FTSI - Earnings call transcript Q4 2020

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Operator

Thank you, and good morning, everyone. We appreciate you joining us for the FTS International conference call and webcast to review fourth quarter and full year 2020 results.

As a reminder, this conference is being recorded for replay purposes. Presenting today's prepared remarks is FTSI's Chief Executive Officer, Michael Doss.

Before we begin, I would like to remind everyone that comments made on today's call that include management's plans, intentions, beliefs, expectations, anticipations or predictions for the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. subject actual and from results in forward-looking are cause that those statements any company's the to statements. forward-looking to uncertainties risks could expressed These differ materially report discussed the reports files with the are in company uncertainties SEC. and XX-K and risks company's These annual on the Form other in company by any not obligation any to as required does revise statements. Except publicly forward-looking law, the undertake update or on company the filings may website, website, be and the are SEC contacting company's available company's The ftsi.com, by and SEC's sec.gov. the on obtained This also discussions non-GAAP of conference includes call financial measures.

the information I'll Mike release includes measures items excluded these earnings now to comparable as non-GAAP Doss, estimate. not Our difficult timing measures unreasonably most reconciliations over are because well their reconciliations further GAAP fully turn and non-GAAP about these nature forward-looking and non-GAAP do FTSI's call accurately We forward-looking CEO. provide of of financial the to measure. directly as for to measures

Michael Doss

you, thank Well, and morning, good everyone.

that to nimble in job November FTSI. excited eliminated that from like saying far other for and prior process and of and some to more to efficiently everyone preserve were and million well shareholders. a by more begin financial value restructuring complete stronger our I'm introduce our debt be $XXX to me to be able doing We calls. couldn't glad thank for done. involved XX we Let I'm liabilities. pleased a I'd I earnings that on back particularly the process emerged

and for XXX% flexibility focused $XX on cash, customers financial have we in we are million ever. Now debt our value than our long-term creating and with X shareholders. more on And

the million XXXX. fourth full on results our quarter, through the earlier to period the were third report. going from commodity That in the in the several prices terms we is November start year activity financial on financial predecessor points over from increased low I'll of We and combining third both compared industry The results a outlook. to successor predecessor quarters conclude year Both for call, last the periods $XX.X comments quarter third the fleets of required quarter. for the the million, in quarter then the quarter the to our second oil weak the active be I'll in and stages our to revenue due more basis. Saudi-Russian completed The quarter. some COVID-XX accomplishments operational fourth XX. year. today's from are discussing effects and quarter. war fourth third fleets, third runs XX% cover XX.X that's with X.X was up by and I'll the price -- that due resulting the fourth in $XX.X X,XXX combined Revenue by was in and up For of average

only X% revenue agnostic, Our commodities. We minimal on last-mile customers' our freight only sand of same to quarter. operational was third with continues the performance. fourth remain million focusing preferences, dollars the The in charges EBITDA quarter and the on the was negative in quarter. roughly instead fourth both margin none we provided improvement million in pass-through $X.X our attention in quarters. to quarter to prices third primarily the function and a This and equipment of negative volume compared reflect and in Adjusted due mostly stages as were $X.X higher is

these we EBITDA reactivation fleet repairs in incurred numbers not both reconciliation. our we back in add and did labor While and costs quarters,

XXXX. not as other Most of results well to of expenses, that indicative successor of EBITDA In much period fleet that $XX.X in million which the holiday net $X.X for including timing $X.X Net period, third compares but from that XX the adjusted in million in benefit includes stock-based of to was due quarter related quarter, $X.X is from of the through million a impacts we compensation. the to SG&A fourth reactivations. November negative as million, This compensation. quarter, of of reorganization-related seeing repair year-end, million As income of stock-based we had $XX.X fourth the was including in are was words, million. items. $X.X million $XXX.X that

compared $XX.X forward facility. expenditures the that cleaner behind million were will with Capital Our $X.X now year fourth P&L million going our million the us. availability under ended the the third in of $XX process credit in revolving quarter. cash be quarter is and lot to restructuring $X.X in We a million

restricted also million in $XX.X assets. current We other of included had cash year-end at

full turning $XX.X decrease in SG&A was million The XXXX. reductions million activity. to stock-based XXXX. XXXX fleets XXXX. $XX.X We to in the million in year in $XXX.X including $XX.X compared essentially of results. in last XXXX. was stock-based to EBITDA million was $XXX.X compared active X.X $XXX.X including was response to to to comp Now $XX.X million, year, Adjusted averaged million comp XX.X taken cost in year of compared and off last to million, compares drop Revenue due that breakeven

amortized this million the in expenditures about $X dual in Capital in excluding expected for and equity quarter, awards operations lower upgrade the XXXX. XXXX a XXXX value as old used fuel awards also Cash Stock-based in kits. comp, Included $XX.X million $XX first with be the comp SG&A, million were being in in will $XX.X million were We predecessor stock-based million in to million of amount spent was is $XX.X had our that $XX between in than flow pre-COVID. periods. that decrease new XXXX.

