SLCA - Earnings call transcript Q4 2019 | U.S. Silica Holdings Inc

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Operator

Greetings, and welcome to the U.S. Silica Fourth Quarter and Full Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

to conference like host, to now Mr. would turn over the your I President and Investor U.S. Lawson, of Michael Vice Relations Corporate for Communications Silica. Thank you.

may You begin.

Michael Lawson

for Chief call. and With everyone, for on Vice the and Thanks. President thank are me and year U.S. Bryan Don today us Executive Shinn, full conference morning, Officer. quarter Officer; Silica’s Chief earnings Good XXXX Financial call fourth Executive and joining you Merril,

forward-looking our I begin, remind like which comments certain today to would include that we Before all risks will to statements, uncertainties. subject are participants and

we a you release of For file discussion these complete documents our read risks with press and Company’s uncertainties, SEC. encourage the the on to and

Please public EBITDA to Additionally, full the EBITDA of measures we adjusted segment adjusted filings reconciliation refer margin. press of and income of non-GAAP segment to release or to contribution for refer today’s this a our contribution definition the may call. net and margin during

limit we wish Finally, to to during who so. session, question a question-and-answer ask all one today’s that a would may your to that plus do questions follow-up ensure you ask

I would to Shinn. the call like CEO, Mr. With that, Bryan to our Bryan? now turn over

Bryan Shinn

and and XXXX. stewardship. by our and I'll key Mike, everyone. quarter environmental priorities for begin highlighting strategic I'll commitment three in performance sustainability today's our our Thanks, accomplishments then to morning, provide fourth on call good reviewing updates and XXXX

call segments; questions. two on Don we I'll the and for the prepared Merril our color provide outlook operating products industrial then performance our additional my and conclude remarks your before with and will today specialty open for financial oil gas. market

million sequential million, a adjusted EBITDA the company EBITDA the a $XX.X which revenue quarter fourth penalty, $XX.X was quarter third in of of a decline X%. of Adjusted $XX.X XXXX. total for shortfall with million Our of included net compared was customer $XXX.X million, QX, represented

the ongoing specialty demand industrial to Asia experienced and product a weaker trade overall segment, due seasonal market decline our plus conditions dispute. we and In normal

was perhaps purchases This the in focused years. more past year of manage generation end at slowed the to than inventories. Customers effort customer cash

As down and in margins segment was a XX% year-over-year result, rebounding contribution margin QX on in as basis. a this expected. Sales are approximately

gas and exhaustion. lower levels response throughout continued seasonality the under related activity E&P normal and sequentially XX% and to volumes in holidays Oil Pricing West in quarter declined proppant budget pressure Texas. particularly

We months of year. have the two however prices improved seen first in this

local offline capacity the that to in total continues legacy prudently additional our X quarter sand we idled to Given currently displace sand proppant bringing tons. approximately capacity, million capacity

manage our the evolves. We as will capacity market to continue

the manner though not to industry reactivated that behaving response stronger-than-expected a capacity sand to believe in disciplined XXXX. is I have start seen as demand in we additional

I in will market. lower sales continue the expect additional with volume that in declined Silica load line over prioritize SandBox in higher QX. XX% volume to sequentially activity completion U.S. prices

a we experienced modest As pricing result, in pressure downward the quarter.

proppant ceramic Silica to success. year robust products manufacture we high-margin, market perspective XX% ISP We Georgia new pursue approximately build, and customer for delivered We growing new XXXX. broader share high-performance of ended continue the transform with in former meet a to opportunities pipeline in sand of in plant a XXXX, business invest long-term U.S. From oilfield demand. a and Millen, converted to to

major facility industrial a and capacity us We contract business in Carolina, long-term expanded milling at to customer. enable new our the secure South which Columbia, with

business our year our million product can capacity investment. ground finest just fact, how example great last capital with grow CapEx. of modest ISP specialty nearly we organically of to produce In with doubled we $X.X A

provide in stand is required contracts our new We new signed blue-chip to will offering invested less for with several a that quieter, for growth long-term next-generation's a in and and maintenance going we which forward. make, fed springboard SandBox, expanding customers expensive customers equipment box less payloads and energy gravity segment is

We headcount perhaps during recorded business also structure. better logistics our team capacity Silica. reducing proppant the in size the the of align our my safest to and XXXX of most footprint, significant proud that our market steps the tenure took and I'm current fact towards oil our gas rightsizing U.S. business with year

across from We total the like done. reduction the X.XX, this X.XX, a XX% and recordable stellar our who plus rate of to accomplishment. achieve the incident completed year. lost colleagues of a X,XXX as achieve XX% safety I'd my time well the belief-based congratulate reduction from XXXX, rate Well workshops enterprise previous

flow, business XXXX turn now for our me growing progress three gas free oil industrials the cash repositioning and to our making Generating and we're strategic priorities Let on our business.

