Press Release Details

Mammoth Energy Services, Inc. Announces Third Quarter 2020 Operational and Financial Results

October 29, 2020 at 4:01 PM EDT

OKLAHOMA CITY, Oct. 29, 2020 (GLOBE NEWSWIRE) -- Mammoth Energy Services, Inc. (“Mammoth” or the “Company”) (NASDAQ: TUSK) today reported financial and operational results for the third quarter ended September 30, 2020.

Financial Highlights for the Third Quarter 2020:

Total revenue was $70.5 million for the three months ended September 30, 2020, up 17% from $60.1 million for the three months ended June 30, 2020 and down 38% from $113.4 million for the three months ended September 30, 2019.

Net income for the three months ended September 30, 2020 was $3.4 million, or $0.07 per fully diluted share, as compared to a net loss of $15.2 million, or $0.33 per fully diluted share, for the three months ended June 30, 2020 and a net loss of $35.7 million, or $0.79 per fully diluted share, for the three months ended September 30, 2019.

Adjusted EBITDA (as defined and reconciled below) was $22.1 million for the three months ended September 30, 2020, as compared to $6.9 million for the three months ended June 30, 2020 and ($3.8) million for the three months ended September 30, 2019.

Arty Straehla, Mammoth's Chief Executive Officer, stated, “The third quarter financial results showed the earnings power of our infrastructure segment with gross margin increasing to 34% and Adjusted EBITDA, excluding interest on trade accounts receivable, in this segment growing more than 350% quarter-over-quarter. The initiatives taken by our infrastructure management team have laid a solid foundation for growth in the years to come. While the oilfield portion of our service offerings continue to experience significant challenges, we continue to maintain our oilfield equipment and plan to be ready to ramp up our oilfield service offerings when oilfield demand, pricing and margins strengthen.”

Infrastructure Services

Mammoth's infrastructure services division contributed revenue of $44.0 million, or approximately 62% of Mammoth's total revenue, for the three months ended September 30, 2020, an increase of 44% from $30.6 million for the three months ended June 30, 2020 and an increase of 18% from $37.3 million for the three months ended September 30, 2019 reflecting a strong market.

As of September 30, 2020, Mammoth had approximately 120 crews operating in the continental United States.

Pressure Pumping Services

Mammoth's pressure pumping services division contributed revenue (inclusive of inter-segment revenue) of $15.8 million on 449 stages for the three months ended September 30, 2020, a decrease of 5% from $16.6 million on 658 stages for the three months ended June 30, 2020 and a decrease of 65% from $44.6 million on 783 stages for the three months ended September 30, 2019. On average, 0.9 of the Company's fleets were active for the three months ended September 30, 2020, compared to average utilization of 1.9 fleets during the three months ended June 30, 2020 and an average utilization of 1.2 fleets during the three months ended September 30, 2019.

Natural Sand Proppant Services

Mammoth's natural sand proppant services division contributed revenue (inclusive of inter-segment revenue) of $6.0 million for the three months ended September 30, 2020, a decrease of 3% from $6.2 million for the three months ended June 30, 2020 and a decrease of 67% from $18.4 million for the three months ended September 30, 2019. The Company sold approximately 68,000 tons of sand during the three months ended September 30, 2020, a decrease of 85% from approximately 456,000 tons sold during the three months ended June 30, 2020 and a decrease of 17% from approximately 82,000 tons sold during the three months ended September 30, 2019. The Company's average sales price for the sand sold during the three months ended September 30, 2020 was $15.59 per ton, a slight increase from the $15.18 per ton average sales price during the three months ended June 30, 2020 and a decrease from the $26.84 per ton average sales price during the three months ended September 30, 2019.

Drilling Services

Mammoth's drilling services division contributed revenue (inclusive of inter-segment revenue) of $1.2 million for the three months ended September 30, 2020, a decrease of 8% from $1.3 million for the three months ended June 30, 2020 and a decrease of 80% from $6.1 million for the three months ended September 30, 2019. The decline is primarily due to reduced utilization. As a result of market conditions, the Company temporarily shut down its contract land drilling operations beginning in December 2019 and its rig hauling operations beginning in April 2020.

