Third Quarter 2020 Financial Results
- Revenue for the third quarter of 2020 was
$205.6 million compared to$244.9 million in the third quarter of 2019. - Net income for the third quarter of 2020 was $18.3 million compared to net income of
$20.4 million in the third quarter of 2019. - Adjusted EBITDA (a non-GAAP measure defined below) for the third quarter of 2020 was
$112.6 million compared to$112.1 million in the third quarter of 2019. - Previously declared quarterly dividend of
$0.145 per common share for the third quarter of 2020 was unchanged compared to the third quarter of 2019. Dividend coverage was 3.5x for the third quarter of 2020. - Archrock’s leverage ratio was 4.0x compared to 4.3x as of
September 30, 2019 . - Tightened range of 2020 Adjusted EBITDA guidance to
$405 million to$420 million , reflecting a$12.5 million increase at the midpoint.
Archrock’s third quarter 2020 net income of
Adjusted EBITDA for the third quarter of 2020 of
Management Commentary and Outlook
“I am proud of Archrock’s third quarter performance and the way our employees continue to respond to the significant demand headwinds brought on by COVID-19,” said Brad Childers, Archrock’s President and Chief Executive Officer. “As our results show, we’ve taken significant action to aggressively manage costs and improve our balance sheet. During the third quarter, we protected our strong contract operations gross margin, reduced SG&A and lowered our capital expenditures. In addition, we continued to high-grade our business and accelerate EBITDA through non-core asset sales totaling close to
“As the third quarter progressed, improved market stability contributed to reduced compression equipment stop activity and the continued restart of equipment that was temporarily on standby status. Looking ahead,
“While it is premature to provide financial guidance for 2021, we expect significantly lower new equipment capital expenditures given muted customer booking activity and our ability to satisfy customer horsepower needs with idle compressor units. We are focused on preserving our operational momentum and again delivering significant free cash flow. Reducing debt and paying a meaningful dividend are key value drivers for our shareholders and we remain confident in our ability to do both in the current environment,” concluded Childers.
Contract Operations
For the third quarter of 2020, contract operations segment revenue totaled
Aftermarket Services
For the third quarter of 2020, aftermarket services segment revenue totaled
Balance Sheet
Long-term debt was
Quarterly Dividend
Our Board of Directors recently declared a quarterly dividend of
2020 Annual Guidance
Full Year 2020 Guidance | |||||||
Low | High | ||||||
Net loss (1) | $ | (69,000 | ) | $ | (54,000 | ) | |
Adjusted EBITDA (2) | 405,000 | 420,000 | |||||
Cash available for dividend (3) (4) | 255,000 | 263,000 | |||||
Segment | |||||||
Contract operations revenue | $ | 735,000 | $ | 745,000 | |||
Contract operations gross margin percentage | 63.0 | % | 65.0 | % | |||
Aftermarket services revenue | $ | 130,000 | $ | 135,000 | |||
Aftermarket services gross margin percentage | 14.0 | % | 16.0 | % | |||
Selling, general and administrative | $ | 105,000 | $ | 108,000 | |||
Capital expenditures | |||||||
Growth capital expenditures | $ | 75,000 | $ | 80,000 | |||
Maintenance capital expenditures | 30,000 | 33,000 | |||||
Other capital expenditures | 23,000 | 27,000 |
(1) | 2020 annual guidance for net loss includes | |
(2) | Management believes Adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons. | |
(3) | Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends. | |
(4) | A forward-looking estimate of cash provided by operating activities is not provided because certain items necessary to estimate cash provided by operating activities, including changes in assets and liabilities, are not estimable at this time. Changes in assets and liabilities were |
Summary Metrics
Three Months Ended | |||||||||||
(in thousands, except percentages, per share amounts and ratios) | 2020 | 2020 | 2019 | ||||||||
Net income (loss) | $ | 18,332 | $ | (30,381 | ) | $ | 20,407 | ||||
Adjusted EBITDA | $ | 112,634 | $ | 100,509 | $ | 112,133 | |||||
Contract operations revenue | $ | 175,223 | $ | 187,949 | $ | 198,337 | |||||
