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spk02: Greetings and welcome to U.S. Wealth Services Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. A reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Josh Shapiro. Thank you. You may begin.
spk00: Thank you, Operator, and good morning, everyone. We appreciate you joining us for the U.S. Wealth Services conference call and webcast to review the full year and fourth quarter 2021 results. Joining us on the call this morning are Joel Broussard, Chief Executive Officer, and Kyle O'Neill, Chief Financial Officer. Following the prepared remarks, the call will be open for Q&A. Yesterday evening, U.S. Wealth Services released its full year and fourth quarter 2021 earnings. The earnings release can be found on the company's website at uswealthservices.com. The company also filed its form 10 K with the SEC yesterday evening. Please note that the information reported on this call speaks only as of today, March 31st, 2022, and therefore time sensitive information may no longer be accurate as at the time of any replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward looking statements within the meeting of the United States federal securities laws. These forward looking statements reflect the current views of US oil services management. However, various risks, uncertainties, and contingencies could cause our actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to review today's earnings release and the company's filings with the SEC to understand those risks, uncertainties, and contingencies. Also, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. And now I'd like to turn the call over to U.S. World Services CEO, Mr. Joel Broussard.
spk04: Thanks, Josh, and good morning, everyone. I'd like to start off by thanking our U.S. World Services team for all their hard work throughout the year. 2021 was a critical transition year for U.S. World Services, filled with significant change and challenges. Despite the distractions throughout the year, our dedicated team remained laser-focused in delivering safe and efficient operations for our customers. I'm incredibly proud of the many milestone successes our team achieved during the last 12 months, including generating $250 million of revenue for the year and $40 million of adjusted EBITDA, phasing out our conventional diesel fleet, which brought our active fleet count from 11 in Q1 to 5 by Q3, executing over 40 individual asset sales of our conventional equipment and power generating assets to raise approximately $120 million, Reduced our senior and secured term loan by $125.6 million during 2021 and repaid an additional $17.8 million so far in the first quarter, securing a 0% interest rate for Q1 2022 and a 1% cash interest rate for our term loan for the balance of 2022. Sold three licenses for our clean fleet technology, for $22.5 million, validating the value and quality of our IP portfolio. Designed the next clean fleet, the next generation of electric frack technology, and initiated construction of four of these new fleets. Won new contracts or extended existing contracts for all of our existing electric fleets and three of our four new builds. Expanded our operational footprint into the Rocky Mountains with the opening of our Vernal, Utah facility, executing multiple capital raises to boast our liquidity and fund our growth CapEx plans. While the results of these achievements did not show up in the fourth quarter results, we have strongly positioned the company to succeed in 2022 and beyond. Our results for the fourth quarter illustrate some of the difficulty we faced in undertaking the strategic transformation, as well as the macroeconomic headwinds felt by the entire industry. We continue to be impacted by our reduced fleet count during the period as a result of our transition away from diesel equipment. This allows fewer fleets to absorb field and corporate level overhead, impacting our profitability. However, we are expected to see greater overhead absorption as we begin to roll out our new fleet starting in Q2 of this year. We were impacted by typical seasonality with 4.1 fully utilized fleets active during the fourth quarter as compared to five in a third. Our operations were materially impacted by the both lack of truck drivers and inability of our customers to obtain all the sand and water required for their operations. During the quarter, we had 16.4 days of downtime per fully utilized fleet, or a total of 67 days due to these constraints. During the fourth quarter, we began to see green shoots with respect to the pricing environment for pressure pumping services. Despite the signs of improving pricing, the difficulties noted earlier continue to impact us through the first two months of 2022. However, beginning in March, we are starting to realize the benefits of our strategic moves and expect results to improve throughout the rest of the year. We are seeing an even greater demand from E&P companies for the next generations. solutions, such as electric clean fleets, and feel confident this momentum will continue to build. With this backdrop, U.S. Well Services are ideally positioned. We believe we have the most premium pressure pumping fleet in the market. Today, we have five all-electric fleets that offer industry-leading fuel cost savings and greenhouse gas emission reductions. And such commands premium pricing relative to both conventional and dual-fuel equipment. We continue to grow our fleet with the addition of four new NICS clean fleets, the first of which we deployed in Q2. Our value proposition is undeniable, and it drives the demand and premium pricing for our fleets relative to alternative technologies. This is further demonstrated by significant rise in diesel prices. The cost of diesel in the field has risen to over $5 per gallon from $3.50 per gallon in the fourth quarter, which means Our customers can save an additional $1.25 million per fleet per month. With that, I'll turn it over to Kyle to review our fourth quarter financial results.
