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): November 7, 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)
______________________________

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))

Securities registered pursuant to Section 12(b) of The Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
TUSK
(The Nasdaq Stock Market LLC)

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.  ¨












Item 2.02 Results of Operations and Financial Condition

On November 7, 2019, Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for the third quarter ended September 30, 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 November 7, 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 November 7, 2019, entitled "Mammoth Energy Services, Inc. Announces Third 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:
November 7, 2019
 
By:
 
/s/ Mark Layton
 
 
 
 
 
Mark Layton
 
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 



Exhibit



http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13188993&doc=3


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


OKLAHOMA CITY, OKLAHOMA, November 7, 2019 - Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the third quarter ended September 30, 2019.

Financial Highlights for the Third Quarter of 2019:

Total revenue was $113.4 million for the three months ended September 30, 2019, down from $181.8 million for the three months ended June 30, 2019 and down from $384.0 million for the three months ended September 30, 2018.

Net loss for the three months ended September 30, 2019 was $35.7 million, or $0.79 per fully diluted share, as compared to net loss of $10.9 million, or $0.24 per fully diluted share, for the three months ended June 30, 2019 and net income of $69.5 million, or $1.54 per fully diluted share, for the three months ended September 30, 2018.

Adjusted EBITDA (as defined and reconciled below) was ($3.8) million for the three months ended September 30, 2019, down from $8.6 million for the three months ended June 30, 2019 and down from $183.6 million for the three months ended September 30, 2018.

Arty Straehla, Mammoth's Chief Executive Officer, stated, “Given the current state of the oilfield services market, we continue to look for investment opportunities in the industrial sector that enhance our current service offerings and further diversify our cash flow. With that objective in mind, during the third quarter we started two new businesses organically, engineering services and equipment manufacturing. The startup of a manufacturing business will enable us to repair our existing equipment in-house as well as manufacture equipment used across our businesses.”

Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $37.3 million for the three months ended September 30, 2019, a decrease from $41.8 million for the three months ended June 30, 2019 and a decline from $237.1 million for the three months ended September 30, 2018.

As of September 30, 2019, Mammoth had a total of approximately 140 transmission and distribution crews in the continental United States. Revenues for the Company's infrastructure operations in the continental United States increased approximately 21% from $30.9 million for the three months ended June 30, 2019 to $37.3 million for the three months ended September 30, 2019.

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $44.6 million for the three months ended September 30, 2019, a decrease from $84.6 million for the three months ended June 30, 2019 and a decrease from $94.2 million for the three months ended September 30, 2018.





Mammoth's pressure pumping division completed a total of 783 stages for the three months ended September 30, 2019, as compared to 1,717 stages for the three months ended June 30, 2019 and 1,594 stages for the three months ended September 30, 2018. On average, 1.2 of our fleets were active for the three months ended September 30, 2019, compared to average utilization of 2.7 fleets during the three months ended June 30, 2019 and an average utilization of 3.5 fleets during the three months ended September 30, 2018.
  
Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $18.4 million for the three months ended September 30, 2019, a decrease from $40.4 million for the three months ended June 30, 2019 and a decrease from $37.0 million for the three months ended September 30, 2018.

The Company sold 456,471 tons of sand during the three months ended September 30, 2019, a 44% decrease from the 812,611 tons sold during the three months ended June 30, 2019 and a 24% decrease from the 598,438 tons sold during the three months ended September 30, 2018. The Company's average sales price for the sand sold during the three months ended September 30, 2019 was $26.84 per ton, an 11% decrease from the $30.09 per ton average sales price during the three months ended June 30, 2019 and a 29% decrease from the $37.88 per ton average sales price during the three months ended September 30, 2018.

Blended production costs were approximately $12 per ton during the three months ended September 30, 2019, unchanged from the three months ended June 30, 2019 production costs and an 18% decrease from production costs of approximately $14.56 per ton during the three months ended September 30, 2018.

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 $20.0 million for the three months ended September 30, 2019, a decrease from $28.4 million for the three months ended June 30, 2019 and a decrease from $35.7 million for the three months ended September 30, 2018.

An average of 541 pieces of equipment were rented during the three months ended September 30, 2019, down 10% from an average of 601 pieces of equipment rented during the three months ended June 30, 2019 and a 42% increase from an average of 381 pieces of equipment rented for the three months ended September 30, 2018. As a result of market conditions, the Company temporarily shut down its cementing and acidizing operations as well as its flowback operations during the third quarter of 2019.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were $14.4 million for the three months ended September 30, 2019, as compared to $9.5 million for the three months ended June 30, 2019 and ($45.3) million for the three months ended September 30, 2018.