Other Services

Mammoth's other services, including coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, oilfield equipment manufacturing and infrastructure engineering and design services, contributed revenue (inclusive of inter-segment revenue) of $4.2 million for the three months ended September 30, 2020, a decrease of 35% from $6.5 million for the three months ended June 30, 2020 and a decrease of 70% from $14.0 million for the three months ended September 30, 2019.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $12.2 million for the three months ended September 30, 2020, as compared to $13.7 million for the three months ended June 30, 2020 and $14.4 million for the three months ended September 30, 2019.

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

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2020   2019   2020   2020   2019
Cash expenses:                  
Compensation and benefits $ 3,449      $ 4,777      $ 3,720      $ 11,138      $ 16,161   
Professional services 5,651      6,104      6,147      15,335      12,827   
Other(a) 2,163      1,665      2,100      6,572      8,290   
Total cash SG&A expense 11,263      12,546      11,967      33,045      37,278   
Non-cash expenses:                  
Bad debt provision 626      964      1,624      2,306      1,230   
Stock based compensation 291      913      135      1,326      2,705   
Total non-cash SG&A expense 917      1,877      1,759      3,632      3,935   
  Total SG&A expense $ 12,180      $ 14,423      $ 13,726      $ 36,677      $ 41,213   

a.     Includes travel-related costs, information technology expenses, rent, utilities and other general and administrative-related costs.

SG&A expenses, as a percentage of total revenue, were 17% for the three months ended September 30, 2020, as compared to 23% for the three months ended June 30, 2020 and 13% for the three months ended September 30, 2019.

Liquidity

As of September 30, 2020, Mammoth had cash on hand of $13.9 million and outstanding borrowings under its revolving credit facility of $89.8 million. As of September 30, 2020, the Company had $18.0 million of available borrowing capacity under its revolving credit facility. This available borrowing capacity reflects (i) a minimum excess availability covenant of 10% of the maximum revolving advance amount and (ii) $9.0 million of outstanding letters of credit. As of September 30, 2020, Mammoth had total liquidity of $31.9 million.

As of October 28, 2020, Mammoth had cash on hand of $12.4 million and outstanding borrowings under its revolving credit facility of $88.4 million. As of October 28, 2020, the Company had $28.1 million of available borrowing capacity under its revolving credit facility, after giving effect to $13.3 million of outstanding letters of credit.

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,
  2020   2019   2020   2020   2019
Infrastructure services(a) $ 178      $ 122      $ 43      $ 298      $ 5,553   
Pressure pumping services(b) 698      2,963      2,450      3,752      14,305   
Natural sand proppant services(c) 194      728      354      1,069      2,703   
Drilling services(d) 131      146      72      211      3,073   
Other(e) 324      711          619      9,256   
Total capital expenditures $ 1,525      $ 4,670      $ 2,924      $ 5,949      $ 34,890   

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

Explanatory Note Regarding Financial Information

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

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

Conference Call Information

Mammoth will host a conference call on Thursday, October 29, 2020 at 4:00 p.m. CDT (5:00 p.m. EDT) to discuss its third quarter 2020 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 2595308. The conference call will also be webcast live on www.mammothenergy.com in the “Investors” section.

About Mammoth Energy Services, Inc.

