Press Release Details

Mammoth Energy Services, Inc. Announces Second Quarter 2018 Operational and Financial Results

August 6, 2018 at 4:01 PM EDT
  • Record revenues of $534 million, up 443% Y/Y
  • Fully repaid credit facility, resulting in zero long term debt outstanding
  • Initiated regular quarterly dividend
  • Signed a new one-year $900 million contract with the Puerto Rico Electric Power Authority ("PREPA")
  • Extended pressure pumping and sand contracts with Gulfport Energy through 2021
  • Closed two acquisitions

OKLAHOMA CITY, Aug. 06, 2018 (GLOBE NEWSWIRE) -- Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the three and six months ended June 30, 2018.

Financial Highlights for the Second Quarter 2018:

Total revenue was $533.6 million for the three months ended June 30, 2018, up 8% sequentially from $494.2 million for the three months ended March 31, 2018 and up 443% from $98.3 million for the three months ended June 30, 2017.

Net income for the three months ended June 30, 2018 was $42.7 million or $0.95 on a per share basis, a $12.8 million decrease from $55.5 million for the three months ended March 31, 2018 and an improvement of $43.9 million from a net loss of $1.2 million for the three months ended June 30, 2017.

Adjusted net income (as defined and reconciled below) for the three months ended June 30, 2018 was $60.2 million, or $1.34 on an adjusted diluted per share basis.

Adjusted EBITDA (as defined and reconciled below) was $148.6 million for the three months ended June 30, 2018, up 14% sequentially from $130.8 million for the three months ended March 31, 2018 and up 878% from $15.2 million for the three months ended June 30, 2017.

CEO Comment

Arty Straehla, Mammoth's Chief Executive Officer, stated, "The second quarter marked a milestone for Mammoth as we were able to completely repay our debt, further expand our services through two acquisitions and organically grow our current businesses all with internally generated cash flows. Most importantly, we initiated a regular quarterly dividend to return some cash to our stockholders. As we look to the future, we see significant growth potential in various areas of the industrial space to bring additional balance to our asset base and revenue stream."

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $101.4 million on 1,815 stages for the three months ended June 30, 2018, a slight increase from $101.1 million on 1,672 stages for the three months ended March 31, 2018 and a 102% increase from $50.2 million on 1,287 stages for the three months ended June 30, 2017.

Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $360.3 million for the three months ended June 30, 2018, an 11% increase from $325.5 million for the three months ended March 31, 2018 and a $358.6 million increase from $1.7 million the three months ended June 30, 2017.

On May 26, 2018, Mammoth’s wholly owned subsidiary Cobra Acquisitions LLC (“Cobra”), signed a one-year $900 million contract with PREPA to complete the restoration of the critical electrical transmission and distribution system components damaged as a result of Hurricane Maria as well as to support the initial phase of reconstruction of the electrical power system in Puerto Rico.

Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $52.8 million for the three months ended June 30, 2018, up 4% from $51.0 million for the three months ended March 31, 2018 and up 113% from $24.8 million for the three months ended June 30, 2017. The Company sold 777,850 tons of sand for the three months ended June 30, 2018, a 6% increase from 735,584 for the three months ended March 31, 2018 and a 117% increase from 359,053 for the three months ended June 30, 2017.

The Company is currently upgrading certain equipment at its Piranha facility, which is expected to increase Mammoth's total sand processing capacity to approximately 4.4 million tons per year.

Contract Land and Directional Drilling Services

Mammoth's contract land and directional drilling services division contributed revenues (inclusive of inter-segment revenues) of $17.2 million for the three months ended June 30, 2018, a 13% increase from $15.2 million for the three months ended March 31, 2018 and a 38% increase from $12.5 million for the three months ended June 30, 2017. The average drilling day rate was $17,229, $16,541 and $14,100, respectively, for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017.

Mammoth anticipates that it will operate, on average, five to six rigs throughout 2018.

