USWS - Earnings call transcript Q2 2021

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Operator

Hello, and welcome to U.S. Well Services Second Quarter Earnings Conference Call and Webcast. [Operator Instructions].

As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Josh Shapiro, Vice President of Finance and Investor Relations. ahead. go Please

Josh Shapiro

and us operator, and everyone. appreciate results. We to Thank the good U.S. joining XXXX quarter for the call Well you review you, second morning, Services webcast conference

call us Kyle and Financial this Joining Chief the morning Joel Executive O’Neill, Broussard, are Officer. Officer; Chief on

the www.uswellservices.com. for company’s can its company Following XXXX SEC second The reported as open the will reading. transcript earnings. this any XXXX, their may with afternoon. August website be U.S. as Please be file today, afternoon, The XX-Q this call the Yesterday prepared only and of release found note quarter replay that the of speaks on listening Well longer time-sensitive at remarks, earnings time information no to information or call Form intends therefore, be XX, Q&A. on Services of also released its accurate the

by contain States the this views the during conference Services comments addition, of securities U.S. laws. may federal of made meaning reflect These forward-looking Well call the In statements within current management the statements management. forward-looking United

of these to release. CEO, to included to like during we are Well However, to achievements and And call differ non-GAAP The measures and call, measures. will from various our expressed could non-GAAP Joel today’s contingencies the uncertainties with understand by those Broussard. over I’d Also, made the Reconciliations the review encouraged the most to today’s certain in filings statements turn now contingencies. earnings earnings listener risks, materially company’s Mr. performance GAAP results, is risks, management. Services’ and directly reference to those actual uncertainties or cause the our in release measures SEC U.S. comparable financial

Joel Broussard

great second annualized U.S. Josh, Services of for and during we team detail our our in market dedication exit quarter. fully provide Well Well become to million. want hydraulic entire the grew electric. U.S. diesel a to the Services’ our to On to I the adjusted Throughout the But would million. market additional first, in a of by and told fracturing team good decision company basis, a context $X.X be strong and period Because XX% public delivered XXXX, like the a per change. become U.S. of focus on performance financial fleet adjusted $XX.X EBITDA provide Thanks, I their around process would to to that goal Services thank we hard make worked Since electric. EBITDA them, results, Well this then, everyone. generated has from reality. fleet morning, will Kyle all someday

studying innovative been technology environment, and have the needs regulatory our developing monitoring while We all of the customers. meet to market the

several market of gas plan. Nyx has intensified. the last technology the our legacy has market flow May, In represents as trailer totaling with build Nyx for announced oversupplied will XX,XXX customers. result, plans Each dual informed the unlikely not pump of This completions our accelerate has consist and decision to design operating to a announced design, response, We X,XXX Demand transition made trends of highest permanent. yet is emissions to diesel frac to cyclical electric fleet pricing by quarters, fracturing Clean demand next-generation remains our to the for equipment clean to new are companies grow pump a but higher X seen. dual Nyx. pressure emissions XX tirelessly ever years fleet recover. newest execute company, these was reduce pump the deliver our for we to continue conventional pre-COVID-XX We pump recover believe this history levels. that and the cash Clean equipment spec and services on is is older custom to strategic Fleet Over greenhouse all has trailers X work and efficient, horsepower we E&P to tailored and recently to solutions And introduction surged. Meanwhile, diesel profiles and are the horsepower. for Fleets. In we

proceeds We expect mid-QX fleet have exit our is process divesting conventional and a of with secured borrowings the on U.S. diesel including decision In XXXX. to connection equipment delivery Nyx To over in we asset to diesel-powered assets. the sales take frac date, million completed assets, loan. senior of certain first term using generation power business, Services the to frac of in of $XX Well noncore repay

the sales asset of pace active remain throughout the in equipment year. selling and the that to up of quarter the pick expect third We in we will remainder

simple. here strategy from is Our

to continue going we in and reduce advanced, low the our quality best-in-class fleets as most to deliver industry, emissions cost-effective load deploy sell assets. We’re service and the legacy debt

to would turn performance. second like call to the I Now Kyle quarter financial review over to our