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

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

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

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

Forward-Looking Statements and Cautionary Statements

This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) contains certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts that address activities, events or developments that Mammoth expects, believes or anticipates 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 the Company's 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 the Company's existing operations, experience and perception of historical trends, current conditions, anticipated future developments and their effect on Mammoth, 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, the Company's forward-looking statements are subject to significant risks and uncertainties, including those described in its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings it makes with the SEC, including those relating to the Company's acquisitions and contracts, many of which are beyond the Company's control, which may cause actual results to differ materially from historical experience and present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the severity and duration of the COVID-19 pandemic, related global and national health concerns and economic repercussions and the resulting negative impact on demand for our services; the current significant surplus in the supply of oil and the ability of the OPEC+ countries to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the oil and gas industry currently resulting from the impact of the foregoing factors, which is negatively impacting our business; operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; the failure to receive or delays in receiving governmental authorizations, approvals and/or payments; the outcome of ongoing government investigations and other legal proceedings, including those relating to the contracts awarded to the Company's subsidiary Cobra Acquisitions LLC by the Puerto Rico Electric Power Authority and contracts for our pressure pumping services and natural sand proppant services; the Company's inability to replace the prior levels of work in its business segments, including its infrastructure and pressure pumping segments; risks relating to economic conditions; the loss of or interruption in operations of one or more key suppliers or customers; the effects of government regulation, permitting and other legal requirements; operating risks; the adequacy of capital resources and liquidity; weather; natural disasters; litigation; competition in the oil and natural gas and infrastructure industries; and costs and availability of resources.

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

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS

ASSETS   September 30,   December 31,
    2020   2019
CURRENT ASSETS   (in thousands)
Cash and cash equivalents   $ 13,884        $ 5,872     
Accounts receivable, net   373,160        363,053     
Receivables from related parties   38,676        7,523     
Inventories   13,297        17,483     
Prepaid expenses   3,363        12,354     
Other current assets   4,413        695     
Total current assets   446,793        406,980     
         
Property, plant and equipment, net   270,624        352,772     
Sand reserves   66,093        68,351     
Operating lease right-of-use assets   25,927        43,446     
Intangible assets, net - customer relationships   452        583     
Intangible assets, net - trade names   4,576        5,205     
Goodwill   12,608        67,581     
Other non-current assets   4,026        7,467     
Total assets   $ 831,099        $ 952,385     
LIABILITIES AND EQUITY        
CURRENT LIABILITIES        
Accounts payable   $ 33,428        $ 39,220     
Payables to related parties   18        526     
Accrued expenses and other current liabilities   35,482        40,754     
Current operating lease liability   10,657        16,432     
Income taxes payable   31,789        33,465     
Total current liabilities   111,374        130,397     
         
Long-term debt   89,800        80,000     
Deferred income tax liabilities   29,423        36,873     
Long-term operating lease liability   15,291        27,102     
Asset retirement obligation   4,683        4,241     
Other liabilities   6,357        5,031     
Total liabilities   256,928        283,644     
         
COMMITMENTS AND CONTINGENCIES        
         
EQUITY        
Equity:        
Common stock, $0.01 par value, 200,000,000 shares authorized, 45,765,533 and 45,108,545 issued and outstanding at September 30, 2020 and December 31, 2019   458        451     
Additional paid in capital   536,685        535,094     
Retained earnings   40,756        136,502     
Accumulated other comprehensive loss   (3,728 )     (3,306 )  
Total equity   574,171        668,741     
Total liabilities and equity   $ 831,099        $ 952,385     
                     

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2020   2019   2020   2020   2019
   
  (in thousands, except per share amounts)
REVENUE  
Services revenue $ 55,279        $ 85,783        $ 44,878        $ 169,002        $ 394,645     
Services revenue - related parties 8,565        15,000        8,650        35,228        95,910     
Product revenue 4,815        9,710        4,706        18,171        40,381     
Product revenue - related parties 1,875        2,924        1,875        5,625        26,439     
Total revenue 70,534        113,417        60,109        228,026        557,375     
                   
