Document




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 1, 2019
 
Mammoth Energy Services, Inc.

(Exact name of registrant as specified in its charter)

001-37917
(Commission File No.)
 
 
 
Delaware
 
32-0498321
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
14201 Caliber Drive, Suite 300
Oklahoma City, Oklahoma
 
73134
(Address of principal executive offices)
 
(Zip Code)
(405) 608-6007
(Registrant’s telephone number, including area code)
______________________________

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§232.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(s) of the Exchange Act.  ¨

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act(17 CFR 240.13e-4(c))



















Item 2.02 Results of Operations and Financial Condition

On May 1, 2019, Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for quarter ended March 31, 2019. A copy of that press release is furnished as Exhibit 99.1 to this report.

The information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified as being incorporated by reference in the registration statement.

Item 7.01 Regulation FD Disclosure
On May 1, 2019, the Company posted an investor presentation to the “investors” section of its website (www.mammothenergy.com), where the Company routinely posts announcements, updates, events, investor information and presentations and recent news releases. Information on the Company's website does not constitute part of this Current Report on Form 8-K.

The information in this Item 7.01 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified as being incorporated by reference in the registration statement.

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits.

99.1     Press release dated May 1, 2019, entitled "Mammoth Energy Services, Inc. Announces First Quarter 2019 Operational and Financial Results."






Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
 
 
MAMMOTH ENERGY SERVICES, INC.
Date:
May 1, 2019
 
By:
 
/s/ Mark Layton
 
 
 
 
 
Mark Layton
 
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 



Exhibit



http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12872511&doc=3


Mammoth Energy Services, Inc. Announces
First Quarter 2019 Operational and Financial Results


First Quarter net income of $28 million, or $0.63 per diluted share
First Quarter Adjusted EBITDA of $83 million
Trailing twelve months after tax return on invested capital (ROIC) of 29%
Declared $0.125 dividend for the first quarter of 2019

OKLAHOMA CITY, OKLAHOMA, May 1, 2019 - Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the quarter ended March 31, 2019.

Financial Highlights for the First Quarter of 2019:

Total revenue was $262.1 million for the three months ended March 31, 2019, down 6% sequentially from $278.2 million for the three months ended December 31, 2018 and down 47% from $494.2 million for the three months ended March 31, 2018.

Net income for the three months ended March 31, 2019 was $28.3 million, or $0.63 per fully diluted share, a 58% decrease from $68.2 million, or $1.51 per fully diluted share, for the three months ended December 31, 2018 and a 49% decrease from $55.5 million, or $1.24 per fully diluted share, for the three months ended March 31, 2018.

Adjusted EBITDA (as defined and reconciled below) was $82.8 million for the three months ended March 31, 2019, a slight decrease from $84.3 million for the three months ended December 31, 2018 and a 37% decline from $130.8 million for the three months ended March 31, 2018.

Arty Straehla, Mammoth's Chief Executive Officer, stated, "The first quarter of 2019 saw improved utilization of our oilfield completions focused businesses as E&P budgets were reset and oil prices experienced a steady increase throughout the quarter. While pressure pumping pricing remains challenged, conversations with customers suggest the possibility for tighter industry conditions for the back half of the year. Demand for Northern White sand is strengthening, with our average pricing up approximately 90% from the lows experienced in fourth quarter of 2018. The movement of our infrastructure equipment from Puerto Rico back to the continental U.S. is progressing and beginning to displace equipment currently being rented, allowing us to deploy additional crews for our Continental U.S. customers."

Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $108.7 million for the three months ended March 31, 2019, a 32% decrease from $159.6 million for the three months ended December 31, 2018 and a 67% decrease from $325.5 million for the three months ended March 31, 2018. During the first quarter of 2019, our crew staffing levels in Puerto Rico reached a high of approximately 500 in January. As of March 31, 2019, a small contingent of non-billable personnel remained on the island to facilitate the demobilization of our remaining equipment.  

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $92.1 million for the three months ended March 31, 2019, a 27% increase from $72.8 million for the three months ended December 31, 2018 and a 9% decrease from $101.1 million for the three months ended March 31, 2018.





Mammoth's pressure pumping division completed a total of 1,889 stages for the three months ended March 31, 2019, a 62% increase from 1,164 stages for the three months ended December 31, 2018 and a 13% increase from 1,672 stages for the three months ended March 31, 2018. An average of 4.4 of our 6 fleets remained active throughout the first quarter of 2019.
  
Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $37.9 million for the three months ended March 31, 2019, a 38% increase from $27.4 million for the three months ended December 31, 2018 and a 26% decrease from $51.0 million for the three months ended March 31, 2018.