Kyle O’Neill

utilization is technology. sequentially. Services a converted note X% with of resulting X.X our June the in linked income X during $XX.X X.X fleets for Not to million purchase Well options offering $X.X XXXX number, was up of the quarter Clean utilized license averaged Revenue Joel, this million, the a million its included in license Thanks, into $XX.X Fleet ProFrac U.S. generated in good active and rate fleets. fully second XX%, morning. quarter, as

chemicals from million, share of cost utilized was opted materials of storage down X% We sequentially the $XX.X Looking at as through sand, revenue equipment source X% our grew a greater a U.S. to of and million. of quarter sale Cost our sales our including Well the first Services. sand quarter saw materials, XX% for per the fully increase customers $XX.X service Revenue from on and from fleet. trucking quarter-over-quarter over of revenue. and -- sales

related quarter-over-quarter pump was hour up expense decrease larger total that primarily a note fleet. our proportion sequential I per maintenance will made and this declined lower electric fleet While to on fleets X% as working basis of a activity, repair

of the in notably costs, trucking impact feel rising lubricants. continued and the fuel to inflation various supply most our the in second across increases During were points quarter, chain, we

with through SG&A increase quarter. for of to We’re many under down some keep $X.X quarter, In customers. million working suppliers our pass or from prior costs the the X% to the our will cost control. increase cases, second all was

from SG&A million the driven Clean million. million was in decrease approximately of second as operations Adjusted for to $XX.X in by fracturing first million a compensation, reduction and $XX.X mostly EBITDA approximately million On quarter. accrual the $X.X stock-based $XX.X quarter. Maintenance Sequential an on professional to for Excluding capital an fully hydraulic patents. quarter. utilized fleet Fleet EBITDA EBITDA figure Adjusted less was is the income from compared fleet $X.X per annualized licensing up Included second this expenditures million were basis, Annualized adjusted EBITDA for million, of quarter, was EBITDA quarter CapEx the the million adjusted was our the $X.X in attributable $XX.X was previous technologies fees. approximately XX% adjusted from the per was $X.X second $X.X the up first quarter. of maintenance million in $X.X basis million.

our million. second of term ended our of on facility balance consisting the at want with color principal million to secured the some quarter, on the term balance company our to balance. our reduce plan additional of the senior At was ABL sheet. under total $XX.X liquidity and loan million, Looking sales asset use quarter The cash. $XXX.X end loan total I availability our to million add of of $XX.X $XX.X

Well third in penalties, quarter, Services reduced asset far our million. $XX.X the $XX.X completed After principal sales. was So has applicable of U.S. million balance prepayment by

XXXX, end Well by X% the If X% U.S. the the for on close. term term we quarter the are our We X borrowings reducing of as pending on quarters in remaining interest XXXX repay and year. an transactions $XXX first will loan the in to of million expect near loan additional pay Services our term of $XX to million successful of interest balance

will April on our balance than loan $XXX for the term QX by year-end. XXXX, rate X% million less the loan entire Additionally, through X, is be interest

licenses Joel of The Fleets, the preferred convertible $XXX.X A of to the some $XX $XX.X to upcoming not senior or of to $XX Fleets. average the goal average -- end structure. $XX.X the of the notes common a capital end issued Well convert U.S. million offering completed for $X.XX to The but the expenditures and with in recognized our for full are remarks, stock the a notes, the Well back into the at discussed notes trading initial growth senior exchange provide earlier, in to shares into X Before are redeemed $X.XX. and million gross $XX.X helps preferred As Series PIK share notes secured Well converted million were our an Prior of sheet price $XX.X of delevering convertible capital convertible $XXX our stock represents stock Services sales of of our combined Joel. volume-weighted million weighted and convertible $X.X of that, XX notes the U.S. million over of when equity transaction convertible operate our exceeds XX% and capital price us received step on recognized reducing were income. our a the price automatically Services notes, out how over balance consecutive will for million an common like Clean build turn common notes issued $XXX weighted With at convertible June additional quarter, of once Clean the of from fund Services convertible new XX third-lien evolve $X XX-day final at the huge the notes quarter, average million million notes converted anticipate million share. million. end U.S. preferred asset transaction, equity-linked into license-linked has per of million our into next Since I’ll of of simplifying the balance This outstanding U.S. proceeds. I’d of $XX.X we only call days. also our we is and license-linked first several structure of we our quarters. offers to details

