Press Release Details

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

October 31, 2018 at 3:57 PM EDT
  • Record net income of $69.5 million, or $1.54 per diluted share
  • Deployed infrastructure crews in support of Hurricanes Florence and Michael
  • Entered into an amended and restated 5-year credit facility increasing borrowing base to $185 million - Remains undrawn
  • Declared quarterly dividend of $0.125 per share

OKLAHOMA CITY, Oct. 31, 2018 (GLOBE NEWSWIRE) -- Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the three and nine months ended September 30, 2018.

Financial Highlights for the Third Quarter 2018:

Total revenue was $384.0 million for the three months ended September 30, 2018, down 28% sequentially from $533.6 for the three months ended June 30, 2018 and up 157% from $149.3 million for the three months ended September 30, 2017.

Net income for the three months ended September 30, 2018 was $69.5 million, or $1.54 on a fully diluted per share basis, a $26.8 million increase from $42.7 million for the three months ended June 30, 2018 and an improvement of $70.3 million from a net loss of $0.8 million for the three months ended September 30, 2017.

Adjusted EBITDA (as defined and reconciled below) was $183.6 million for the three months ended September 30, 2018, an increase from $148.6 million for the three months ended June 30, 2018 and from $28.0 million for the three months ended September 30, 2017. Excluding the reversal of bad debt provisions of $69.6 million, adjusted EBITDA was $114.0 million for the three months ended September 30, 2018.

Arty Straehla, Mammoth's Chief Executive Officer, stated, "The third quarter marked two full years as a public company and was a record quarter on a net income basis. Over the past two years, we have more than doubled the size of our oil field services business and we have also created a large infrastructure organization that has a bright future that should complement our diversified growth for years to come. While the third quarter was challenging for oil field services, we were pleased with the execution in our infrastructure business. In addition, we finalized our amended and restated $185 million five-year credit facility, which both increases our liquidity and gives us the flexibility to react quickly to identified opportunities. We continue our commitment to a balanced stockholder return through the approval of a regular quarterly dividend to be paid on November 15, 2018."

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $92.4 million on 1,594 stages for the three months ended September 30, 2018, a 9% decrease from $101.4 million on 1,815 stages for the three months ended June 30, 2018, and a 21% increase from $76.7 million on 1,617 stages for the three months ended September 30, 2017.

Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $237.1 million for the three months ended September 30, 2018, a 34% decrease from $360.3 million for the three months ended June 30, 2018 and a $223.6 million increase from $13.5 million the three months ended September 30, 2017.

Transmission and distribution crews answered the call for mutual aid following Hurricanes Florence and Michael and were deployed to both the eastern seaboard and the gulf coast.

Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $37.0 million for the three months ended September 30, 2018, a 30% decrease from $52.8 million for the three months ended June 30, 2018 and up 13% from $32.7 million for the three months ended September 30, 2017. The Company sold 598,438 tons of sand during the three months ended September 30, 2018, a 23% decrease from 777,850 during the three months ended June 30, 2018 and a 26% increase from 474,933 during the three months ended September 30, 2017.

During the third quarter of 2018, the Company completed the upgrade of certain equipment at its Piranha facility, which increased Mammoth's total sand processing capacity to approximately 4.4 million tons per year. Due to market conditions, our Muskie facility was temporarily idled during the third quarter of 2018 and we expect this to lower our blended production costs.

Contract Land and Directional Drilling Services

Mammoth's contract land and directional drilling services division contributed revenues (inclusive of inter-segment revenues) of $15.9 million for the three months ended September 30, 2018, a 7% decrease from $17.2 million for the three months ended June 30, 2018, and a 17% increase from $13.6 million for the three months ended September 30, 2017. The average drilling day rate was $17,170, $17,229 and $14,800, respectively, for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017.

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

Other Services

Mammoth's other services, including coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, water transfer and remote accommodations, contributed revenues (inclusive of inter-segment revenues) of $21.5 million for the three months ended September 30, 2018, a 7% increase from $20.2 million for the three months ended June 30, 2018, and a 24% increase from $17.4 million for the three months ended September 30, 2017.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were a credit of $45.3 million for the three months ended September 30, 2018, compared to $65.1 million for the three months ended June 30, 2018, and $8.0 million for the three months ended September 30, 2017.