Contract operations gross margin | $ | 114,779 | $ | 124,559 | $ | 122,396 | |||||
Contract operations gross margin percentage | 66 | % | 66 | % | 62 | % | |||||
Aftermarket services revenue | $ | 30,408 | $ | 32,367 | $ | 46,612 | |||||
Aftermarket services gross margin | $ | 4,699 | $ | 3,681 | $ | 8,987 | |||||
Aftermarket services gross margin percentage | 15 | % | 11 | % | 19 | % | |||||
Selling, general, and administrative | $ | 18,681 | $ | 28,745 | $ | 29,526 | |||||
Cash available for dividend | $ | 77,246 | $ | 58,036 | $ | 68,306 | |||||
Cash available for dividend coverage | 3.5 | x | 2.6 | x | 3.1 | x | |||||
Total available horsepower (at period end) | 4,153 | 4,203 | 4,441 | ||||||||
Total operating horsepower (at period end) | 3,465 | 3,613 | 3,916 | ||||||||
Horsepower utilization spot (at period end) | 83 | % | 86 | % | 88 | % |
Conference Call Details
To listen to the call via a live webcast, please visit Archrock’s website at www.archrock.com. The call will also be available by dialing 1-877-407-0784 in
A replay of the conference call will be available on Archrock’s website for approximately seven days. Also, a replay may be accessed by dialing 1-844-512-2921 in
*****
Adjusted EBITDA, a non-GAAP measure, is defined as net income (loss) excluding interest expense, income taxes, depreciation and amortization, long-lived asset impairment, restructuring charges, debt extinguishment loss, transaction-related costs, non-cash stock-based compensation expense, indemnification income (expense), net and other items. A reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure, and a reconciliation of our updated full year 2020 Adjusted EBITDA guidance to net income (loss) appear below.
Gross margin, a non-GAAP measure, is defined as revenue less cost of sales (excluding depreciation and amortization). Gross margin percentage is defined as gross margin divided by revenue. A reconciliation of gross margin to net income (loss), the most directly comparable GAAP measure, appears below.
Cash available for dividend, a non-GAAP measure, is defined as net income (loss) excluding interest expense, income taxes, depreciation and amortization, long-lived asset impairment, restructuring charges, debt extinguishment loss, transaction-related costs, non-cash stock-based compensation expense and indemnification income (expense), net and other items, less maintenance capital expenditures, other capital expenditures, cash taxes and cash interest expense. Reconciliations of cash available for dividend to net income (loss) and cash flows from operating activities, the most directly comparable GAAP measures, appear below.
About
Forward-Looking Statements
All statements in this release (and oral statements made regarding the subjects of this release) other than historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors that could cause actual results to differ materially from such statements, many of which are outside the control of
While
These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Archrock’s Annual Report on Form 10-K for the year ended
SOURCE:
For information, contact:
VP of Investor Relations
281-836-8360
investor.relations@archrock.com
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended | |||||||||||
2020 | 2020 | 2019 | |||||||||
Revenue: | |||||||||||
Contract operations | $ | 175,223 | $ | 187,949 | $ | 198,337 | |||||
Aftermarket services | 30,408 | 32,367 | 46,612 | ||||||||
Total revenue | 205,631 | 220,316 | 244,949 | ||||||||
Cost of sales (excluding depreciation and amortization): | |||||||||||
Contract operations | 60,444 | 63,390 | 75,941 | ||||||||
Aftermarket services | 25,709 | 28,686 | 37,625 | ||||||||
Total cost of sales (excluding depreciation and amortization) | 86,153 | 92,076 | 113,566 | ||||||||
Selling, general and administrative | 18,681 | 28,745 | 29,526 | ||||||||
Depreciation and amortization | 47,279 | 48,849 | 48,409 | ||||||||
Long-lived and other asset impairment | 10,727 | 55,210 | 7,097 | ||||||||
Restructuring charges | 2,900 | 2,408 | — | ||||||||
Interest expense | 25,221 | 25,778 | 27,401 | ||||||||
Debt extinguishment loss | — | 3,971 | — | ||||||||
Transaction-related costs | — | — | 4,905 | ||||||||
