NexTier Announces First Quarter 2023 Financial and Operational Results
NexTier Oilfield Solutions reported robust financial results for Q1 2023, with total revenue of $935.7 million, marking a 7% increase from Q4 2022. The net income surged to $254 million, or $1.07 per diluted share, boosted by a non-cash tax benefit of $107.4 million. Adjusted net income rose to $156.4 million, or $0.66 per diluted share. The company repurchased 5.9 million shares for $53.4 million in Q1 2023, totaling 17.4 million shares since the repurchase program began. Management expects continued revenue growth and strong demand for services in oil basins, forecasting a free cash flow of approximately $500 million for the year.
- Total revenue increased 7% to $935.7 million in Q1 2023 compared to Q4 2022.
- Net income rose to $254 million, or $1.07 per diluted share, reflecting strong operational performance.
- Share repurchase program resulted in the buyback of 5.9 million shares for $53.4 million in Q1 2023.
- Adjusted net income increased to $156.4 million, or $0.66 per diluted share, in Q1 2023.
- Forecasting approximately $500 million in free cash flow for 2023.
- Revenue from Well Construction and Intervention Services decreased to $40.1 million in Q1 2023 from $41.1 million in Q4 2022.
- Selling, General and Administrative expenses increased to $39.7 million in Q1 2023 from $36.9 million in Q4 2022.
Shareholder return program
- Repurchased 5.9 million shares for
$53.4 million - Through Q1, repurchased a total of 17.4 million shares for
$166.4 million 7% of shares outstanding prior to commencement of the program inOctober 2022
First Quarter 2023 Results and Recent Highlights
- Total revenue of
$935.7 million 7% sequential increase - Net income of
$254.0 million $1.07 $133.0 million $0.54 $107.4 million - Adjusted net income(1) of
$156.4 million $0.66 $145.8 million $0.59 - Adjusted EBITDA(1) of
$227.6 million $212.7 million - Net cash from operations of
$173.3 million $76.3 million - Exited first quarter of 2023 with total liquidity of
$630.5 million $218.5 million
Management Commentary
"As anticipated, the first quarter for NexTier was very strong. We delivered another quarter of improved operational and financial performance, demonstrating both the resiliency and consistency of our strategy," commented
"We once again saw our returns step higher, while generating meaningful free cash flow despite normal seasonal working capital headwinds," said
First Quarter 2023 Financial Results
Revenue totaled
Net income totaled
Selling, general and administrative expense ("SG&A") of
Adjusted EBITDA totaled
First Quarter 2023 Management Adjustments
EBITDA(1) for the first quarter of 2023 was
Adjusted net income of
Completion Services
Revenue in our Completion Services segment totaled
Revenue in our
Balance Sheet and Capital
Total debt outstanding as of
Total cash provided by operating activities during the first quarter of 2023 was
Outlook
For the second quarter of 2023, we expect moderate sequential revenue growth, with adjusted EBITDA expected to improve once again. We expect our frac equipment to remain sold out, with strong demand for our services continuing in oil basins. Given very high industry frac equipment utilization and the widening service quality bifurcation we are seeing amongst our peer group, we do not anticipate that we will have a need to change our pricing strategy.
