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


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Source: Mammoth Energy Services, Inc.

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

Financial Highlights for the Third Quarter 2020:

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

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

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

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

Infrastructure Services

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

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

Pressure Pumping Services

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

Natural Sand Proppant Services

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

Drilling Services

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

Other Services

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

Selling, General and Administrative Expenses

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

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

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

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

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

Liquidity

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

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

Capital Expenditures

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

Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2020 2019 2020 2020 2019
Infrastructure services(a) $ 178 $ 122 $ 43 $ 298 $ 5,553
Pressure pumping services(b) 698 2,963 2,450 3,752 14,305
Natural sand proppant services(c) 194 728 354 1,069 2,703
Drilling services(d) 131 146 72 211 3,073
Other(e) 324 711 5 619 9,256
Total capital expenditures $ 1,525 $ 4,670 $ 2,924 $ 5,949 $ 34,890

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

Explanatory Note Regarding Financial Information

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

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

Conference Call Information

Mammoth will host a conference call on Thursday, October 29, 2020 at 4:00 p.m. CDT (5:00 p.m. EDT) to discuss its third quarter 2020 financial and operational results. The telephone number to access the conference call is 844-265-1561 in the U.S. and the international dial in is 216-562-0385. The conference ID for the call is 2595308. The conference call will also be webcast live on www.mammothenergy.com in the “Investors” section.

About Mammoth Energy Services, Inc.

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

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

Investor Contact:
Don Crist
Director of Investor Relations
[email protected]
405-608-6048

Media Contact:
Peter Mirijanian
[email protected]
(202) 464-8803

Forward-Looking Statements and Cautionary Statements

This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) contains certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts that address activities, events or developments that Mammoth expects, believes or anticipates will or may occur in the future are forward-looking statements. The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely” and similar expressions, and the negative thereof, are intended to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company’s business outlook and plans, future financial position, liquidity and capital resources, operations, performance, acquisitions, returns, capital expenditure budgets, costs and other guidance regarding future developments. Forward-looking statements are not assurances of future performance. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for the Company’s existing operations, experience and perception of historical trends, current conditions, anticipated future developments and their effect on Mammoth, and other factors believed to be appropriate. Although management believes that the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Moreover, the Company’s forward-looking statements are subject to significant risks and uncertainties, including those described in its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings it makes with the SEC, including those relating to the Company’s acquisitions and contracts, many of which are beyond the Company’s control, which may cause actual results to differ materially from historical experience and present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the severity and duration of the COVID-19 pandemic, related global and national health concerns and economic repercussions and the resulting negative impact on demand for our services; the current significant surplus in the supply of oil and the ability of the OPEC+ countries to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the oil and gas industry currently resulting from the impact of the foregoing factors, which is negatively impacting our business; operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; the failure to receive or delays in receiving governmental authorizations, approvals and/or payments; the outcome of ongoing government investigations and other legal proceedings, including those relating to the contracts awarded to the Company’s subsidiary Cobra Acquisitions LLC by the Puerto Rico Electric Power Authority and contracts for our pressure pumping services and natural sand proppant services; the Company’s inability to replace the prior levels of work in its business segments, including its infrastructure and pressure pumping segments; risks relating to economic conditions; the loss of or interruption in operations of one or more key suppliers or customers; the effects of government regulation, permitting and other legal requirements; operating risks; the adequacy of capital resources and liquidity; weather; natural disasters; litigation; competition in the oil and natural gas and infrastructure industries; and costs and availability of resources.