(Gain) loss on sale of assets, net | (9,146 | ) | 2,189 | (7,859 | ) | ||||||
Other (income) loss, net | (324 | ) | (438 | ) | 49 | ||||||
Income (loss) before income taxes | 24,140 | (38,472 | ) | 21,855 | |||||||
Provision for (benefit from) income taxes | 5,808 | (8,091 | ) | 1,448 | |||||||
Net income (loss) | $ | 18,332 | $ | (30,381 | ) | $ | 20,407 | ||||
Basic and diluted net income (loss) per common share (1) | $ | 0.12 | $ | (0.20 | ) | $ | 0.14 | ||||
Weighted average common shares outstanding: | |||||||||||
Basic | 150,974 | 150,743 | 142,931 | ||||||||
Diluted | 151,038 | 150,743 | 142,965 |
(1) | Basic and diluted net income (loss) per common share is computed using the two-class method to determine the net income (loss) per share for each class of common stock and participating security (restricted stock and stock-settled restricted stock units that have non-forfeitable rights to receive dividends or dividend equivalents) according to dividends declared and participation rights in undistributed earnings. Accordingly, we have excluded net income attributable to participating securities from our calculation of basic and diluted net income (loss) per common share. |
UNAUDITED SUPPLEMENTAL INFORMATION
(in thousands, except percentages, per share amounts and ratios)
Three Months Ended | |||||||||||
2020 | 2020 | 2019 | |||||||||
Revenue: | |||||||||||
Contract operations | $ | 175,223 | $ | 187,949 | $ | 198,337 | |||||
Aftermarket services | 30,408 | 32,367 | 46,612 | ||||||||
Total revenue | $ | 205,631 | $ | 220,316 | $ | 244,949 | |||||
Gross margin (1): | |||||||||||
Contract operations | $ | 114,779 | $ | 124,559 | $ | 122,396 | |||||
Aftermarket services | 4,699 | 3,681 | 8,987 | ||||||||
Total gross margin | $ | 119,478 | $ | 128,240 | $ | 131,383 | |||||
Gross margin percentage: | |||||||||||
Contract operations | 66 | % | 66 | % | 62 | % | |||||
Aftermarket services | 15 | % | 11 | % | 19 | % | |||||
Total gross margin percentage | 58 | % | 58 | % | 54 | % | |||||
Selling, general and administrative | $ | 18,681 | $ | 28,745 | $ | 29,526 | |||||
% of revenue | 9 | % | 13 | % | 12 | % | |||||
Adjusted EBITDA (1) | $ | 112,634 | $ | 100,509 | $ | 112,133 | |||||
% of revenue | 55 | % | 46 | % | 46 | % | |||||
Capital expenditures | $ | 17,054 | $ | 41,343 | $ | 68,495 | |||||
Less: Proceeds from sale of property, plant and equipment and other assets | (17,707 | ) | (2,528 | ) | (33,720 | ) | |||||
Net capital expenditures | $ | (653 | ) | $ | 38,815 | $ | 34,775 | ||||
Total available horsepower (at period end) (2) | 4,153 | 4,203 | 4,441 | ||||||||
Total operating horsepower (at period end) (3) | 3,465 | 3,613 | 3,916 | ||||||||
Average operating horsepower | 3,536 | 3,752 | 3,770 | ||||||||
Horsepower utilization: | |||||||||||
Spot (at period end) | 83 | % | 86 | % | 88 | % | |||||
Average | 85 | % | 86 | % | 88 | % | |||||
Dividend declared for the period per share | $ | 0.145 | $ | 0.145 | $ | 0.145 | |||||
Dividend declared for the period to all shareholders | $ | 22,216 | $ | 22,229 | $ | 22,051 | |||||
Cash available for dividend coverage (4) | 3.5 | x | 2.6 | x | 3.1 | x |
(1) | Management believes gross margin and Adjusted EBITDA provide useful information to investors because these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide a more complete understanding of our performance than GAAP results alone. Management uses these non-GAAP measures as supplemental measures to review current period operating performance, comparability measures and performance measures for period-to-period comparisons. | |
(2) | Defined as idle and operating horsepower. New compressor units completed by a third party manufacturer that have been delivered to us are included in the fleet. | |
(3) | Defined as horsepower that is operating under contract and horsepower that is idle but under contract and generating revenue such as standby revenue. | |
(4) | Defined as cash available for dividend divided by dividends declared for the period. |
2020 | 2020 | 2019 | ||||||
Balance Sheet | ||||||||
Long-term debt (1) | $ | 1,731,459 | $ | 1,807,937 | $ | 1,825,475 | ||
Total equity | 949,685 | 950,873 | 1,057,018 |
(1) Carrying values are shown net of unamortized debt discounts and unamortized deferred financing costs.