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Following is a breakout of SG&A expense (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2019
 
2018
 
2019
 
2019
 
2018
Cash expenses:
 
 
 
 
 
 
 
 
 
Compensation and benefits
$
4,777

 
$
14,864

 
$
2,154

 
$
16,161

 
$
33,541

Professional services
6,104

 
3,267

 
2,934

 
12,827

 
8,835

Other(a)
1,665

 
3,701

 
3,381

 
8,290

 
9,243

Total cash SG&A expense
12,546

 
21,832

 
8,469

 
37,278

 
51,619

Non-cash expenses:
 
 
 
 
 
 
 
 
 
Bad debt provision(b)
964

 
(68,333
)
 
262

 
1,230

 
(14,543
)
Equity based compensation(c)

 

 

 

 
17,487

Stock based compensation
913

 
1,177

 
724

 
2,705

 
3,751

Total non-cash SG&A expense
1,877

 
(67,156
)
 
986

 
3,935

 
6,695

Total SG&A expense
$
14,423

 
$
(45,324
)
 
$
9,455

 
$
41,213

 
$
58,314

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 of the bad debt expense recognized in the first half of 2018.
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 13% for the three months ended September 30, 2019 as compared to 5% for the three months ended June 30, 2019 and (12%) for the three months ended September 30, 2018. Excluding bad debt expense, SG&A expenses as a percentage of total revenue were 12% for the three months ended September 30, 2019 as compared to 5% for the three months ended June 30, 2019 and 6% for the three months ended September 30, 2018.

Liquidity

As of September 30, 2019, Mammoth had cash on hand totaling $9.6 million and outstanding borrowings under its revolving credit facility of $80.0 million. As of September 30, 2019, the Company had $96.1 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 $105.7 million. As of November 5, 2019, the Company had cash on hand of $9.7 million and outstanding borrowings under its revolving credit facility of $80.0 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,
 
2019
 
2018
 
2019
 
2019
 
2018
Infrastructure services(a)
$
122

 
$
21,737

 
$
2,177

 
$
5,553

 
$
78,293

Pressure pumping services(b)
2,963

 
8,042

 
4,013

 
14,305

 
24,141

Natural sand proppant services(c)
728

 
3,145

 
990

 
2,703

 
15,803

Other(d)
857

 
7,821

 
2,767

 
12,329

 
31,293

Total capital expenditures
$
4,670

 
$
40,745

 
$
9,947

 
$
34,890

 
$
149,530

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 2019 periods presented and plant upgrades for the 2018 periods presented.
d.
Capital expenditures primarily for equipment for the Company's rental business and upgrades to its rig fleet for the periods presented.

3




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"), 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 Friday, November 8, 2019 at 2:00 p.m. CST (3:00 p.m. EST) to discuss its third 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 6576647. 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.

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

4



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; the outcome of an ongoing government investigation and legal proceedings relating to the contracts awarded to our subsidiary Cobra Acquisitions LLC by the Puerto Rico Electric Power Authority; our inability to replace the prior levels of work in our infrastructure segment; 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.




5

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS


ASSETS
 
September 30,
 
December 31,
 
 
2019
 
2018
CURRENT ASSETS
 
(in thousands)
Cash and cash equivalents
 
$
9,598

 
$
67,625

Accounts receivable, net
 
369,313

 
337,460

Receivables from related parties
 
8,542

 
11,164

Inventories
 
17,303

 
21,302

Prepaid expenses
 
7,613

 
11,317

Other current assets
 
682

 
688

Total current assets
 
413,051

 
449,556

 
 
 
 
 
Property, plant and equipment, net
 
381,656

 
436,699

Sand reserves
 
68,423

 
71,708

Operating lease right-of-use assets
 
47,959

 

Intangible assets, net - customer relationships
 
1,433

 
1,711

Intangible assets, net - trade names
 
5,415

 
6,045

Goodwill
 
98,051

 
101,245

Other non-current assets
 
7,101

 
6,127

Total assets
 
$
1,023,089

 
$
1,073,091

LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
36,898

 
$
68,843

Payables to related parties
 
486

 
370

Accrued expenses and other current liabilities
 
40,552

 
59,652

Current operating lease liability
 
17,142

 

