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Mammoth Energy Services, Inc.$2.09($.13)(5.86%)

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 Mammoth Energy Services, Inc. Announces Second Quarter 2019 Operational and Financial Results
   Thursday, August 01, 2019 4:05:00 PM ET
  • Second Quarter net loss of $11 million, or $0.24 per diluted share
  • Second Quarter Adjusted EBITDA of $9 million
  • Suspended dividend due to oilfield service market conditions
  • 2019 capital budget decreased 49% from $80 million to $41 million

OKLAHOMA CITY, Aug. 01, 2019 (GLOBE NEWSWIRE) -- Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the quarter ended June 30, 2019.



Financial Highlights for the Second Quarter of 2019:

Total revenue was $181.8 million for the three months ended June 30, 2019, down from $262.1 million for the three months ended March 31, 2019 and down from $533.6 million for the three months ended June 30, 2018.

Net loss for the three months ended June 30, 2019 was $10.9 million, or $0.24 per fully diluted share, as compared to net income of $28.3 million, or $0.63 per fully diluted share, for the three months ended March 31, 2019 and net income of $42.7 million, or $0.95 per fully diluted share, for the three months ended June 30, 2018.

Adjusted EBITDA (as defined and reconciled below) was $8.6 million for the three months ended June 30, 2019, down from $82.8 million for the three months ended March 31, 2019 and down from $148.6 million for the three months ended June 30, 2018.

Arty Straehla, Mammoth's Chief Executive Officer, stated, “The second quarter of 2019 was a challenging environment as further capital restraint by our oilfield customers continued to apply downward pressure on pricing and resulted in several completions being delayed or canceled with short notice. In addition, we worked through the challenges of demobilizing our equipment from Puerto Rico. As a result of current market conditions, we have begun to right size our operations and we expect this process to be completed in the coming months. Demand for infrastructure services remains high with the competencies and experience of our crews allowing for unique bidding opportunities in both the US and overseas. While our work in Puerto Rico has ended, we have continued to receive payments from PREPA, with $42 million received in the second quarter of 2019. For the remainder of 2019, we are taking a disciplined approach to our spending and we have reduced our 2019 capital expenditure budget from $80 million to $41 million. As a result of oilfield market conditions, our board of directors has suspended the quarterly cash dividend.”

Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $41.8 million for the three months ended June 30, 2019, a decrease from $108.7 million for the three months ended March 31, 2019 and a decline from $360.3 million for the three months ended June 30, 2018.

During the second quarter of 2019, Mammoth demobilized approximately 1,000 pieces of equipment from Puerto Rico back to the Lower 48.

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $84.6 million for the three months ended June 30, 2019, a decrease from $92.1 million for the three months ended March 31, 2019 and a decrease from $101.4 million for the three months ended June 30, 2018.

Mammoth's pressure pumping division completed a total of 1,717 stages for the three months ended June 30, 2019, as compared to 1,889 stages for the three months ended March 31, 2019 and 1,815 stages for the three months ended June 30, 2018. An average of 2.7 of our 6 fleets were active for the three months ended June 30, 2019, compared to average utilization of 4.4 fleets during the three months ended March 31, 2019 and an average utilization of 4.3 fleets during the three months ended June 30, 2018.

Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $40.4 million for the three months ended June 30, 2019, an increase from $37.9 million for the three months ended March 31, 2019 and a decrease from $52.8 million for the three months ended June 30, 2018.

The Company sold 812,611 tons of sand during the three months ended June 30, 2019, a 22% increase from the 665,806 tons sold during the three months ended March 31, 2019 and a 4% increase from the 777,850 tons sold during the three months ended June 30, 2018. The Company's average sales price for the sand sold during the second quarter of 2019 was $30.09 per ton, a 7% decrease from the $32.20 per ton average sales price during the first quarter of 2019 and a 30% decrease from the $43.09 per ton average sales price during the second quarter of 2018.

Blended second quarter production costs came in at approximately $12 per ton during the second quarter of 2019, unchanged from the first quarter of 2019 production costs and a 24% decrease from production costs of approximately $15.70 per ton during the second quarter of 2018.