Other Services

Mammoth's other services, including coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations, contributed revenues (inclusive of inter-segment revenues) of $20.2 million for the three months ended June 30, 2018, a 12% decrease from $22.9 million for the three months ended March 31, 2018 and a 98% increase from $10.2 million for the three months ended June 30, 2017.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses increased to $65.1 million for the three months ended June 30, 2018 from $38.5 million for the three months ended March 31, 2018 and $7.7 million for the three months ended June 30, 2017. The increase from the second quarter of 2017 to the second quarter of 2018 is primarily attributable to $28.3 million in bad debt expense and $17.5 million in non-employee non-cash equity compensation expense. The increase from the first quarter of 2018 to the second quarter of 2018 is primarily attributable to $17.5 million in non-employee non-cash equity compensation expense and a $2.7 million increase in bad debt expense.

SG&A expenses, as a percentage of total revenue, were 12% for the three months ended June 30, 2018 compared to 8% for the three months ended March 31, 2018 and 8% for the three months ended June 30, 2017. Excluding bad debt and non-employee non-cash equity compensation expenses, SG&A expenses as a percentage of total revenue were 3.6% for the three months ended June 30 2018, compared to 2.6% for the three months ended March 31, 2018 and 7.8% for the three months ended June 30, 2017.

Acquisitions

During the second quarter of 2018, Mammoth acquired WTL Oil LLC ("WTL"), a company engaged in the hauling of crude oil in Oklahoma. Immediately following the closing of the transaction, WTL embarked on an expansion program to grow its fleet to 49 crude hauling trucks (from 20 at the time of acquisition) and entered the west Texas market.

Additionally, during the second quarter of 2018, Mammoth acquired RTS Energy Services LLC ("RTS"), a company engaged in the cementing and acidizing of oil and gas wells in west Texas. Through the RTS transaction, Mammoth expanded its service offerings into the Permian Basin with top quality operators.

Initiation of Quarterly Cash Dividend

On July 16, 2018, Mammoth announced that its Board of Directors initiated a quarterly dividend policy and declared its first quarterly cash dividend of $0.125 per share of common stock, to be paid on August 14, 2018 to stockholders of record as of the close of business on August 7, 2018.

Strong financial results and a favorable outlook support some balanced return of capital to Mammoth's stockholders. The regular quarterly cash dividend provides benefit to Mammoth’s existing stockholders as well as broadening Mammoth’s exposure to additional income oriented investors.

Liquidity

As of June 30, 2018, Mammoth had cash on hand totaling $10.7 million and no borrowings outstanding under its revolving credit facility. As of June 30, 2018, the Company had approximately $162.7 million of available borrowing capacity under its revolving credit facility, after giving effect to $6.5 million of outstanding letters of credit, resulting in total liquidity of approximately $173.4 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,
  2018   2017   2018   2018   2017
Pressure pumping services(a) $ 8,233     $ 24,737     $ 7,866     $ 16,099     $ 53,402  
Infrastructure services(b) 40,778     3,958     15,778     56,556     3,958  
Natural sand proppant services(c) 6,958     2,795     5,700     12,658     2,970  
Contract and directional drilling services(d) 7,083     3,632     3,618     10,701     5,901  
Other(e) 9,959     344     2,812     12,771     344  
Total capital expenditures $ 73,011     $ 35,466     $ 35,774     $ 108,785     $ 66,575  

   a.   Capital expenditures primarily for pressure pumping equipment for the periods presented.
   b.   Capital expenditures primarily for trucks and other equipment for the periods presented.
   c.   Capital expenditures primarily for plant upgrades for the periods presented.
   d.   Capital expenditures primarily for upgrades to our rig fleet and real estate purchases for the periods presented.
   e.   Capital expenditures primarily for equipment for our rental and crude oil hauling businesses for 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 filed on Form 10-K with the Securities and Exchange Commission ("SEC") on February 28, 2018, 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.

On June 5, 2017, the Company completed the acquisition of (1) Sturgeon Acquisitions, LLC and its wholly owned subsidiaries Taylor Frac LLC, Taylor RE, LLC and South River, LLC (collectively, "Sturgeon"), (2) Stingray Energy Services and (3) Stingray Cementing (together with Stingray Energy Services, the “Stingray Acquisition”) in exchange for the issuance by Mammoth of an aggregate of 7,000,000 shares of its common stock.

Prior to the acquisition, the Company and Sturgeon were under common control and it is required under accounting principles generally accepted in the Unites States of America ("GAAP") to account for this common control acquisition in a manner similar to the pooling of interest method of accounting. Therefore, the Company's historical financial information has been recast to combine Sturgeon with the Company as if the acquisition had been completed at commencement of Sturgeon's operations on September 13, 2014.