Income taxes payable
 
32,453

 
104,958

Total current liabilities
 
127,531

 
233,823

 
 
 
 
 
Long-term debt
 
80,000

 

Deferred income tax liabilities
 
47,260

 
79,309

Long-term operating lease liability
 
30,827

 

Asset retirement obligation
 
3,559

 
3,164

Other liabilities
 
5,485

 
2,743

Total liabilities
 
294,662

 
319,039

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 45,021,461 and 44,876,649 issued and outstanding at September 30, 2019 and December 31, 2018
 
450

 
449

Additional paid in capital
 
534,284

 
530,919

Retained earnings
 
197,281

 
226,765

Accumulated other comprehensive loss
 
(3,588
)
 
(4,081
)
Total equity
 
728,427

 
754,052

Total liabilities and equity
 
$
1,023,089

 
$
1,073,091




6

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



 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2019
 
2018
 
2019
 
2019
 
2018
 
(in thousands, except per share amounts)
REVENUE
 
Services revenue
$
85,783

 
$
346,368

 
$
115,760

 
$
394,645

 
$
1,210,572

Services revenue - related parties
15,000

 
18,933

 
36,837

 
95,910

 
108,632

Product revenue
9,710

 
14,955

 
18,362

 
40,381

 
67,703

Product revenue - related parties
2,924

 
3,787

 
10,861

 
26,439

 
24,979

Total revenue
113,417

 
384,043

 
181,820

 
557,375

 
1,411,886

 
 
 
 
 
 
 
 
 
 
COST AND EXPENSES
 
 
 
 
 
 
 
 
 
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $25,749, $27,810, $25,597, $77,028 and $79,283, respectively, for the three months ended September 30, 2019, September 30, 2018 and June 30, 2019 and nine months ended September 30, 2019 and 2018)
91,813

 
216,670

 
132,688

 
382,607

 
809,932

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, 2019, September 30, 2018 and June 30, 2019 and nine months ended September 30, 2019 and 2018)
774

 
1,425

 
2,650

 
4,138

 
5,645

Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $4,019, $4,183, $4,525, $11,414 and $10,376, respectively, for the three months ended September 30, 2019, September 30, 2018 and June 30, 2019 and nine months ended September 30, 2019 and 2018)
18,547

 
29,470

 
32,677

 
81,475

 
97,917

Selling, general and administrative
14,029

 
(45,761
)
 
8,796

 
39,726

 
56,916

Selling, general and administrative - related parties
394

 
437

 
659

 
1,487

 
1,398

Depreciation, depletion, amortization and accretion
29,791

 
32,015

 
30,145

 
88,512

 
89,718

Impairment of long-lived assets
6,542

 
4,582

 

 
6,542

 
4,769

Total cost and expenses
161,890

 
238,838

 
207,615

 
604,487

 
1,066,295

Operating (loss) income
(48,473
)
 
145,205

 
(25,795
)
 
(47,112
)
 
345,591

 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
Interest expense, net
(1,398
)
 
(458
)
 
(1,551
)
 
(3,472
)
 
(2,654
)
Other, net
6,368

 
(400
)
 
4,019

 
34,944

 
(914
)
Total other income (expense)
4,970

 
(858
)
 
2,468

 
31,472

 
(3,568
)
(Loss) income before income taxes
(43,503
)
 
144,347

 
(23,327
)
 
(15,640
)
 
342,023

(Benefit) provision for income taxes
(7,794
)
 
74,835

 
(12,438
)
 
2,625

 
174,265

Net (loss) income
$
(35,709
)
 
$
69,512

 
$
(10,889
)
 
$
(18,265
)
 
$
167,758

 
 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE (LOSS) INCOME
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax of ($49), ($87), $92, $134 and $185, respectively, for the three months ended September 30, 2019, September 30, 2018 and June 30, 2019 and nine months ended September 30, 2019 and 2018)
(213
)
 
327

 
350

 
493

 
(459
)
Comprehensive (loss) income
$
(35,922
)
 
$
69,839

 
$
(10,539
)
 
$
(17,772
)
 
$
167,299

 
 
 
 
 
 
 
 
 
 
Net (loss) income per share (basic)
$
(0.79
)
 
$
1.55

 
$
(0.24
)
 
$
(0.41
)
 
$
3.75

Net (loss) income per share (diluted)
$
(0.79
)
 
$
1.54

 
$
(0.24
)
 
$
(0.41
)
 