a we improve the operations reduction annualized headcount energy with savings our of $XX and announced approximately current in challenges support and Late last align staffing delivering in million. efficiencies to year, businesses, XX% better SG&A

products plants, We've rightsizing minimized capital increased cost XXXX We've to to ship to and automation $XX million. and to the to our asset driving a million planned to of products. basic industrial while our higher-margin mix the lowest expenditures we for increase range $XX are of continuing on efficiency business

an optimizing perspective, key better From working and inventory improving as vendors a including monetizing accelerating on with cash have intense terms as management non-core we possible. focus wherever negotiating capital assets management well collections,

strategic business. second make gas progress also oil We've which good our on is priority, and reposition our to

high-cost fees to by rightsize and suboptimal As to our optimize production. while eliminating rail sites We'll and network earlier, we've steps stated rates. renegotiating I transload exiting shipments executed continue transload

XXXX very cars curve. more also and Moreover, year. this on keep staggered off maximizing low-cost next rolling XXX barging us end developing new rail with the cost rolling routings low the and are year we're leases of railcar lease to off We

very path our growing with of aggregate non-contracted to and our clay for for team industrial pleased done a Once work priority diatomaceous most sand, increases implement products. that ISP lay I'm our had earth we've silica of third business, price our the terms In again, growth. a

to continue growth margin products business several and pursuing our shift We ISP higher towards are platforms.

looking delivers not-in-kind that milling for capabilities. effective We're offerings. expanding an high-value, existing new alternative targeting through are using technology where we're For customers also new example, markets

several we're making products but gaining products cases, trials. for stages good have and headway. various new We of long, cycles these many are traction sale In in customer the new very

to is plan higher-margin focus adjacent through base new opportunistically and products increase small and acquisitions. business grow Our gain, on tuck-in launching our through price share the

an that stakeholders our provide Let with initiatives. major U.S. you update Being to me ESG Silica in deeply stewardship me and core personally. on environmental value is now a employees, and our and leader a sustainability to our matters

stewardship of of This commitment resources. to precious includes one our most water, sustainability

advance efforts. conservation recycling We water continue to our and

facility Jackson gallons water we invested example, million Mississippi For and and consumption our last year in XX our million reduce over annually. $X by

to energy consumption. committed We're reducing also

we million to efficient technology and to will energy variable enough substantially hours LoveLock, electricity shifted annually, equipment. in XXX energy year. for approximately example, one changes key our lighting drives power frequency about save of kilowatt and For lowered a costs for Nevada, These households

primary at well-being dust XXXX be the continues a to our Safety identify and exposure also. of a U.S. focus team partnered Silica We have we sources employees. NIOSH, and Health reduce unexpected with to for and their terrific In National Institute Occupational,

Finally, we products impact continue to develop low customers. for environmental our

plant rather to the our not over branch Because organic and made amendment showing years. out doubled into past environment the significant commercial the to pesticide, is business growth. of For harmful agricultural its than soil DEsect two as minerals helped up success has improve us DEsect organic a chemicals, example,

for on with conclude of both Let my market risks and a prepared Based have Reserve industrials. segments reports Federal believe from with today me outlook the U.S. operating others, that our starting economy recent we downside remarks the to receded.

continued overall that job remains Further, and remodeling, building the and strength of population optimistic U.S. constructive we're relatively and strong consumer job business. are positive The economy indicators industrial market in for both XXXX. strong important growth spending market for the U.S. U.S. home a

and markets XXXX vehicle are creating of forecasted On U.S. the and for diatomaceous our beer earth the silica flip headwinds to in wine and offerings. side, product sand some light sales contract

from impact Further, combination GDP and by believe All-in, profitably price we're carefully higher trade business times at of our new and three continued rate issues. product health that XXXX two we watching to increases emerging of in introductions. grow global driven for volumes, can industrial a potential

in good off a we're to Oil and start gas, QX.

continue capacity in between Accordingly, I to million tons million of XX XX the sell prioritize volumes over to sand sales not and pricing do ton and XXXX. per to for oilfield sand frac think we'll and plan market. idled return expect We profit incremental to

and we SandBox, of their anticipate flows volumes pricing pressure I the in and For year-over-year customers total persist last that year. as stay profitability disciplined that throughout load the will cash also but within seasonality flat not worsen. down to the to terms continue two will energy of slightly be business spend years in to mirror our expect

estimate $XXX million for adjusted million I these After that is expect reasonable, account, company but a conservative factors outlook taking in the EBITDA profitability all $XXX to of XXXX. current street total consensus, into