Conference Call Information

Mammoth will host a conference call on Tuesday, August 7, 2018 at 10:00 a.m. CDT (11:00 am EDT) to discuss its second quarter 2018 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 9885197. 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 company serving both the oil and gas and the electric utility industries in North America and US territories.  Mammoth's subsidiaries provide a diversified set of drilling and completion services to the exploration and production industry including pressure pumping, coil tubing, natural sand and proppant services as well as trucking, drilling, cementing, water transfer among others.  In addition, its infrastructure division provides transmission, distribution and logistics services to various public and private owned utilities throughout the US and Puerto Rico.

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: risks relating to economic conditions; volatility of crude oil and natural gas commodity prices; delays in or failure of delivery of current or future orders of specialized equipment; the loss of or interruption in operations of one or more key suppliers or customers; solvency of counterparties to our contracts and their ability to timely pay for our services; oil and gas market conditions; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing; operating risks; the adequacy of our capital resources and liquidity; weather; 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.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

         
ASSETS   June 30,   December 31,
    2018   2017
CURRENT ASSETS   (in thousands)
Cash and cash equivalents   $ 10,702     $ 5,637  
Accounts receivable, net   312,850     243,746  
Receivables from related parties   30,674     33,788  
Inventories   12,717     17,814  
Prepaid expenses   13,811     12,552  
Other current assets   816     886  
   Total current assets   381,570     314,423  
         
Property, plant and equipment, net   423,315     351,017  
Sand reserves   73,759     74,769  
Intangible assets, net - customer relationships   6,204     9,623  
Intangible assets, net - trade names   6,726     6,516  
Goodwill   101,511     99,811  
Deferred income tax asset   31,892     6,739  
Other non-current assets   4,146     4,345  
Total assets   $ 1,029,123     $ 867,243  
LIABILITIES AND EQUITY        
CURRENT LIABILITIES        
Accounts payable   $ 177,353     $ 141,306  
Payables to related parties   1,916     1,378  
Accrued expenses and other current liabilities   54,701     40,895  
Income taxes payable   131,210     36,409  
   Total current liabilities   365,180     219,988  
         
Long-term debt       99,900  
Deferred income tax liabilities   31,036     34,147  
Asset retirement obligation   3,138     2,123  
Other liabilities   4,100     3,289  
Total liabilities   403,454     359,447  
         
COMMITMENTS AND CONTINGENCIES        
         
EQUITY        
Equity:        
  Common stock, $0.01 par value, 200,000,000 shares authorized, 44,752,765 and 44,589,306
  issued and outstanding at June 30, 2018 and December 31, 2017, respectively
  448     446  
  Additional paid in capital   528,421     508,010  
  Retained earnings   100,247     2,001  
  Accumulated other comprehensive loss   (3,447 )   (2,661 )
    Total equity   625,669     507,796  
    Total liabilities and equity   $ 1,029,123     $ 867,243  
 



MAMMOTH ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) 

   
  Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,
  2018   2017   2018   2018   2017
  (in thousands, except per share amounts)
REVENUE  
Services revenue $ 455,545     $ 29,659     $ 408,659     $ 864,204     $ 56,751  
Services revenue - related parties 40,611     44,603     49,088     89,699     77,565  
Product revenue 27,708     10,395     25,040     52,748     13,767  
Product revenue - related parties 9,730     13,605     11,462     21,192     25,145  
Total revenue 533,594     98,262     494,249     1,027,843     173,228  
                   
COST AND EXPENSES                  
Services cost of revenue (exclusive of depreciation,
depletion, amortization and accretion of $26,898, $51,473,
$24,575, $17,651 and $33,489, respectively, for the three
and six months ended June 30, 2018, three month ended
March 31, 2018 and three and six months ended June 30,
2017)
302,283     57,104     290,979     593,262     102,565  
Services cost of revenue - related parties (exclusive of
depreciation, depletion, amortization and accretion of $0,
$0, $0, $0 and $0, respectively, for the three and six months
ended June 30, 2018, three months ended March 31, 2018
and three and six months ended June 30, 2017)
2,428     262     1,792     4,220     692  
Product cost of revenue (exclusive of depreciation,
depletion, amortization and accretion of $3,879, $6,193,
$2,314, $2,204 and $3,566, respectively, for the three and
six months ended June 30, 2018, three months ended March
31, 2018 and three and six months ended June 30, 2017)
35,117     19,974     33,330     68,447     32,581  
Selling, general and administrative 64,595     7,393     38,082     102,677     13,806  
Selling, general and administrative - related parties 532     307     429     961     631  
Depreciation, depletion, amortization and accretion 30,795     19,893     26,908     57,703     37,130  
Impairment of long-lived assets 187             187      
Total cost and expenses 435,937     104,933     391,520     827,457     187,405  
Operating income (loss) 97,657     (6,671 )   102,729     200,386     (14,177 )
                   
