Q3 2020 Mammoth Energy Services Inc Earnings Call

Energy services.

Services' third quarter 2020, <unk> earnings conference call.

At this time, all participants are in English and only mode late.

Later, we will conduct a question and answer session and instructions will follow at that time.

As a reminder, this conference call is being recorded and will be available for replay on memory nervous.

Services website.

I would now like to introduce your host for today.

For today's conference Mr., Don Crist man.

Mmm energy services director of Investor Relations.

Sure you may begin.

Thank you Daphne.

Good afternoon, and welcome to Mammoth Energy services third quarter 2020 earnings Conference call. Joining me on today's call are already straight <unk>, Chief Executive Officer, and Mark Layton Chief Financial Officer, before I turn the call over them I'd like to read our safe Harbor statement.

Some of our comments today may include forward looking statements reflect the mammoth energy services views about future events.

These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward looking statements. These risks are discussed in Mammoth energy services form 10-K forms 10-Q current reports on form 8-K, and other securities and Exchange Commission filings, we undertake undertake.

No obligation to revise or update publicly any forward looking statements for any reason.

Our comments today May also include non-GAAP financial measures additional details and reconciliations to the most directly comparable GAAP financial measures are included in our in our third quarter press release, which can be borne found on our web site along with our updated presentation now like to turn the call over to art.

Thank you Don and good afternoon, everyone.

The third quarter of 2020 was a very active one as our team continued to adapt to the ongoing COVID-19 pandemic and the effects is having on the business today.

Since the outbreak independently nearly every aspect of our daily lives that's been impacted but our first priority is and has always been the safety and health of our team and we continue to take steps to protect our team members from the virus.

Our infrastructure teams saw significant demand for their services during the third quarter. In addition to our normal operations. Our teams responded to several natural disasters across the country. During the third quarter Storm work continues today on the Gulf Coast with our crews working to restore damage caused by Hurricane Laura.

Delta and data in Louisiana, given the current state of the electrical grid in that area, we would anticipate our crews to be active in the area throughout the fourth quarter.

We have just as we have discussed our diversification strategy for several years and it is now clear to see in our financials for the effects of the new infrastructure management team has made over the past year. The gross margin of the infrastructure Division came in at 34% during the third quarter 2020, with EBITDA growing over 300% 300.

30% quarter over quarter, when excluding interest on proper receivables.

The new infrastructure management team is leveraging current operations to introduce our capabilities to potential customers, we believe industry demand and bidding opportunities will remain robust with our cost structure streamlined and a core base of operations. We have built a solid foundation and are positioned to grow both our customer base and geographic.

Our footprint over the coming years.

Our operating subsidiaries higher power and five star are well respected amongst the utilities. They work for and are expanding their customer base. These business has grown significantly since we acquired them in our current.

Current and they are currently comprised of approximately 500 experienced field personnel spread across 120 crews.

Our engineering business is expanding its footprint and we're looking at ways to integrate engineering into our infrastructure business and there have been some engineering procurement and construction or PC work.

In addition, we are exploring ways to integrate our manufacturing operation into our infrastructure offering through the manufacturer of equipment materials and products used by our infrastructure teams.

We are encouraged by water infrastructure engineering manufacturing teams have done over a short period of time and what the future holds for us turning.

Okay.

Thank you already and good afternoon, everyone.

I hope that all of you have had a chance to read our press release, So I will keep my financial comments brief and focus on certain highlights.

<unk> revenue during the third quarter of 2020 came in at $71 million as compared to 60 million during the second quarter of 2020.

The majority of the change quarter over quarter was due to an increase in infrastructure revenue.

Our net income for the third quarter of 2020 was $3 million as compared to a net loss of $15 million during the second quarter of 2020.

On a per share basis, the net profit for the third quarter came in at seven per diluted share.

Adjusted EBITDA for the third quarter of 2020 came in at $22 million as compared to $7 million during the second quarter of 2020.

Capex during the third quarter of 2020 was approximately 2 million with a total of 6 million spent through the first nine months of the year.

Our full year 2020, Capex budget remains at $10 million has oilfield service utilization in pricing remains challenge.

We ended the third quarter with cash on hand of approximately $14 million and debt of approximately 90 million.

We thank our stockholders for their support this concludes our prepared remarks and we thank you for your time and attention. We will now open the call for questions.

Apple strain in order to ask a question Crestar they've been number one on your telephone.

To withdraw your question press the pound key.

Please come my while we compiled Q&A lasting.

Yeah first question comes from the lineup Gangl Bank.

Johnson White.

Hey, guys can you hear me.

We can hear you just fine Daniel.

Alright, great afternoon.

Afternoon, guys.

Let's see.

A good quarter from infrastructure certainly.

Already.

This may be difficult to I guess to to separate but but can you address when we look at the performance of infrastructure in the third quarter, how to think about it in terms of.

Storm driven the benefits of storm work versus destruction of changes, you've you've really implemented within the business.

Well it's.

Certainly.

It's it's kind of complex to do that we were the storms came through and.

Primarily September and October and.

But before that we were having a pretty decent quarter as well.

And what's going on is that certainly is we've put this team together and with their relationships and things that they they.

They've been able to reach out to our bidding opportunities are are continuing to grow pretty significantly.

Al will tell you that we're probably getting right now about 25% of our bids. So we feel very good about the relationships and the companies that were working for so that part continues to grow there is some obviously, they're storm work in there and continue even even.

<unk> yesterday with an I know Daniel you live in the New Orleans area, and hopefully you and family are safe.

From Zeta.

But.

We continue to work today and as we said, we think will be in parts of Louisiana for the next couple of months as.