$
3.73

Weighted average number of shares outstanding (basic)
45,020

 
44,756

 
45,003

 
44,984

 
44,718

Weighted average number of shares outstanding (diluted)
45,020

 
45,082

 
45,003

 
44,984

 
45,012

Dividends declared per share
$

 
0.125

 
$
0.125

 
$
0.25

 
0.125


7

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


 
Nine Months Ended
 
September 30,
 
2019
 
2018
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(18,265
)
 
$
167,758

Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:
 
 
 
Equity based compensation

 
17,487

Stock based compensation
3,367

 
4,331

Depreciation, depletion, accretion and amortization
88,512

 
89,718

Amortization of coil tubing strings
1,236

 
1,473

Amortization of debt origination costs
245

 
299

Bad debt expense
1,230

 
(14,543
)
Loss (gain) on disposal of property and equipment
245

 
(185
)
Impairment of long-lived assets
6,542

 
4,769

Inventory obsolescence
1,349

 

Deferred income taxes
(32,183
)
 
6,418

Other
(539
)
 

Changes in assets and liabilities, net of acquisitions of businesses:
 
 
 
Accounts receivable, net
(33,042
)
 
(132,553
)
Receivables from related parties
2,622

 
8,453

Inventories
1,415

 
(2,665
)
Prepaid expenses and other assets
3,713

 
1,814

Accounts payable
(27,187
)
 
(5,179
)
Payables to related parties
117

 
24

Accrued expenses and other liabilities
(19,121
)
 
(405
)
Income taxes payable
(72,501
)
 
135,578

Net cash (used in) provided by operating activities
(92,245
)
 
282,592

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(34,637
)
 
(144,898
)
Purchases of property and equipment from related parties
(253
)
 
(4,632
)
Business acquisitions

 
(14,456
)
Contributions to equity investee
(680
)
 

Proceeds from disposal of property and equipment
2,491

 
1,213

Net cash used in investing activities
(33,079
)
 
(162,773
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings from lines of credit
138,000

 
77,000

Repayments of lines of credit
(58,000
)
 
(176,900
)
Dividends paid
(11,219
)
 
(5,594
)
Principal payments on financing leases and equipment financing notes
(1,534
)
 
(219
)
Net cash provided by (used in) financing activities
67,247

 
(105,713
)
Effect of foreign exchange rate on cash
50

 
(51
)
Net change in cash and cash equivalents
(58,027
)
 
14,055

Cash and cash equivalents at beginning of period
67,625

 
5,637

Cash and cash equivalents at end of period
$
9,598

 
$
19,692

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
3,280

 
$
2,726

Cash paid for income taxes
$
116,448

 
$
32,269

Supplemental disclosure of non-cash transactions:
 
 
 
Purchases of property and equipment included in accounts payable
$
1,203

 
$
21,124


8

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

Three months ended September 30, 2019
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
37,289

$
43,887

$
12,634

$
19,607

$

$
113,417

Intersegment revenues

725

5,727

367

(6,819
)

Total revenue
37,289

44,612

18,361

19,974

(6,819
)
113,417

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
36,940

33,059

18,547

22,588


111,134

Intersegment cost of revenues

6,054

326

439

(6,819
)

Total cost of revenue
36,940

39,113

18,873

23,027

(6,819
)
111,134

Selling, general and administrative
7,322

3,669

1,314

2,118


14,423

Depreciation, depletion, amortization and accretion
7,953

10,176

4,022

7,640


29,791

Impairment of long-lived assets



6,542


6,542

Operating (loss) income
(14,926
)
(8,346
)
(5,848
)
(19,353
)

(48,473
)
Interest expense, net
599

316

43

440


1,398

Other (income) expense, net
(6,239
)
(3
)
99

(225
)

(6,368
)
(Loss) income before income taxes
$
(9,286
)
$
(8,659
)
$
(5,990
)
$
(19,568
)
$

$
(43,503
)
Three months ended September 30, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
237,052

$
93,360

$
18,742

$
34,889

$

$
384,043

Intersegment revenues

809

18,268

781

(19,858
)

Total revenue
237,052

94,169

37,010

35,670

(19,858
)
384,043

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
128,267

55,490

29,470

34,338


247,565

Intersegment cost of revenues
37

19,002

546

263

(19,848
)