The Company sold 665,806 tons of sand during the three months ended March 31, 2019, a 17% increase from the 569,195 tons sold during the three months ended December 31, 2018 and a 9% decrease from the 735,584 tons sold during the three months ended March 31, 2018. The Company's average production costs were approximately $12 per ton during the first quarter of 2019.

Other Services

Mammoth's other services, including contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations, contributed revenues (inclusive of inter-segment revenues) of $38.5 million for the three months ended March 31, 2019, a slight decrease from $38.8 million for the three months ended December 31, 2018 and a slight increase from $38.1 million for the three months ended March 31, 2018. The Company’s rental division drove a majority of the increase from the prior periods with the average amount of equipment on rent increasing from 357 for the three months ended March 31, 2018 to 500 for the three months ended December 31, 2018.  An average of 621 pieces of equipment were rented during the three months ended March 31, 2019.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were $17.3 million for the three months ended March 31, 2019, compared to $14.8 million for the three months ended December 31, 2018 and $38.5 million for the three months ended March 31, 2018.
Following is a breakout of SG&A expense (in thousands):
 
Three Months Ended
 
March 31,
 
December 31,
 
2019
 
2018
 
2018
Cash expenses:
 
 
 
 
 
Compensation and benefits
$
9,230

 
$
7,699

 
$
9,409

Professional services
3,789

 
2,587

 
3,018

Other(a)
3,244

 
1,607

 
1,475

Total cash SG&A expense
16,263

 
11,893

 
13,902

Non-cash expenses:
 
 
 
 
 
Bad debt provision(b)
4

 
25,527

 
(34
)
Stock based compensation
1,069

 
1,091

 
915

Total non-cash SG&A expense
1,073

 
26,618

 
881

Total SG&A expense
$
17,336

 
$
38,511

 
$
14,783

a.
Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.
$25.4 million of the bad debt expense recognized during the three months ended March 31, 2018 was subsequently reversed during the third quarter of 2018.

SG&A expenses, as a percentage of total revenue, were 7% for the three months ended March 31, 2019 compared to 5% for the three months ended December 31, 2018 and 8% for the three months ended March 31, 2018.


2



Liquidity

As of March 31, 2019, Mammoth had cash on hand totaling $21.3 million and outstanding borrowings under its revolving credit facility of $82.0 million. As of March 31, 2019, the Company had $93.5 million of available borrowing capacity under its revolving credit facility, after giving effect to $8.7 million of outstanding letters of credit, resulting in total liquidity of approximately $114.8 million. As of April 30, 2019, the Company had cash on hand totaling $32.5 million and outstanding borrowings under its revolving credit facility of $108.6 million.

Capital Expenditures

The following table summarizes Mammoth's capital expenditures by operating division for the periods indicated (in thousands):
 
Three Months Ended
 
March 31,
 
December 31,
 
2019
 
2018
 
2018
Infrastructure services(a)
$
3,254

 
$
15,778

 
$
22,409

Pressure pumping services(b)
7,329

 
7,866

 
9,632

Natural sand proppant services(c)
985

 
5,700

 
2,132

Other(d)
8,705

 
6,430

 
8,240

Total capital expenditures
$
20,273

 
$
35,774

 
$
42,413

a.
Capital expenditures primarily for truck, tooling and other equipment for the periods presented.
b.
Capital expenditures primarily for pressure pumping and water transfer equipment for the for the periods presented
c.
Capital expenditures primarily for maintenance for the three months ended March 31, 2019 and December 31, 2018 and plant upgrades for the three months ended March 31, 2018.
d.
Capital expenditures primarily for equipment for the Company's rental business and upgrades to its rig fleet for the periods presented.


Explanatory Note Regarding Financial Information

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

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

Conference Call Information

Mammoth will host a conference call on Thursday, May 2, 2019 at 10:00 a.m. CDT (11:00 am EDT) to discuss its first quarter 2019 financial and operational results. The telephone number to access the conference call is 844-265-1561 in the U.S. and the international dial in is 216-562-0385. The conference ID for the call is 9185999. The conference call will also be webcast live on www.mammothenergy.com in the “Investors” section.

About Mammoth Energy Services, Inc.