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

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS

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

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

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

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

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

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

Three months ended September 30, 2020 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 44,009 $ 15,738 $ 6,031 $ 1,193 $ 3,563 $ $ 70,534
Intersegment revenues 53 26 672 (751 )
Total revenue 44,009 15,791 6,031 1,219 4,235 (751 ) 70,534
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 29,074 6,881 3,784 1,964 4,226 45,929
Intersegment cost of revenues 162 449 26 114 (751 )
Total cost of revenue 29,236 7,330 3,810 1,964 4,340 (751 ) 45,929
Selling, general and administrative 7,377 1,744 1,033 382 1,644 12,180
Depreciation, depletion, amortization and accretion 7,589 7,196 2,693 2,323 3,331 23,132
Operating loss (193 ) (479 ) (1,505 ) (3,450 ) (5,080 ) (10,707 )
Interest expense, net 628 269 54 60 87 1,098
Other (income) expense, net (9,204 ) (1,156 ) 1,792 20 (494 ) (9,042 )
Income (loss) before income taxes $ 8,383 $ 408 $ (3,351 ) $ (3,530 ) $ (4,673 ) $ $ (2,763 )
Three months ended September 30, 2019 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 37,289 $ 43,887 $ 12,634 $ 6,065 $ 13,542 $ $ 113,417
Intersegment revenues 725 5,727 58 417 (6,927 )
Total revenue 37,289 44,612 18,361 6,123 13,959 (6,927 ) 113,417
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 36,940 33,059 18,547 7,203 15,385 111,134
Intersegment cost of revenues 6,054 326 185 362 (6,927 )
Total cost of revenue 36,940 39,113 18,873 7,388 15,747 (6,927 ) 111,134
Selling, general and administrative 7,322 3,669 1,314 910 1,208 14,423
Depreciation, depletion, amortization and accretion 7,953 10,176 4,022 3,096 4,544 29,791
impairment of goodwill 3,194 3,194
Impairment of other long-lived assets 3,348 3,348
Operating loss (14,926 ) (8,346 ) (5,848 ) (5,271 ) (14,082 ) (48,473 )
Interest expense, net 599 316 43 220 220 1,398
Other (income) expense, net (6,239 ) (3 ) 99 (100 ) (125 ) (6,368 )
Loss before income taxes $ (9,286 ) $ (8,659 ) $ (5,990 ) $ (5,391 ) $ (14,177 ) $ $ (43,503 )
Three months ended June 30, 2020 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 30,579 $ 16,125 $ 6,237 $ 1,250 $ 5,918 $ $ 60,109
Intersegment revenues 446 25 580 (1,051 )
Total revenue 30,579 16,571 6,237 1,275 6,498 (1,051 ) 60,109
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 25,368 8,744 6,025 2,027 6,589 48,753
Intersegment cost of revenues 27 333 28 21 642 (1,051 )
Total cost of revenue 25,395 9,077 6,053 2,048 7,231 (1,051 ) 48,753
Selling, general and administrative 8,037 1,477 1,357 1,331 1,524 13,726
Depreciation, depletion, amortization and accretion 7,816 7,685 2,348 2,700 3,567 24,116
Operating loss (10,669 ) (1,668 ) (3,521 ) (4,804 ) (5,824 ) (26,486 )
Interest expense, net 720 346 53 143 209 1,471
Other (income) expense, net (7,809 ) (1,179 ) (2 ) (298 ) 18 (9,270 )
Loss before income taxes $ (3,580 ) $ (835 ) $ (3,572 ) $ (4,649 ) $ (6,051 ) $ $ (18,687 )
Nine months ended September 30, 2020 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 100,294 $ 74,549 $ 22,421 $ 7,166 $ 23,596 $ $ 228,026
Intersegment revenues 1,435 95 107 2,026 (3,663 )
Total revenue 100,294 75,984 22,516 7,273 25,622 (3,663 ) 228,026
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 81,389 41,833 20,465 9,627 23,274 176,588
Intersegment cost of revenues 197 1,410 355 151 1,550 (3,663 )
Total cost of revenue 81,586 43,243 20,820 9,778 24,824 (3,663 ) 176,588
Selling, general and administrative 19,711 5,443 3,641 2,777 5,105 36,677
Depreciation, depletion, amortization and accretion 23,339 23,373 7,353 7,900 11,165 73,130
Impairment of goodwill 53,406 1,567 54,973
Impairment of other long-lived assets 4,203 326 8,368 12,897
Operating loss (24,342 ) (53,684 ) (9,298 ) (13,508 ) (25,407 ) (126,239 )
Interest expense, net 2,105 907 167 473 555 4,207
Other (income) expense, net (24,289 ) (2,444 ) 1,753 (251 ) (490 ) (25,721 )
Loss before income taxes $ (2,158 ) $ (52,147 ) $ (11,218 ) $ (13,730 ) $ (25,472 ) $ $ (104,725 )
Nine months ended September 30, 2019 Infrastructure Pressure
Pumping
Sand Drilling All Other Eliminations Total
Revenue from external customers $ 187,831 $ 217,456 $ 66,820 $ 27,091 $ 58,177 $ $ 557,375
Intersegment revenues 3,936 29,795 484 1,870 (36,085 )
Total revenue 187,831 221,392 96,615 27,575 60,047 (36,085 ) 557,375
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 140,768 157,106 81,475 29,030 59,841 468,220
Intersegment cost of revenues 1 31,388 2,513 686 1,557 (36,145 )
Total cost of revenue 140,769 188,494 83,988 29,716 61,398 (36,145 ) 468,220
Selling, general and administrative 19,874 9,544 4,214 3,117 4,464 41,213
Depreciation, depletion, amortization and accretion 23,490 30,244 11,423 9,866 13,489 88,512
Impairment of goodwill 3,194 3,194
Impairment of other long-lived assets 3,348 3,348
Operating income (loss) 3,698 (6,890 ) (3,010 ) (15,124 ) (25,846 ) 60 (47,112 )
Interest expense, net 1,024 965 145 679 659 3,472
Other (income) expense, net (35,108 ) 5 67 (122 ) 214 (34,944 )
Income (loss) before income taxes $ 37,782 $ (7,860 ) $ (3,222 ) $ (15,681 ) $ (26,719 ) $ 60 $ (15,640 )

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

Adjusted EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s financial statements, such as industry analysts, investors, lenders and rating agencies. Mammoth defines Adjusted EBITDA as net income (loss) before depreciation, depletion, amortization and accretion expense, impairment of goodwill, impairment of other long-lived assets, inventory obsolescence charges, acquisition related costs, stock based compensation, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets and interest on trade accounts receivable) and provision (benefit) for income taxes, further adjusted to add back interest on trade accounts receivable. The Company excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within the energy service industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of Mammoth’s operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets. Mammoth’s computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company believes that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure its ability to meet debt service requirements.