OTHER (EXPENSE) INCOME                  
Interest expense, net (959 )   (1,112 )   (1,237 )   (2,196 )   (1,509 )
Bargain purchase gain, net of tax     4,012             4,012  
Other, net (486 )   (203 )   (28 )   (514 )   (387 )
Total other (expense) income (1,445 )   2,697     (1,265 )   (2,710 )   2,116  
Income (loss) before income taxes 96,212     (3,974 )   101,464     197,676     (12,061 )
Provision (benefit) for income taxes 53,512     (2,804 )   45,918     99,430     (5,910 )
Net income (loss) $ 42,700     $ (1,170 )   $ 55,546     $ 98,246     $ (6,151 )
                   
OTHER COMPREHENSIVE INCOME (LOSS)                  
Foreign currency translation adjustment, net of tax of $86,
$272, $186, $434 and $454, respectively, for the three and
six months ended June 30, 2018, three months ended March
31, 2018 and three and six months ended June 30, 2017
(325 )   181     (461 )   (786 )   409  
Comprehensive income (loss) $ 42,375     $ (989 )   $ 55,085     $ 97,460     $ (5,742 )
                   
Net income (loss) per share (basic) $ 0.95     $ (0.03 )   $ 1.24     $ 2.20     $ (0.16 )
Net income (loss) per share (diluted) $ 0.95     $ (0.03 )   $ 1.24     $ 2.18     $ (0.16 )
Weighted average number of shares outstanding (basic) 44,737     39,500     44,650     44,700     38,506  
Weighted average number of shares outstanding (diluted) 45,059     39,500     44,884     44,977     38,506  
                             


MAMMOTH ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 
  Six Months Ended
  June 30,
  2018   2017
  (in thousands)
Cash flows from operating activities:      
Net income (loss) $ 98,246     $ (6,151 )
Adjustments to reconcile net income (loss) to cash provided by operating activities:      
Equity based compensation 17,487      
Stock based compensation 2,916     1,620  
Depreciation, depletion, accretion and amortization 57,703     37,130  
Amortization of coil tubing strings 1,120     1,046  
Amortization of debt origination costs 199     199  
Bad debt expense 53,790     19  
(Gain) loss on disposal of property and equipment (128 )   127  
Gain on bargain purchase     (4,012 )
Impairment of long-lived assets 187      
Deferred income taxes (27,906 )   (6,529 )
Changes in assets and liabilities, net of acquisitions of businesses:      
       Accounts receivable, net (122,908 )   (4,793 )
       Receivables from related parties 3,114     (12,995 )
       Inventories 4,156     (4,932 )
       Prepaid expenses and other assets (1,195 )   1,528  
       Accounts payable 34,186     20,557  
       Payables to related parties 538     (83 )
       Accrued expenses and other liabilities 10,193     1,301  
       Income taxes payable 94,753     (28 )
Net cash provided by operating activities 226,451     24,004  
       
Cash flows from investing activities:      
Purchases of property and equipment (105,349 )   (66,575 )
Purchases of property and equipment from related parties (3,436 )    
Business acquisitions (13,356 )   (39,570 )
Proceeds from disposal of property and equipment 898     781  
Business combination cash acquired     2,671  
Net cash used in investing activities (121,243 )   (102,693 )
       
Cash flows from financing activities:      
Borrowings from lines of credit 52,000     79,150  
Repayments of lines of credit (151,900 )   (14,150 )
Repayments of equipment financing note (145 )    
Repayment of Stingray acquisition long-term debt     (7,074 )
Net cash (used in) provided by financing activities (100,045 )   57,926  
Effect of foreign exchange rate on cash (98 )   73  
Net change in cash and cash equivalents 5,065     (20,690 )
Cash and cash equivalents at beginning of period 5,637     29,239  
Cash and cash equivalents at end of period $ 10,702     $ 8,549  
       