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

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


3



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

Forward-Looking Statements and Cautionary Statements

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




4

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS


ASSETS
 
March 31,
 
December 31,
 
 
2019
 
2018
CURRENT ASSETS
 
(in thousands)
Cash and cash equivalents
 
$
21,343

 
$
67,625

Accounts receivable, net
 
404,389

 
337,460

Receivables from related parties
 
45,032

 
11,164

Inventories
 
18,913

 
21,302

Prepaid expenses
 
8,913

 
11,317

Other current assets
 
706

 
688

Total current assets
 
499,296

 
449,556

 
 
 
 
 
Property, plant and equipment, net
 
428,280

 
436,699

Sand reserves
 
71,496

 
71,708

Operating lease right-of-use assets
 
56,234

 

Intangible assets, net - customer relationships
 
1,637

 
1,711

Intangible assets, net - trade names
 
5,835

 
6,045

Goodwill
 
101,245

 
101,245

Other non-current assets
 
6,484

 
6,127

Total assets
 
$
1,170,507

 
$
1,073,091

LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
67,542

 
$
68,843

Payables to related parties
 
609

 
370

Accrued expenses and other current liabilities
 
55,258

 
59,652

Current operating lease liability
 
17,533

 

Income taxes payable
 
60,272

 
104,958

Total current liabilities
 
201,214

 
233,823

 
 
 
 
 
Long-term debt
 
82,037

 

Deferred income tax liabilities
 
63,923

 
79,309

Long-term operating lease liability
 
38,572

 

Asset retirement obligation
 
3,056

 
3,164

Other liabilities
 
3,285

 
2,743

Total liabilities
 
392,087

 
319,039

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,876,649 issued and outstanding at March 31, 2019 and December 31, 2018, respectively
 
449

 
449

Additional paid in capital
 
532,208

 
530,919

Retained earnings
 
249,488

 
226,765

Accumulated other comprehensive loss
 
(3,725
)
 
(4,081
)
Total equity
 
778,420

 
754,052

Total liabilities and equity
 
$
1,170,507

 
$
1,073,091




5

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



 
Three Months Ended
 
March 31,
 
December 31,
 
2019
 
2018
 
2018
 
(in thousands, except per share amounts)
REVENUE
 
Services revenue
$
193,101

 
$
408,659

 
$
260,513

Services revenue - related parties
44,073

 
49,088

 
9,551

Product revenue
12,309

 
25,040

 
8,063

Product revenue - related parties
12,655

 
11,462

 
71

Total revenue
262,138

 
494,249

 
278,198

 
 
 
 
 
 
COST AND EXPENSES
 
 
 
 
 
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $25,682, $24,575 and $26,999, respectively, for the three months ended March 31, 2019, March 31, 2018 and December 31, 2018)
158,106

 
290,979

 
151,273

Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0 and $0, respectively, for the three months ended March 31, 2019, March 31, 2018 and December 31, 2018)
713

 
1,792

 
240

Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $2,871, $2,314 and $3,136, respectively, for the three months ended March 31, 2019, March 31, 2018 and December 31, 2018)
30,251

 
33,330

 
28,797

Selling, general and administrative
16,902

 
38,082

 
14,283

Selling, general and administrative - related parties
434

 
429

 
500

Depreciation, depletion, amortization and accretion
28,576

 
26,908

 
30,159

Impairment of long-lived assets

 

 
4,086

Total cost and expenses
234,982

 
391,520

 
229,338

Operating income
27,156

 
102,729

 
48,860

 
 
 
 
 
 
OTHER INCOME (EXPENSE)
 
 
 
 
 
Interest expense, net
(523
)
 
(1,237
)
 
(533
)
Other, net
24,557

 
(28
)
 
(1,122
)
Total other income (expense)
24,034

 
(1,265
)
 
(1,655
)
Income before income taxes
51,190

 
101,464

 
47,205

Provision (benefit) for income taxes
22,857

 
45,918

 
(21,002
)
Net income
$
28,333

 
$
55,546

 
$
68,207

 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME
 
 
 
 
 
Foreign currency translation adjustment, net of tax of ($90), $186 and $212, respectively, for the three months ended March 31, 2019, March 31, 2018 and December 31, 2018
356

 
(461
)
 
(961
)
Comprehensive income
$
28,689

 
$
55,085

 
$
67,246

 
 
 
 
 
 
Net income per share (basic)
$
0.63

 
$
1.24

 
$
1.52

Net income per share (diluted)
$
0.63

 
$
1.24

 
$
1.51

Weighted average number of shares outstanding (basic)
44,929

 
44,650

 
44,845

Weighted average number of shares outstanding (diluted)
45,063

 
44,884

 
45,048

Dividends declared per share
$
0.125

 

 
$
0.125


6

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


 
Three Months Ended
 
March 31,
 
2019
 
2018
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
28,333

 
$
55,546

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
Stock based compensation
1,289

