Mammoth Energy Services, Inc. Announces Fourth Quarter and Full Year 2018 Operational and Financial Results
March 14, 2019 - 5:25 PM EDT
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Mammoth Energy Services, Inc. Announces Fourth Quarter and Full Year 2018 Operational and Financial Results
Fourth Quarter net income of $68 million, or $1.51 per diluted share, and full year 2018 net income of $236 million, or $5.24 per diluted share
2018 adjusted EBITDA of $547 million, a three-fold increase from 2017
After tax return on invested capital (ROIC) of 35% in 2018
Returned $11 million of cash to stockholders through dividends
OKLAHOMA CITY, March 14, 2019 (GLOBE NEWSWIRE) -- Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the fourth quarter and full year ended December 31, 2018.
Financial Highlights for the Fourth Quarter and Full Year 2018:
Total revenue was $278.2 million for the three months ended December 31, 2018, down 28% sequentially from $384.0 million for the three months ended September 30, 2018 and down 25% from $369.0 million for the three months ended December 31, 2017. Total revenue was $1.7 billion for the year ended December 31, 2018, a 144% increase from $691.5 million for the year ended December 31, 2017.
Net income for the three months ended December 31, 2018 was $68.2 million, or $1.51 per fully diluted share, a $1.2 million decrease from $69.5 million, or $1.54 per fully diluted share, for the three months ended September 30, 2018 and an increase of $2.3 million from $65.9 million, or $1.48 per fully diluted share, for the three months ended December 31, 2017. Net income was $236.0 million, or $5.24 per fully diluted share, for the year ended December 31, 2018, a 300% increase from $59.0 million, or $1.42 per fully diluted share, for the year ended December 31, 2017.
Adjusted EBITDA (as defined and reconciled below) was $84.3 million for the three months ended December 31, 2018, a $99.3 million decrease from $183.6 million for the three months ended September 30, 2018 and a $26.2 million decline from $110.5 million for the three months ended December 31, 2017. Adjusted EBITDA was $547.3 million for the year ended December 31, 2018, a 231% increase from $165.3 million for the year ended December 31, 2017.
Arty Straehla, Mammoth's Chief Executive Officer, stated, "2018 was another strong year for Mammoth as we posted record levels of total revenue, net income and adjusted EBITDA. In addition, we strategically invested in high margin businesses, returned $11 million to stockholders through dividends and positioned ourselves to take advantage of M&A opportunities. Since going public in late 2016, adjusted EBITDA has grown more than 12 times to $547 million in 2018 from $41 million in 2016. Despite continuing volatility in commodity prices and reductions in capital expenditure budgets at many of our customers, oilfield activity levels have been improving so far in 2019 from the levels experienced in the fourth quarter of 2018. Our six frac fleets have experienced full utilization since late January and demand and pricing for our sand is getting stronger."
Infrastructure Services
Mammoth's infrastructure services segment contributed revenues of $159.6 million for the three months ended December 31, 2018, a 33% decrease from $237.1 million for the three months ended September 30, 2018 and a 24% decrease from $209.2 million the three months ended December 31, 2017. During the fourth quarter of 2018, our staffing levels in Puerto Rico generally ranged from 475 to 550, dropping to approximately 130 at year end for a period of three days due to the holidays.
The infrastructure segment contributed revenues of $1.1 billion for the year ended December 31, 2018, a 382% increase from $224.4 million for the year ended December 31, 2017.
Pressure Pumping Services
Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $72.8 million on 1,164 stages for the three months ended December 31, 2018, a 23% decrease from $94.2 million on 1,594 stages for the three months ended September 30, 2018 and a 35% decrease from $111.9 million on 1,375 stages for the three months ended December 31, 2017.
The pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $369.5 million for the year ended December 31, 2018, a 32% increase from $279.4 million for the year ended December 31, 2017. During 2018, Mammoth’s pressure pumping division completed a total of 6,245 stages, an increase of 22% from 2017.
An average of 3.7 fleets remained active throughout the fourth quarter of 2018.
Natural Sand Proppant Services
Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $27.4 million for the three months ended December 31, 2018, a 26% decrease from $37.0 million for the three months ended September 30, 2018 and a 38% decrease from $43.9 million for the three months ended December 31, 2017. The Company sold 569,195 tons of sand during the three months ended December 31, 2018, a 5% decrease from 598,438 during the three months ended September 30, 2018 and a 5% decrease from 600,182 during the three months ended December 31, 2017.
The natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $168.3 million for the year ended December 31, 2018, a 44% increase from $117.0 million for the year ended December 31, 2017. The Company sold 2.7 million tons of sand during the year ended December 31, 2018, a 59% increase from 1.7 million during the year ended December 31, 2017.
During 2018, Mammoth's total sand processing capacity increased to approximately 4.4 million tons per year. Due to market conditions, our Muskie facility was temporarily idled during the third quarter of 2018 and continues to be idled. The Company's average production costs were approximately $12 per ton during the fourth quarter of 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 $38.8 million for the three months ended December 31, 2018, a 9% increase from $35.7 million for the three months ended September 30, 2018 and a 34% increase from $28.9 million for the three months ended December 31, 2017.
The Company's other services contributed revenues (inclusive of inter-segment revenues) of $149.9 million for the year ended December 31, 2018, a 47% increase from $102.2 million for the year ended December 31, 2017.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses were $14.8 million for the three months ended December 31, 2018, compared to a credit of $45.3 million for the three months ended September 30, 2018 and $27.4 million for the three months ended December 31, 2017.
Following is a breakout of SG&A expense (in thousands):
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
2018
2017
2018
2018
2017
Cash expenses:
Compensation and benefits
$
9,409
$
6,364
$
14,864
$
42,950
$
15,322
Professional services
3,018
2,690
3,267
11,854
7,765
Other(a)
1,475
1,802
3,701
10,718
7,503
Total cash SG&A expense
13,902
10,856
21,832
65,522
30,590
Non-cash expenses:
Bad debt provision(b)
(34
)
16,020
(68,333
)
(14,578
)
16,098
Equity based compensation(c)
—
—
—
17,487
—
Stock based compensation
915
550
1,177
4,666
3,198
Total non-cash SG&A expense
881
16,570
(67,156
)
7,575
19,296
Total SG&A expense
$
14,783
$
27,426
$
(45,324
)
$
73,097
$
49,886
a.
Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.
During the three months ended September 30, 2018, the Company received payment for amounts previously reserved in 2017. As a result, during the three months ended September 30, 2018, the Company reversed bad debt expense of $16.0 million recognized in 2017 and $53.6 million recognized in the first half of 2018. The Company expects to receive payment for the 2018 amounts once the Company files its 2018 Puerto Rico tax return and pays any taxes due as calculated by the return. The Company expects that the Puerto Rico 2018 tax return will be filed in mid-2019.
c.
Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level).
SG&A expenses, as a percentage of total revenue, were 5% for the three months ended December 31, 2018 compared to (12%) for the three months ended September 30, 2018 and 7% for the three months ended December 31, 2017. Excluding bad debt expenses, SG&A expenses as a percentage of total revenue were 5% for the three months ended December 31, 2018, compared to 6% for the three months ended September 30, 2018 and 3% for the three months ended December 31, 2017.
Income Tax Expense
During the fourth quarter of 2018, the Company recognized a tax benefit of $21.0 million related to a change in the mix of earnings between our United States and Puerto Rico operations as compared to the three months ended September 30, 2018. For the full year of 2018, the Company’s effective tax rate was 39%.
Liquidity
On October 19, 2018, Mammoth entered into an amended and restated five-year asset backed revolving credit facility led by PNC Capital Markets with a maximum revolving advance amount at closing of $185 million and the potential to increase the facility by up to an additional $165 million.
As of December 31, 2018, Mammoth had cash on hand totaling $67.6 million and no borrowings outstanding under its revolving credit facility. As of December 31, 2018, the Company had approximately $175.8 of available borrowing capacity under its revolving credit facility, after giving effect to $8.4 million of outstanding letters of credit, resulting in total liquidity of approximately $243.4 million. On March 13, 2019, the Company borrowed $82.0 million under its revolving credit facility for 2018 Puerto Rico income taxes to be paid on March 15, 2019. Pursuant to the terms of its original contract with the Puerto Rico Electric Power Authority, or PREPA, once the Company's 2018 Puerto Rico income taxes are paid and the applicable returns are filed the Company is entitled to receive payment from PREPA of $44.8 million related to a contractual income tax provision.