as to the XXXX update our expect progresses. We outlook year

the turn Don? call now to I'll that, over Don. with And

Don Merril

Bryan morning fourth everyone. stated, this million was quarter. was $XX.X customer Thanks net figure in shortfall good $XX.X a and And quarter the adjusted that for penalty The million. recorded as EBITDA the includes Bryan

on amount keep on could increase informed we or based and you current decrease. an negotiations comment but cannot occur. The is this, recorded estimate as We further will changes

to frac XXXX, in pricing. fourth produced decrease a frac sold like sharp sand sand regional During and sand contributed were customer fourth quarter of of experienced as the this White and in-basin. for we for frac more decline the quarter significant in tons demand XXXX, non-in-basin Northern Unfortunately, a

for in-basin utilization also even overcapacity of Given more. our sand, network the the and in the the railcar and changes of preferences experienced transload we railcar of in customer decline sand this fleet type in demand grew the industry-wide

of million related the property, and fourth equipment, triggering the $XXX.X $X.X million of and of lease assets. related assets result right-of-use operating related a described As in million above, impaired million quarter inventories assets and plant intangible we $XXX.X consisting events to $XXX.X

The bulk Texas, been related Tyler, were or Wisconsin including facilities of have idled and operating charges at the reduced equipment and to that Utica, impairment Spartan, Illinois. capacity property, are plant

to The impairments are asset right-of-use leases. lease entirely related railcar operating

leased lease. As railcars a of storage. railcars of In XX, X,XXX XXXX we approximately off XXXX, roll expect maintained we in fleet were which X,XXX the XXXX, of December

two segments. product segment the for seasonality the XX% was and the typical down from see of in $XXX.X results onto our industrial largely Moving quarter quarter to revenue operating XXXX third Fourth specialty million, that due the segment. we

was XX% XXXX. off the pricing sand the look $XXX.X shortfall X% a the frac revenue and start the quarter a earlier, to like XX% third and is to mentioned gas million in from previously XXXX ISP XXXX largely a of good quarter penalty. of down volumes, by decline first due reduction As segment offset segment quarter three Oil in of should mentioned

penalty the a contribution margin On segment volume. basis, $XX.XX third contribution essentially shortfall was flat The reduction basis The margin customer quarter XXXX. gas lower for XX% compared with pricing. offsetting part-time increase impact versus despite was of $XX.XX of a ton segment the is the and quarter on in $XX.XX ISP to the due for and per volumes third was the the oil

fourth look This of to now costs general at expenses the quarter the by million of total decrease Let's of administrative a reductions offset Selling company due quarter represented non-cash $XX.X of equity-based X% lower and higher XXXX. from results. largely partially compensation the third employee headcount was decrease result in expense.

believe that reductions expense headcount the XXXX $XXX will the other year million our approximately We full total for initiatives. and to announced SG&A in cost-cutting due XXXX

for Depreciation, XXXX. the amortization million XXXX. down estimate idled driven to due the million, third that in to DD&A in be mostly expense X% from DD&A totaled year We decrease was depletion fourth the the The depletion quarter $XX.X plants. and roughly expense $XXX full reduced quarter

Our December about respectively. At anticipated and were effective this year, and rate XX% XX% for in in we tax the XXXX tax of the point XX% XXXX. ended year XX, benefit quarter

sheet. the to balance on Moving

in of $XX.X and of cash XXXX and December credit its cash under resulting $XXX.X XX, $XXX.X million. revolving million equivalents the total liquidity facility, million company As in available had

expenditures Our our SandBox our of maintenance billion, our $XX.X and a term was expand quarter were well totaled at as has to other related spending date projects. net Capital on year-end fourth in the cost maturity equipment $X.XX ISP to million segment, projects and and growth debt improvement loans and operation XXXX. in mainly as

million be our flow expenditures the capital funded range keep and to XXXX expect from to of $XX We operations. million $XX in in from cash

on Lastly, I'd policy. like allocation our to capital comment

per cash $X.XX our with As businesses. you action this be use appropriate that as dividend reduce We better will strategic to recently and align know, leverage was grow elected additional and reduce did up could industrial and free this felt it of we to our that to the quarterly our priorities higher-margin share. logistics

turn I'll the that, with Bryan. over back call And to

Bryan Shinn

Thanks Operator, lines please Don. the you for would open questions.

Operator

Thank you.

question that now be answer will to we a We and interest limit the one ask yourself time, conducing and follow-up. one of you Instructions]. session. question please In [Operator

first with of proceed question line comes the your wth questions. Our Gengaro Please from Stephen Stifel.

Stephen Gengaro

gentlemen. Good morning, Thanks.

Bryan Shinn

morning, Good Steven.