Consistent with prior guidance, our 2023 capital expenditure budget remains within our guide at 8
We expect to generate approximately
Conference Call Information
On April, 26, 2023, NexTier will hold a conference call for investors at
About
Headquartered in
(1) | Non-GAAP Financial Measures. The Company has included in this press release or discussed on the conference call described above certain non-GAAP financial measures, some of which are calculated on segment basis or product line basis. These measurements provide supplemental information which management believes is useful to analysts and investors to evaluate our ongoing results of operations, when considered alongside GAAP measures such as net income and operating income. You should not consider them in isolation from, or as a substitute for, analysis of our results under GAAP. |
Non-GAAP financial measures include EBITDA, adjusted EBITDA, adjusted gross profit, adjusted net income, adjusted net income per share, free cash flow, adjusted SG&A, net debt, invested capital, average invested capital, return on invested capital, annualized return on invested capital, and adjusted annualized return on invested capital. These non-GAAP financial measures exclude the financial impact of items management does not consider in assessing the Company's ongoing operating performance, and thereby facilitate review of the Company's operating performance on a period-to-period basis. Other companies may have different capital structures, and comparability to the Company's results of operations may be impacted by the effects of acquisition accounting on its depreciation and amortization. As a result of the effects of these factors and factors specific to other companies, the Company believes EBITDA, adjusted EBITDA, adjusted gross profit, adjusted net income, adjusted net income per share, and adjusted SG&A provide helpful information to analysts and investors to facilitate a comparison of its operating performance to that of other companies. Management also uses adjusted EBITDA to set targets and to assess the performance of the Company. The Company believes free cash flow, and net debt provide investors a useful measure to assess management's effectiveness in the areas of profitability and capital management. Invested capital, average invested capital, return on invested capital, annualized return on invested capital, and adjusted annualized return on invested capital are presented based on the Company's belief that these non-GAAP measures are useful information to investors and management when comparing profitability and the efficiency with which capital has been employed over time relative to other companies. | |
For a reconciliation of these non-GAAP measures, please see the tables at the end of this press release. Reconciliations of forward-looking non-GAAP financial measures to comparable GAAP measures are not available due to the challenges and impracticability with estimating some of the items, particularly with estimates for certain contingent liabilities, and estimating non-cash unrealized fair value losses and gains which are subject to market variability and therefore a reconciliation is not available without unreasonable effort. | |
Non-GAAP Measure Definitions: EBITDA is defined as net income adjusted to eliminate the impact of interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA as further adjusted with certain items management does not consider in assessing ongoing performance. Adjusted gross profit is defined as revenue less cost of services, further adjusted to eliminate items in cost of services that management does not consider in assessing ongoing performance. Adjusted net income is defined as net income adjusted with certain items management does not consider in assessing ongoing performance. Adjusted net income per share is defined as (i) adjusted net income, (ii) divided by the number of weighted average shares outstanding. Free cash flow is defined as the net increase (decrease) in cash and cash equivalents before financing activities, excluding any acquisitions. Adjusted SG&A is defined as selling, general and administrative expenses adjusted for non-cash stock compensation and other non-routine items. Net debt is defined as (i) total debt, net of unamortized debt discount and unamortized deferred financing costs, (ii) subtracting cash and cash equivalents. Invested capital is defined as the sum of (a) long-term operating lease liabilities, less current maturities, (b) plus long-term finance lease liabilities, less current maturities, (c) plus long-term debt, net of unamortized deferred financing cost and unamortized debt discounts, less current maturities (d) plus total stockholder's equity. Average invested capital is defined as the average of the beginning and ending invested capital. Return on invested capital is defined as (i) net income, (ii) divided by average invested capital during the period. Annualized return on invested capital is defined as (i) annualized net income for a given quarter (ii) divided by average invested capital during the period. Adjusted annualized return on invested capital is defined as (i) annualized adjusted net income for a given quarter, (ii) divided by average invested capital during the period. |