Other Services

Mammoth's other services, including contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations, contributed revenues (inclusive of inter-segment revenues) of $28.4 million for the three months ended June 30, 2019, a decrease from $38.5 million for the three months ended March 31, 2019 and a decrease from $37.3 million for the three months ended June 30, 2018.

An average of 601 pieces of equipment were rented during the three months ended June 30, 2019, down 3% from the average 621 pieces of equipment rented during the three months ended March 31, 2019 and a 77% increase from an average of 339 pieces of equipment rented for the three months ended June 30, 2018. As a result of market conditions, the Company has temporarily shut down its cementing and acidizing operations as well as its flowback operations subsequent to June 30, 2019.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were $9.5 million for the three months ended June 30, 2019, as compared to $17.3 million for the three months ended March 31, 2019 and $65.1 million for the three months ended June 30, 2018.

Following is a breakout of SG&A expense (in thousands):

 Three Months Ended Six Months Ended
 June 30, March 31, June 30,
 2019 2018 2019 2019 2018
Cash expenses:         
Compensation and benefits$2,154  $10,978  $9,230  $11,384  $18,677 
Professional services2,934  2,981  3,789  6,723  5,568 
Other(a)3,381  3,935  3,244  6,626  5,542 
Total cash SG&A expense8,469  17,894  16,263  24,733  29,787 
Non-cash expenses:         
Bad debt provision(b)262  28,263  4  266  53,790 
Equity based compensation(c)  17,487      17,487 
Stock based compensation724  1,483  1,069  1,792  2,574 
Total non-cash SG&A expense986  47,233  1,073  2,058  73,851 
Total SG&A expense$9,455  $65,127  $17,336  $26,791  $103,638 

a.     Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.     $28.3 million and $53.6 million of the bad debt expense recognized during the three and six months ended June 30, 2018 was subsequently reversed during the third quarter of 2018.
c.     Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level).

SG&A expenses, as a percentage of total revenue, were 5% for the three months ended June 30, 2019 as compared to 7% for the three months ended March 31, 2019 and 12% for the three months ended June 30, 2018.

Liquidity

As of June 30, 2019, Mammoth had cash on hand totaling $7.2 million and outstanding borrowings under its revolving credit facility of $82.0 million. As of June 30, 2019, the Company had $93.5 million of available borrowing capacity under its revolving credit facility, after giving effect to $8.7 million of outstanding letters of credit, resulting in total liquidity of approximately $100.7 million. As of July 31, 2019, the Company had cash on hand totaling $11.6 million and outstanding borrowings under its revolving credit facility of $85.5 million.

Capital Expenditures

The following table summarizes Mammoth's capital expenditures by operating division for the periods indicated (in thousands):

 Three Months Ended Six Months Ended
 June 30, March 31, June 30,
 2019 2018 2019 2019 2018
Infrastructure services(a)$2,177  $40,778  $3,254  $5,431  $56,556 
Pressure pumping services(b)4,013  8,233  7,329  11,342  16,099 
Natural sand proppant services(c)990  6,958  985  1,975  12,658 
Other(d)2,767  17,042  8,705  11,472  23,472 
Total capital expenditures$9,947  $73,011  $20,273  $30,220  $108,785 

a.     Capital expenditures primarily for truck, tooling and other equipment for the periods presented.
b.     Capital expenditures primarily for pressure pumping and water transfer equipment for the for the periods presented.
c.     Capital expenditures primarily for maintenance for the 2019 periods presented and plant upgrades for the 2018 periods presented.
d.     Capital expenditures primarily for equipment for the Company's rental business and upgrades to its rig fleet for the periods presented.

Explanatory Note Regarding Financial Information

The financial information contained in this release should be read in conjunction with the financial information contained in Mammoth’s Annual Report to be filed on Form 10-K with the Securities and Exchange Commission ("SEC"), Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings.

The Company's Chief Executive Officer and Chief Financial Officer comprise the Company's Chief Operating Decision Maker function ("CODM"). Segment information is prepared on the same basis that the CODM manages the segments, evaluates the segment financial statements and makes key operating and resource utilization decisions. Segment evaluation is determined on a quantitative basis based on a function of operating income (loss) as well as a qualitative basis, such as nature of the product and service offerings and types of customers.