COST AND EXPENSES                  
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $20,424, $25,749, $21,750, $65,728 and $77,028, respectively, for the three months ended September 30, 2020, September 30, 2019 and June 30, 2020 and nine months ended September 30, 2020 and 2019) 41,445        91,813        42,255        154,397        382,607     
Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0, $0, $0 and $0, respectively, for the three months ended September 30, 2020, September 30, 2019 and June 30, 2020 and nine months ended September 30, 2020 and 2019) 131        774        97        329        4,138     
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $2,689, $4,019, $2,346, $7,344 and $11,414, respectively, for the three months ended September 30, 2020, September 30, 2019 and June 30, 2020 and nine months ended September 30, 2020 and 2019) 4,353        18,547        6,401        21,862        81,475     
Selling, general and administrative 11,979        14,029        13,528        36,063        39,726     
Selling, general and administrative - related parties 201        394        198        614        1,487     
Depreciation, depletion, amortization and accretion 23,132        29,791        24,116        73,130        88,512     
Impairment of goodwill —        3,194        —        54,973        3,194     
Impairment of other long-lived assets —        3,348        —        12,897        3,348     
Total cost and expenses 81,241        161,890        86,595        354,265        604,487     
Operating loss (10,707 )     (48,473 )     (26,486 )     (126,239 )     (47,112 )  
                   
OTHER INCOME (EXPENSE)                  
Interest expense, net (1,098 )     (1,398 )     (1,471 )     (4,207 )     (3,472 )  
Other, net 7,943        6,368        8,137        23,489        34,944     
Other, net - related parties 1,099        —        1,133        2,232        —     
Total other income 7,944        4,970        7,799        21,514        31,472     
Loss before income taxes (2,763 )     (43,503 )     (18,687 )     (104,725 )     (15,640 )  
(Benefit) provision for income taxes (6,193 )     (7,794 )     (3,482 )     (8,979 )     2,625     
Net income (loss) $ 3,430        $ (35,709 )     $ (15,205 )     $ (95,746 )     $ (18,265 )  
                   
OTHER COMPREHENSIVE INCOME (LOSS)                  
Foreign currency translation adjustment, net of tax of ($95), ($49), ($150), $116 and $134, respectively, for the three months ended September 30, 2020, September 30, 2019 and June 30, 2020 and nine months ended September 30, 2020 and 2019 324        (213 )     668        (422 )     493     
Comprehensive income (loss) $ 3,754        $ (35,922 )     $ (14,537 )     $ (96,168 )     $ (17,772 )  
                   
Net income (loss) per share (basic) $ 0.07        $ (0.79 )     $ (0.33 )     $ (2.10 )     $ (0.41 )  
Net income (loss) per share (diluted) $ 0.07        $ (0.79 )     $ (0.33 )     $ (2.10 )     $ (0.41 )  
Weighted average number of shares outstanding (basic) 45,764        45,020        45,727        45,603        44,984     
Weighted average number of shares outstanding (diluted) 46,571        45,020        45,727        45,603        44,984     
Dividends declared per share $ —        $ —        $ —        $ —        $ 0.25     
                                                 

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS 

  Nine Months Ended
  September 30,
  2020   2019
   
  (in thousands)
Cash flows from operating activities:      
Net loss $ (95,746 )     $ (18,265 )  
Adjustments to reconcile net loss to cash provided by (used in) operating activities:      
Stock based compensation 1,598        3,367     
Depreciation, depletion, accretion and amortization 73,130        88,512     
Amortization of coil tubing strings 359        1,236     
Amortization of debt origination costs 703        245     
Bad debt expense 2,306        1,230     
(Gain) loss on disposal of property and equipment (927 )     245     
Impairment of goodwill 54,973        3,194     
Impairment of other long-lived assets 12,897        3,348     
Inventory obsolescence —        1,349     
Deferred income taxes (7,334 )     (32,183 )  
Other 581        (539 )  
Changes in assets and liabilities:      
Accounts receivable, net (11,707 )     (33,042 )  
Receivables from related parties (31,152 )     2,622     
Inventories 3,827        1,415     
Prepaid expenses and other assets 8,803        3,713     
Accounts payable (5,211 )     (27,187 )  
Payables to related parties (508 )     117     
Accrued expenses and other liabilities (3,166 )     (19,121 )  
Income taxes payable (1,644 )     (72,501 )  
Net cash provided by (used in) operating activities 1,782        (92,245 )  
       