Stephen Gengaro

capacity the start of I two And When that about release things. we're you lot I mines the hearing mentioned a among the a Texas. down now. of talk you're two in-basin know that's press how in-basin there? highest Can with perspective? is, the in And guess are about there I down capacity you right what impacting in seeing utilized situation pricing sort also from

Bryan Shinn

Sure, Stephen.

the I usually Permian in-basin this that's speak of to which of where sort when I is. thinking we're given think think about So we if capacity where it is most it of way. about

today XX supply million total supply something that capable closer would what got probably be like the kind million could that is to I is is of call million And that is think tons. seeing the tons. of that maybe -- What XX active there we've installed for tons. a out sort like supply realistic what's XX more I

that if the you ton I was to demand as exited at opposite so million and think QX XX the entered XX demand, probably look And range. QX we in

So there we're Permian in to pretty the relative starting out that's to the today. active get supply tight

Stephen Gengaro

Okay. business that to the lines is ISP XXXX ton the are and product bit number you. And here. forward kind these Should XXXX think of that new going numbers a of roll more much? that as per we margin as a advance is some impact of And introduced? about at event or Thank you then contribution

Bryan Shinn

contribution of tends we margins. see So, that time, average of at bit same new today. I a a legacy demand and we'll high bit is have there lower what we'll which some business the be see launch very that think continue At that that's rebounding all legacy margins products, is series than to a to

get So, see some legacy fast kind big recently. extra from on it we'll side of products I how much depends contracts demand launched the had on get the going balancing of new signed really that we've and a And how couple think customers. of We've we act legacy a our forward.

And so, to the contribution to somewhat overall that accretive dilutive would be very obviously but margin, total.

it'll think, be I So, plus sort minus. or of

model going out legacy I of we flat as some between several say would I forward products balance the as So, next kind products. pretty this quarters it, play for new it's and

Stephen Gengaro

Great. Thank you.

Bryan Shinn

Stephen. Thanks, Yes.

Operator

Thank you.

Our next from question Please with of Stephens proceed comes Tommy Moll Inc. line with the questions. your

Unidentified Analyst

Cameron actually [ph] morning. Tommy. Hey, on good for This is

Bryan Shinn

this doing Hi, Cameron. How you're morning?

Unidentified Analyst

you that some you. Doing about going helpful? with that well. in that want the Its to guys can be start is of of color going and be going XXXX? I are How Thank look give forward. there we you investing to right and ISP ISP forward into see revenue. would growth XXXX growing opportunities Any now a third do

Bryan Shinn

Sure.

of drive business. get years growth products over chunk a I see what's two we'll think big a launched. the of that's And So, next new going to number industrial the our really in revenue

products ton. it's If you margin look today we contribution million in annualized at per for the new have about pipeline that $XXX

last potential working their generate up. kind years that are So to annualized products the launched the way over these tons contribution XX XX think of which through. we've of million coming they we all as have scale things months are about In the

when with we at a our that's company. think to but long a we've facilities, of looking product. a $XX lot launch on got we're give million of a that actually but questions consumer to we actually filler high-end I the I a have we've us really a been consumer contract It's new contribution get scale leading be They're then market. close out. interesting say And production some examples, We've looks what's And come very product term just yet. of going actually have in new about product a launched. annual to products call equipment one causing from that margin launched I to into we that there on interesting. And a filtration generation add products specialty back got officially And know, the was go what the being product, new one, up. would investors fillers, talking side. DE some about not launch, at And compounding we another

coatings over high-end of about and couple countertops. And of the resins, a products, So paints, for quite we'll then that that still polymers, ramp the we couple next have for bit things. light specialty quartz talked up years. one really of We've manufacturer Could those see for industry. aerospace type ceramic a one high-end cool and

see the then year should in I So, of XXXX. half this think we'll and go to of products from impact these an it up ramp through as we start more second

we'll the have see the and So, I'm to in excited products start we that have about quarters. -- the Cameron, definitely that we very here, product coming effects

Unidentified Analyst

That's demand, confidence then, talk X% will be things flipping a then about to looks And And can about of that some do to contribution given in you maybe in like year-over-year think XXXX. have per you. into proppant Thank gas margin ton that be if great. could oil Awesome. the creative and XXXX? you But that? we it

Bryan Shinn

have really and is positives idled. get step think The couple idled lot million the capacity emerge. you about in out several capacity other certainly tons at lot kind Silica, and to there's as thing. the starting And of market example, Texas proppant We've seen it is West U.S. X seen I we've over interesting. done back last market That capacity, of of of a it, of for the of quarters. look our come same competitors a

in that is in prices And think we're I sales generally right sand the just some help certainly a across industry, from here will sales good. incremental rationalization now, prioritizing discipline drive I the volumes I market. our And the lot so, over QX. perspective, which think in And of higher space see

completions We higher. strongly in we're point, that or stages are up pick terms headed versus pretty suggest completions seen QX some and the We've demand plus But in here in seeing think XX% increase to estimates and minus QX your QX. stages. of

for demand. all that's positive So proppant

up see to incremental percent we'll volumes few go sales opposed on ton. as from our a that QX to pricing as we really think last I focus trying sequentially to QX. here Again, getting

XXXX I guess seen same the the E&P as so. is other that comment of to on I XXXX spend seasonality expect see in kind we've of have XXXX we'd and

the will QX be trend as guess just years and expect fourth will in spend So and here that of always be be [ph] quarter, to that And would things for couple a get QX QX seen I then higher. much We've in okay. into persists now that specific, will fall is XXXX. off. we my

Unidentified Analyst

Great. much. All so turn And right. I'll back. Thank it you

Bryan Shinn

Thanks Cameron. Okay.