Joel Broussard

excited Well been team call several on the over plan open our questions the solutions. will edge the and strategic Thank Thanks, transition next of up you. hydraulic deliver leading what Kyle. for Services to as Operator, this please always execute U.S. and we quarters technology full has fraction continue electrification. I’m towards answers. for and

Operator

Sandler. MacPherson Piper today is [Operator Instructions] first Our Ian from coming from question

Ian MacPherson

your in value monetized here the really see and of to great a IP strong It’s way. validated

that. So congratulations on

Joel Broussard

you. Thank

Ian MacPherson

be, words, In you down accomplish quarters was from you contributor we Can where diesel how probably from need glide conventional the can you to without half you where If us X help think in much When -- EBITDA we and of objectives with some the to running cascade your up it, can EBITDA? conventional away your at your do disposed to and EBITDA meaningful How fully all? are other saw second you QX? of sell a sale selling of that the working from maybe of so, you path from about talk immediately to that will Nyx. horsepower now, call your immediately? last away fleets? asset remaining of contribution first much couple Or

Joel Broussard

the is as -- we thought. half Yes, EBITDA going The the diesel left We sure. we be X fleets diesel due minimal the recovering June, have on was to finished today from We diesel XXth. of currently that currently first think, fleet quick pricing year I not had for to X.X working. contribution the as

bit? So do you to elaborate on Josh, August. diesel we’ll with up little that XXth on wrapped want of a be

Josh Shapiro

we there mean the we been has is first contribution Nyx throughout I said see that I the would stay more Joel absorbing at where and diesel sure. overhead. it to from half, fairly start least expect then profitability think and fleet-level Yes, minimal right was what as deploying fleets and fleets improve the

Joel Broussard

SG&A electric would until drag to down back we get the fleets. profitability XX

Ian MacPherson

that. Yes. Yes. Got

Joel Broussard

We’re transforming part and company, of just process. the transformation the that’s

Ian MacPherson

Yes. Yes.

I EBITDA offering ahead, you’re probably quarters We absorption, announced it. with how your they trials, When a transitional have -- pretty you’ve Clean know you’ve economics upgrade customer you on for perspective earlier next return with the to new objectives get the fleet that to builds you generation Nyx. the several today. you’re some for earning per new and compare your got I and about and your that significant Can Fleets sure, talk really have

Joel Broussard

a Yes. that’s building, done, new economics, person We X every expect for the far will and the trials we’re interested we on we’ve electric new electric or a fleets so The that more in we -- -- demand equipment trial on feel is basis. on first have than payback we going fleet for have building -- we’re our and that the fleets. cash XX-month we more generation

Ian MacPherson

take can I more few with a have up you I surprisingly. Not guys off-line.

Operator

John Partners. Our today is from Energy question Daniel coming next from Daniel

John Daniel

go you, Joel. I guess to will the one first

we’re paths, that preference you equipment DGB. sort people Tier customer demand clearly, for the the and is going X What others on then for IV of at is this seeing X opting electric the rise, some Just between but this the do driving think point? right,

Joel Broussard

one? Josh, do that take to want you

Josh Shapiro

Yes, sure.

think gravitating are and solution I twofold; from that’s DGB reductions. what John, towards we’re savings really then So here next-generation emission reason DGB electric or of IV is fuel cost these. And whether the offers the and customers solutions, the a Tier IV seeing is our view, Tier both partial on it’s

most operating using As are natural cost no higher the savings with fuel. are fuel will the really customers rate burning the when and the of But dual goes, far substitution, diesel more fuel gas. as they dual -- CNG cost fleet fuel entirely enjoy eliminates the diesel

emissions. cost a one fleet, burning a same enjoy if the were savings conventional diesel type And particulate field would thing those goes carbon the some not DGB to gas. same on emissions. not and engines So our dioxide NOx really reduce electric They hydrocarbon designed reduce And as but they’re using there’s versus engine. is degree really, emissions. designed nonmethane engine were to customer Tier to fuel fleets a matter nearly Tier IV of IV