Conference Call Information

Mammoth will host a conference call on Friday, August 2, 2019 at 10:00 a.m. CDT (11:00 am EDT) to discuss its second quarter 2019 financial and operational results. The telephone number to access the conference call is 844-265-1561 in the U.S. and the international dial in is 216-562-0385. The conference ID for the call is 6178026. The conference call will also be webcast live on www.mammothenergy.com  in the “Investors” section.

About Mammoth Energy Services, Inc.

Mammoth is an integrated, growth-oriented energy service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves and government-funded utilities, private utilities, public investor-owned utilities and co-operative utilities through its energy infrastructure services. Mammoth’s suite of services and products include: pressure pumping services, infrastructure services, natural sand and proppant services and other energy services.

For additional information about Mammoth, please visit its website at www.mammothenergy.com , where Mammoth routinely posts announcements, updates, events, investor information and presentations and recent news releases.

Investor Contact:
Don Crist
Director of Investor Relations
dcrist@mammothenergy.com  
405-608-6048

Media Contact:
Peter Mirijanian
peter@pmpadc.com  
(202) 464-8803

Forward-Looking Statements and Cautionary Statements

This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) contains certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely” and similar expressions, and the negative thereof, are intended to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding our business outlook and plans, future financial position, liquidity and capital resources, operations, performance, acquisitions, returns, capital expenditure budgets, costs and other guidance regarding future developments. Forward-looking statements are not assurances of future performance. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for our existing operations, experience and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes that the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Moreover, our forward-looking statements are subject to significant risks and uncertainties, including those described in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings we make with the SEC, including those relating to our acquisitions and our contracts, many of which are beyond our control, which may cause actual results to differ materially from our historical experience and our present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the failure to receive or delays in receiving governmental authorizations, approvals and/or payments; the outcome of an ongoing government investigation relating to the contracts awarded to our subsidiary Cobra Acquisitions LLC by the Puerto Rico Electric Power Authority; our inability to replace the prior levels of work in our infrastructure segment; risks relating to economic conditions; the loss of or interruption in operations of one or more key suppliers or customers; the effects of government regulation, permitting and other legal requirements; operating risks; the adequacy of capital resources and liquidity; weather; natural disasters; litigation; competition in the oil and natural gas and infrastructure industries; and costs and availability of resources.

Investors are cautioned not to place undue reliance on any forward-looking statement which speaks only as of the date on which such statement is made. We undertake no obligation to correct, revise or update any forward-looking statement after the date such statement is made, whether as a result of new information, future events or otherwise, except as required by applicable law.



MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS

ASSETS June 30, December 31,
  2019 2018
   
CURRENT ASSETS (in thousands)
Cash and cash equivalents $7,245  $67,625 
Accounts receivable, net 385,626  337,460 
Receivables from related parties 37,400  11,164 
Inventories 22,114  21,302 
Prepaid expenses 10,196  11,317 
Other current assets 699  688 
Total current assets 463,280  449,556 
     
Property, plant and equipment, net 408,408  436,699 
Sand reserves 69,762  71,708 
Operating lease right-of-use assets 52,184   
Intangible assets, net - customer relationships 1,563  1,711 
Intangible assets, net - trade names 5,625  6,045 
Goodwill 101,245  101,245 
Other non-current assets 6,843  6,127 
Total assets $1,108,910  $1,073,091 
LIABILITIES AND EQUITY    
CURRENT LIABILITIES    
Accounts payable $72,671  $68,843 
Payables to related parties 1,020  370 
Accrued expenses and other current liabilities 42,658  59,652 
Current operating lease liability 17,338   
Income taxes payable 30,780  104,958 
Total current liabilities 164,467  233,823 
     
Long-term debt 82,036   
Deferred income tax liabilities 56,580  79,309 
Long-term operating lease liability 34,807   
Asset retirement obligation 3,534  3,164 
Other liabilities 4,270  2,743 
Total liabilities 345,694  319,039 
     
COMMITMENTS AND CONTINGENCIES    
     
EQUITY    
Equity:    
Common stock, $0.01 par value, 200,000,000 shares authorized, 45,004,795 and 44,876,649 issued and outstanding at June 30, 2019 and December 31, 2018 450  449 
Additional paid in capital 533,151  530,919 
Retained earnings 232,990  226,765 
Accumulated other comprehensive loss (3,375) (4,081)
Total equity 763,216  754,052 
Total liabilities and equity $1,108,910  $1,073,091 