Cash flows from investing activities:      
Purchases of property and equipment (5,873 )     (34,637 )  
Purchases of property and equipment from related parties (76 )     (253 )  
Contributions to equity investee —        (680 )  
Proceeds from disposal of property and equipment 4,859        2,491     
Net cash used in investing activities (1,090 )     (33,079 )  
       
Cash flows from financing activities:      
Borrowings from lines of credit 30,800        138,000     
Repayments of lines of credit (21,000 )     (58,000 )  
Dividends paid —        (11,219 )  
Principal payments on financing leases and equipment financing notes (1,423 )     (1,534 )  
Debt issuance costs (1,000 )     —     
Net cash provided by financing activities 7,377        67,247     
Effect of foreign exchange rate on cash (57 )     50     
Net change in cash and cash equivalents 8,012        (58,027 )  
Cash and cash equivalents at beginning of period 5,872        67,625     
Cash and cash equivalents at end of period $ 13,884        $ 9,598     
       
Supplemental disclosure of cash flow information:      
Cash paid for interest $ 3,637        $ 3,280     
Cash paid for income taxes $ 13        $ 116,448     
Supplemental disclosure of non-cash transactions:      
Purchases of property and equipment included in accounts payable $ 2,032        $ 1,203     
                   

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

Three months ended September 30, 2020 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 44,009      $ 15,738      $ 6,031      $ 1,193      $ 3,563      $ —      $ 70,534     
Intersegment revenues —      53      —      26      672      (751 )   —     
Total revenue 44,009      15,791      6,031      1,219      4,235      (751 )   70,534     
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 29,074      6,881      3,784      1,964      4,226      —      45,929     
Intersegment cost of revenues 162      449      26      —      114      (751 )   —     
Total cost of revenue 29,236      7,330      3,810      1,964      4,340      (751 )   45,929     
Selling, general and administrative 7,377      1,744      1,033      382      1,644      —      12,180     
Depreciation, depletion, amortization and accretion 7,589      7,196      2,693      2,323      3,331      —      23,132     
Operating loss (193 )   (479 )   (1,505 )   (3,450 )   (5,080 )   —      (10,707 )  
Interest expense, net 628      269      54      60      87      —      1,098     
Other (income) expense, net (9,204 )   (1,156 )   1,792      20      (494 )   —      (9,042 )  
Income (loss) before income taxes $ 8,383      $ 408      $ (3,351 )   $ (3,530 )   $ (4,673 )   $ —      $ (2,763 )  


Three months ended September 30, 2019 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 37,289      $ 43,887      $ 12,634      $ 6,065      $ 13,542      $ —      $ 113,417     
Intersegment revenues —      725      5,727      58      417      (6,927 )   —     
Total revenue 37,289      44,612      18,361      6,123      13,959      (6,927 )   113,417     
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 36,940      33,059      18,547      7,203      15,385      —      111,134     
Intersegment cost of revenues —      6,054      326      185      362      (6,927 )   —     
Total cost of revenue 36,940      39,113      18,873      7,388      15,747      (6,927 )   111,134     
Selling, general and administrative 7,322      3,669      1,314      910      1,208      —      14,423     
Depreciation, depletion, amortization and accretion 7,953      10,176      4,022      3,096      4,544      —      29,791     
impairment of goodwill —      —      —      —      3,194      —      3,194     
Impairment of other long-lived assets —      —      —      —      3,348      —      3,348     
Operating loss (14,926 )   (8,346 )   (5,848 )   (5,271 )   (14,082 )   —      (48,473 )  
Interest expense, net 599      316      43      220      220      —      1,398     
Other (income) expense, net (6,239 )   (3 )   99      (100 )   (125 )   —      (6,368 )  
Loss before income taxes $ (9,286 )   $ (8,659 )   $ (5,990 )   $ (5,391 )   $ (14,177 )   $ —      $ (43,503 )  