UNAUDITED SUPPLEMENTAL INFORMATION
(in thousands)
Three Months Ended | |||||||||||
2020 | 2020 | 2019 | |||||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA and Gross Margin | |||||||||||
Net income (loss) | $ | 18,332 | $ | (30,381 | ) | $ | 20,407 | ||||
Depreciation and amortization | 47,279 | 48,849 | 48,409 | ||||||||
Long-lived and other asset impairment | 10,727 | 55,210 | 7,097 | ||||||||
Restructuring charges | 2,900 | 2,408 | — | ||||||||
Interest expense | 25,221 | 25,778 | 27,401 | ||||||||
Debt extinguishment loss | — | 3,971 | — | ||||||||
Transaction-related costs | — | — | 4,905 | ||||||||
Stock-based compensation expense | 2,645 | 2,772 | 2,276 | ||||||||
Indemnification (income) expense, net (1) | (278 | ) | (7 | ) | 190 | ||||||
Provision for (benefit from) income taxes | 5,808 | (8,091 | ) | 1,448 | |||||||
Adjusted EBITDA (2) | 112,634 | 100,509 | 112,133 | ||||||||
Selling, general and administrative | 18,681 | 28,745 | 29,526 | ||||||||
Stock-based compensation expense | (2,645 | ) | (2,772 | ) | (2,276 | ) | |||||
Indemnification income (expense), net (1) | 278 | 7 | (190 | ) | |||||||
(Gain) loss on sale of assets, net | (9,146 | ) | 2,189 | (7,859 | ) | ||||||
Other (income) loss, net | (324 | ) | (438 | ) | 49 | ||||||
Gross margin (2) | $ | 119,478 | $ | 128,240 | $ | 131,383 |
(1) | Represents the net income earned or net expense incurred pursuant to indemnification provisions of our separation and distribution and tax matters agreements with Exterran Corporation. | |
(2) | Management believes Adjusted EBITDA and gross margin provide useful information to investors because these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide a more complete understanding of our performance than GAAP results alone. Management uses these non-GAAP measures as supplemental measures to review current period operating performance, comparability measures and performance measures for period-to-period comparisons. |
UNAUDITED SUPPLEMENTAL INFORMATION
(in thousands)
Three Months Ended | |||||||||||
2020 | 2020 | 2019 | |||||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA and Cash Available for Dividend | |||||||||||
Net income (loss) | $ | 18,332 | $ | (30,381 | ) | $ | 20,407 | ||||
Depreciation and amortization | 47,279 | 48,849 | 48,409 | ||||||||
Long-lived and other asset impairment | 10,727 | 55,210 | 7,097 | ||||||||
Restructuring charges | 2,900 | 2,408 | — | ||||||||
Interest expense | 25,221 | 25,778 | 27,401 | ||||||||
Debt extinguishment loss | — | 3,971 | — | ||||||||
Transaction-related costs | — | — | 4,905 | ||||||||
Stock-based compensation expense | 2,645 | 2,772 | 2,276 | ||||||||
Indemnification (income) expense, net | (278 | ) | (7 | ) | 190 | ||||||
Provision for (benefit from) income taxes | 5,808 | (8,091 | ) | 1,448 | |||||||
Adjusted EBITDA (1) | 112,634 | 100,509 | 112,133 | ||||||||
Less: Maintenance capital expenditures | (3,817 | ) | (8,965 | ) | (14,145 | ) | |||||
Less: Other capital expenditures | (7,363 | ) | (9,086 | ) | (5,566 | ) | |||||
Less: Cash tax refund (payment) | (407 | ) | — | 1,514 | |||||||
Less: Cash interest expense | (23,801 | ) | (24,422 | ) | (25,630 | ) | |||||