Supplemental disclosure of cash flow information:      
Cash paid for interest $ 2,543     $ 1,086  
Cash paid for income taxes $ 32,584     $ 912  
Supplemental disclosure of non-cash transactions:      
Purchases of property and equipment included in accounts payable and accrued expenses $ 20,897     $ 7,836  
Acquisition of Sturgeon, Stingray Cementing LLC and Stingray Energy Services LLC $     $ 23,091  
               


MAMMOTH ENERGY SERVICES, INC.

SEGMENT INCOME STATEMENTS (unaudited)
(in thousands)

 
Three months ended June 30, 2018 Pressure
Pumping
Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 100,333   $ 360,250   $ 37,439   $ 17,126   $ 18,446   $   $ 533,594  
Intersegment revenues 1,073     15,406   84   1,721   (18,284 )  
Total revenue 101,406   360,250   52,845   17,210   20,167   (18,284 ) 533,594  
Cost of revenue, exclusive of depreciation,
depletion, amortization and accretion
61,593   210,189   35,117   15,280   17,649     339,828  
Intersegment cost of revenues 16,174   754   1,019   (40 ) 129   (18,036 )  
Total cost of revenue 77,767   210,943   36,136   15,240   17,778   (18,036 ) 339,828  
Selling, general and administrative 20,822   39,786   1,787   1,591   1,141     65,127  
Depreciation, depletion, amortization and accretion 13,829   4,094   3,881   5,349   3,642     30,795  
Impairment of long-lived assets       187       187  
Operating income (loss) (11,012 ) 105,427   11,041   (5,157 ) (2,394 ) (248 ) 97,657  
Interest expense, net 341   106   76   265   171     959  
Other expense 80   330   36   32   8     486  
Income (loss) before income taxes $ (11,433 ) $ 104,991   $ 10,929   $ (5,454 ) $ (2,573 ) $ (248 ) $ 96,212  


Three months ended June 30, 2017 Pressure
Pumping
Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 49,924   $ 1,709   $ 24,000   $ 12,472   $ 10,157   $   $ 98,262  
Intersegment revenues 272     762     85   (1,119 )  
Total revenue 50,196   1,709   24,762   12,472   10,242   (1,119 ) 98,262  
Cost of revenue, exclusive of depreciation,
depletion, amortization and accretion
35,826   1,626   19,974   12,033   7,881     77,340  
Intersegment cost of revenues 847     267     5   (1,119 )  
Total cost of revenue 36,673   1,626   20,241   12,033   7,886   (1,119 ) 77,340  
Selling, general and administrative 2,403   307   2,416   1,435   1,139     7,700  
Depreciation, depletion, amortization and accretion 9,626   340   2,206   4,974   2,747     19,893  
Operating income (loss) 1,494   (564 ) (101 ) (5,970 ) (1,530 )   (6,671 )
Interest expense, net 303   4   353   440   12     1,112  
Bargain purchase gain     (4,012 )       (4,012 )
Other expense 4     140   60   (1 )   203  
Income (loss) before income taxes $ 1,187   $ (568 ) $ 3,418   $ (6,470 ) $ (1,541 ) $   $ (3,974 )


Three months ended March 31, 2018 Pressure
Pumping
Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 96,579   $ 325,459   $ 36,503   $ 15,228   $ 20,480   $   $ 494,249  
Intersegment revenues 4,559     14,512   2   2,415   (21,488 )  
Total revenue 101,138   325,459   51,015   15,230   22,895   (21,488 ) 494,249  
Cost of revenue, exclusive of depreciation,
depletion, amortization and accretion
66,612   194,076   33,330   14,475   17,608     326,101  
Intersegment cost of revenues 15,402   1,791   4,286   162   105   (21,746 )  
Total cost of revenue 82,014   195,867   37,616   14,637   17,713   (21,746 ) 326,101  
Selling, general and administrative 2,663   31,851   1,644   1,253   1,100     38,511  
Depreciation, depletion, amortization and accretion 13,986   2,407   2,316   4,355   3,844     26,908  
Operating income (loss) 2,475   95,334   9,439   (5,015 ) 238   258   102,729  
Interest expense, net 504   76   80   395   182     1,237  
Other expense 12   2   (13 ) 40   (13 )   28  
Income (loss) before income taxes $ 1,959   $ 95,256   $ 9,372   $ (5,450 ) $ 69   $ 258   $ 101,464  