Capital Expenditures
The following table summarizes Mammoth's capital expenditures by operating division for the periods indicated (in thousands):
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
2018
2017
2018
2018
2017
Infrastructure services(a)
$
22,409
$
8,131
$
21,737
$
100,701
$
20,144
Pressure pumping services(b)
9,632
12,870
8,042
33,774
85,853
Natural sand proppant services(c)
2,132
8,478
3,145
17,935
16,376
Other(d)
8,240
2,100
7,821
39,533
11,480
Total capital expenditures
$
42,413
$
31,579
$
40,745
$
191,943
$
133,853
a.
Capital expenditures primarily for truck, tooling and equipment purchases for new infrastructure crews for periods presented.
b.
Capital expenditures primarily for pressure pumping equipment, including three new fleets, for 2017 and various pressure pumping and water transfer equipment for 2018.
c.
Capital expenditures primarily for the upgrade and expansion of our plants for 2018 and plant upgrades for 2017.
d.
Capital expenditures primarily for equipment for our equipment rental and crude hauling businesses for 2018 and upgrades to our rig fleet and purchase of other equipment for 2017.
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.
Based on its assessment of Financial Accounting Standards Board guidance at December 31, 2018, the Company identified three reportable segments: infrastructure services, pressure pumping services and natural sand proppant services. For the year ended December 31, 2017, the Company identified four reportable segments consisting of infrastructure services, pressure pumping services, natural sand proppant services and contract land and directional drilling services. The Company changed its reportable segment presentation in 2018, as it determined based upon both a quantitative and qualitative basis that the contract land and directional drilling services segment, which previously included Bison Drilling and Field Services LLC, Bison Trucking LLC, Panther Drilling Systems LLC, Mako Acquisitions LLC and White Wing Tubular LLC, is not of continuing significance. The Company now includes the results of the entities previously included in the contract land and directional drilling services segment in its reconciling column titled "All Other" in the tables below. The financial results by segment below for the three months ended September 30, 2018 and the three months and year ended December 31, 2017 have been retroactively adjusted to reflect this change in reportable segments.
On June 5, 2017, the Company completed the acquisition of (1) Sturgeon Acquisitions, LLC and its wholly owned subsidiaries Taylor Frac LLC, Taylor RE, LLC and South River, LLC (collectively, "Sturgeon"), (2) Stingray Energy Services and (3) Stingray Cementing (together with Stingray Energy Services, the “Stingray Acquisition”) in exchange for the issuance by Mammoth of an aggregate of 7,000,000 shares of its common stock.
Prior to the acquisition, the Company and Sturgeon were under common control and it is required under accounting principles generally accepted in the Unites States of America ("GAAP") to account for this common control acquisition in a manner similar to the pooling of interest method of accounting. Therefore, the Company's historical financial information has been recast to combine Sturgeon with the Company as if the acquisition had been completed at commencement of Sturgeon's operations on September 13, 2014.
Conference Call Information
Mammoth will host a conference call on Friday, March 15, 2019 at 10:00 a.m. CDT (11:00 am EDT) to discuss its fourth quarter and full year 2018 financial and operational results. The telephone number to access the conference call is 844-265-1561 in the U.S. and the international dial in is 216-562-0385. The conference ID for the call is 1357129. The conference call will also be webcast live on www.mammothenergy.com in the “Investors” section.
About Mammoth Energy Services, Inc.
Mammoth is an integrated, growth-oriented company serving both the oil and gas and the electric utility industries in North America and US territories. Mammoth's subsidiaries provide a diversified set of drilling and completion services to the exploration and production industry including pressure pumping, coil tubing, natural sand and proppant services as well as trucking, drilling, cementing, water transfer among others. In addition, its infrastructure division provides transmission, distribution and logistics services to various public and private owned utilities throughout the US and Puerto Rico.
For additional information about Mammoth, please visit its website at www.mammothenergy.com, where Mammoth routinely posts announcements, updates, events, investor information and presentations and recent news releases.
Investor Contact: Don Crist Director of Investor Relations dcrist@mammothenergy.com 405-608-6048
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.
MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
December 31,
2018
2017
CURRENT ASSETS
(in thousands)
Cash and cash equivalents
$
67,625
$
5,637
Accounts receivable, net
337,460
243,746
Receivables from related parties
11,164
33,788
Inventories
21,302
17,814
Prepaid expenses
11,317
12,552
Other current assets
688
886
Total current assets
449,556
314,423
Property, plant and equipment, net
436,699
351,017
Sand reserves
71,708
74,769
Intangible assets, net - customer relationships
1,711
9,623
Intangible assets, net - trade names
6,045
6,516
Goodwill
101,245
99,811
Deferred income tax asset
—
6,739
Other non-current assets
6,127
4,345
Total assets
$
1,073,091
$
867,243
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
$
68,843
$
141,306
Payables to related parties
370
1,378
Accrued expenses and other current liabilities
59,652
40,895
Income taxes payable
104,958
36,409
Total current liabilities
233,823
219,988
Long-term debt
—
99,900
Deferred income tax liabilities
79,309
34,147
Asset retirement obligation
3,164
2,123
Other liabilities
2,743
3,289
Total liabilities
319,039
359,447
COMMITMENTS AND CONTINGENCIES
EQUITY
Equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,876,649 and 44,589,306 issued and outstanding at December 31, 2018 and 2017
449
446
Additional paid in capital
530,919
508,010
Retained earnings
226,765
2,001
Accumulated other comprehensive loss
(4,081
)
(2,661
)
Total equity
754,052
507,796
Total liabilities and equity
$
1,073,091
$
867,243
MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
2018
2017
2018
2018
2017
(in thousands, except per share amounts)
REVENUE
Services revenue
$
260,513
$
315,545
$
346,368
$
1,471,085
$
435,409
Services revenue - related parties
9,551
31,639
18,933
118,183
166,064
Product revenue
8,063
18,024
14,955
75,766
47,067
Product revenue - related parties
71
3,755
3,787
25,050
42,956
Total revenue
278,198
368,963
384,043
1,690,084
691,496
COST AND EXPENSES
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $26,999, $25,044 and $27,810, respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $106,282 and $82,686, respectively, for the years ended December 31, 2018 and 2017)
151,273
198,201
216,670
961,205
390,112
Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0 and $0, respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $0 and $0, respectively, for the years ended December 31, 2018 and 2017)
240
707
1,425
5,885
1,408
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $3,136, $2,790 and $4,183, respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $13,512 and $9,389, respectively, for the years ended December 31, 2018 and 2017)
28,797
33,290
29,470
126,714
91,049
Selling, general and administrative
14,283
26,931
(45,761
)
71,199
48,405
Selling, general and administrative - related parties
500
495
437
1,898
1,481
Depreciation, depletion, amortization and accretion
30,159
27,770
32,015
119,877
92,124
Impairment of long-lived assets
4,086
4,146
4,582
8,855
4,146
Total cost and expenses
229,338
291,540
238,838
1,295,633
628,725
Operating income
48,860
77,423
145,205
394,451
62,771
OTHER (EXPENSE) INCOME
Interest expense, net
(533
)
(1,381
)
(458
)
(3,187
)
(4,310
)
Bargain purchase gain, net of tax
—
—
—
—
4,012
Other, net
(1,122
)
28
(400
)
(2,036
)
(677
)
Total other expense
(1,655
)
(1,353
)
(858
)
(5,223
)
(975
)
Income before income taxes
47,205
76,070
144,347
389,228
61,796
(Benefit) provision for income taxes
(21,002
)
10,155
74,835
153,263
2,832
Net income
$
68,207
$
65,915
$
69,512
$
235,965
$
58,964
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment, net of tax of $212, ($167) and ($87), respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $397 and $645, respectively, for the years ended December 31, 2018 and 2017
(961
)
(482
)
327
(1,420
)
555
Comprehensive income
$
67,246
$
65,433
$
69,839
$
234,545
$
59,519
Net income per share (basic)
$
1.52
$
1.48
$
1.55
$
5.27
$
1.42
Net income per share (diluted)
$
1.51
$
1.48
$
1.54
$
5.24
$
1.42
Weighted average number of shares outstanding (basic)
44,845
44,579
44,756