Total cost of revenue
128,304

74,492

30,016

34,601

(19,848
)
247,565

Selling, general and administrative
(54,200
)
4,508

1,618

2,750


(45,324
)
Depreciation, depletion, amortization and accretion
6,591

12,720

4,184

8,520


32,015

Impairment of long-lived assets

143


4,439


4,582

Operating income (loss)
156,357

2,306

1,192

(14,640
)
(10
)
145,205

Interest expense, net
159

150

37

112


458

Other expense, net
181

2

199

18


400

Income (loss) before income taxes
$
156,017

$
2,154

$
956

$
(14,770
)
$
(10
)
$
144,347

Three months ended June 30, 2019
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
41,821

$
82,973

$
29,223

$
27,803

$

$
181,820

Intersegment revenues

1,668

11,170

584

(13,422
)

Total revenue
41,821

84,641

40,393

28,387

(13,422
)
181,820

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
44,864

59,835

32,676

30,640


168,015

Intersegment cost of revenues

11,797

1,141

562

(13,500
)

Total cost of revenue
44,864

71,632

33,817

31,202

(13,500
)
168,015

Selling, general and administrative
3,035

2,664

1,380

2,376


9,455

Depreciation, depletion, amortization and accretion
7,818

10,174

4,528

7,625


30,145

Operating income (loss)
(13,896
)
171

668

(12,816
)
78

(25,795
)
Interest expense, net
386

452

72

641


1,551

Other expense, net
(4,045
)
9

(32
)
49


(4,019
)
Income (loss) before income taxes
$
(10,237
)
$
(290
)
$
628

$
(13,506
)
$
78

$
(23,327
)

9

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

Nine months ended September 30, 2019
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
187,831

$
217,456

$
66,820

$
85,268

$

$
557,375

Intersegment revenues

3,936

29,795

1,610

(35,341
)

Total revenue
187,831

221,392

96,615

86,878

(35,341
)
557,375

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
140,768

157,106

81,475

88,871


468,220

Intersegment cost of revenues
1

31,388

2,513

1,499

(35,401
)

Total cost of revenue
140,769

188,494

83,988

90,370

(35,401
)
468,220

Selling, general and administrative
19,874

9,544

4,214

7,581


41,213

Depreciation, depletion, amortization and accretion
23,490

30,244

11,423

23,355


88,512

Impairment of long-lived assets



6,542


6,542

Operating income (loss)
3,698

(6,890
)
(3,010
)
(40,970
)
60

(47,112
)
Interest expense, net
1,024

965

145

1,338


3,472

Other (income) expense, net
(35,108
)
5

67

92


(34,944
)
Income (loss) before income taxes
$
37,782

$
(7,860
)
$
(3,222
)
$
(42,400
)
$
60

$
(15,640
)
Nine months ended September 30, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
922,761

$
290,272

$
92,684

$
106,169

$

$
1,411,886

Intersegment revenues

6,441

48,186

4,974

(59,601
)

Total revenue
922,761

296,713

140,870

111,143

(59,601
)
1,411,886

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
532,532

183,695

97,917

99,350


913,494

Intersegment cost of revenues
2,582

50,578

5,851

590

(59,601
)

Total cost of revenue
535,114

234,273

103,768

99,940

(59,601
)
913,494

Selling, general and administrative
17,437

27,993

5,049

7,835


58,314

Depreciation, depletion, amortization and accretion
13,092

40,535

10,381

25,710


89,718

Impairment of long-lived assets

143


4,626


4,769

Operating income (loss)
357,118

(6,231
)
21,672

(26,968
)

345,591

Interest expense, net
341

995

193

1,125


2,654

Other expense (income), net
513

94

222

85


914

Income (loss) before income taxes
$
356,264

$
(7,320
)
$
21,257

$
(28,178
)
$

$
342,023




10

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, inventory obsolescence charges, acquisition related costs, public offering costs, equity based compensation, 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
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net (loss) income:
2019
 
2018
 
2019
 
2019
 
2018
Net (loss) income
$
(35,709
)
 
$
69,512

 
$
(10,889
)
 
$
(18,265
)
 
$
167,758

Depreciation, depletion, accretion and amortization expense
29,791

 
32,015

 
30,145

 
88,512

 
89,718

Impairment of long-lived assets
6,542

 
4,582

 

 
6,542

 
4,769

Inventory obsolescence charges
1,349

 

 

 
1,349

 

Acquisition related costs

 
99

 
45

 
45

 
130

Public offering costs

 
260

 

 

 
991

Equity based compensation

 

 

 