Six months ended June 30, 2018 Pressure
Pumping
Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 196,912   $ 685,709   $ 73,942   $ 32,354   $ 38,926   $   $ 1,027,843  
Intersegment revenues 5,632     29,918   86   4,136   (39,772 )  
Total revenue 202,544   685,709   103,860   32,440   43,062   (39,772 ) 1,027,843  
Cost of revenue, exclusive of depreciation,
depletion, amortization and accretion
128,205   404,265   68,447   29,755   35,257     665,929  
Intersegment cost of revenues 31,576   2,545   5,305   122   234   (39,782 )  
Total cost of revenue 159,781   406,810   73,752   29,877   35,491   (39,782 ) 665,929  
Selling, general and administrative 23,485   71,637   3,431   2,844   2,241     103,638  
Depreciation, depletion, amortization and accretion 27,815   6,501   6,197   9,704   7,486     57,703  
Impairment of long-lived assets       187       187  
Operating income (loss) (8,537 ) 200,761   20,480   (10,172 ) (2,156 ) 10   200,386  
Interest expense, net 845   182   156   660   353     2,196  
Other expense 92   332   23   72   (5 )   514  
Income (loss) before income taxes $ (9,474 ) $ 200,247   $ 20,301   $ (10,904 ) $ (2,504 ) $ 10   $ 197,676  


Six months ended June 30, 2017 Pressure
Pumping
Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 90,377   $ 1,709   $ 38,912   $ 23,223   $ 19,007   $   $ 173,228  
Intersegment revenues 459     1,447     85   (1,991 )  
Total revenue 90,836   1,709   40,359   23,223   19,092   (1,991 ) 173,228  
Cost of revenue, exclusive of depreciation,
depletion, amortization and accretion
64,533   1,712   32,582   22,986   14,025     135,838  
Intersegment cost of revenues 1,532     454     5   (1,991 )  
Total cost of revenue 66,065   1,712   33,036   22,986   14,030   (1,991 ) 135,838  
Selling, general and administrative 4,180   355   4,474   2,728   2,700     14,437  
Depreciation, depletion, amortization and accretion 18,784   340   3,569   9,942   4,495     37,130  
Operating income (loss) 1,807   (698 ) (720 ) (12,433 ) (2,133 )   (14,177 )
Interest expense, net 431   4   486   657   (69 )   1,509  
Bargain purchase gain     (4,012 )       (4,012 )
Other expense 7     154   224   2     387  
Income (loss) before income taxes $ 1,369   $ (702 ) $ 2,652   $ (13,314 ) $ (2,066 ) $   $ (12,061 )
                                           


MAMMOTH ENERGY SERVICES, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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, bargain purchase gain, 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. 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): 2018   2017   2018   2018   2017
Net income (loss) $ 42,700     $ (1,170 )   $ 55,546     $ 98,246     $ (6,151 )
Depreciation, depletion, accretion and amortization expense 30,795     19,893     26,908     57,703     37,130  
Impairment of long-lived assets 187             187      
Acquisition related costs 77     961     (46 )   31     2,208  
Public offering costs 731             731      
Equity based compensation 17,487             17,487      
Stock based compensation 1,660     1,050     1,256     2,916     1,620  
Bargain purchase gain     (4,012 )           (4,012 )
Interest expense, net 959     1,112     1,237     2,196     1,509  
Other expense, net 486     203     28     514     387  
Provision (benefit) for income taxes 53,512     (2,804 )   45,918     99,430     (5,910 )
Adjusted EBITDA $ 148,594     $ 15,233     $ 130,847     $ 279,441     $ 26,781  


Pressure Pumping Services

  Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net income $ (11,433 )   $ 1,187     $ 1,959     $ (9,474 )   $ 1,369  
Depreciation and amortization expense 13,829     9,626     13,986     27,815     18,784  
Acquisition related costs 33             33      
Public offering costs 202             202      
Equity based compensation 17,487             17,487      
Stock based compensation 453     503     418     871     774  
Interest expense 341     303     504     845     431  
Other expense, net 80     4     12     92     7  
Adjusted EBITDA $ 20,992     $ 11,623     $ 16,879     $ 37,871     $ 21,365  