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

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2018   2017   2018   2018   2017
Cash expenses:                  
Compensation and benefits $ 14,864     $ 3,577     $ 10,978     $ 33,541     $ 8,958  
Professional services 3,267     1,494     2,981     8,835     5,075  
Other(a) 3,701     1,820     3,935     9,243     5,700  
Total cash SG&A expense 21,832     6,891     17,894     51,619     19,733  
Non-cash expenses:                  
Bad debt provision(b) (68,333 )   103     28,263     (14,543 )   78  
Equity based compensation(c)         17,487     17,487      
Stock based compensation 1,177     1,028     1,483     3,751     2,648  
Total non-cash SG&A expense (67,156 )   1,131     47,233     6,695     2,726  
Total SG&A expense $ (45,324 )   $ 8,022     $ 65,127     $ 58,314     $ 22,459  

a.    Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.    During the three months ended September 30, 2018, the Company received payment for amounts previously reserved in 2017. As a result, during the three months ended September 30, 2018, the Company reversed bad debt expense of $16.0 million recognized in 2017 and $53.6 million recognized in the first half of 2018. The Company expects to receive payment for the 2018 amounts once the Company files its 2018 Puerto Rico tax return and pays any taxes due as calculated by the return. The Company expects that the Puerto Rico 2018 tax return will be filed in mid-2019.
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 (12%) for the three months ended September 30, 2018 compared to 12% for the three months ended June 30, 2018 and 5% for the three months ended September 30, 2017. Excluding bad debt and non-employee non-cash equity compensation expenses, SG&A expenses as a percentage of total revenue were 6% for the three months ended September 30, 2018, compared to 4% for the three months ended June 30, 2018 and 5% for the three months ended September 30, 2017.

Liquidity

As of September 30, 2018, Mammoth had cash on hand totaling $19.7 million and no borrowings outstanding under its revolving credit facility. As of September 30, 2018, the Company had approximately $162.5 million of available borrowing capacity under its revolving credit facility, after giving effect to $6.7 million of outstanding letters of credit, resulting in total liquidity of approximately $182.2 million.

On October 19, 2018, Mammoth entered into an amended and restated five-year asset backed revolving credit facility led by PNC Capital Markets with a maximum revolving advance amount at closing of $185 million and the potential to increase the facility by up to an additional $165 million.

Capital Expenditures

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

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2018   2017   2018   2018   2017
Pressure pumping services(a) $ 5,630     $ 19,581     $ 8,233     $ 21,729     $ 72,983  
Infrastructure services(b) 21,737     8,055     40,778     78,293     12,013  
Natural sand proppant services(c) 3,145     4,928     6,958     15,803     7,898  
Contract and directional drilling services(d) 1,570     2,356     7,083     12,271     8,257  
Other(e) 8,663     777     9,959     21,434     1,122  
Total capital expenditures $ 40,745     $ 35,697     $ 73,011     $ 149,530     $ 102,273  

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 Thursday, November 1, 2018 at 10:00 a.m. CDT (11:00 am EDT) to discuss its third 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 6888202. 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   September 30,   December 31,
    2018   2017
CURRENT ASSETS   (in thousands)
Cash and cash equivalents   $ 19,692     $ 5,637  
Accounts receivable, net   390,824     243,746  
Receivables from related parties   25,335     33,788  
Inventories   19,185     17,814  
Prepaid expenses   10,969     12,552  
Other current assets   652     886  
Total current assets   466,657     314,423  
         
Property, plant and equipment, net   434,785     351,017  
Sand reserves   72,207     74,769  
Intangible assets, net - customer relationships   3,021     9,623  
Intangible assets, net - trade names   6,134     6,516  
Goodwill   98,308     99,811  
Deferred income tax asset       6,739  
Other non-current assets   4,046     4,345  
Total assets   $ 1,085,158     $ 867,243  
LIABILITIES AND EQUITY        
CURRENT LIABILITIES        
Accounts payable   $ 139,374     $ 141,306  
Payables to related parties   1,402     1,378  
Accrued expenses and other current liabilities   42,605     40,895  
Income taxes payable   172,000     36,409  
Total current liabilities   355,381     219,988  
         