with restructuring. the in be $XX.X $XX.X associated year interest shortfall continuing. shortfall the cash sand that well associated of million of million cash $XX.X million payments will event sand period However, and restructuring million as payments payments but that for was not Total of the were predecessor process paid $XX.X includes million $XX.X as the with

for year, positive the working was flow driven by cash of release operating items, these all a Excluding capital.

connection per year, invest all in The cash on terminated contracts totaled to earnings or on contracts restructuring. carry business that million in $XX shareholders. we'll the had release, with interest we mentioned have As in return now to those debt nearly plus our payments our sand the supply we

to over has recent day a progress stages set the ever updates. quarter. and achieving terms in the XXX pressure. up day. hours XXX quarter higher We and more made reduce been per but for equipment fleet Not between company We day of third utilized between the on Much time utilized per routinely frequently fourth from in are up is XX per per efficient of pads. have stages in record hours That's hours periods. averaging efficiency days most with in time operational fleets earlier utilizing new in from customers pumping stages fully innovations years, and pumping XX hours. our Pumping designs Moving high to to increase, and fully fleet hitting fleets and our more quarter, out to also pumping rate way some fleet there only job month, demanding a per working we days fourth with most in of per the XX continues per techniques

customers stimulates fleets outstanding These result iron. All jobs of more who has X productivity. and XXK technique require equipment have simul-fracs. We X We're simultaneously. our that in utilizing working are simul-frac with performing closely currently labor the currently equipment wells but

we gain to customers ways to reduce expect costs, continue this technique could traction. completion As find

relative could to XX%, COX seen dual a depending working we the displacement X to to partnering dual dual on costs, displacement on have fuel install in our on where rates. We're fuel. of Dual updates optimize fuel depending further additives. improve diesel field. success diesel natural also dual pumps, these currently about us approximately as fuel utilization to in a area upgrade fuel emissions. as million fleet customers fuel have out of reduced operating kit We conditions. customers allows efficacy versus Another reduce a which prices rate $X gas costs X evaluating with software well relates to fuel, has fleets to our of the the diesel the It our Tier of We're which

making. MIQ a with the a partnership no release has time. This has artificial I'm problem critical operator accomplishment control than we our automatically rates so successfully a the equipment skilled loss more mimics industry. or of integrated will just much relative commonplace does otherwise system and highly design. more corrective more seen This a failures into pleased monitors pump in announce might in in shuts downtime This it improve constantly healthy does prevents of that that have job MIQ equipment detects in automatically pump is efficiencies and in but our saving second. may fraction safety. our to pump, affect so that tested has intelligence that to a than if and years rebalances take to without X the and costly software action become reduce health KCF it MIQ you been monitoring field press reliability, pumps. MIQ, And performance human It is our downtime, accuracy the a with frac major and Next, have with intervention, health. down MachineIQ and or to one increase improve was yesterday, that capability Technologies. of

below average X.X. incident record that TRIR, safety, of or industry of company was a to report X.XX Speaking pleased our rate, recordable year, total far I'm last and the

year. I HSE more our and also of couldn't the We and time operations of for every safety no a last proud making be an teams had incidents our doing priority outstanding each job lost day. of employees

how provide XXXX. me guidance we far so let on some are Finally, in performing

to strong. release, X South X Utah. West our X in off in our each we the a fleets and are the fleets, and XX efficiency in Northeast currently mentioned As active, are numbers Oklahoma, strong We in XX are are Texas, and Texas, start. have Of we have

that West down One storm fleets negatively but seen delays by all shut this, companies came through. will in estimate stages. to month, EBITDA likely then the put territory the sand XXX winter deliveries. about single the fuel a expect Texas. for severe Despite were be us going pricing that improvement affected Most for mid-digit first of have related Last lingering figure. to will experienced positive we we Texas that and lost quarter, locations the weather We South frac itself, we soon

but our will and customers of results that the optimistic the year. light. the We first improve $X.X XXXX, increases their quarter As we about new performance have objectives. ESG for further. not are year per We to expect believe active currently engines are on And to for the And pricing. maintenance. assist market the the of we lower-emissions spend price any actively in the in Separately, made with full second like considering average currently supports relatively achieving Tier the we decisions. yet our equipment will million for investments CapEx be higher roughly customers additional we fleet working quarter, X our remainder Cat are DGB for performance

in frac We also monitoring equipment. developments are electric

We that for could change continue are area let's have all the not believe open is economics innovation equation. room interesting starting more prepared some to ideas now in that and the for currently see lines remarks. to that there justified, we That's our I Operator, questions. but are soon the this for