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

Consolidated

Three Months Ended Nine Months Ended
September 30, June 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2020 2019 2020 2020 2019
Net income (loss) $ 3,430 $ (35,709 ) $ (15,205 ) $ (95,746 ) $ (18,265 )
Depreciation, depletion, amortization and accretion expense 23,132 29,791 24,116 73,130 88,512
Impairment of goodwill 3,194 54,973 3,194
Impairment of other long-lived assets 3,348 12,897 3,348
Inventory obsolescence charges 1,349 1,349
Acquisition related costs 45
Stock based compensation 353 1,134 196 1,598 3,367
Interest expense, net 1,098 1,398 1,471 4,207 3,472
Other income, net (9,042 ) (6,368 ) (9,270 ) (25,721 ) (34,944 )
(Benefit) provision for income taxes (6,193 ) (7,794 ) (3,482 ) (8,979 ) 2,625
Interest on trade accounts receivable 9,285 5,896 9,071 26,052 34,865
Adjusted EBITDA $ 22,063 $ (3,761 ) $ 6,897 $ 42,411 $ 87,568

Infrastructure Services

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

Pressure Pumping Services

Three Months Ended Nine Months Ended
September 30, June 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2020 2019 2020 2020 2019
Net income (loss) $ 408 $ (8,659 ) $ (835 ) $ (52,149 ) $ (7,860 )
Depreciation and amortization expense 7,196 10,176 7,685 23,373 30,244
Impairment of goodwill 53,406
Impairment of other long-lived assets 4,203
Acquisition related costs 18
Stock based compensation 77 503 53 465 1,402
Interest expense 269 316 346 907 965
Other (income) expense, net (1,156 ) (3 ) (1,179 ) (2,444 ) 5
Interest on trade accounts receivable 1,073 1,133 2,205
Adjusted EBITDA $ 7,867 $ 2,333 $ 7,203 $ 29,966 $ 24,774

Natural Sand Proppant Services

Three Months Ended Nine Months Ended
September 30, June 30, September 30,
Reconciliation of Adjusted EBITDA to net loss: 2020 2019 2020 2020 2019
Net loss $ (3,351 ) $ (5,990 ) $ (3,572 ) $ (11,218 ) $ (3,222 )
Depreciation, depletion, amortization and accretion expense 2,693 4,022 2,348 7,353 11,423
Acquisition related costs 8
Stock based compensation 76 216 45 347 656
Interest expense 54 43 53 167 145
Other expense (income), net 1,792 99 (2 ) 1,753 67
Interest on trade accounts receivable 26 26
Adjusted EBITDA $ 1,290 $ (1,610 ) $ (1,128 ) $ (1,572 ) $ 9,077

Drilling Services

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

Other Services(a)

Three Months Ended Nine Months Ended
September 30, June 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2020 2019 2020 2020 2019
Net income (loss) $ 3,165 $ (4,905 ) $ (1,620 ) $ (11,407 ) $ (22,674 )
Depreciation, amortization and accretion expense 3,331 4,544 3,567 11,165 13,489
Impairment of goodwill 3,194 1,567 3,194
Impairment of other long-lived assets 3,348 8,368 3,348
Inventory obsolescence charges 1,349 1,349
Acquisition related costs 5
Stock based compensation 21 107 19 183 341
Interest expense, net 87 220 209 555 659
Other (income) expense, net (494 ) (125 ) 18 (490 ) 214
Benefit for income taxes (7,838 ) (9,272 ) (4,431 ) (14,064 ) (4,045 )
Interest on trade accounts receivable 16 9 25
Adjusted EBITDA $ (1,712 ) $ (1,540 ) $ (2,229 ) $ (4,098 ) $ (4,120 )
  1. Includes results for Mammoth’s coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation and remote accommodations, oilfield equipment manufacturing and infrastructure engineering and design services and corporate related activities. The Company’s corporate related activities do not generate revenue.

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

Adjusted net income (loss) and adjusted basic and diluted earnings (loss) per share are supplemental non-GAAP financial measures that are used by management to evaluate the Company’s operating and financial performance. Management believes these measures provide meaningful information about the Company’s performance by excluding certain non-cash charges, such as impairment of goodwill and impairment of other long-lived assets, that may not be indicative of the Company’s ongoing operating results. Adjusted net income (loss) and adjusted earnings (loss) per share should not be considered in isolation or as a substitute for net income (loss) and earnings (loss) per share prepared in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The following tables provide a reconciliation of adjusted net income (loss) and adjusted earnings (loss) per share to the GAAP financial measures of net income (loss) and earnings (loss) per share for the periods specified.

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

 



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