Long-term debt       99,900  
Deferred income tax liabilities   33,601     34,147  
Asset retirement obligation   3,155     2,123  
Other liabilities   1,703     3,289  
Total liabilities   393,840     359,447  
         
COMMITMENTS AND CONTINGENCIES        
         
EQUITY        
Equity:        
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,755,678 and 44,589,306 issued and outstanding at September 30, 2018 and December 31, 2017, respectively   448     446  
Additional paid in capital   529,825     508,010  
Retained earnings   164,165     2,001  
Accumulated other comprehensive loss   (3,120 )   (2,661 )
Total equity   691,318     507,796  
Total liabilities and equity   $ 1,085,158     $ 867,243  


MAMMOTH ENERGY SERVICES, INC.

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

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2018   2017   2018   2018   2017
  (in thousands, except per share amounts)
REVENUE  
Services revenue $ 346,368     $ 63,113     $ 455,545     $ 1,210,572     $ 119,864  
Services revenue - related parties 18,933     56,861     40,611     108,632     134,426  
Product revenue 14,955     15,276     27,708     67,703     29,043  
Product revenue - related parties 3,787     14,055     9,730     24,979     39,200  
Total revenue 384,043     149,305     533,594     1,411,886     322,533  
                   
COST AND EXPENSES                  
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $27,810, $79,283, $26,898, $24,153 and $57,642, respectively, for the three and nine months ended September 30, 2018, three month ended June 30, 2018 and three and nine months ended September 30, 2017) 216,670     89,346     302,283     809,932     191,911  
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 nine months ended September 30, 2018, three month ended June 30, 2018 and three and nine months ended September 30, 2017) 1,425     9     2,428     5,645     701  
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $4,183, $10,376, $3,879, $3,033 and $6,599, respectively, for the three and nine months ended September 30, 2018, three month ended June 30, 2018 and three and nine months ended September 30, 2017) 29,470     25,178     35,117     97,917     57,759  
Selling, general and administrative (45,761 )   7,667     64,595     56,916     21,473  
Selling, general and administrative - related parties 437     355     532     1,398     986  
Depreciation, depletion, amortization and accretion 32,015     27,224     30,795     89,718     64,354  
Impairment of long-lived assets 4,582         187     4,769      
Total cost and expenses 238,838     149,779     435,937     1,066,295     337,184  
Operating income (loss) 145,205     (474 )   97,657     345,591     (14,651 )
                   
OTHER (EXPENSE) INCOME                  
Interest expense, net (458 )   (1,420 )   (959 )   (2,654 )   (2,929 )
Bargain purchase gain, net of tax                 4,012  
Other, net (400 )   (320 )   (486 )   (914 )   (707 )
Total other (expense) income (858 )   (1,740 )   (1,445 )   (3,568 )   376  
Income (loss) before income taxes 144,347     (2,214 )   96,212     342,023     (14,275 )
Provision (benefit) for income taxes 74,835     (1,413 )   53,512     174,265     (7,323 )
Net income (loss) $ 69,512     $ (801 )   $ 42,700     $ 167,758     $ (6,952 )
                   
OTHER COMPREHENSIVE INCOME (LOSS)                  
Foreign currency translation adjustment, net of tax of ($87), $185, $86, $358 and $812, respectively, for the three and nine months ended September 30, 2018, three month ended June 30, 2018 and three and nine months ended September 30, 2017) 327     628     (325 )   (459 )   1,037  
Comprehensive income (loss) $ 69,839     $ (173 )   $ 42,375     $ 167,299     $ (5,915 )
                   
Net income (loss) per share (basic) $ 1.55     $ (0.02 )   $ 0.95     $ 3.75     $ (0.17 )
Net income (loss) per share (diluted) $ 1.54     $ (0.02 )   $ 0.95     $ 3.73     $ (0.17 )
Weighted average number of shares outstanding (basic) 44,756     44,502     44,737     44,718     40,526  
Weighted average number of shares outstanding (diluted) 45,082     44,502     45,059     45,012     40,526  
Dividends declared per share $ 0.125         $     $ 0.125      


MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

  Nine Months Ended
  September 30,
  2018   2017
  (in thousands)
Cash flows from operating activities:      
Net income (loss) $ 167,758     $ (6,952 )
Adjustments to reconcile net income (loss) to cash provided by operating activities:      
Equity based compensation 17,487      
Stock based compensation 4,331     2,648  
Depreciation, depletion, accretion and amortization 89,718     64,354  
Amortization of coil tubing strings 1,473     2,144  
Amortization of debt origination costs 299     299  
Bad debt expense (14,543 )   117  
(Gain) loss on disposal of property and equipment (185 )   126  
Gain on bargain purchase     (4,012 )
Impairment of long-lived assets 4,769      
Deferred income taxes 6,418     (8,151 )
Changes in assets and liabilities, net of acquisitions of businesses:      
Accounts receivable, net (132,553 )   (37,440 )
Receivables from related parties 8,453     (12,081 )
Inventories (2,665 )   (7,878 )
Prepaid expenses and other assets 1,814     2,644  
Accounts payable (5,179 )   30,445  
Payables to related parties 24     8  
Accrued expenses and other liabilities (405 )   14,393  
Income taxes payable 135,578     (28 )
Net cash provided by operating activities 282,592     40,636  
       
Cash flows from investing activities:      
Purchases of property and equipment (144,898 )   (102,273 )
Purchases of property and equipment from related parties (4,632 )    
Business acquisitions (14,456 )   (42,008 )
Proceeds from disposal of property and equipment 1,213     782  
Business combination cash acquired     2,671  
Net cash used in investing activities (162,773 )   (140,828 )
       
Cash flows from financing activities:      
Borrowings from lines of credit 77,000     118,850  
Repayments of lines of credit (176,900 )   (24,850 )
Repayments of equipment financing note (219 )    
Dividends paid (5,594 )    
Repayment of acquisition long-term debt     (8,851 )
Net cash (used in) provided by financing activities (105,713 )   85,149  
Effect of foreign exchange rate on cash (51 )   82  
Net change in cash and cash equivalents 14,055     (14,961 )
Cash and cash equivalents at beginning of period 5,637     29,239  
Cash and cash equivalents at end of period $ 19,692     $ 14,278  
       
Supplemental disclosure of cash flow information:      
Cash paid for interest $ 2,726     $ 2,300  
Cash paid for income taxes $ 32,269     $ 840  
Supplemental disclosure of non-cash transactions:      
Purchases of property and equipment included in accounts payable and accrued expenses $ 21,124     $ 13,648  
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 September 30, 2018 Pressure Pumping Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 91,595   $ 237,052   $ 18,742   $ 15,800   $ 20,854   $   $ 384,043  
Intersegment revenues 815     18,268   139   671   (19,893 )  
Total revenue 92,410   237,052   37,010   15,939   21,525   (19,893 ) 384,043  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 54,023   128,267   29,470   14,104   21,701     247,565  
Intersegment cost of revenues 18,897   37   546   158   245   (19,883 )  
Total cost of revenue 72,920   128,304   30,016   14,262   21,946   (19,883 ) 247,565  
Selling, general and administrative 4,335   (54,200 ) 1,618   1,362   1,561     (45,324 )
Depreciation, depletion, amortization and accretion 12,665   6,591   4,184   4,327   4,248     32,015  
Impairment of long-lived assets 143         4,439     4,582  
Operating income (loss) 2,347   156,357   1,192   (4,012 ) (10,669 ) (10 ) 145,205  
Interest expense, net 150   159   37   53   59     458  
Other expense 2   181   199   (5 ) 23     400  
Income (loss) before income taxes $ 2,195   $ 156,017   $ 956   $ (4,060 ) $ (10,751 ) $ (10 ) $ 144,347  