Forward-Looking Statements and Where to Find Additional Information
This press release and discussion in the conference call described above contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company's control. Statements in this press release or made during the conference call described above, including guidance for 2023 and beyond and other outlook information (including with respect to the industry in which NexTier conducts its business), statements regarding our future operating results, financial position, business strategy, plans and objectives of management for future operations, and expectation regarding the capabilities and impact of our products and services on our operating results and financial position, are forward-looking statements within the meaning of the PSLRA. Statements of assumptions underlying or relating to our forward-looking statements are also forward-looking statements. Where a forward-looking statement expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. The words "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "forecast," "future," "goal," "intend," "may," "outlook," "plan," "potential," "predict," "project," "reflect," "see," "should," "target," "will," and "would," or the negative or plural thereof, and similar expressions, are intended to identify such forward-looking statements. Any forward-looking statements contained in this presentation or in oral statements made in connection with this presentation speak only as of the date on which we make them and are based upon our historical performance and on current plans, estimates and expectations. These factors and risks include, but are not limited to, (i) NexTier's business strategy, plans, objectives, expectations and intentions; (ii) NexTier's future operating results; (iii) dependence on capital spending and well completion by the onshore oil and natural gas industry and demand for services in the industry in which NexTier conducts its business; (iv) the variability of crude oil and natural gas commodity prices; (v) changing regional, national or global economic conditions, including oil and gas supply and demand and the impact of geopolitical conditions on those prices; (vi) the competitive nature of the industry in which NexTier conducts its business, including pricing pressures; (vii) the impact of pipeline capacity constraints and adverse weather conditions in oil or gas producing regions; (viii) the effect of government regulation, including regulations of hydraulic fracturing, and the operating hazards of NexTier's business; (ix) the effect of a loss of, or the financial distress of, or interruption in operations of one or more NexTier suppliers, materials or customers; (x) the ability to maintain the right level of commitments under NexTier's supply agreements; (xi) impact of new technology on NexTier's business; (xii) impact of any legal proceedings, liability claims and external investigations; (xiii) the ability to obtain permits, approvals and authorizations from governmental and third parties; (xiv) the ability to identify, effect and integrate acquisitions, divestitures and future capital expenditures and the impact of such transactions; (xv) environmental, social, and governance matters, including investor focus and industry perception; (xvi) the ability to employ a sufficient number of skilled and qualified workers; (xvii) the ability to service debt obligations and access capital; (xviii) the market volatility of our stock; (xix) the impact of our stock buyback program, (xx) our ability to maintain effective information technology systems and the impact of cybersecurity incidents on our business, (xxi) the impact of inflation on our business, and (xxii) other risks detailed in NexTier's latest Annual Report on Form 10-K, including, but not limited to "Part I, Item 1A. Risk Factors" and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," and our other filings with the
Additional information about the Company can be found in its periodic reports and other filings with the
Investor Contact:
Executive Vice President - Chief Financial Officer
Vice President - Investor Relations and Business Development
michael.sabella@nextierofs.com
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, amounts in thousands, except per share data) | ||||
Three Months Ended | ||||
Revenue | $ 935,672 | $ 870,857 | ||
Operating costs and expenses: | ||||
Cost of services | 673,944 | 632,890 | ||
Depreciation and amortization | 58,645 | 58,760 | ||