MAMMOTH ENERGY SERVICES, INC. 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 Three Months Ended Six Months Ended
 June 30, March 31, June 30,
 2019 2018 2019 2019 2018
  
 (in thousands, except per share amounts)
REVENUE 
Services revenue$115,760  $455,545  $193,101  $308,861  $864,204 
Services revenue - related parties36,837  40,611  44,073  80,910  89,699 
Product revenue18,362  27,708  12,309  30,671  52,748 
Product revenue - related parties10,861  9,730  12,655  23,516  21,192 
Total revenue181,820  533,594  262,138  443,958  1,027,843 
          
COST AND EXPENSES         
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $25,597, $26,898, $25,682, $51,280 and $51,473, respectively, for the three months ended June 30, 2019, June 30, 2018 and March 31, 2019 and six months ended June 30, 2019 and 2018)132,688  302,283  158,106  290,794  593,262 
Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0, $0, $0 and $0, respectively, for the three months ended June 30, 2019, June 30, 2018 and March 31, 2019 and six months ended June 30, 2019 and 2018)2,650  2,428  713  3,363  4,220 
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $4,525, $3,879, $2,871, $7,395 and $6,193, respectively, for the three months ended June 30, 2019, June 30, 2018 and March 31, 2019 and six months ended June 30, 2019 and 2018)32,677  35,117  30,251  62,928  68,447 
Selling, general and administrative8,796  64,595  16,902  25,698  102,677 
Selling, general and administrative - related parties659  532  434  1,093  961 
Depreciation, depletion, amortization and accretion30,145  30,795  28,576  58,721  57,703 
Impairment of long-lived assets  187      187 
Total cost and expenses207,615  435,937  234,982  442,597  827,457 
Operating (loss) income(25,795) 97,657  27,156  1,361  200,386 
          
OTHER INCOME (EXPENSE)         
Interest expense, net(1,551) (959) (523) (2,074) (2,196)
Other, net4,019  (486) 24,557  28,576  (514)
Total other income (expense)2,468  (1,445) 24,034  26,502  (2,710)
(Loss) income before income taxes(23,327) 96,212  51,190  27,863  197,676 
(Benefit) provision for income taxes(12,438) 53,512  22,857  10,419  99,430 
Net (loss) income$(10,889) $42,700  $28,333  $17,444  $98,246 
          
OTHER COMPREHENSIVE INCOME (LOSS)         
Foreign currency translation adjustment, net of tax of $92, $86, ($90), $182 and $272, respectively, for the three months ended June 30, 2019, June 30, 2018 and March 31, 2019 and six months ended June 30, 2019 and 2018350  (325) 356  706  (786)
Comprehensive (loss) income$(10,539) $42,375  $28,689  $18,150  $97,460 
          
Net (loss) income per share (basic)$(0.24) $0.95  $0.63  $0.39  $2.20 
Net (loss) income per share (diluted)$(0.24) $0.95  $0.63  $0.39  $2.18 
Weighted average number of shares outstanding (basic)45,003  44,737  44,929  44,966  44,700 
Weighted average number of shares outstanding (diluted)45,003  45,059  45,063  45,060  44,977 
Dividends declared per share$0.125    $0.125  $0.25   



MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

 Six Months Ended
 June 30,
 2019 2018
  
 (in thousands)
Cash flows from operating activities:   
Net income$17,444  $98,246 
Adjustments to reconcile net income to cash provided by operating activities:   
Equity based compensation  17,487 
Stock based compensation2,233  2,916 
Depreciation, depletion, accretion and amortization58,721  57,703 
Amortization of coil tubing strings1,003  1,120 
Amortization of debt origination costs163  199 
Bad debt expense266  53,790 
Loss (gain) on disposal of property and equipment176  (128)
Impairment of long-lived assets  187 
Deferred income taxes(22,911) (27,906)
Other(199)  
Changes in assets and liabilities, net of acquisitions of businesses:   
Accounts receivable, net(48,530) (122,908)
Receivables from related parties(26,236) 3,114 
Inventories(1,815) 4,156 
Prepaid expenses and other assets1,115  (1,195)
Accounts payable7,366  34,186 
Payables to related parties650  538 
Accrued expenses and other liabilities(17,129) 10,193 
Income taxes payable(74,172) 94,753 
Net cash (used in) provided by operating activities(101,855) 226,451 
    