Cash available for dividend (2) | $ | 77,246 | $ | 58,036 | $ | 68,306 |
(1) | Management believes Adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons. | |
(2) | Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends. |
UNAUDITED SUPPLEMENTAL INFORMATION
(in thousands)
Three Months Ended | |||||||||||
2020 | 2020 | 2019 | |||||||||
Reconciliation of Cash Flows From Operating Activities to Cash Available for Dividend | |||||||||||
Net cash provided by operating activities | $ | 99,760 | $ | 67,945 | $ | 74,962 | |||||
Cash flows used in discontinued operations | — | — | 269 | ||||||||
Inventory write-downs | (220 | ) | (413 | ) | (170 | ) | |||||
(Provision for) benefit from credit losses | 47 | (1,530 | ) | (644 | ) | ||||||
Gain (loss) on sale of assets, net | 9,146 | (2,189 | ) | 7,859 | |||||||
Current income tax provision (benefit) | (21 | ) | 60 | (41 | ) | ||||||
Cash tax refund (payment) | (407 | ) | — | 1,514 | |||||||
Amortization of operating lease ROU assets | (928 | ) | (846 | ) | (726 | ) | |||||
Amortization of contract costs | (6,630 | ) | (6,851 | ) | (6,110 | ) | |||||
Deferred revenue recognized in earnings | 4,421 | 5,027 | 8,311 | ||||||||
Cash restructuring charges | 1,402 | 2,307 | — | ||||||||
Transaction-related costs | — | — | 4,905 | ||||||||
Indemnification (income) expense, net | (278 | ) | (7 | ) | 190 | ||||||
Changes in assets and liabilities | (16,797 | ) | 13,283 | (2,625 | ) | ||||||
Maintenance capital expenditures | (3,817 | ) | (8,965 | ) | (14,145 | ) | |||||
Other capital expenditures | (7,363 | ) | (9,086 | ) | (5,566 | ) | |||||
Proceeds from (payments for) settlement of interest rate swaps that include financing elements | (1,069 | ) | (699 | ) | 323 | ||||||
Cash available for dividend (1) | $ | 77,246 | $ | 58,036 | $ | 68,306 |
(1) | Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends. |
UNAUDITED SUPPLEMENTAL INFORMATION
(in thousands)
Annual | |||||||
2020 | |||||||
Low | High | ||||||
Reconciliation of Net Loss to Adjusted EBITDA and Cash Available for Dividend | |||||||
Net loss (1) | $ | (69,000 | ) | $ | (54,000 | ) | |
Depreciation and amortization | 192,000 | 192,000 | |||||
Interest expense | 105,000 | 105,000 | |||||
Stock-based compensation expense | 11,000 | 11,000 | |||||
Benefit from income taxes | (16,000 | ) | (16,000 | ) | |||
182,000 | 182,000 | ||||||
Adjusted EBITDA (2) | 405,000 | 420,000 | |||||
Less: Maintenance capital expenditures | (30,000 | ) | (33,000 | ) | |||
Less: Other capital expenditures | (23,000 | ) | (27,000 | ) | |||
Less: Cash interest expense | (97,000 | ) | (97,000 | ) | |||
Cash available for dividend (3) (4) | $ | 255,000 | $ | 263,000 |
(1) | 2020 annual guidance for net loss includes | |
(2) | Management believes Adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons. | |
(3) | Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends. | |
(4) | A forward-looking estimate of cash provided by operating activities is not provided because certain items necessary to estimate cash provided by operating activities, including changes in assets and liabilities, are not estimable at this time. Changes in assets and liabilities were |
Source:
2020 GlobeNewswire, Inc., source