44,750
41,548
Weighted average number of shares outstanding (diluted)
45,048
44,683
45,082
45,021
41,639
Dividends declared per share
$
0.125
—
$
0.125
$
0.25
—
MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended
December 31,
2018
2017
(in thousands)
Cash flows from operating activities:
Net income
$
235,965
$
58,964
Adjustments to reconcile net income to cash provided by operating activities:
Equity based compensation
17,487
—
Stock based compensation
5,425
3,741
Depreciation, depletion, accretion and amortization
119,877
92,124
Amortization of coil tubing strings
2,193
2,855
Amortization of debt origination costs
387
399
Bad debt expense
(14,578
)
16,206
Loss on disposal of property and equipment
947
69
Gain on bargain purchase
—
(4,012
)
Impairment of long-lived assets
8,855
4,146
Deferred income taxes
52,226
(34,425
)
Loss from equity investee
16
—
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net
(78,840
)
(231,751
)
Receivables from related parties
22,624
(1,096
)
Inventories
(5,502
)
(14,238
)
Prepaid expenses and other assets
1,423
(7,628
)
Accounts payable
(64,966
)
101,725
Payables to related parties
(1,008
)
1,174
Accrued expenses and other liabilities
15,445
32,968
Income taxes payable
68,692
36,395
Net cash provided by operating activities
386,668
57,616
Cash flows from investing activities:
Purchases of property and equipment
(187,285
)
(132,295
)
Purchases of property and equipment from related parties
(4,658
)
(1,558
)
Business acquisitions
(20,824
)
(42,008
)
Contributions to equity investee
(702
)
—
Proceeds from disposal of property and equipment
1,514
907
Business combination cash acquired
—
2,671
Net cash used in investing activities
(211,955
)
(172,283
)
Cash flows from financing activities:
Borrowings from lines of credit
77,000
156,850
Repayments of lines of credit
(176,900
)
(56,950
)
Dividends paid
(11,201
)
—
Repayments of equipment financing note
(292
)
—
Debt issuance costs
(1,199
)
—
Repayment of acquisition long-term debt
—
(8,851
)
Net cash (used in) provided by financing activities
(112,592
)
91,049
Effect of foreign exchange rate on cash
(133
)
16
Net change in cash and cash equivalents
61,988
(23,602
)
Cash and cash equivalents at beginning of period
5,637
29,239
Cash and cash equivalents at end of period
$
67,625
$
5,637
Supplemental disclosure of cash flow information:
Cash paid for interest
$
3,212
$
3,656
Cash paid for income taxes
$
32,757
$
840
Supplemental disclosure of non-cash transactions:
Acquisition of Stingray Cementing LLC and Stingray Energy Services LLC
$
—
$
23,091
Purchases of property and equipment included in accounts payable
$
11,908
$
15,038
MAMMOTH ENERGY SERVICES, INC.
SEGMENT INCOME STATEMENTS
(in thousands)
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
Three months ended December 31, 2017
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
209,229
$
111,244
$
21,779
$
26,711
$
—
$
368,963
Intersegment revenues
—
617
22,167
2,154
(24,938
)
—
Total revenue
209,229
111,861
43,946
28,865
(24,938
)
368,963
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
108,289
65,594
33,289
25,026
—
232,198
Intersegment cost of revenues
1,443
22,928
373
159
(24,903
)
—
Total cost of revenue
109,732
88,522
33,662
25,185
(24,903
)
232,198
Selling, general and administrative
20,365
2,810
1,875
2,376
—
27,426
Depreciation, depletion, amortization and accretion
1,805
13,590
2,791
9,584
—
27,770
Impairment of long-lived assets
—
—
324
3,822
—
4,146
Operating income (loss)
77,327
6,939
5,294
(12,102
)
(35
)
77,423
Interest expense, net
168
599
107
507
—
1,381
Other (income) expense, net
(4
)
2
(40
)
14
—
(28
)
Income (loss) before income taxes
$
77,163
$
6,338
$
5,227
$
(12,623
)
$
(35
)
$
76,070
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
Year ended December 31, 2018
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
1,082,371
$
362,491
$
100,816
$
144,406
$
—
$
1,690,084
Intersegment revenues
—
7,001
67,459
5,516
(79,976
)
—
Total revenue
1,082,371
369,492
168,275
149,922
(79,976
)
1,690,084
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