Operator

you. Thank

Our next question comes from Please the your Kurt line questions. Capital. proceed Hallead RBC of with with

Hallead Kurt - Q

Good Hey. morning.

Bryan Shinn

Good Kurt. Hi, morning.

Kurt - Q Hallead

the summary and within question that especially gas Great oil in-basin dynamics as Bryan, Hey, dynamics you there. way dynamic. a that different on I at you Appreciate. there sand are out the just altering for on being distributed SandBox, understand few that look competitive is are there the business

out guess system You have belt out And this that's I mobile then there. conveyor unit some processing you that's have there. supposedly

Just you impacting what that's kind wanted get be may SandBox on and get feel combat gauge how your -- to of your doing that? to

Bryan Shinn

know, a really question good You Kurt. it's

today we're step I what SandBox look at in and market. We XX% market share. think share think quickly gained a at very as the we about back we've

about today through back is just oilfield being one SandBox the that. That about means, in a out of being every run and consumed four think system. tons so, And that's step

about rapidly. versus XX% pretty The grown XXXX were XXXX. that we've we in loads up So delivered

competitive share. all of massive onto I that dynamics really still optimistic of year-on-year. that like increase XXXX, feels flattish as kind more year it to SandBox. hold may mentioned, the So work be also you feel And about we a

and that and just for you benefits company expressed at ever ever by silos. bank. were a these first preference customers they're systems in out and market. saw And leading recent survey when the time And first done customers I a that survey was box more the service it all this those But think of versus ours of I energy company of the enormous. for the the respondents look time brings,

liked XX% of said survey boxes So only respondents like that and silos. XX% these

sizes -- or the the terrain solutions Marcellus particularly some and for is basins in an pad Marcellus, preference other are tough, overwhelming So leader in the Mid-Con there's that of Rockies, that and in like where areas we're smallest box sector. the and so the the some

going advantages numerous is to benefit that And there's to think silo I over So accrue us. the system.

have We're there just like don't really But in good we'll year about and a expect working the feels kind just feel year. lot good year that. of certainly SandBox we come think flattish prospects. into XXXX, share on XXXX. So, to I our took And share me. more I a given a whole to more to I take this

- Q Kurt Hallead

about going oil the same just to Got dynamic. follow-up that to you commentary the the within staying the in then commentary look side. you. And the pricing on gas token mentioned Thanks. again At Appreciate proppant prepared maximize that. the that you're and fact

So let me differently. phrase it

context the give if could you that was in expect you in wondering was I the given what of way So that under already us improvement magnitude pricing indicated of market? you've kind relative the some discipline

Bryan Shinn

you but with industry there, to It a with it's up in we quarters When pretty look comes occurred in going would seeing up up what's QX, a low we've $X to Texas cases here in sort time in line at and be or rationalize, quite pricing QX overall look we're at spot year, again pricing the upper $XX like up mid in as West rate. ton could of XXs. disciplined the like And Texas. particularly off think spot back versus now say $XX far to $X what about quarter over pricing I here. we're so West its take that last where end think a very end mid And in looking at of seen capacity pricing the to already if to-date, or a that XXs, something several our significantly, honestly. was to I I pricing the some we may things get more exit ton it

we pretty out think spot. in I settle that a good chance a there's

Hallead Kurt - Q

That's Awesome. Thank color. that you. Appreciate great.

Bryan Shinn

Thank you, Kurt.

Operator

you. Thank

of George with comes line next your question from with questions. Our Pickering Holt. Please proceed O’Leary Tudor the

George O’Leary

guys. Good morning, Bryan. Good morning

Bryan Shinn

Hi. George. morning, Good

George O’Leary

I to are on sand the to both trending basis And pricing? wondered following bifurcate pricing and White frac a of you quarter-over-quarter maybe front. on if could Just that how pricing between those prior Northern relative and any in And point. walk the XXX-Mesh at across other? XX/XX, differentiation bit even you XX/XX a above buckets? deltas grade, pricing there various between is just we But is any heard getting wondered through on pricing kind question those this in-basin then, each little if

Bryan Shinn

I so just out would it we've has Northern Texas say that fallen George, a pricing. the year. and last been the up bit the that's So what and is seen end at it's as pricing far of got most West is the most as a because the certainly really more much of as but some, we through Texas not White XXXX bit West back favor went come sand steady depressed

grades to your where certain that's now. grade And sell So right just like favor most don't have seeing there enough of we're and There's that the XX/XX really times in which it point for the in are most. XX/XX the we times of think increase I it's to where like demand. its hard goes out where seems

of what relative customers like lot energy company they to it's to specific a So pump. and

love XX/XX. customers Some

would say as in So is usual. the of it's map But pricing sort now rebound over right I all West the most of Texas.