Infrastructure Services

  Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net income (loss) $ 52,359     $ (568 )   $ 47,299     $ 99,658     $ (702 )
Depreciation and amortization expense 4,094     340     2,407     6,501     340  
Acquisition related costs 4     42     (8 )   (4 )   42  
Public offering costs 360             360      
Stock based compensation 606         457     1,063      
Interest expense 106     4     76     182     4  
Other expense, net 330         2     332      
Provision for income taxes 52,632         47,957     100,569      
Adjusted EBITDA $ 110,491     $ (182 )   $ 98,190     $ 208,681     $ (316 )


Natural Sand Proppant Services

  Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net income $ 10,929     $ 3,409     $ 9,372     $ 20,301     $ 2,643  
Depreciation, depletion, accretion and amortization expense 3,881     2,206     2,316     6,197     3,569  
Acquisition related costs     916     (38 )   (38 )   1,954  
Public offering costs 95             95      
Stock based compensation 205     182     186     391     252  
Bargain purchase gain     (4,012 )           (4,012 )
Interest expense 76     353     80     156     486  
Other expense, net 36     140     (13 )   23     154  
Provision for income taxes     9             9  
Adjusted EBITDA $ 15,222     $ 3,203     $ 11,903     $ 27,125     $ 5,055  


Contract Land and Directional Drilling Services

  Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net loss $ (5,454 )   $ (6,470 )   $ (5,450 )   $ (10,904 )   $ (13,314 )
Depreciation and amortization expense 5,349     4,974     4,355     9,704     9,942  
Impairment of long-lived assets 187             187      
Acquisition related costs     3             25  
Public offering costs 34             34      
Stock based compensation 301     180     107     408     292  
Interest expense, net 265     440     395     660     657  
Other expense, net 32     60     40     72     224  
Adjusted EBITDA $ 714     $ (813 )   $ (553 )   $ 161     $ (2,174 )


Other Services(a)

  Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net (loss) income $ (3,453 )   $ 1,272     $ 2,107     $ (1,346 )   $ 3,853  
Depreciation and amortization expense 3,642     2,747     3,844     7,486     4,495  
Acquisition related costs 40             40     187  
Public offering costs 40             40      
Stock based compensation 94     184     89     183     301  
Interest expense, net 171     12     182     353     (69 )
Other expense, net 8     (1 )   (13 )   (5 )   2  
Provision (benefit) for income taxes 880     (2,813 )   (2,038 )   (1,158 )   (5,919 )
Adjusted EBITDA $ 1,422     $ 1,401     $ 4,171     $ 5,593     $ 2,850  

(a)  Includes results for our coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations services and corporate related activities. Our corporate related activities do not generate revenue.

Adjusted Net Income and Adjusted Earnings per Share

Adjusted net income and adjusted earnings per share are supplemental non-GAAP financial measures that are used by management to evaluate the Company's operating and financial performance. Management believes these measures provide meaningful information about the Company's performance by excluding certain non-cash charges that may not be indicative of the Company's ongoing operating results. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for net income and earnings per share prepared in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The following tables provide a reconciliation of adjusted net income and adjusted earnings per share to the GAAP financial measures of net income and earnings per share for the periods specified.

 
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2018   2017   2018   2017
  (in thousands, except per share amounts)
Net income, as reported $ 42,700     $ (1,170 )   $ 98,246     $ (6,151 )
Equity based compensation 17,487         17,487      
Adjusted net income $ 60,187     $ (1,170 )   $ 115,733     $ (6,151 )
               
Basic earnings per share, as reported $ 0.95     $ (0.03 )   $ 2.20     $ (0.16 )
Equity based compensation 0.40         0.40      
Adjusted basic earnings per share $ 1.35     $ (0.03 )   $ 2.60     $ (0.16 )
               
Diluted earnings per share, as reported $ 0.95     $ (0.03 )   $ 2.18     $ (0.16 )
Equity based compensation 0.39         0.39      
Adjusted diluted earnings per share $ 1.34     $ (0.03 )   $ 2.57     $ (0.16 )
 

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Source: Mammoth Energy Services, Inc.