Operator

to first get with line we'll from on And our Simmons. Instructions]. Ian MacPherson the question [Operator

Ian MacPherson

or things much appreciate savings color simul-frac? derive on that well. pulling And is -- think horsepower in simul-frac. in conducting operations. then It like normal a do How on on less step-up I'd all what little for of maintenance are fleet hear the you more a you do love you I to the think configuration? going that from the a -- type from horsepower per efficiencies very there have of sounds you

Michael Doss

terms that have vary currently requirements. of maintenance in difference But equipment. X significant fleets worth about fleet that locations Yes. the X.X based worth a on rate It's and But and it's X.X of in will of the not roughly costs. equipment, equipment, pressure we

Ian MacPherson

you're that continued for And right strategically. And is discount at Good. think then come you landscape And something participating reflecting I and peers is the Do significant thinking on regard, through. public your that sheet. about valuation at to clearly, that all Okay. your in the sheet new you've looking on new do you balance balance Congratulations that's was I'm so? sure you new just a if that. see how consolidation? your after based on

Michael Doss

was with our sheet balance be a whereas and participate question productively we're about consolidation, in and company. I was with always position to maturities debt as you previously, to mentioned, what in there able think a now liquidity, going happen to Well, clean the the

consider So we're I great We're a interested. shape think in to opportunities.

think the there. out with a than continue we interested, we the can't players are that. or I of consolidation, other there's over could But either or happen that just we us year combinations say couple next so and think potential And in really occur to that will speculate other to that X. market, on

Ian MacPherson

think and a is which is competitive think that is it needle power right getting would it's low valley that's a improving Do obviously business where consolidation pricing power for improving, in more you Do better to you for be? your the but that like a structure pricing off far for mover the now, needed and you of from business?

Michael Doss

depend what It synergies Potentially. are would commercial on of involved. type

the a industry-wide if on helps some to that. for don't access I improve lot customers, different it will it consolidation types For diversification, of benefit whole be example, if unless geographic there level. it's pricing itself at think do -- was could

more consolidated with I think players, would cost involved, discipline. more come power just But benefits elimination the the from and I see for real think of industry any just more and you'd itself fewer I the so think particular lot a expenses company, forth. duplicate pricing having became savings if purchasing

Operator

[Operator our question on to with from Stephen Instructions]. Gengaro get the Stifel. next line We'll

Stephen Gengaro

like One, things. visibility far X et about you as as bit, decision a demand looking the assets think key two your parameters that, and talk about an when when you Tier them returns, on into are of sort guess what and cetera? DGB I investment

Michael Doss

the a access Well, I benefits new is us, think customer. one for gaining of to

we contract it we would profitability. high a good have with so were term is want that a has and have customer, for We'd some a to associated Certainly, which also to fleet that a with And utilized. critical customer want build to utilization if fully Ts to and Cs.

a opportunity a for And an high so to bit us it's build it's just if -- grade, you of will.

just is And of I the in payback that a point. other And then think consider reasonable terms starting X-year customer of that, in X- particularly would would return, come think so I to having terms with benefits mix. a we along

Stephen Gengaro

sort or when you these my you'll to perspective, pricing higher-quality that, around from then which ties at bit material premium? the simul-fracs a that get but you a question, of other and look -- e-fleets, was maybe bifurcation for compensated see more you little your and these where to about just fleets assets when these fuel in market how do command sort And you even so this in start of this believe dual will

Michael Doss

is minds a there Well, out I'm I some fleets and a of and are the Still I of the just good give question that comments, not in totally on investors bifurcation. space, there's you of I ideas. and on space. relatively a think lot a bit as lot in analysts in early mentioned of are come think the that's certainly and significant that And innings, my so are there innovation electric a still niche. it that so interesting I the opinion, my a personal convinced fleets,

X, as Tier they're frac they as have looking have to be every to think ESG customers, and large going emissions. companies company wants reduce going when independent far mandates a I -- to as E&P to think opportunity so I are when we for