Selling, general and administrative expenses | 39,681 | 36,867 | ||
Merger and integration | 161 | 3,000 | ||
Loss (gain) on disposal of assets | 3,770 | (4,456) | ||
Total operating costs and expenses | 776,201 | 727,061 | ||
Operating income | 159,471 | 143,796 | ||
Other expense: | ||||
Other expense, net | (280) | (2,697) | ||
Interest expense, net | (6,198) | (6,514) | ||
Total other expense | (6,478) | (9,211) | ||
Income before income taxes | 152,993 | 134,585 | ||
Income tax benefit (expense)(1) | 101,000 | (1,600) | ||
Net income | $ 253,993 | $ 132,985 | ||
Net income per share: basic | $ 1.09 | $ 0.55 | ||
Net income per share: diluted | $ 1.07 | $ 0.54 | ||
Weighted-average shares: basic | 233,158 | 241,519 | ||
Weighted-average shares: diluted | 237,072 | 247,980 | ||
(1) | During the three months ended | |||
CONSOLIDATED BALANCE SHEETS (amounts in thousands) | ||||
(Unaudited) | ||||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ 218,501 | $ 218,476 | ||
Trade and other accounts receivable, net | 487,905 | 397,197 | ||
Inventories, net | 66,261 | 66,395 | ||
Prepaid and other current assets | 40,936 | 43,947 | ||
Total current assets | 813,603 | 726,015 | ||
Operating lease right-of-use assets | 26,471 | 18,659 | ||
Finance lease right-of-use assets | 79,324 | 43,714 | ||
Property and equipment, net | 764,310 | 679,513 | ||
192,780 | 192,780 | |||
Intangible assets | 48,395 | 50,586 | ||
Deferred income taxes | 107,426 | — | ||
Other noncurrent assets | 13,611 | 15,901 | ||
Total assets | $ 2,045,920 | $ 1,727,168 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Accounts payable | $ 335,417 | $ 202,936 | ||
Accrued expenses | 234,379 | 281,715 | ||
Customer contract liabilities | 19,377 | 19,377 | ||
Current maturities of operating lease liabilities | 8,588 | 6,083 | ||
Current maturities of finance lease liabilities | 54,409 | 19,855 | ||
Current maturities of long-term debt | 14,086 | 14,004 | ||
Other current liabilities | 7,572 | 9,368 | ||
Total current liabilities | 673,828 | 553,338 | ||
Long-term operating lease liabilities, less current maturities | 17,267 | 13,267 | ||
Long-term finance lease liabilities, less current maturities | 10,172 | 11,925 | ||
Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities | 343,895 | 347,425 | ||
Other non-current liabilities | 12,642 | 11,294 | ||
Total non-current liabilities | 383,976 | 383,911 | ||
Total liabilities | 1,057,804 | 937,249 | ||
Stockholders' equity: | ||||
Common stock | 2,305 | 2,340 | ||
Paid-in capital in excess of par value | 952,951 | 1,007,492 | ||
Retained earnings (deficit) | 27,798 | (226,195) | ||
Accumulated other comprehensive income | 5,062 | 6,282 | ||
Total stockholders' equity | 988,116 | 789,919 | ||
Total liabilities and stockholders' equity | $ 2,045,920 | $ 1,727,168 | ||
ADDITIONAL SELECTED FINANCIAL AND OPERATING DATA (unaudited, amounts in thousands) | |||||
Three Months Ended | |||||
Completion Services: | |||||
Revenue | $ 895,564 | $ 829,800 | |||
Cost of services | 642,929 | 602,326 | |||
Depreciation and amortization and (gain) loss on sale of assets, net | 58,823 | 50,194 | |||
Net income | 193,812 | 177,280 | |||
Adjusted gross profit(1) | $ 252,635 | $ 227,474 | |||
Revenue | $ 40,108 | $ 41,057 | |||
Cost of services | 31,015 | 30,564 | |||
Depreciation and amortization and (gain) loss on sale of assets, net | 603 | 699 | |||
Net income | 8,490 | 9,794 | |||
Adjusted gross profit(1) | $ 9,093 | $ 10,493 | |||
(1) | The Company uses adjusted gross profit as its measure of profitability for segment reporting. | ||||
NON-GAAP FINANCIAL MEASURES (unaudited, amounts in thousands) | ||||
Three Months Ended | ||||
Net income | $ 253,993 | 132,985 | ||
Interest expense, net | 6,198 | 6,514 | ||
Income tax (benefit) expense | (101,000) | 1,600 | ||
Depreciation and amortization | 58,645 | 58,760 | ||
EBITDA | $ 217,836 | 199,859 | ||
Plus management adjustments: | ||||
Acquisition, integration and expansion(1) | $ 161 | 3,000 | ||
Non-cash stock compensation(2) | 8,853 | 7,114 | ||
Divestiture of business(3) | 547 | (27) | ||
Loss on equity security investment(4) | — | 196 | ||
Insurance recovery, net(5) | 204 | 2,480 | ||
Other | 22 | 67 | ||
Adjusted EBITDA | $ 227,623 | $ 212,689 | ||
(1) | Represents transaction and integration costs, including earnout payments, related to acquisitions. | |||
(2) | Represents non-cash amortization of equity awards issued under the Company's Incentive Award Plan. | |||
(3) | Represents bad debt expense on the sale of the | |||
(4) | Represents a realized loss on an equity security investment composed primarily of common equity shares in a public company. | |||
(5) | Represents losses associated with assets that were damaged in the fire that occurred in the third quarter of 2022 and ultimately could not be repaired or recovered. | |||
NON-GAAP FINANCIAL MEASURES (unaudited, amounts in thousands) | ||||||