608,017
223,296
126,714
135,777
—
1,093,804
Intersegment cost of revenues
2,583
70,365
6,103
898
(79,949
)
—
Total cost of revenue
610,600
293,661
132,817
136,675
(79,949
)
1,093,804
Selling, general and administrative
27,126
29,761
6,218
9,992
—
73,097
Depreciation, depletion, amortization and accretion
20,516
51,487
13,519
34,355
—
119,877
Impairment of long-lived assets
308
143
—
8,404
—
8,855
Operating income (loss)
423,821
(5,560
)
15,721
(39,504
)
(27
)
394,451
Interest expense, net
423
1,171
234
1,359
—
3,187
Other expense, net
573
434
525
504
—
2,036
Income (loss) before income taxes
$
422,825
$
(7,165
)
$
14,962
$
(41,367
)
$
(27
)
$
389,228
Year ended December 31, 2017
Infrastructure
Pressure Pumping
Sand
All Other
Eliminations
Total
Revenue from external customers
$
224,425
$
277,326
$
90,023
$
99,722
$
—
$
691,496
Intersegment revenues
—
2,026
27,014
2,527
(31,567
)
—
Total revenue
224,425
279,352
117,037
102,249
(31,567
)
691,496
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
120,117
183,089
91,049
88,314
—
482,569
Intersegment cost of revenues
1,443
28,147
1,731
211
(31,532
)
—
Total cost of revenue
121,560
211,236
92,780
88,525
(31,532
)
482,569
Selling, general and administrative
21,606
9,501
8,190
10,589
—
49,886
Depreciation, depletion, amortization and accretion
3,185
45,413
9,394
34,132
—
92,124
Impairment of long-lived assets
—
—
324
3,822
—
4,146
Operating income (loss)
78,074
13,202
6,349
(34,819
)
(35
)
62,771
Interest expense, net
241
1,622
679
1,768
—
4,310
Bargain purchase gain
—
—
(4,012
)
—
—
(4,012
)
Other expense, net
6
129
211
331
—
677
Income (loss) before income taxes
$
77,827
$
11,451
$
9,471
$
(36,918
)
$
(35
)
$
61,796
Adjusted EBITDA
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. Mammoth defines Adjusted EBITDA as net income (loss) before depreciation, depletion, amortization and accretion expense, impairment of long-lived assets, acquisition related costs, public offering costs, equity based compensation, stock based compensation, bargain purchase gain, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets) and provision (benefit) for income taxes. The Company excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within the energy service industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of Mammoth's operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Mammoth's computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company believes that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure its ability to meet debt service requirements.
The following tables provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of net income (loss) on a consolidated basis and for each of the Company's segments (in thousands):
Consolidated
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
Reconciliation of Adjusted EBITDA to net income:
2018
2017
2018
2018
2017
Net income
$
68,207
$
65,915
$
69,512
$
235,965
$
58,964
Depreciation, depletion, accretion and amortization expense
30,159
27,770
32,015
119,877
92,124
Impairment of long-lived assets
4,086
4,146
4,582
8,855
4,146
Acquisition related costs
61
51
99
191
2,506
Public offering costs
(10
)
—
260
982
—
Equity based compensation
—
—
—
17,487
—
Stock based compensation
1,094
1,093
1,415
5,425
3,741
Bargain purchase gain
—
—
—
—
(4,012
)
Interest expense, net
533
1,381
458
3,187
4,310
Other expense (income), net
1,122
(28
)
400
2,036
677
(Benefit) provision for income taxes
(21,002
)
10,155
74,835
153,263
2,832
Adjusted EBITDA
$
84,250
$
110,483
$
183,576
$
547,268
$
165,288
Infrastructure Services
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
Reconciliation of Adjusted EBITDA to net income:
2018
2017
2018
2018
2017
Net income
$
141,875
$
47,873
$
78,405
$
319,940
$
48,537
Depreciation and amortization expense
7,425
1,805
6,591
20,516
3,185
Impairment of long-lived assets
308
—
—
308
—
Acquisition related costs
61
8
—
58
98
Public offering costs
(10
)
—
123
473
—
Stock based compensation
470
316
555
2,089
345
Interest expense
82
168
159
423
241
Other expense (income), net