spk01: Thanks, Joel, and good morning, everyone. I'll start off by reviewing the fourth quarter of 2021 before adding some additional color on our full year 2021 results. We averaged five active fleets during the quarter with a utilization rate of 82%, which equates to 4.1 fully utilized fleets. This compares to 89% utilization in five fully utilized fleets for the third quarter of 2021. US Well Services reported total revenue of $38.9 million for the fourth quarter, which is down 31% from the third quarter revenue of $56.5 million, largely driven by non-productive time related to sand and water constraints in the Northeast and typical seasonality. Total non-productive time during the quarter due to sand and water shortages totaled 67 days or 16.4 days per fully utilized fleets. Cost of sales in the fourth quarter was $41.4 million, down 29% sequentially. Reduction in the cost of sales was related to lower active fleet count and a 50% reduction in the amount of sand and consumables sold during the period. SG&A for the fourth quarter was $6.8 million compared to $11.1 million the third quarter of 2021. Excluding share-based compensation, SGMA was $5 million for the fourth quarter versus $6.5 million in the third quarter. This sequential decrease was primarily related to a reduction in personnel costs. Adjusted EBITDA was a loss of $7.9 million for the fourth quarter of 2021, and we incurred approximately $2.8 million of maintenance capital expenditures on an accrual basis. During the fourth quarter, U.S. Wealth Services spent approximately $6.7 million of growth capital expenditures related to the four new-build NICS clean fleets and additional long lead time components for future fleets. We expect to spend between $5 and $10 million on growth CapEx during the first quarter, The majority of the capital expenditures for these new fleets will be incurred closer to when the fleets are delivered beginning in Q2 of 2022. Turning now to our balance sheet, the company ended 2021 with $20.2 million of total liquidity consisting of $9.1 million of cash and $11.1 million of availability under our ABL facility. In late February, the company closed on a $21.5 million first lien last out financing, and in March, the company raised $46.3 million of equity proceeds. Profitable for the associated fees and expenses, the company's total liquidity increased to $84.6 million. The proceeds of these capital raises will be used to fund our growth, capital expenditures, as well as general corporate purposes. As of December 31st, 2021, we had approximately $120.7 million outstanding principal on our senior secured term loan. To date in the first quarter, U.S. Well Services has repaid an additional $17.8 million, bringing that balance down to $102.9 million. As a result of this significant debt reduction, the company secured an interest rate of 0% for the first quarter of 2022 and a cash interest rate 1% and 4.25% pick for Q2-4 of 2022, resulting in a cash savings of nearly $9.8 million for the year. Shifting now to our full year 2021 results, we generated revenue of $250 million, reflecting a modest increase relative to $244 million in 2020. Our cost of sales for 2021 was $221 million, as compared to $187.8 million in 2020, or an 18% increase. The increase in our cost of service is primarily attributable to an increase in labor costs, as well as costs associated with procuring third-party power generation services as the company transitioned away from owning its own power generation assets. Selling general administrative expense decreased to $32.6 million from $43.6 million in 2020, excluding stock-based compensation and non-cash charges for doubtful collections of accounts receivable. SG&A totaled $23 million compared to $23.5 million in 2020. Net loss attributable to the company was $70.6 million for the full year of 2021 as compared to $229.3 million for 2020. Adjusted EBITDA for 2021 was $40 million, which equates to $6.2 million per fully utilized fleet. Full year 2020 capital expenditures were $53.5 million, of which 24.1 was related to maintenance capital expenditures. The remaining $29.4 million was for growth capital expenditures related to our new-build electric fleets. And with that, I'll turn it back over to Joel for closing remarks.
spk04: Thanks, Kyle. Since we introduced the first all-electric fleet in 2014, U.S. Wealth Services has been vocal advocates for electric pressure pumping technology. No other technology offers the same combination of economics, ESG, and HSSE benefits. which is why Electric Fleets continue to grow as a share of the overall U.S. pressure plumbing fleet. U.S. Wealth Services has the fleet technology, expertise, and personnel to deliver for its customers to create value for shareholders, and we continue to believe that the future is very bright for this company.
spk02: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Alex Schrevehofer with Stifel. Please proceed with your question.
spk03: Thank you, and good morning, everyone, and thank you for taking my question. Good morning, Alex. Good morning. So the first question I have here, I believe you kind of touched on this during the call, but basically as you continue to roll out your full complement for athletes, do you expect to see a sharp increase in profitability? And if so, how should we start to think about the timing of when we should start to see that materialize? I believe you said Q2, but I just wanted to give you a little bit more color around that.
spk05: You want to take that?
spk01: Absolutely. Yeah, I mean, in Q4 and in Q1 so far, I mean, we've definitely been impacted. Our profitability has been impacted by only having four to five fleets running. So we have the same G&A that we had last year when we had 11 fleets running. So as we ramp up these fleets, which will also be a better price than what we experienced in 2021, you'll definitely start to see an increase in our profitability. First fleet goes to work in Q2. The second fleet will be the end of Q2, early Q3. And then the next two fleets will be in Q3 and Q4. So by year end, we'll exit the year with a dramatically improved profitability profile.
spk03: Got it. Got it. Thank you for that. And if I could just squeeze in a second question here, you also commented during the call about a some continued difficulty in getting fractions of mine. I was just curious to see if you're starting to continue to create inefficiency at the well site because of that and kind of when you guys expect or might expect to see that start to normalize.
spk04: Kyle?
spk01: I think that we're really going to start to see the benefits of that really beginning with these new fleets rolling out starting in Q2.
spk03: Okay, so kind of the same. Okay. Awesome.
spk05: Thank you for that. And we, in March also, due to, you know, different customer promises with trucking and sand and water. Got it.
spk03: Okay, thank you for that, Coach.
spk02: We've reached the end of the question and answer session. I'd now like to turn the call back over to Joel Brouchard for closing comments.
spk05: Thank everybody for joining me. Have a great weekend.
spk02: This concludes today's conference call. You may disconnect your lines at this time and have a wonderful day.
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