 
1,256

Depreciation, depletion, accretion and amortization
28,576

 
26,908

Amortization of coil tubing strings
535

 
565

Amortization of debt origination costs
82

 
100

Bad debt expense
4

 
25,527

Loss (gain) on disposal of property and equipment
94

 
(184
)
Deferred income taxes
(15,476
)
 
(12,117
)
Other
41

 

Changes in assets and liabilities, net of acquisitions of businesses:
 
 
 
Accounts receivable, net
(67,093
)
 
(25,722
)
Receivables from related parties
(33,868
)
 
(12,550
)
Inventories
1,854

 
5,060

Prepaid expenses and other assets
2,389

 
294

Accounts payable
(353
)
 
8,302

Payables to related parties
239

 
851

Accrued expenses and other liabilities
(4,956
)
 
1,636

Income taxes payable
(44,684
)
 
25,851

Net cash (used in) provided by operating activities
(102,994
)
 
101,323

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(20,273
)
 
(35,176
)
Purchases of property and equipment from related parties

 
(598
)
Contributions to equity investee
(480
)
 

Proceeds from disposal of property and equipment
1,500

 
286

Net cash used in investing activities
(19,253
)
 
(35,488
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings from lines of credit
82,000

 
31,000

Repayments of lines of credit

 
(91,900
)
Dividends paid
(5,610
)
 

Principal payments on financing leases and equipment financing notes
(457
)
 
(72
)
Net cash provided by (used in) financing activities
75,933

 
(60,972
)
Effect of foreign exchange rate on cash
32

 
(53
)
Net change in cash and cash equivalents
(46,282
)
 
4,810

Cash and cash equivalents at beginning of period
67,625

 
5,637

Cash and cash equivalents at end of period
$
21,343

 
$
10,447

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
294

 
$
1,442

Cash paid for income taxes
$
91,955

 
$
32,184

Supplemental disclosure of non-cash transactions:
 
 
 
Purchases of property and equipment included in accounts payable
$
5,016

 
$
16,558




7

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

Three months ended March 31, 2019
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
108,721

$
90,595

$
24,964

$
37,858

$

$
262,138

Intersegment revenues

1,544

12,897

658

(15,099
)

Total revenue
108,721

92,139

37,861

38,516

(15,099
)
262,138

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
58,965

64,211

30,252

35,642


189,070

Intersegment cost of revenues

13,537

1,047

497

(15,081
)

Total cost of revenue
58,965

77,748

31,299

36,139

(15,081
)
189,070

Selling, general and administrative
9,517

3,213

1,519

3,087


17,336

Depreciation, depletion, amortization and accretion
7,719

9,893

2,873

8,091


28,576

Operating income (loss)
32,520

1,285

2,170

(8,801
)
(18
)
27,156

Interest expense, net
39

198

30

256


523

Other (income) expense, net
(24,824
)
(1
)

268


(24,557
)
Income (loss) before income taxes
$
57,305

$
1,088

$
2,140

$
(9,325
)
$
(18
)
$
51,190

Three months ended March 31, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
325,459

$
96,579

$
36,503

$
35,708

$

$
494,249

Intersegment revenues

4,559

14,512

2,417

(21,488
)

Total revenue
325,459

101,138

51,015

38,125

(21,488
)
494,249

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
194,076

66,612

33,330

32,083


326,101

Intersegment cost of revenues
1,791

15,402

4,286

267

(21,746
)

Total cost of revenue
195,867

82,014

37,616

32,350

(21,746
)
326,101

Selling, general and administrative
31,851

2,663

1,644

2,353


38,511

Depreciation, depletion, amortization and accretion
2,407

13,986

2,316

8,199


26,908

Operating income (loss)
95,334

2,475

9,439

(4,777
)
258

102,729

Interest expense, net
76

504

80

577


1,237

Other expense (income), net
2

12

(13
)
27


28

Income (loss) before income taxes
$
95,256

$
1,959

$
9,372

$
(5,381
)
$
258

$
101,464

Three months ended December 31, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
159,610

$
72,219

$
8,133

$
38,236

$

$
278,198

Intersegment revenues

560

19,273

542

(20,375
)

Total revenue
159,610

72,779

27,406

38,778

(20,375
)
278,198

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
75,486

39,601

28,796

36,427


180,310

Intersegment cost of revenues

19,787

253

308

(20,348
)