George O’Leary

the as incremental how you've million you just COGS and was any and you making reduction are continue will and our $XX of to idled. out system in headway mines ongoing side, guys much for super there dollars clearly that how And the side logistics a the across reduction cost efforts SG&A in the way that the to given taken cost good costs the from nice That's perspective you've any Okay. much see. helpful. Is board to out on the From take equation, us? reduction of way frame reducing then frame these

Don Merril

line, to per the of we're contribution see side. Yes. about your to not we've really bottom good point, not on taken To the a that. to start Look, cost the We're logistic a ton. hit going is margin talking I out more There's really way lot cost. really frame think

it for of know impact saying As hit going that forward, go as we we're you a favorable CM incremental impacts, see Bryan think best impacts full go to per as ton forward. I cost to we our the year

George O’Leary

On QX to But could. I'll sneak I started that in that -- move so see are well. move second it the in quarter the the in some and one prior of pricing? side enough spot of And results that and Did a will I quick early benefit to year. has materialize the more year beginning rise pricing see perspective? oil appreciate enough from QX more we Or realization the pricing gas as the if there that will some over of response of on business?

Bryan Shinn

continues think stay that QX. into I certainly company and hanging a think over we'll I disciplined, definitely we if see disciplined we see market be if the some to benefit in And QX over as QX. could

George O’Leary

very guys you much. Thank

Bryan Shinn

Thanks Okay. George.

Operator

Thank you.

the Our questions. Lynagh with of your Please next question comes line proceed with Connor Morgan from Stanley.

Connor Lynagh

guys. Morning Thanks.

Bryan Shinn

Connor. morning. Good

Connor Lynagh

tie like quarter, pricing a and just bit some So, it seems in gas together, you after lower these the idling I was costs tailwind pieces have of different first the could wondering all business have if mines. moving in you'll you've probably finished oil a some we these of

So to you or relative how how quarter? to margin be frame margin to to up fourth guess be much ton Could dollars as contribution prefer the would willing per hazard contribution a you it.

Don Merril

But It's that. any quarter, on a guidance don't that market. hard move that. now is we where into But give some now. look, we've We've coming a Look, good. of as look moving we've you to just very little are beginning more schizophrenic to do and on some bit Maybe out. nice We right insight we'll there's the as got And that very really look right really we lot headed. costs Right got parts talked. difficult have side the Bryan good because tailwinds. volumes question, to in it's a got relatively your of following volume this talked, tell now in know said a the some really

Connor Lynagh

things you tailwind Okay. I of we fourth just cost lot big in have? things to like do railcars. talk know, that actions quarter still fair. idling the like could of off That's a maybe a how roll the mean It seems do about if and you was starting and some you're there

things, on you would much So, of side of a expect? benefit that how

Bryan Shinn

see idling we're railcars, the where going of railcars to come from coming think cost to is out. the lease off I start the

we think have benefit I going a would are I to say.

probably at the margin let's a to overall $X.XX you're contribution look the say, of ton. you ton looking benefit If per at cost, between $X somewhere

Connor Lynagh

year or the full a benefit that's first And quarter?

Bryan Shinn

Well, That's hitting full QX. it start in will Yes. year.

You're going in to benefit start QX. to that see

got see that you've in for to an then from cost and ton So overall ton every take after these impact outs that. you're per CM quarter follow it'll a going $X-ish QX

Connor Lynagh

it. Got

Okay. the prices one supply/demand to back? just before what makes do that sense the Is higher much One think pulled I the out How you on broadly move last does think. incentive that capacity industry. here. of you you've about back bring to picture level the how lease pricing here in or more bring some higher mean

Don Merril

let there's for much higher way long. look two it, me to at how think the The we Right? Connor. and So components it, second start one. with I how There's

shift have reactivate. need completely And been there's or There's takeout. big shut. taken And to need maybe hire where about would industry, profitability, just because before be you there's would hurdle cost where capacity look I higher back that. capacity and personally, across do places there's definite two there's at you sustained and prices excited of of to months then go takeout out all sustained the line, a to of you've to I'd a there kinds if see sites me people. out a And For several bringing on two

So first we've of it's lot take out in the case barriers system. higher. pretty case, so the much bit lower. is a the And In little second the hard seen far across to

out that restart So look the lot industry tons shut local a for And the capacity see sort what in shut based you coming our of is if of no I rushing our week to get pricing. see Tyler to on in not the would seen case in the let's kind have terms in reactivate market. start general here just a we've rush mines We just mine. of we online of quarter believe in the for in when that around and those And first example, we've more spike take at one a would to actions we'd mine. our

So in it's period the take to I over going rational time restart pricing the more of industry people sustained much think to entice a of most capacity. longer to

Connor Lynagh

All right. very Thanks much.