Three months ended September 30, 2017 Pressure Pumping Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 75,705   $ 13,486   $ 29,332   $ 13,644   $ 17,138   $   $ 149,305  
Intersegment revenues 950     3,401     287   (4,638 )  
Total revenue 76,655   13,486   32,733   13,644   17,425   (4,638 ) 149,305  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 52,961   10,117   25,178   11,598   14,679     114,533  
Intersegment cost of revenues 3,688     905   45     (4,638 )  
Total cost of revenue 56,649   10,117   26,083   11,643   14,679   (4,638 ) 114,533  
Selling, general and administrative 2,511   886   1,841   1,374   1,410     8,022  
Depreciation, depletion, amortization and accretion 13,039   1,039   3,034   5,036   5,076     27,224  
Operating income (loss) 4,456   1,444   1,775   (4,409 ) (3,740 )   (474 )
Interest expense, net 592   68   87   570   103     1,420  
Other expense 120   10   98   39   53     320  
Income (loss) before income taxes $ 3,744   $ 1,366   $ 1,590   $ (5,018 ) $ (3,896 ) $   $ (2,214 )


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  


Nine months ended September 30, 2018 Pressure Pumping Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 288,507   $ 922,761   $ 92,684   $ 48,154   $ 59,780   $   $ 1,411,886  
Intersegment revenues 6,447     48,186   225   4,807   (59,665 )  
Total revenue 294,954   922,761   140,870   48,379   64,587   (59,665 ) 1,411,886  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 182,228   532,532   97,917   43,859   56,958     913,494  
Intersegment cost of revenues 50,473   2,582   5,851   280   479   (59,665 )  
Total cost of revenue 232,701   535,114   103,768   44,139   57,437   (59,665 ) 913,494  
Selling, general and administrative 27,820   17,437   5,049   4,206   3,802     58,314  
Depreciation, depletion, amortization and accretion 40,480   13,092   10,381   14,031   11,734     89,718  
Impairment of long-lived assets 143       187   4,439     4,769  
Operating income (loss) (6,190 ) 357,118   21,672   (14,184 ) (12,825 )   345,591  
Interest expense, net 995   341   193   713   412     2,654  
Other expense 94   513   222   67   18     914  
Income (loss) before income taxes $ (7,279 ) $ 356,264   $ 21,257   $ (14,964 ) $ (13,255 ) $   $ 342,023  


Nine months ended September 30, 2017 Pressure Pumping Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 166,082   $ 15,195   $ 68,244   $ 36,867   $ 36,145   $   $ 322,533  
Intersegment revenues 1,409     4,848     372   (6,629 )  
Total revenue 167,491   15,195   73,092   36,867   36,517   (6,629 ) 322,533  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 117,494   11,829   57,760   34,584   28,704     250,371  
Intersegment cost of revenues 5,220     1,359   45   5   (6,629 )  
Total cost of revenue 122,714   11,829   59,119   34,629   28,709   (6,629 ) 250,371  
Selling, general and administrative 6,691   1,241   6,315   4,102   4,110     22,459  
Depreciation, depletion, amortization and accretion 31,823   1,379   6,603   14,978   9,571     64,354  
Operating income (loss) 6,263   746   1,055   (16,842 ) (5,873 )   (14,651 )
Interest expense, net 1,023   72   573   1,227   34     2,929  
Bargain purchase gain     (4,012 )       (4,012 )
Other expense 127   10   252   263   55     707  
Income (loss) before income taxes $ 5,113   $ 664   $ 4,242   $ (18,332 ) $ (5,962 ) $   $ (14,275 )


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   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net income (loss) $ 69,512     $ (801 )   $ 42,700     $ 167,758     $ (6,952 )
Depreciation, depletion, accretion and amortization expense 32,015     27,224     30,795     89,718     64,354  
Impairment of long-lived assets 4,582         187     4,769      
Acquisition related costs 99     264     77     130     2,455  
Public offering costs 260         731     991      
Equity based compensation         17,487     17,487      
Stock based compensation 1,415     1,028     1,660     4,331     2,648  
Bargain purchase gain                 (4,012 )
Interest expense, net 458     1,420     959     2,654     2,929  
Other expense, net 400     320     486     914     707  
Provision (benefit) for income taxes 74,835     (1,413 )   53,512     174,265     (7,323 )
Adjusted EBITDA $ 183,576     $ 28,042     $ 148,594     $ 463,017     $ 54,806  