IV so emission II is on Tier Tier And COX performance pretty versus of engine the a similar. engine

of IV benefit things does provide incomplete so DGB it engine here, the the from methane natural And while slip will from gas. Tier combustion like suffer some

Tier not to but nearly IV emissions the electric as degree be diesel, a might our the same better than so fleets. And

the Today, electric they’re fleet. DGB that However, they’re I prefer we fleets, than XX% where readily is customers the think more available. estimate less active of

stronger to benefits some these But benefit able being them is access of complete more a package. I given for drive electric preference so the electric. will the portion think DGB towards And over

John Daniel

guys you be more less multiyear what like backing for maybe just for about it’s of whereas sort And I’m other that’s are is if might about because the -- on you curious route, customers when solutions talked expensive. another project, your looking

So there’s don’t seen like less if all. of that, know commitment. any you’ve that’s a I color

Joel Broussard

John. for commitment We’re actually a looking XX-month now,

much So how also, to electric those operate we and IV I Tier basis on so -- engines. operate and is know cheaper. costs much CapEx just a

John Daniel

given there sort elaborate lower conventional. Can And of I maintenance to that just next the you’re this cost question sort on away you more of be -- the the maintenance want helpful. transition like-for-like bit dig because little into fleet from cost the quarter, a just between guys now would referenced anything you per the X

Joel Broussard

Josh?

Josh Shapiro

operations of I Yes, start think sure. report. versus play seen numbers financial as the see able cost electric to eliminate results more XX% historically, for advantage the in And mean you’ll we’re diesel. we’ve that to our to out I diesel from all-in XX% we

John Daniel

Fair enough. final And then the one...

Joel Broussard

if our few working, EBITDA that but -- up showed have earnings fleets look John, CapEx. still nearly at approved. we And that a really in this versus you diesel when quarter maintenance is

John Daniel

something from guys it I to to was feels Republic, it see, about, in New was able and talked so... it, remember years like that you ago we’re now see hard just

Joel Broussard

September, really cut -- the We’ll get in have last no October, November, in the diesel see to working. we from

John Daniel

can went But be what’s along if the name can then buyer, the lines type the guys, that equipment last subsequent you know on Or any it’s describe you answer, existing went player, And been those sure the because sold hopefully, player? or just new I’m helpful. Alamo you whether the of us of what’s but a would Okay. X-K. docket. for to not that via of some out buyers can one, we color

Joel Broussard

the want asset Josh, sales. take be handling to one? You’ve most do of that you

Josh Shapiro

sure. Yes,

-- board. has it’s interested across the been There shops. been of the kind buying in have some the of companies refurb So some equipment, service resellers, interest some

as The I’d buyer, publicly kind sold bulk say company. a well Alamo disclosed was interest in to third what that the So of has the wide. quarter the as we pretty been we to in of date nonservice transaction

Operator

from is from Gengaro next coming Stifel. question Stephen The

Stephen Gengaro

you Two don’t things, if mind.

the quarter lot line. is referenced contribution a the of EBITDA in you in first The diesel having and profitability the not

of fleet, I Is like Clean that electric quarter when it there a $X the fleet per EBITDA like assets. the on kind of in of are Fleets out many million math around for running looks just is back we how current do the sort number? envelope, So mean, ballpark reasonable in the your

Joel Broussard

Kyle, do you want to take that one?

Kyle O’Neill

Yes. -- a at I we diesel, premium. electric that’s electric is equipment but think mean, don’t the the definitely I report versus the substantial

a of of range. within the realm So that’s kind reasonable

Stephen Gengaro

Okay.

You’re to kind the have fleet work and have not next you thought ridiculous given the be to seem amount into electric. is report process Kyle. But going of electric to all quarter plan a just you soon, as step-up to of go that

Kyle O’Neill

Yes. going that overhead we running almost down really I around in into the you caution had to QX bite to -- drop I mean from we’ll as fleets we I’ll be X think -- that. you’re have X,

think million to then level I with X absorption that come -- field results of of is the -- kind going So overhead. that EBITDA per you’re and fleet $X-plus down of

Stephen Gengaro

Understand that. That’s fair.

us? now, where you see year, could of sheet you growth for us reasonably balance one I have and the aggressive other working the that but a And fund like but what -- obviously it you’ve sheet CapEx of position how trying repair walk question, committed safe when but was for -- position, our the you the at how still to half ‘XX, back is to in lot CapEx. think like expectations to in curious a ask can this feels balance I’m is to laid you’ve balance keep from also I sheet, your yourself looks if the you’re The financial the through your the out right, XXXX, look but evolving, perspective, you just

Joel Broussard

Kyle?