Cash flows from investing activities:   
Purchases of property and equipment(30,085) (105,349)
Purchases of property and equipment from related parties(135) (3,436)
Business acquisitions  (13,356)
Contributions to equity investee(680)  
Proceeds from disposal of property and equipment2,465  898 
Net cash used in investing activities(28,435) (121,243)
    
Cash flows from financing activities:   
Borrowings from lines of credit108,000  52,000 
Repayments of lines of credit(25,964) (151,900)
Dividends paid(11,219)  
Principal payments on financing leases and equipment financing notes(992) (145)
Net cash provided by (used in) financing activities69,825  (100,045)
Effect of foreign exchange rate on cash85  (98)
Net change in cash and cash equivalents(60,380) 5,065 
Cash and cash equivalents at beginning of period67,625  5,637 
Cash and cash equivalents at end of period$7,245  $10,702 
    
Supplemental disclosure of cash flow information:   
Cash paid for interest$1,830  $2,543 
Cash paid for income taxes$116,442  $32,584 
Supplemental disclosure of non-cash transactions:   
Purchases of property and equipment included in accounts payable$2,339  $20,897 



MAMMOTH ENERGY SERVICES, INC.
SEGMENT INCOME STATEMENTS
(in thousands)

Three months ended June 30, 2019InfrastructurePressure PumpingSandAll OtherEliminationsTotal
Revenue from external customers$41,821 $82,973 $29,223 $27,803 $ $181,820 
Intersegment revenues 1,668 11,170 584 (13,422) 
Total revenue41,821 84,641 40,393 28,387 (13,422)181,820 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion44,864 59,835 32,676 30,640  168,015 
Intersegment cost of revenues 11,797 1,141 562 (13,500) 
Total cost of revenue44,864 71,632 33,817 31,202 (13,500)168,015 
Selling, general and administrative3,035 2,664 1,380 2,376  9,455 
Depreciation, depletion, amortization and accretion7,818 10,174 4,528 7,625  30,145 
Operating (loss) income(13,896)171 668 (12,816)78 (25,795)
Interest expense, net386 452 72 641  1,551 
Other (income) expense, net(4,045)9 (32)49  (4,019)
(Loss) income before income taxes$(10,237)$(290)$628 $(13,506)$78 $(23,327)


Three months ended June 30, 2018InfrastructurePressure PumpingSandAll OtherEliminationsTotal
Revenue from external customers$360,250 $100,333 $37,439 $35,572 $ $533,594 
Intersegment revenues 1,073 15,406 1,776 (18,255) 
Total revenue360,250 101,406 52,845 37,348 (18,255)533,594 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion210,189 61,593 35,117 32,929  339,828 
Intersegment cost of revenues754 16,174 1,019 60 (18,007) 
Total cost of revenue210,943 77,767 36,136 32,989 (18,007)339,828 
Selling, general and administrative39,786 20,822 1,787 2,732  65,127 
Depreciation, depletion, amortization and accretion4,094 13,829 3,881 8,991  30,795 
Impairment of long-lived assets   187  187 
Operating income (loss)105,427 (11,012)11,041 (7,551)(248)97,657 
Interest expense, net106 341 76 436  959 
Other expense, net330 80 36 40  486 
Income (loss) before income taxes$104,991 $(11,433)$10,929 $(8,027)$(248)$96,212 


Three months ended March 31, 2019InfrastructurePressure PumpingSandAll OtherEliminationsTotal
Revenue from external customers$108,721 $90,595 $24,964 $37,858 $ $262,138 
Intersegment revenues 1,544 12,897 658 (15,099) 
Total revenue108,721 92,139 37,861 38,516 (15,099)262,138 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion58,965 64,211 30,252 35,642  189,070 
Intersegment cost of revenues 13,537 1,047 497 (15,081) 
Total cost of revenue58,965 77,748 31,299 36,139 (15,081)189,070 
Selling, general and administrative9,517 3,213 1,519 3,087  17,336 
Depreciation, depletion, amortization and accretion7,719 9,893 2,873 8,091  28,576 
Operating income (loss)32,520 1,285 2,170 (8,801)(18)27,156 
Interest expense, net39 198 30 256  523 
Other expense, net(24,824)(1) 268  (24,557)
Income (loss) before income taxes$57,305 $1,088 $2,140 $(9,325)$(18)$51,190 