Three months ended June 30, 2020 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 30,579      $ 16,125      $ 6,237      $ 1,250      $ 5,918      $ —      $ 60,109     
Intersegment revenues —      446      —      25      580      (1,051 )   —     
Total revenue 30,579      16,571      6,237      1,275      6,498      (1,051 )   60,109     
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 25,368      8,744      6,025      2,027      6,589      —      48,753     
Intersegment cost of revenues 27      333      28      21      642      (1,051 )   —     
Total cost of revenue 25,395      9,077      6,053      2,048      7,231      (1,051 )   48,753     
Selling, general and administrative 8,037      1,477      1,357      1,331      1,524      —      13,726     
Depreciation, depletion, amortization and accretion 7,816      7,685      2,348      2,700      3,567      —      24,116     
Operating loss (10,669 )   (1,668 )   (3,521 )   (4,804 )   (5,824 )   —      (26,486 )  
Interest expense, net 720      346      53      143      209      —      1,471     
Other (income) expense, net (7,809 )   (1,179 )   (2 )   (298 )   18      —      (9,270 )  
Loss before income taxes $ (3,580 )   $ (835 )   $ (3,572 )   $ (4,649 )   $ (6,051 )   $ —      $ (18,687 )  


Nine months ended September 30, 2020 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 100,294      $ 74,549      $ 22,421      $ 7,166      $ 23,596      $ —      $ 228,026     
Intersegment revenues —      1,435      95      107      2,026      (3,663 )   —     
Total revenue 100,294      75,984      22,516      7,273      25,622      (3,663 )   228,026     
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 81,389      41,833      20,465      9,627      23,274      —      176,588     
Intersegment cost of revenues 197      1,410      355      151      1,550      (3,663 )   —     
Total cost of revenue 81,586      43,243      20,820      9,778      24,824      (3,663 )   176,588     
Selling, general and administrative 19,711      5,443      3,641      2,777      5,105      —      36,677     
Depreciation, depletion, amortization and accretion 23,339      23,373      7,353      7,900      11,165      —      73,130     
Impairment of goodwill —      53,406      —      —      1,567      —      54,973     
Impairment of other long-lived assets —      4,203      —      326      8,368      —      12,897     
Operating loss (24,342 )   (53,684 )   (9,298 )   (13,508 )   (25,407 )   —      (126,239 )  
Interest expense, net 2,105      907      167      473      555      —      4,207     
Other (income) expense, net (24,289 )   (2,444 )   1,753      (251 )   (490 )   —      (25,721 )  
Loss before income taxes $ (2,158 )   $ (52,147 )   $ (11,218 )   $ (13,730 )   $ (25,472 )   $ —      $ (104,725 )  


Nine months ended September 30, 2019 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 187,831      $ 217,456      $ 66,820      $ 27,091      $ 58,177      $ —      $ 557,375     
Intersegment revenues —      3,936      29,795      484      1,870      (36,085 )   —     
Total revenue 187,831      221,392      96,615      27,575      60,047      (36,085 )   557,375     
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 140,768      157,106      81,475      29,030      59,841      —      468,220     
Intersegment cost of revenues     31,388      2,513      686      1,557      (36,145 )   —     
Total cost of revenue 140,769      188,494      83,988      29,716      61,398      (36,145 )   468,220     
Selling, general and administrative 19,874      9,544      4,214      3,117      4,464      —      41,213     
Depreciation, depletion, amortization and accretion 23,490      30,244      11,423      9,866      13,489      —      88,512     
Impairment of goodwill —      —      —      —      3,194      —      3,194     
Impairment of other long-lived assets —      —      —      —      3,348      —      3,348     
Operating income (loss) 3,698      (6,890 )   (3,010 )   (15,124 )   (25,846 )   60      (47,112 )  
Interest expense, net 1,024      965      145      679      659      —      3,472     
Other (income) expense, net (35,108 )       67      (122 )   214      —      (34,944 )  
Income (loss) before income taxes $ 37,782      $ (7,860 )   $ (3,222 )   $ (15,681 )   $ (26,719 )   $ 60      $ (15,640 )  
                                                         