Pressure Pumping Services

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net income $ 2,195     $ 3,744     $ (11,433 )   $ (7,279 )   $ 5,113  
Depreciation and amortization expense 12,665     13,039     13,829     40,480     31,823  
Impairment of long-lived assets 143             143      
Acquisition related costs 6     1     33     39     1  
Public offering costs 61         202     263      
Equity based compensation         17,487     17,487      
Stock based compensation 400     428     453     1,271     1,202  
Interest expense 150     592     341     995     1,023  
Other expense, net 2     120     80     94     127  
Adjusted EBITDA $ 15,622     $ 17,924     $ 20,992     $ 53,493     $ 39,289  

Infrastructure Services

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net income (loss) $ 78,405     $ 1,366     $ 52,359     $ 178,064     $ 664  
Depreciation and amortization expense 6,591     1,039     4,094     13,092     1,379  
Acquisition related costs     48     4     (4 )   90  
Public offering costs 123         360     483      
Stock based compensation 555     29     606     1,618     29  
Interest expense 159     68     106     341     72  
Other expense, net 181     10     330     513     10  
Provision for income taxes 77,612         52,632     178,200      
Adjusted EBITDA $ 163,626     $ 2,560     $ 110,491     $ 372,307     $ 2,244  

Natural Sand Proppant Services

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net income $ 956     $ 1,566     $ 10,929     $ 21,257     $ 4,209  
Depreciation, depletion, accretion and amortization expense 4,184     3,034     3,881     10,381     6,603  
Acquisition related costs     167         (38 )   2,121  
Public offering costs 49         95     144      
Stock based compensation 211     272     205     602     524  
Bargain purchase gain                 (4,012 )
Interest expense 37     87     76     193     573  
Other expense, net 199     98     36     222     252  
Provision for income taxes     24             33  
Adjusted EBITDA $ 5,636     $ 5,248     $ 15,222     $ 32,761     $ 10,303  

Contract Land and Directional Drilling Services

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net loss $ (4,060 )   $ (5,018 )   $ (5,454 )   $ (14,964 )   $ (18,332 )
Depreciation and amortization expense 4,327     5,036     5,349     14,031     14,978  
Impairment of long-lived assets         187     187      
Acquisition related costs     (16 )           9  
Public offering costs 10         34     44      
Stock based compensation 132     138     301     540     430  
Interest expense, net 53     570     265     713     1,227  
Other expense, net (5 )   39     32     67     263  
Adjusted EBITDA $ 457     $ 749     $ 714     $ 618     $ (1,425 )

Other Services(a)

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net (loss) income $ (7,974 )   $ (2,459 )   $ (3,453 )   $ (9,320 )   $ 1,394  
Depreciation and amortization expense 4,248     5,076     3,642     11,734     9,571  
Impairment of long-lived assets 4,439             4,439      
Acquisition related costs 93     65     40     133     236  
Public offering costs 17         40     57      
Stock based compensation 117     162     94     300     463  
Interest expense, net 59     103     171     412     34  
Other expense, net 23     53     8     18     55  
Provision (benefit) for income taxes (2,777 )   (1,437 )   880     (3,935 )   (7,356 )
Adjusted EBITDA $ (1,755 )   $ 1,563     $ 1,422     $ 3,838     $ 4,397  

(a)  Includes results for our coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, water transfer 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, such as equity based compensation, 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   Nine Months Ended
  September 30,   September 30,
  2018   2017   2018   2017
  (in thousands, except per share amounts)
Net income, as reported $ 69,512     $ (801 )   $ 167,758     $ (6,952 )
Equity based compensation         17,487      
Adjusted net income $ 69,512     $ (801 )   $ 185,245     $ (6,952 )
               
Basic earnings per share, as reported $ 1.55     $ (0.02 )   $ 3.75     $ (0.17 )
Equity based compensation         0.39      
Adjusted basic earnings per share $ 1.55     $ (0.02 )   $ 4.14     $ (0.17 )
               
Diluted earnings per share, as reported $ 1.54     $ (0.02 )   $ 3.73     $ (0.17 )
Equity based compensation         0.39      
Adjusted diluted earnings per share $ 1.54     $ (0.02 )   $ 4.12     $ (0.17 )

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Source: Mammoth Energy Services, Inc.