Six months ended June 30, 2019InfrastructurePressure PumpingSandAll OtherEliminationsTotal
Revenue from external customers$150,542 $173,568 $54,187 $65,661 $ $443,958 
Intersegment revenues 3,212 24,067 1,243 (28,522) 
Total revenue150,542 176,780 78,254 66,904 (28,522)443,958 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion103,828 124,047 62,928 66,282  357,085 
Intersegment cost of revenues 25,334 2,188 1,060 (28,582) 
Total cost of revenue103,828 149,381 65,116 67,342 (28,582)357,085 
Selling, general and administrative12,553 5,876 2,899 5,463  26,791 
Depreciation, depletion, amortization and accretion15,537 20,068 7,401 15,715  58,721 
Operating income (loss)18,624 1,455 2,838 (21,616)60 1,361 
Interest expense, net425 649 102 898  2,074 
Other (income) expense, net(28,869)8 (32)317  (28,576)
Income (loss) before income taxes$47,068 $798 $2,768 $(22,831)$60 $27,863 


Six months ended June 30, 2018InfrastructurePressure PumpingSandAll OtherEliminationsTotal
Revenue from external customers$685,709 $196,912 $73,942 $71,280 $ $1,027,843 
Intersegment revenues 5,632 29,918 4,193 (39,743) 
Total revenue685,709 202,544 103,860 75,473 (39,743)1,027,843 
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion404,265 128,205 68,447 65,012  665,929 
Intersegment cost of revenues2,545 31,576 5,305 327 (39,753) 
Total cost of revenue406,810 159,781 73,752 65,339 (39,753)665,929 
Selling, general and administrative71,637 23,485 3,431 5,085  103,638 
Depreciation, depletion, amortization and accretion6,501 27,815 6,197 17,190  57,703 
Impairment of long-lived assets   187  187 
Operating income (loss)200,761 (8,537)20,480 (12,328)10 200,386 
Interest expense, net182 845 156 1,013  2,196 
Other expense (income), net332 92 23 67  514 
Income (loss) before income taxes$200,247 $(9,474)$20,301 $(13,408)$10 $197,676 


Adjusted EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. Mammoth defines Adjusted EBITDA as net income (loss) before depreciation, depletion, amortization and accretion expense, impairment of long-lived assets, acquisition related costs, public offering costs, equity based compensation, stock based compensation, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets) and provision (benefit) for income taxes, further adjusted to add back interest on trade accounts receivable. The Company excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within the energy service industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of Mammoth's operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Mammoth's computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company believes that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure its ability to meet debt service requirements.

The following tables provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of net income (loss) on a consolidated basis and for each of the Company's segments (in thousands):

Consolidated

 Three Months Ended Six Months Ended
 June 30, March 31, June 30,
Reconciliation of Adjusted EBITDA to net income (loss):2019 2018 2019 2019 2018
Net (loss) income$(10,889) $42,700  $28,333  $17,444  $98,246 
Depreciation, depletion, accretion and amortization expense30,145  30,795  28,576  58,721  57,703 
Impairment of long-lived assets  187      187 
Acquisition related costs45  77    45  31 
Public offering costs  731      731 
Equity based compensation  17,487      17,487 
Stock based compensation944  1,660  1,289  2,233  2,916 
Interest expense, net1,551  959  523  2,074  2,196 
Other (income) expense, net(4,019) 486  (24,557) (28,576) 514 
Interest on trade accounts receivable3,234    25,735  28,969   
(Benefit) provision for income taxes(12,438) 53,512  22,857  10,419  99,430 
Adjusted EBITDA$8,573  $148,594  $82,756  $91,329  $279,441 