 
17,487

Stock based compensation
1,134

 
1,415

 
944

 
3,367

 
4,331

Interest expense, net
1,398

 
458

 
1,551

 
3,472

 
2,654

Other (income) expense, net
(6,368
)
 
400

 
(4,019
)
 
(34,944
)
 
914

Interest on trade accounts receivable
5,896

 

 
3,234

 
34,865

 

(Benefit) provision for income taxes
(7,794
)
 
74,835

 
(12,438
)
 
2,625

 
174,265

Adjusted EBITDA
$
(3,761
)
 
$
183,576

 
$
8,573

 
$
87,568

 
$
463,017



11

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


Infrastructure Services
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net (loss) income:
2019
 
2018
 
2019
 
2019
 
2018
Net (loss) income
$
(10,763
)
 
$
78,405

 
$
6,210

 
$
31,113

 
$
178,064

Depreciation and amortization expense
7,953

 
6,591

 
7,818

 
23,490

 
13,092

Acquisition related costs

 

 
12

 
12

 
(4
)
Public offering costs

 
123

 

 

 
483

Stock based compensation
217

 
555

 
9

 
688

 
1,618

Interest expense
599

 
159

 
386

 
1,024

 
341

Other (income) expense, net
(6,239
)
 
181

 
(4,045
)
 
(35,108
)
 
513

Interest on trade accounts receivable
5,896

 

 
3,234

 
34,865

 

Provision (benefit) for income taxes
1,477

 
77,612

 
(16,447
)
 
6,670

 
178,200

Adjusted EBITDA
$
(860
)
 
$
163,626

 
$
(2,823
)
 
$
62,754

 
$
372,307


Pressure Pumping Services
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net (loss) income:
2019
 
2018
 
2019
 
2019
 
2018
Net (loss) income
$
(8,659
)
 
$
2,154

 
$
(290
)
 
$
(7,860
)
 
$
(7,320
)
Depreciation and amortization expense
10,176

 
12,720

 
10,174

 
30,244

 
40,535

Impairment of long-lived assets

 
143

 

 

 
143

Acquisition related costs

 
6

 
18

 
18

 
39

Public offering costs

 
62

 

 

 
264

Equity based compensation

 

 

 

 
17,487

Stock based compensation
503

 
423

 
489

 
1,402

 
1,294

Interest expense
316

 
150

 
452

 
965

 
995

Other (income) expense, net
(3
)
 
2

 
9

 
5

 
94

Adjusted EBITDA
$
2,333

 
$
15,660

 
$
10,852

 
$
24,774

 
$
53,531


Natural Sand Proppant Services
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net (loss) income:
2019
 
2018
 
2019
 
2019
 
2018
Net (loss) income
$
(5,990
)
 
$
956

 
$
628

 
$
(3,222
)
 
$
21,257

Depreciation, depletion, accretion and amortization expense
4,022

 
4,184

 
4,528

 
11,423

 
10,381

Acquisition related costs

 

 
8

 
8

 
(38
)
Public offering costs

 
49

 

 

 
144

Stock based compensation
216

 
211

 
236

 
656

 
602

Interest expense
43

 
37

 
72

 
145

 
193

Other expense (income), net
99

 
199

 
(32
)
 
67

 
222

Adjusted EBITDA
$
(1,610
)
 
$
5,636

 
$
5,440

 
$
9,077

 
$
32,761



12

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


Other Services(a) 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net loss:
2019
 
2018
 
2019
 
2019
 
2018
Net loss
$
(10,297
)
 
$
(11,993
)
 
$
(17,515
)
 
$
(38,356
)
 
$
(24,243
)
Depreciation and amortization expense
7,640

 
8,520

 
7,625

 
23,355

 
25,710

Impairment of long-lived assets
6,542

 
4,439

 

 
6,542

 
4,626

Inventory obsolescence charges
1,349

 

 

 
1,349

 

Acquisition related costs

 
93

 
7

 
7

 
133

Public offering costs

 
26

 

 

 
100

Stock based compensation
198

 
226

 
210

 
621

 
817

Interest expense, net
440

 
112

 
641

 
1,338

 
1,125

Other (income) expense, net
(225
)
 
18

 
49

 
92

 
85

(Benefit) provision for income taxes
(9,271
)
 
(2,777
)
 
4,009

 
(4,045
)
 
(3,935
)
Adjusted EBITDA
$
(3,624
)
 
$
(1,336
)
 
$
(4,974
)
 
$
(9,097
)
 
$
4,418

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.



13