Don Merril

Connor. Thanks

Operator

Thank you.

Company. comes from Our your Jon proceed the next Please with questions. Cowen Hunter of question and with line

Jon Hunter

good for thanks morning my and Hey, taking questions.

Bryan Shinn

Jon. morning, Good

Jon Hunter

margin within EBITDA guess year, million some the be I'm overall contribution digit to business one XXXX for EBITDA first have growth and XXXX level kind is single in the take year. of high you your XXX. pieces to you exact of of for opportunities as outlook cadence a to volume know the If cost-out within wondering to of mentioned pricing. XX and to I able getting the I of assuming the And profitability XX some XXX that for expectation achieve on But ton ISP, to and moving today? So of per see tons I of had gas of and kind are it I these and gas level oil what you oil some that kind assume

Bryan Shinn

So of out. are of I a can ways think here. lot there's play this that there lot pieces obviously moving a And

up the we do pieces all move perhaps to We I or recognizing felt is like think to to for conservative. XXX of to together and knit number appropriate, we XXX are give year what an when that that but was indication some trying down. sort XXX going this

that some upside particularly the pricing seeing. there's sort that we're think positives to of given early I

Jon Hunter

the are to And to working of free the relates of then be cash kind it of much kind is I'm expectations for And curious how $XX year, flow a for it. revenue your or benefit? cash in as cash shortfall expected benefit a Got cap XXXX? million was what

Don Merril

Yes.

cash. shortfall year. not expectation of But now right the So baked in than penalty that's to of less positive flow be cash half a going free next that being into our about little is

up. goal of in And that can of button from XXXX. in was you brought push a every that source to is I capital. our our out to on think I'm Our continue squeeze got to cash working cost big XXXX. Working to glad capital we've we more savings

to So we're goiong that. continue to on focus

Jon Hunter

it. Thank Got you.

Don Merril

Jon. Thanks

Operator

you. Thank

John Simmons comes line with question from of Watson Energy. next the Our

Please questions. proceed your with

John Watson

Thank you. Good morning.

Bryan Shinn

morning, Good John.

John Watson

fluid talk the today wanted through to start it understanding a obviously I that subject you could it's Bryan. morning, ISP. Good how us change? It's segment? that potentially impact to thinking on situation. But coronavirus could about How you're

Bryan Shinn

any would as of the impact I we haven't coronavirus. from seen Sure, John. this very A question. point say, good

industrial who there's have two coin hand, customers us. one to On sort that think of of China. their chain of our some the across parts sector in I have we for supply sides

So out. those be how this are degree some customers to depending ultimately plays could impacted on

So negative side. on it's the

in side an relatively aggressive out other in there the China have the is competitor of the who market. competitor we but small, emerging On coin,

would as And expect well. that so, face I they some challenges may

of of it's sort a hard just And be of real So us result we'll that on that. into a we'll sort to massive from it. I pulled look balance if to a see or positive back all this at as disruption real negative sort of and certainly there's global for business way up

Our chains. industrial of XX,XXX all more value across sells kinds business customers to than

of So coming in not or our profitability industries. of still at terms XX% impacted and probably a sort probably sales be We're of I domestically. industry any this area specific would concentrated we of point average an in at an say overly have would and we of geography variety

I rely global So said definitely U.S. sales I have before the supply But our customers chains. think as some we're not outside tremendously on of

John Watson

Sure.

That's Okay. helpful.

demand anticipating appreciated you dynamics made the shortfalls pricing the terms you're Secondly, John's and I would in demand the shortfall. have something you with and that outlined. I And wanted respect commentary of follow that to What this you're earlier? for to more realize you to environment year? to into the change Is pricing EBITDA question baking up adjusted on that

Bryan Shinn

all. gas and don't and sort baked with all environment We actually contract Look, and is oil that have continue a are levels. that, expectation a to strong their byproduct we into at my hope No. my lot customers of of our

contractual think And for discussion example us do the signed penalty what. up their that I would shortfall this though commitments is they is no the say up of live expectation that that matter around is time think I same contracts accountable to at a the holding our what good for. customers I customers

John Watson

Right.