60
(4
)
181
573
6
(Benefit) provision for income taxes
(75,315
)
29,290
77,612
102,885
29,290
Adjusted EBITDA
$
74,956
$
79,456
$
163,626
$
447,265
$
81,702
Pressure Pumping Services
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
2017
2018
2018
2017
Net income (loss)
$
154
$
6,338
$
2,154
$
(7,165
)
$
11,451
Depreciation and amortization expense
10,952
13,590
12,720
51,487
45,413
Impairment of long-lived assets
—
—
143
143
—
Acquisition related costs
—
—
6
39
1
Public offering costs
—
—
62
264
—
Equity based compensation
—
—
—
17,487
—
Stock based compensation
318
438
423
1,612
1,641
Interest expense
177
599
150
1,171
1,622
Other expense, net
340
2
2
434
129
Adjusted EBITDA
$
11,941
$
20,967
$
15,660
$
65,472
$
60,257
Natural Sand Proppant Services
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
2017
2018
2018
2017
Net (loss) income
$
(6,295
)
$
5,263
$
956
$
14,962
$
9,474
Depreciation, depletion, accretion and amortization expense
3,138
2,791
4,184
13,519
9,394
Impairment of long-lived assets
—
324
—
—
324
Acquisition related costs
—
42
—
(38
)
2,163
Public offering costs
—
—
49
144
—
Stock based compensation
181
184
211
783
708
Bargain purchase gain
—
—
—
—
(4,012
)
Interest expense
40
107
37
234
679
Other expense (income), net
304
(40
)
199
525
211
Benefit for income taxes
—
(36
)
—
—
(4
)
Adjusted EBITDA
$
(2,632
)
$
8,635
$
5,636
$
30,129
$
18,937
Other Services(a)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
2017
2018
2018
2017
Net (loss) income
$
(67,500
)
$
6,476
$
(11,993
)
$
(91,745
)
$
(10,464
)
Depreciation and amortization expense
8,644
9,584
8,520
34,355
34,132
Impairment of long-lived assets
3,778
3,822
4,439
8,404
3,822
Acquisition related costs
—
1
93
132
244
Public offering costs
—
—
26
101
—
Stock based compensation
125
155
226
941
1,047
Interest expense, net
234
507
112
1,359
1,768
Other expense, net
418
14
18
504
331
Provision (benefit) for income taxes
54,313
(19,099
)
(2,777
)
50,378
(26,454
)
Adjusted EBITDA
$
12
$
1,460
$
(1,336
)
$
4,429
$
4,426
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.
Adjusted Net Income and Adjusted Earnings per Share
Adjusted net income and adjusted earnings per share are supplemental non-GAAP financial measures that are used by management to evaluate the Company's operating and financial performance. Management believes these measures provide meaningful information about the Company's performance by excluding certain non-cash charges that may not be indicative of the Company's ongoing operating results, such as equity based compensation, that may not be indicative of the Company's ongoing operating results. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for net income and earnings per share prepared in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The following tables provide a reconciliation of adjusted net income and adjusted earnings per share to the GAAP financial measures of net income and earnings per share for the periods specified.
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
2018
2017
2018
2018
2017
(in thousands, except per share amounts)
Net income, as reported
$
68,207
$
65,915
$
69,512
$
235,965
$
58,964
Equity based compensation
—
—
—
17,487
—
Adjusted net income
$
68,207
$
65,915
$
69,512
$
253,452
$
58,964
Basic earnings per share, as reported
$
1.52
$
1.48
$
1.55
$
5.27
$
1.42
Equity based compensation
—
—
—
0.39
—
Adjusted basic earnings per share
$
1.52
$
1.48
$
1.55
$
5.66
$
1.42
Diluted earnings per share, as reported
$
1.51
$
1.48
$
1.54
$
5.24
$
1.42
Equity based compensation
—
—
—
0.39
—
Adjusted diluted earnings per share
$
1.51
$
1.48
$
1.54
$
5.63
$
1.42
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
December 31,
2018
2017
2016
(in thousands)
Net income
$
235,965
$
58,964
Capital Employed
Total debt
$
—
$
99,900
$
—
Total equity
754,052
507,796
422,781
Total capital employed
$
754,052
$
607,696
$
422,781
Average capital employed(a)
$
680,874
$
515,239
After tax return on invested capital(b)
35
%
11
%
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.