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 goodwill, impairment of other long-lived assets, inventory obsolescence charges, acquisition related costs, stock based compensation, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets and interest on trade accounts receivable) and provision (benefit) for income taxes, further adjusted to add back interest on trade accounts receivable. The Company excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within the energy service industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of Mammoth's operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets. 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): 2020   2019   2020   2020   2019
Net income (loss) $ 3,430        $ (35,709 )     $ (15,205 )     $ (95,746 )     $ (18,265 )  
Depreciation, depletion, amortization and accretion expense 23,132        29,791        24,116        73,130        88,512     
Impairment of goodwill —        3,194        —        54,973        3,194     
Impairment of other long-lived assets —        3,348        —        12,897        3,348     
Inventory obsolescence charges —        1,349        —        —        1,349     
Acquisition related costs —        —        —        —        45     
Stock based compensation 353        1,134        196        1,598        3,367     
Interest expense, net 1,098        1,398        1,471        4,207        3,472     
Other income, net (9,042 )     (6,368 )     (9,270 )     (25,721 )     (34,944 )  
(Benefit) provision for income taxes (6,193 )     (7,794 )     (3,482 )     (8,979 )     2,625     
Interest on trade accounts receivable 9,285        5,896        9,071        26,052        34,865     
Adjusted EBITDA $ 22,063        $ (3,761 )     $ 6,897        $ 42,411        $ 87,568     

Infrastructure Services

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2020   2019   2020   2020   2019
Net income (loss) $ 6,738        $ (10,763 )     $ (4,529 )     $ (7,242 )     $ 31,113     
Depreciation and amortization expense 7,589        7,953        7,816        23,339        23,490     
Acquisition related costs —        —        —        —        12     
Stock based compensation 141        217        45        437        688     
Interest expense 628        599        720        2,105        1,024     
Other income, net (9,204 )     (6,239 )     (7,809 )     (24,289 )     (35,108 )  
Provision for income taxes 1,645        1,477        949        5,085        6,670     
Interest on trade accounts receivable 8,170        5,896        7,929        23,796        34,865     
Adjusted EBITDA $ 15,707        $ (860 )     $ 5,121        $ 23,231        $ 62,754     

Pressure Pumping Services

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2020   2019   2020   2020   2019
Net income (loss) $ 408        $ (8,659 )     $ (835 )     $ (52,149 )     $ (7,860 )  
Depreciation and amortization expense 7,196        10,176        7,685        23,373        30,244     
Impairment of goodwill —        —        —        53,406        —     
Impairment of other long-lived assets —        —        —        4,203        —     
Acquisition related costs —        —        —        —        18     
Stock based compensation 77        503        53        465        1,402     
Interest expense 269        316        346        907        965     
Other (income) expense, net (1,156 )     (3 )     (1,179 )     (2,444 )        
Interest on trade accounts receivable 1,073        —        1,133        2,205        —     
Adjusted EBITDA $ 7,867        $ 2,333        $ 7,203        $ 29,966        $ 24,774     

Natural Sand Proppant Services

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net loss: 2020   2019   2020   2020   2019
Net loss $ (3,351 )     $ (5,990 )     $ (3,572 )     $ (11,218 )     $ (3,222 )  
Depreciation, depletion, amortization and accretion expense 2,693        4,022        2,348        7,353        11,423     
Acquisition related costs —        —        —        —           
Stock based compensation 76        216        45        347        656     
Interest expense 54        43        53        167        145     
Other expense (income), net 1,792        99        (2 )     1,753        67     
Interest on trade accounts receivable 26        —        —        26        —     
Adjusted EBITDA $ 1,290        $ (1,610 )     $ (1,128 )     $ (1,572 )     $ 9,077     