Total cost of revenue
75,486

59,388

29,049

36,735

(20,348
)
180,310

Selling, general and administrative
9,689

1,768

1,170

2,156


14,783

Depreciation, depletion, amortization and accretion
7,425

10,952

3,138

8,644


30,159

Impairment of long-lived assets
308



3,778


4,086

Operating income (loss)
66,702

671

(5,951
)
(12,535
)
(27
)
48,860

Interest expense, net
82

177

40

234


533

Other expense, net
60

340

304

418


1,122

Income (loss) before income taxes
$
66,560

$
154

$
(6,295
)
$
(13,187
)
$
(27
)
$
47,205



8

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

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

Consolidated
 
Three Months Ended
 
March 31,
 
December 31,
Reconciliation of Adjusted EBITDA to net income:
2019
 
2018
 
2018
Net income
$
28,333

 
$
55,546

 
$
68,207

Depreciation, depletion, accretion and amortization expense
28,576

 
26,908

 
30,159

Impairment of long-lived assets

 

 
4,086

Acquisition related costs

 
(46
)
 
61

Public offering costs

 

 
(10
)
Stock based compensation
1,289

 
1,256

 
1,094

Interest expense, net
523

 
1,237

 
533

Other (income) expense, net
(24,557
)
 
28

 
1,122

Interest on trade accounts receivable
25,735

 

 

Provision (benefit) for income taxes
22,857

 
45,918

 
(21,002
)
Adjusted EBITDA
$
82,756

 
$
130,847

 
$
84,250



9

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


Infrastructure Services
 
Three Months Ended
 
March 31,
 
December 31,
Reconciliation of Adjusted EBITDA to net income:
2019
 
2018
 
2018
Net income
$
35,665

 
$
47,299

 
$
141,875

Depreciation and amortization expense
7,719

 
2,407

 
7,425

Impairment of long-lived assets

 

 
308

Acquisition related costs

 
(8
)
 
61

Public offering costs

 

 
(10
)
Stock based compensation
462

 
457

 
470

Interest expense
39

 
76

 
82

Other (income) expense, net
(24,824
)
 
2

 
60

Interest on trade accounts receivable
25,735

 

 

Provision (benefit) for income taxes
21,639

 
47,957

 
(75,315
)
Adjusted EBITDA
$
66,435

 
$
98,190

 
$
74,956


Pressure Pumping Services
 
Three Months Ended
 
March 31,
 
December 31,
Reconciliation of Adjusted EBITDA to net income:
2019
 
2018
 
2018
Net income
$
1,088

 
$
1,959

 
$
154

Depreciation and amortization expense
9,893

 
13,986

 
10,952

Stock based compensation
410

 
418

 
318

Interest expense
198

 
504

 
177

Other (income) expense, net
(1
)
 
12

 
340

Adjusted EBITDA
$
11,588

 
$
16,879

 
$
11,941


Natural Sand Proppant Services
 
Three Months Ended
 
March 31,
 
December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2019
 
2018
 
2018
Net income (loss)
$
2,140

 
$
9,372

 
$
(6,295
)
Depreciation, depletion, accretion and amortization expense
2,873

 
2,316

 
3,138

Acquisition related costs

 
(38
)
 

Stock based compensation
203

 
186

 
181

Interest expense
30

 
80

 
40

Other (income) expense, net

 
(13
)
 
304

Adjusted EBITDA
$
5,246

 
$
11,903

 
$
(2,632
)


10

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


Other Services(a) 
 
Three Months Ended
 
March 31,
 
December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2019
 
2018
 
2018
Net (loss) income
$
(10,542
)
 
$
(3,342
)
 
$
(67,500
)
Depreciation and amortization expense
8,091

 
8,199

 
8,644

Impairment of long-lived assets

 

 
3,778

Stock based compensation
214

 
195

 
125

Interest expense, net
256

 
577

 
234

Other expense, net
268

 
27

 
418

Provision (benefit) for income taxes
1,217

 
(2,039
)
 
54,313

Adjusted EBITDA
$
(496
)
 
$
3,617

 
$
12

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

After Tax Return on Invested Capital

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

 
Twelve Months Ended
 
March 31,
 
2019
 
2018
 
2017
 
(in thousands)
Net income
$
208,752

 
$
119,491

 
 
Capital Employed
 
 
 
 
 
Total debt
$
82,037

 
$
39,000

 
$

Total equity
778,420

 
564,137

 
418,597

Total capital employed
$
860,457

 
$
603,137

 
$
418,597

 
 
 
 
 
 
Average capital employed(a)
$
731,797

 
$
510,867

 
 
Trailing twelve month after tax return on invested capital(b)
29
%
 
23
%
 
 
a.
Average capital employed is the average of total capital employed as of end of the period and end of the prior period.
b.
After tax return on invested capital is the ratio of net income for the period to average capital employed.


11