Thanks turn for back. it Bryan. I'll Okay. that

Bryan Shinn

John. Thanks,

Operator

Thank you.

with Our Please next question Lowe comes from the proceed J.B. Citi. line your question. of with

J.B. Lowe

morning good Hey, guys.

Bryan Shinn

Good J.B. morning,

J.B. Lowe

wrap up last Just that of questioning. line to

On of contract? XX many guys actually under are the you XXXX, in how those XX expecting million to are tons

Bryan Shinn

oil year XX% under gas. about for have sales our this and of contract We

J.B. Lowe

having And customers? payments so, we move a do shortfall we been you've on what potential is based there that discussions been throughout further you've see as your with the year the --

Bryan Shinn

pretty mean, The I It certainly looks expectation. us. our that's it's But backstop should in now. change. the right oilfield for a market great something not robust

in backstop I So year. is always don't not that's said, well anywhere the case. the our base in market in go case this as But things

J.B. Lowe

Okay, great. question And just SandBox. other was then my on

I more from into being Because saying of think your to little bit competitors you both a of don't that the function some market a worse. that going just of know there's get You systems disciplined. in pricing much is too competitors. pushes Is types that the

behavior has of in weeks Just months? and pricing their wondering recent been kind what

Bryan Shinn

a the starting of to starting we're share customers what a of which like kind somewhat think of get of is I silos. is out. boxes, like you see it settling And And which out to like market. kind So feels of market customers sense level the

have that that you just have. share in think and you become something happy year give the there you so I to a to the look, continue bit you customers with regions from point certain up probably don't at some or certain and or success And share from you perhaps seen some aggressiveness as moderates this we've take some try if competitors out of

three of which unsustainable in seen that think it's players a competitive aggressive four of And quite of ourselves or a a much and more said. it not actions frankly pricing frankly tell is may some relatively XX like of kind that maybe there from our a narrow competitors. like share. only competitors It's terms XXXX. including And really bit in the set industry or out in and is cases we've for sand I there's in But that there's perhaps matter has to small hard so some And moderates sure. SandBox

J.B. Lowe

Great. Thanks right. All much. so

Bryan Shinn

You're welcome.

Operator

Thank you.

line question from final Riley Our your Please proceed the with of Pipes B questions. with Lucas FBR. comes

Unidentified Analyst

November XX% you number at looking Hey, the think and This on just I lower on Dan a And contribution margin. I'm correctly in I had for that the oil guys. like Lucas. guided If is actually gas pretty good remembering it morning had sequentially. in came actually quick higher. question significantly back

what get a some volumes in happened there, you would If mines maybe could if on to like were was costs just uncontracted it there just that the better. be So, on able color idled came if take out some you're pricing great? from lot Thanks.

Don Merril

we're starting and the in gas what's upside think I and of most contribution as but the shortfall consideration the that's impacting dramatic you penalty take of cost, into oil of there to the idled mines segment. impact the margin see Look, well ton to some and that's that's have in -- lower per

Unidentified Analyst

if where pricings more plays then heavy by just on what's harder gas players curious going the outlook level. could And Maybe you those like it. Marcellus and the off about some the on in bit natural Thanks. higher break are Especially financially? demand time basin. a follow-up fallen Got really of out having one are maybe a

Bryan Shinn

Yes. comment I landed cost into But specific lowest can or on And Marcellus. up can we're I in demand extremely We've deliver Marcellus. think there. by rail. supplier barge there pretty don't have the quite of honestly. breakout the basin. by strong seen a well-positioned the front We're I We by

the last of there luck terms we've in So, over good sales few had quarters. pretty

take do point. substantially pricing has and Now we'll that come look natural down gas under I We perhaps your know pressure. further be

pretty Marcellus for us. we'll been that But strong has closely. the watch So

west. well Mid-Con out has do we been strong. And really actually

we're in basins. all the So

you whether of one or sand the total can country. we feel supplier effective want so And be like local the I most Northern across White.

Unidentified Analyst

Great. Thank you.

Bryan Shinn

Dan. Thanks,

Operator

this are time. Thank over to further I'd to questions no like remarks. you. the closing Shinn any Mr. at call back There for turn

Bryan Shinn

in that growth accelerating that organic gas few oil a effectively key namely, our and priorities, continue will XXXX maximize year optimistic today's on deploying Thanks operator. have then industrial a assets reemphasizing I'd close success. cash and business, the to call like the by to focus And profitability generating be our to free we resources the and very we right for plan of confident course strong right that I'm strategy, right for Silica. flow. U.S. I'm

with dialing day for and great a everyone. our have call So that, thanks into

Operator

Thank you. This concludes today's teleconference.

You this may Have participation. you your day. your lines disconnect time. wonderful Thank for a at

U.S. Silica (SLCA) 25 Feb 202019 Q4 Earnings call transcript