As we continue to move and some of that has turned from pure restoration type work to some of the reconstruction that goes on in the aftermath of of.

Of Hurricanes.

Got it thanks, Hardie and thanks for the well wishes were doing pretty well down here.

Let's see maybe maybe one other way to ask that question would be.

With with some level of storm response work continuing through the fourth quarter and healthy utilization of of the business are there any reasons infrastructures results or.

Look materially different in queue for them they didn't Q3.

Daniel This is mark I think as we look at Q for for infrastructure.

It should be about in the same ZIP code of where we saw the results for Q3.

Okay perfect.

With the business performing well in already as you said.

Winning 25% of bids I mean.

It feels like it's.

It's a problem the habit, maybe you're almost constrained in terms of what your ability your ability to serve the business.

What kind of capital allocation Mike.

Contemplate for infrastructure looking ahead to 2021.

Well, we're still working on our annual operating plan for that but but certainly you'll have a certain amount of maintenance capex and that type of thing.

We're still a little bit constrained on cash and we're not going to.

Were knocked out run or wait, but certainly as you can tell from the numbers that mark talked about.

Cash position is improving part of the part of the reason why you see it just at the time of the.

The end of the third quarter, we were kind of caught a little bit in between from a cash perspective of pain out all the.

Payroll and labor parts without actually collecting the money's and and that type of thing so.

I'll tell you I'm very optimistic about what our teams is done.

What they continue to do and some of the bids that we're seeing we're starting to get into the EPC type of bidding.

Bidding, where it's a little bit more robust and a little bit a little bit better than the standard MSA work that we do so.

Debating opportunities have increased significantly over the last two to three months and we think that is a.

Very good trend for us and we continue to build that team we continued to add.

People in critical positions and we continue continue to build.

That team up as we go so.

Optimistic about where we're heading with with our with our team degroup on the oil and gas side.

They've done a significant job of taken out to cost.

Certainly.

But we've taken out.

Quite a bit of we.

We had 1600 seven people when we started the year and today, we have 807 and in the meantime, we've been continuing we went down a little bit with our infrastructure cruise and then we're building them back up now.

So very optimistic about where we're going and the cost controls and we put in place in the oil and gas Sun.

With that said from a capex standpoint, we haven't formulated everything.

For 21, yet.

Understood and.

Maybe maybe just ask one on the left side then.

Maybe a quick focus on the sand business you all have a pretty good window, obviously entered in the northern white.

Mark.

What are you seeing at this juncture.

In the sand market.

Daniel This is dawn.

It's pretty interesting we've seen a couple of the major public's go go bankrupt over the last several months and.

And a lot of people who've of either idled are completely closed minds.

As of today I'm pretty sure that we're the only northern White mine on the U P that is still able to operate obviously, we're not operating at at full utilization today, it's down from that but we are able to ramp up rapidly if if.

If the need and demand arises and.

And a lot of other people can't say that today.

Another thing that you're seeing out there as you are seeing a lot of people actually let their mind certificates laps, they're not renewing them.

Which basically at that stage means you're going to reclaim the mine and sell off the equipment. So.

The amount of northern White mine's is definitely dwindling out there.

Outside of that on the demand side demand has picked up a little bit over the last three weeks or so months or so.

But it's still not in any sort of.

Area or ZIP code, where we would like it today in pricing is still depressed so.

That market will come back at some time.

But at this stage, it's still it's still pretty challenge Yeah, Let me, let me take it a little bit further.

Daniel and.

Obviously gives me an opportunity to brag on our Sam team.

The team.

Under very challenging circumstances railcar leases and all that everybody faces and the industry was able to produce positive EBITDA in Q3.

That's a huge step because they actually are.

In position, where their fixed costs that we have on leashes and that type of thing really takes away from them, but they're.

They've done a number of different things, including.

<unk> with.

Railcar leases and different things like that they have done a fantastic job and they are to be congratulated for what they they did we continue to roll off railcar leases and and we are managing that process very closely in the.

The team has just done an excellent job.

Got it I guess I'll append, maybe maybe one last question and then have answered it myself I assume.

Not too much commentary today on the status of your efforts to collect from from prep up.

Assume not much to add maybe to that observation already but if there's anything any timeline or any any elements to be attended to you right now with regard to those efforts he could for an update.

No. We continue to pursue lots of different venues had communication with with prep of this week and you continue to try to help them capture the money that they have coming from famous taken pay us ultimately.

We continue to challenge them in some in the bankruptcy court proceedings and different things of that nature. So a lot of different venues.

Are going we do continue to pursue.

For your request and we think that we'll see a significant for your request sometime in.

In November before Yo of courses acronym for Freedom of Information Act and we think that that shows us in a very very good like much like the Rand report did force. The Rand report unequivocally was complimentary of the Cobra team the assets we brought into their the work that our teams did.

The efficiencies that they they were able to achieve so we will continue to pursue that and we're going to continue to pursue a prep of money.

As you know, it's a big receivable and.

We continue to pursue all avenues to collect.

That makes sense, okay, guys I appreciate it I'll leave it there thanks.

Thank you Dan.

Alright.

Other questions I will now turn the conference back over to Mister <unk> during that.

Thank you very much staff certainly appreciate your help today, we want to thank everyone for dial in today I want to personally. Thank our team we believe the future's bright for mammoth in our team members as we intend to strategically develop our service offerings to grow and deliver stockholder value in the years to come.

Thank you to our stockholders for your support and interest in our company, while the current oilfield market conditions are challenging the infrastructure side of the businesses growing just the way that we planned when we made the pivot.

Three years ago.

We are working hard to control costs and continue pivot mammoth into a more industrial focus come.

This concludes our third quarter conference call. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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