Kyle O’Neill

Right. Sure.

early after from transaction, July, $XX.X June in fees we’ve pay of some required raised $XX debt the the part million Smart June million expenses proceeds. and and cash then the in Sand That’s resulted settlement and raised of we approximately about downs. So

cash Most be So be with $XXX million. delivered -- $XXX for will our XXXX. to to due funding requirements fleets these early the of when fleets around will million new mid that part new of are in building the

assets term reduce the selling balance. loan currently We’re to

below at We’re little the $XXX of a end the from over get $XXX quarter. targeting million that to million

to going So to $XXX able through. be million fleets, paydown. funding of is million $XX million we’ll of we then about needed source debt which we’re $XX looking on additional at think be all And to to X build

We’re looking several options, cetera. financing, different equipment at including equity et

think and plan, Clean we very get So to the our to a to to achievable it’s that benefits critical -- active true get need start to or X fleets think mass to really I really economic the of have see XX we back Fleets.

Joel Broussard

Yes, to thing to that. add like one I’d

to and also it going license sales. equity, between debt We’re additional do

Kyle O’Neill

fleets just be are, for about -- building we’re And what what I fleets, accretive highly as you the pay should debt building and our for these should mean for we’re shares. be -- the the with this this think what new down economics combined

Stephen Gengaro

Okay.

million from comes Okay. And what? you debt $XXX that incremental envisioned then the of paydown

Kyle O’Neill

assets. Primarily,

Stephen Gengaro

Excuse me?

Kyle O’Neill

From assets.

Joel Broussard

Sorry, Kyle.

Stephen Gengaro

Yes.

sales asset far, addition in already the are have to those So that the right? ones so -- announced you ones

Joel Broussard

Correct.

Kyle O’Neill

million me sales of announced we’ve through asset asset would an incremental $XXX sales. let There million will -- Well, be amortization. scheduled or $XX be about

Operator

coming next Johnson Company. question Burke & from from is Your Rice Daniel

Daniel Burke

to, multiple other guess, that licenses? when already Or acquire has the would ProFrac? second mentioned options you parties you or than license to the additional I a it do party mean Joel, be additional sales,

Joel Broussard

ProFrac and others potentially feel this at We point.

Daniel Burke

-- level pretty since Fair right. sale just plans, this All enough. they Okay. bit year. by asset key the the getting talked about a of debt to that down little seem maybe And end we’ve then

good So pace. asset to proceed at have pretty sales a

a think be end proceeds, million that to asset guys about this have sale say all still of of target? is would But in that $XXX target a the completed by year. I put not out you total calendar viable

Kyle O’Neill

the range targeting. we’re still that’s in Yes, of what

Daniel Burke

for fleets we a little you’ve then think in fleets? the right, in one. talk the one mind guys. power All about just can on you the got Okay. gen bit coming new And other the side, When electric about maybe strategy

Joel Broussard

Yes.

what We’re they generation power We asset they want, now feel leave whether are going the the whichever up client best friendly. environmental it to the -- most to on turbines the choose. and

recommend, reciprocating they it’s power, client. it’s we’re engine, up -- we’ll grid the it’s So turbine, it whether whatever leave to whether whether

Daniel Burke

sheet, Joel, think to And not Okay. I that be would put is fair? though, plan on the those balance the

Joel Broussard

Absolutely.

Operator

question-and-answer to turn We I’d reached management end or back closing the to session. for over of comments. the our any floor like further

Joel Broussard

great you day. participation in Thank your for the Have a call.

Operator

you. Thank and teleconference webcast. today’s conclude That does

at day. for your You this have today. you participation wonderful may time, your a We and disconnect thank line

U.S. Well Services (USWS) 13 Aug 212021 Q2 Earnings call transcript