And into so X into that. fits Tier electric that, definitely fits

And so served still with will larger bifurcation, be there existing some but think market equipment. I well is think I the

Stephen Gengaro

one if slip in And I Great. Okay. more. could

basically had you You XX in numbers. I press mentioned today release. the your And you fleets per fleet think said CapEx maintenance active

do and fleets, this. or a More get tier then get into as deeper does is think reactivation do XX you term? just it went your base? forward you reactivation we look adding more near in XX there's to to of about if think material a As about from cost kind asset XX? how you how I'm Or significant we But to like, sure there XX the

Michael Doss

Yes. It's the latter.

and to And so we rebuild to million, XX, last that refurbishment in incur. costs cost of million, those get up few deeper fleets, were if would terms as fleets we million expenses -- $X we probably in XX-plus need go back to $X $X

XX expensed XX, for be And would maybe $X end, lot fleet. XX front to ends, a from that fluid XX million going per the to example. or to of On $X million

So XX-plus very not is a will running end. lot a payback we on a strong FTS if get the did XX, would market, economics that's got fleets, those and front quick And market that on say provide be to I into the where reactivation expenses. a

Operator

We'll proceed line question to Partners. with the of Daniel next our on line the Sean from Mitchell Energy

Sean Mitchell

on I Ian want the to simul-fracs. what was go back talking about to

of second And in gains? be reduction for the horsepower. about fleets, I so -- the people how additional then general. job a available terms is labor market in just the terms think question efficiency in you personnel in X.X of around What many on would mentioned

You guys count, market some front? pickup. color are the the see, is think activity growing like? And fleet and give labor look which can any obviously to What's similar you I that are seeing great others us on

Michael Doss

Yes. Sure.

not on the equipment. to resources slightly given of hour crew number the are if in additional going labor, about roughly of X.X more. Just X less. look Repair of per simul-frac, think location, I And terms costs the X not it's it's worth -- on but fleets more or same dramatically at members so it's required just pumps, maybe location, then you

over cost. getting you're more lot smaller volume a So a spread

we traction. lot But do those to practiced, is flow performance It's The helps that. a it and of could we some gain well. customer, but are economics a helps And through the it result there's simul-fracs as of good. as on think think improvement we potential widely so -- And customer. the us not it pricing but the

-- It's there's And our had fleet still with haven't ample any terms labor, of difficulties up available. reactivations. workforce so recent in crewing

a now fleets industry I at got that to were significant the level another we we X as thought X have compared to as we've or leg working if little think surprised think is months what up, see may everyone I ago. many

up. So big a that was leg

then we attention do on see another further will comments any have ability to some in greater up, leg you Before see terms think we're not hire. anticipating, else, we which and Anything wages that? Buddy, Buddy? I of

Buddy Petersen

component more operations, I a labor piece rigging rigging of course little assets it labor. intensive, one there's think location, to during the same. on bit takes down. a up But get variable and little the is It's normal more because the to additional the it's labor required

our or of way. that may to with we of that move not fleets kind offset manage situation a be So and it some around flex other in may

Operator

further have turn we line. no on to questions Doss, I'll Mr. back you. the it

Michael Doss

thank Yes? interest. for Well, Okay. you your everyone

Operator

I apologize.

Before concluding, that if line queued we'll with And proceed it's of Andy from SES question okay, X just question Clark I [ph]. have the with up. the

Unidentified Analyst

I could start-up profitability X-month It costs was pricing. if was go burdened with QX discuss the into QX. like wondering you outlook sounds and

Of impact. course, the has QX weather

color So would be any helpful. profitability go-forward on

Michael Doss

number Yes. we've It's because agreed pricing give now hard on we're pricing customers some of of already improvements achieved up to right terms -- crystal in on. a lot negotiating quarter, right currently a but it's definitely that the already for across for headed second of guidance into

so for number EBITDA the kind Still first of quarter. period mid-digit results. quarter And in single mentioned I the first transitional a

think, I I higher, bit EBITDA. a quite -- second we'll think number for quarter, double-digit

Operator

for no once back Doss, I'll questions on to line. remarks. the turn again we it Mr. have any closing you

Michael Doss

Well, everyone, with time. for deal. next thank you forward good again you, speaking in your interest FTSI. We Well, look to Okay.

Operator

you conference conclude thank lines. for thank We and today. good Have ask and call much, everyone. does disconnect very everyone. participation you the you your that a That day, Thank you, for your

FTS International (FTSI) 5 Mar 212020 Q4 Earnings call transcript