but projects is a for go So, have visible from for and to ramp ramp already you the XQ backlog half?

Brady Murphy

Right.

year total very equipment out we our ones Clearly, the that the are mid-$XX sales. only We've there what that less sales. towards the So, what not million. backlogs expecting indicated is that's tailed this than for than of equipment on more expect that's we're

in range we're majority that, is are the XX% vast delivering of to So, making on it just. well and Praveen. in We the we're on some not up sales also that new orders confirm. we're the expecting the in our fleet margins QX Yes, pick on profit And be equipment, XX% will the delivered second range. yet aftermarket quarter our call of services XX% new in equipment and

short So, the that equipment prefer the anything, be least. margins to the of sales if we're we were going short to on are be

Praveen Narra

Great.

You characterize you financials, it's bit. being per I still strong. it forward is how stability? we then walk the that? given And about quarter-over-quarter what down horsepower revenue figure drove guys did compression notice pricing also pricing a through come rolling should mean I Can think that in did

Elijio Serrano

Yes.

then in discussion the horsepower the higher small of And units much in I at $XX, there And $XX in had fleet run are rate mix range. large with our the per the think the past Praveen. we have the horsepower are this recall a might So that $XX range. unit

overall will So average the down adding the keep it equipment fleet. large horsepower more we

the a to month because at range. big issue $XX, per $XX, Relative the gas example plus we rate. $XX keep $XX units adding as it's an the unit the So, check there mix simply in

Brady Murphy

Brady. this Praveen, is

for is The delivered quarter December. actually a of highest we in other substantial we that horsepower. revenue part about thing in horsepower fourth probably not I'll add full to we mentioned quarter that the as get what Elijio our XX,XXX And delivered fleet a did

of see QX horsepower. in So a our our results that lot it's results, but that for in you QX will not

Praveen Narra

Okay.

one, change sizing, was per horsepower we materially. and mentioned XX,XXX and mix largely as on out last like-for-like large, it small, segment, medium pricing on model you unit? is, It just then just think our not when we of horsepower So if the did

Elijio Serrano

sure all we're And to the other fleet. thing also above make that new that want we're on all adding the clear at we're existing adding, prices units, the

we've monthly So, existing are few that rate the than all is are fleet new getting units the usual. deployed that the units got higher

Praveen Narra

Right, perfect, very thank you much guys.

Operator

Our question Brody Please with from America. go next Gregg question. of Instructions] your [Operator from Bank ahead comes

Gregg Brody

the and color. guys for Good thank all morning, you

Just your you see of you're come industry? changing still terms then if the you How that And and what flow in maybe you focused debt talk a a that talk getting excess job this thinking cash target, use of seeing Could the times about year. could you're you on bit target. we down number you've X.X are about little done really should down about more is nice leverage could something just a further after for bit based little on think in reduction? the

Brady Murphy

Good Greg. question,

that Right be get the in laid immediate of X.X we So, cash the some see that of retire a out. into are that target the in the you That's we've actually the at XXXX bonds to through the goal if we unsecured improvements end around can X.X of wanted combination EBITDA above times. proceeds that continued annualize of we plus we're some five we QX, goal. said to And now, times. at times. We slightly think XXXX

a to some looking remains might opportunities market market in customers be attractive that our achieved more continue might the drill the equipment very and priorities. of our direct capital will we to that and goal, are the debt reduce returns prudent direction. on challenging we the our is of capital in capital It on is to there in uncertainty As allocation deploy lot If market. and more rebounding at it if reassess

that direction. we equity Also, evaluate believe reward how capital we we in our we that moving significantly shareholders hit how by at look we equity undervalued will after and leverage at is if trading our our target, our might

we'll I current environment the think we Board for discussion, we'll achieve financial what bit doing it refinancing. our like looks have with our understanding

Gregg Brody

you I you point, run some when year, at if guess think So, and be there like will I at in last a does What to or a there. you're it the XX month on on I'm because quarter it be this quarter, run that you're, this there when be maybe as do as have feels you rate but next basis? rate Is you've really asking is, you there that have basis conversation, a you'll simple you not close. it need discussion guided to

Elijio Serrano

Right.

times. reiterate the at again point expect Praveen three already We're QX slightly softer one. the times X.X So but run be to at We're due we timing. just this to we X.X rate, number had with on QX discussion

month achieved year. March, under by end trailing be However, that on month this be XXst of five going don't around on a be until X.X expect XX towards I times XX the will want we're we of to times a there basis. trailing basis that think XXXX to we

allocation that. beyond, maturities maturities think markets the and Board we've that, quickly Now up open into about after for or at knowing able dialog that then if open our we of capital refinance with push we low all in bonds I or and are unsecured the XXXX XXXX got the point up to our

Gregg Brody

and gas do like you with almost utilized to able hold That's utilized that obviously And weaker? in you're where, us concentrated you seem pricing. very business and where if in centralized terms could - basins How noteworthy stronger in are remind where the you're fully are, are fully seeing that your of horsepower maybe you're higher markets you differences just basically or you helpful.

Brady Murphy

and between is be from think that we're accounts it's deliveries with for centralized is XXXX mean, we in the our have basins, a with past. I we've deployments allowing Mid-Continent in of pretty I between Permian the Permian lot customers that the key most us gas the were that three aligned South and mentioned Texas our allocated Yes, seen And core for Texas. the aligned Greg, XXXX so. demand Basin, who their will horsepower is and South and of same by lift again driven that and we've

Gregg Brody

you're one the has know seeing then, M&A you. uptick? of potential the the longer-term an strategy. like Curious And one last for been environment just and today Okay. maybe what if I for and part which

Elijio Serrano

there private recently been to of some market. So, companies have transactions coming

appropriate. disciplined some growth opportunities. like for And our that fleet acquisitions, at have appropriate. if We flow we We're opportunity to look think gain If price the the cash If we very is that for not not are at with that capital. is we profile think of just not evaluated think that very is disciplined we we synergies those appropriate. opportunities any the

on we've was those CSI pass done from that it opportunities think tells you fit will We good our and it simply have since M&A because us. didn't not we we for opportunities a walked acquisition, since away

continue evaluate take but open that of further on And and will back leverage there not we're our to is acquiring. dialog transaction opportunities. of ratios the acquire We going the improve will to that we're for to them

Gregg Brody

guys. the That's time. you very Thank for helpful

Operator

session. to the Murphy we've conference time, turn this any at gentlemen, Brady remarks. back and like ladies call closing question-and-answer reached the of for the I'd end And to over

Brady Murphy

concludes Okay, call. join and This for in Compressco thank time this your you We you. our us thank interest morning. CSI appreciate to taking the

Operator

gentlemen, conclude and We do for conference call. Ladies you does that joining. today's thank

disconnect may your now You lines.

CSI Compressco (CCLP) 26 Feb 202019 Q4 Earnings call transcript