Drilling Services

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net loss: 2020   2019   2020   2020   2019
Net loss $ (3,530 )     $ (5,391 )     $ (4,649 )     $ (13,730 )     $ (15,681 )  
Depreciation expense 2,323        3,096        2,700        7,900        9,866     
Impairment of other long-lived assets —        —        —        326        —     
Acquisition related costs —        —        —        —           
Stock based compensation 38        90        34        166        279     
Interest expense 60        220        143        473        679     
Other expense (income), net 20        (100 )     (298 )     (251 )     (122 )  
Adjusted EBITDA $ (1,089 )     $ (2,085 )     $ (2,070 )     $ (5,116 )     $ (4,977 )  

Other Services(a)

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2020   2019   2020   2020   2019
Net income (loss) $ 3,165        $ (4,905 )     $ (1,620 )     $ (11,407 )     $ (22,674 )  
Depreciation, amortization and accretion expense 3,331        4,544        3,567        11,165        13,489     
Impairment of goodwill —        3,194        —        1,567        3,194     
Impairment of other long-lived assets —        3,348        —        8,368        3,348     
Inventory obsolescence charges —        1,349        —        —        1,349     
Acquisition related costs —        —        —        —           
Stock based compensation 21        107        19        183        341     
Interest expense, net 87        220        209        555        659     
Other (income) expense, net (494 )     (125 )     18        (490 )     214     
Benefit for income taxes (7,838 )     (9,272 )     (4,431 )     (14,064 )     (4,045 )  
Interest on trade accounts receivable 16        —              25        —     
Adjusted EBITDA $ (1,712 )     $ (1,540 )     $ (2,229 )     $ (4,098 )     $ (4,120 )  
  1. Includes results for Mammoth's coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation and remote accommodations, oilfield equipment manufacturing and infrastructure engineering and design services and corporate related activities. The Company's corporate related activities do not generate revenue.

Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share

Adjusted net income (loss) and adjusted basic and diluted earnings (loss) 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, such as impairment of goodwill and impairment of other long-lived assets, that may not be indicative of the Company's ongoing operating results. Adjusted net income (loss) and adjusted earnings (loss) per share should not be considered in isolation or as a substitute for net income (loss) and earnings (loss) 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 (loss) and adjusted earnings (loss) per share to the GAAP financial measures of net income (loss) and earnings (loss) per share for the periods specified.

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,
  2020   2019   2020   2020   2019
   
  (in thousands, except per share amounts)
Net income (loss), as reported $ 3,430        $ (35,709 )     $ (15,205 )     $ (95,746 )     $ (18,265 )  
Impairment of goodwill —        3,194        —        54,973        3,194     
Impairment of other long-lived assets —        3,348        —        12,897        3,348     
Adjusted net income (loss) $ 3,430        $ (29,167 )     $ (15,205 )     $ (27,876 )     $ (11,723 )  
                   
Basic earnings (loss) per share, as reported $ 0.07        $ (0.79 )     $ (0.33 )     $ (2.10 )     $ (0.41 )  
Impairment of goodwill —        0.07        —        1.21        0.07     
Impairment of other long-lived assets —        0.07        —        0.28        0.07     
Adjusted basic earnings (loss) per share $ 0.07        $ (0.65 )     $ (0.33 )     $ (0.61 )     $ (0.27 )  
                   
Diluted earnings (loss) per share, as reported $ 0.07        $ (0.79 )     $ (0.33 )     $ (2.10 )     $ (0.41 )  
Impairment of goodwill —        0.07        —        1.21        0.07     
Impairment of other long-lived assets —        0.07        —        0.28        0.07     
Adjusted diluted earnings (loss) per share $ 0.07        $ (0.65 )     $ (0.33 )     $ (0.61 )     $ (0.27 )  

 


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Source: Mammoth Energy Services, Inc.