Infrastructure Services

 Three Months Ended Six Months Ended
 June 30, March 31, June 30,
Reconciliation of Adjusted EBITDA to net income:2019 2018 2019 2019 2018
Net income$6,210  $52,359  $35,665  $41,875  $99,658 
Depreciation and amortization expense7,818  4,094  7,719  15,537  6,501 
Acquisition related costs12  4    12  (4)
Public offering costs  360      360 
Stock based compensation9  606  462  471  1,063 
Interest expense386  106  39  425  182 
Other (income) expense, net(4,045) 330  (24,824) (28,869) 332 
Interest on trade accounts receivable3,234    25,735  28,969   
(Benefit) provision for income taxes(16,447) 52,632  21,639  5,193  100,589 
Adjusted EBITDA$(2,823) $110,491  $66,435  $63,613  $208,681 


Pressure Pumping Services

 Three Months Ended Six Months Ended
 June 30, March 31, June 30,
Reconciliation of Adjusted EBITDA to net income (loss):2019 2018 2019 2019 2018
Net income (loss)$(290) $(11,433) $1,088  $798  $(9,474)
Depreciation and amortization expense10,174  13,829  9,893  20,068  27,815 
Acquisition related costs18  33    18  33 
Public offering costs  202      202 
Equity based compensation  17,487      17,487 
Stock based compensation489  453  410  899  871 
Interest expense452  341  198  649  845 
Other expense (income), net9  80  (1) 8  92 
Adjusted EBITDA$10,852  $20,992  $11,588  $22,440  $37,871 


Natural Sand Proppant Services

 Three Months Ended Six Months Ended
 June 30, March 31, June 30,
Reconciliation of Adjusted EBITDA to net income (loss):2019 2018 2019 2019 2018
Net income$628  $10,929  $2,140  $2,768  $20,301 
Depreciation, depletion, accretion and amortization expense4,528  3,881  2,873  7,401  6,197 
Acquisition related costs8      8  (38)
Public offering costs  95      95 
Stock based compensation236  205  203  439  391 
Interest expense72  76  30  102  156 
Other (income) expense, net(32) 36    (32) 23 
Adjusted EBITDA$5,440  $15,222  $5,246  $10,686  $27,125 


Other Services(a)

 Three Months Ended Six Months Ended
 June 30, March 31, June 30,
Reconciliation of Adjusted EBITDA to net income (loss):2019 2018 2019 2019 2018
Net (loss) income$(17,515) $(8,907) $(10,542) $(28,057) $(12,250)
Depreciation and amortization expense7,625  8,991  8,091  15,715  17,190 
Impairment of long-lived assets  187      187 
Acquisition related costs7  40    7  40 
Public offering costs  74      74 
Stock based compensation210  396  214  424  592 
Interest expense, net641  436  256  898  1,013 
Other expense, net49  40  268  317  67 
Provision (benefit) for income taxes4,009  880  1,217  5,226  (1,158)
Adjusted EBITDA$(4,974) $2,137  $(496) $(5,470) $5,755 

a.     Includes results for Mammoth's contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations services and corporate related activities. The Company's corporate related activities do not generate revenue.

After Tax Return on Invested Capital

After tax return on invested capital is a supplemental non-GAAP measure that is used by management to evaluate the Company's performance. Mammoth defines after tax return on invested capital as net income divided by total capital employed, which is the average of ending debt and equity for the last two years. Management believes after tax return on invested capital is a useful measure of how effectively the Company uses capital to generate profits and it provides additional insight for analysts and investors in evaluating the Company's financial and operating performance. After tax return on invested capital should not be considered in isolation or as a substitute for financial measures reported in accordance with GAAP. The following table provides the calculation of after tax return on invested capital using the GAAP financial measures of net income, total debt and total equity.

 Twelve Months Ended
 June 30,
 2019 2018 2017
  
 (in thousands)
Net income$155,163  $163,360   
Capital Employed     
Total debt$82,036  $  $65,000 
Total equity763,216  625,669  440,410 
Total capital employed$845,252  $625,669  $505,410 
      
Average capital employed(a)$735,461  $565,540   
Trailing twelve month after tax return on invested capital(b)21% 29%  

a.     Average capital employed is the average of total capital employed as of end of the period and end of the prior period.
b.     After tax return on invested capital is the ratio of net income for the period to average capital employed.

mammothlogo.jpg

Source: Mammoth Energy Services, Inc.


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