Three Months Ended | ||||||
Selling, general and administrative expenses | $ 39,681 | $ 36,867 | ||||
Less management adjustments: | ||||||
Non-cash stock compensation | (8,853) | (7,114) | ||||
Divestiture of business | (547) | 27 | ||||
Other | (22) | (67) | ||||
Adjusted selling, general and administrative expenses | $ 30,259 | $ 29,713 | ||||
Three Months Ended | ||||||
Completion | WC&I | Total | ||||
Revenue | $ 895,564 | $ 40,108 | $ 935,672 | |||
Cost of services | 642,929 | 31,015 | 673,944 | |||
Gross profit excluding depreciation and amortization | 252,635 | 9,093 | 261,728 | |||
Management adjustments associated with cost of services | — | — | — | |||
Adjusted gross profit | $ 252,635 | $ 9,093 | $ 261,728 | |||
Three Months Ended | ||||||
Completion | WC&I | Total | ||||
Revenue | $ 829,800 | $ 41,057 | $ 870,857 | |||
Cost of services | 602,326 | 30,564 | 632,890 | |||
Gross profit excluding depreciation and amortization | 227,474 | 10,493 | 237,967 | |||
Management adjustments associated with cost of services | — | — | — | |||
Adjusted gross profit | $ 227,474 | $ 10,493 | $ 237,967 | |||
NON-GAAP FINANCIAL MEASURES (unaudited, amounts in thousands) | ||||
Three Months Ended | ||||
Net cash provided by operating activities | $ 173,253 | $ 144,070 | ||
Net cash used in investing activities: | ||||
Capital expenditures | (99,121) | (79,478) | ||
Proceeds from disposal of assets | 2,102 | 14,129 | ||
Proceeds from insurance recoveries | 104 | 14,506 | ||
Net cash used in investing activities | (96,915) | (50,843) | ||
Free cash flow | $ 76,338 | $ 93,227 | ||
Three Months Ended | ||||
Total debt, net of unamortized debt discount and debt issuance costs | $ 357,981 | $ 361,429 | ||
Cash and cash equivalents | 218,501 | 218,476 | ||
Net debt | $ 139,480 | $ 142,953 | ||
NON-GAAP FINANCIAL MEASURES (unaudited, amounts in thousands, except per share data) | ||||
Three Months Ended | ||||
Net income | $ 253,993 | $ 132,985 | ||
Plus management adjustments: | ||||
Acquisition, integration and expansion(1) | $ 161 | $ 3,000 | ||
Non-cash stock compensation(2) | 8,853 | 7,114 | ||
Divestiture of business(3) | 547 | (27) | ||
Loss on equity security investment(4) | — | 196 | ||
Insurance recovery, net(5) | 204 | 2,480 | ||
Income tax benefit(6) | (107,426) | — | ||
Other | 22 | 67 | ||
Adjusted net income | $ 156,354 | $ 145,815 | ||
Adjusted net income per share: basic | $ 0.67 | $ 0.60 | ||
Adjusted net income per share: diluted | $ 0.66 | $ 0.59 | ||
Weighted-average shares: basic | 233,158 | 241,519 | ||
Weighted-average shares: diluted | 237,072 | 247,980 | ||
(1) | Represents transaction and integration costs, including earnout payments, related to acquisitions. | |||
(2) | Represents non-cash amortization of equity awards issued under the Company's Incentive Award Plan. | |||
(3) | Represents bad debt expense on the sale of the | |||
(4) | Represents a realized loss on an equity security investment composed primarily of common equity shares in a public company. | |||
(5) | Represents losses associated with assets that were damaged in the fire that occurred in the third quarter of 2022 and ultimately could not be repaired or recovered. | |||
(6) | Represents tax benefit recognized by the Company related to the partial release of a valuation allowance on our deferred tax asset. This release reflects improved market conditions and the Company's expectation to utilize these deferred tax assets in the coming years. | |||
NON-GAAP FINANCIAL MEASURES (unaudited, amounts in thousands) | ||||
Three Months Ended | ||||
Net income | $ 253,993 | |||
Annualized net income | 1,015,972 | |||
Adjusted net income | 156,354 | |||
Annualized adjusted net income | $ 625,416 | |||
Long-term operating lease liabilities, less current maturities | 17,267 | 13,267 | ||
Long-term finance lease liabilities, less current maturities | 10,172 | 11,925 | ||
Long-term debt, net of unamortized deferred financing costs and unamortized debt discount, less current maturities | 343,895 | 347,425 | ||
Total stockholders' equity | 988,116 | 789,919 | ||
Invested capital | $ 1,359,450 | $ 1,162,536 | ||
Average invested capital(1) | $ 1,260,993 | |||
Annualized return on invested capital(2) | 81 % | |||
Adjusted annualized return on invested capital(3) | 50 % | |||
(1) | Average invested capital is defined as the average of the beginning and ending invested capital. | |||
(2) | Annualized return on invested capital is defined as (i) annualized net income for a given quarter, (ii) divided by average invested capital during the period. | |||
(3) | Adjusted annualized return on invested capital is defined as (i) annualized adjusted net income for a given quarter, (ii) divided by average invested capital during the period. | |||
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FAQ
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