Hi-Crush Inc. (NYSE: HCR)
Investor Presentation
January 2020
Forward Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Cautionary Statements
Some of the information in this presentation may contain 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 (the "Exchange Act"). Forward-looking statements give our current expectations, and contain projections of results of operations or of financial condition, or forecasts of future events. Words such as "may," "should," "assume," "forecast," "position," "predict," "strategy," "expect," "intend," "hope," "plan," "estimate," "anticipate," "could," "believe," "project," "budget," "potential," "likely," or "continue," and similar expressions are used to identify forward- looking statements. They can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward- looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Hi-Crush Inc.'s reports filed with the SEC, including those described under Item 1A of Hi-Crush Inc.'s Form 10-K for the year ended December 31, 2018 and any subsequently filed 10-Q. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the risk factors in our reports filed with the SEC or the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward looking statements include: the volume of frac sand we are able to sell; the price at which we are able to sell frac sand; the outcome of any pending litigation, claims or assessments, including unasserted claims; changes in the price and availability of natural gas or electricity; changes in prevailing economic conditions; and difficulty collecting receivables. All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements. Hi-Crush Inc.'s forward-looking statements speak only as of the date made and Hi-Crush Inc. undertakes no obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
Use of Non-GAAP Information
This presentation may include non-GAAP financial measures. Such non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. For additional disclosure regarding such non-GAAP measures, including reconciliations to their most directly comparable GAAP measure, please refer to Hi-Crush Inc.'s most recent earnings release at www.hicrushinc.com.
Investor Presentation | January 2020 | 2 |
Business Updates
Current Priorities:
- Leveraging integrated portfolio to deliver high quality customer service
- Improving profitability through operational optimization and cost reduction
- Maintaining liquidity and reducing debt
4Q19 frac sand market
projections holding
- 4Q19 activity slowed as guided during 3Q19 conference call
- Pace of activity expected to increase throughout 1Q20
Cash balance increased
into YE 2019
- Approximately $57mm in cash available
- Remain undrawn under ABL facility; availability of $44.3mm
- Total liquidity of approximately $101mm1
Last mile business continues to grow
- Pronghorn Energy Services awarded work with additional customer in December; will begin work for three new customers in early 2020
- Cash balance as of December 31, 2019; ABL availability as of November 30, 2019
Investor Presentation
January 2020 | 3
The Hi-Crush Value Proposition
Investor value creation
Leading customer service delivering reliability, safety and efficiency
Financial discipline focused on flexibility and efficient capital allocation
Fully-integrated platform to most efficiently service customers
Supplier of essential products and services for well completions and development of U.S. shale
Investor Presentation | January 2020 | 4 |
Corporate Values Evidence Commitment to ESG
Our values guide everything we do. We are constantly looking for ways to ensure the protection and promotion of human health, safety and quality of life. This includes our employees as well as the people in the communities where we live and operate.
Evidence of Our Commitment
Behavior-based safety program | |||
ingrained in all aspects of our culture | |||
Our Wisconsin production facilities | |||
participate in the Wisconsin Department | |||
of Natural Resources Green Tier | |||
Program as a Tier 1 participant | |||
>90% reduction of particulate matter | |||
>90% | emissions from wellsite sand operations | ||
from Pronghorn, meeting OSHA PEL | |||
regulations | |||
Investor Presentation | January 2020 | 5 |
Inaugural Corporate Responsibility Report
Hi-Crush Inc. published its first Corporate Responsibility Report
in December 2019
Lowest greenhouse gas emissions
per ton of sand sold among reporting companies1
Lost Time Incident Rate 35% lower than industry
average2
Publication of the 2018 Corporate Responsibility Report evidences the
company's commitment to the communities in which we operate,
and to safe, efficient operations
- Reported 0.022 MT of CO2 produced per ton of sand sold during 2018
- Based on 0.78 Lost Time Incident Rate (LTIR) for total company during 2018; mining industry average LTIR during 2018 of 1.2
Investor Presentation | January 2020 | 6 |
Our Financial Priorities
What We're Focused On
Strong Liquidity and Balance Sheet
Maintaining strong liquidity including cash and ABL availability; balance sheet supports financial flexibility
Free Cash Flow Generation
Strong platform for cash flow generation, supported by operational diversity and disciplined capital program
Efficient Capital Allocation
Commitment to prioritizing liquidity and balance sheet
strength to help manage through market cycles
Maximizing Investment Returns
- Executing strategy through quality service delivery, leveraging our unique platform of assets and capabilities; share repurchase program remains authorized
~$101mm million of liquidity1; no covenants or near-term debt maturities
Significantly reducing capex in 2020 to $25mm; forecasting positive free cash flow for FY20
Ended 2019 with strong
liquidity, including cash balance
of approximately $57mm
Generating value through focus
on execution and
asset utilization
- Cash balance as of December 31, 2019; ABL availability as of November 30, 2019
Investor Presentation | January 2020 | 7 |
Balance Sheet & Liquidity Update
No near-term | Highly flexible | Prioritizing |
maturities | ||
balance sheet | balance sheet | |
or covenant | ||
position | & liquidity | |
restrictions | ||
Liquidity Update1 | Debt Structure1 | |||||
Senior Notes | ABL Facility | |||||
~$57mm | No borrowings | |||||
$450mm | $200mm | |||||
Cash | + on ABL Facility | |||||
$393mm net of | $44.3mm of | |||||
~$101mm | cash | availability | ||||
No maturities | ||||||
Total Liquidity | No borrowings | |||||
until Aug 2026 | ||||||
- Cash balance as of December 31, 2019; ABL availability as of November 30, 2019
Investor Presentation | January 2020 | 8 |
Q3 2019 Results
3Q19 progress aligned with our new organizational structure
Achieved 3Q19 quarterly sales volume of 2.7mm tons; slight increase over 2Q19 volumes and at the high-end of the guidance range
Continue to deploy enhanced measurement and other upgrades on last-mile silo equipment
Increased last mile truckloads delivered by 7% in 3Q19 versus loads delivered in 2Q19
Latest release improves integration with silo inventory systems and terminal assets, and improves data integrity to enable more accurate analysis
63% | |||
of quarterly sales volumes in 3Q19 | |||
sold to E&P customers | |||
63% | 66% | 63% | |
51% | |||
40% | |||
33% | 31% | ||
25% | |||
14% | |||
7% | |||
0% 1% |
% of total quarterly sales volumes
Investor Presentation | January 2020 | 9 |
Operational Strategy
Committed to Our Strategy
Focused on delivering value and driving long-term success
Focusing on | Deploying | Innovating | Delivering |
Proppant | |||
Serving | Proprietary | Low-cost | |
Logistics | |||
Customers | Technology | Production | |
Solutions | |||
Investor Presentation | January 2020 | 11 |
Our Fully-Integrated Platform
Customer Solutions
Logistics | Equipment |
Flexible solutions | Silos & containers |
Real-time logistics and inventory management
Terminal Network
Owned & operated
In-Basin | Northern White |
Production facilities | Production facilities |
Fully-IntegratedPlatform
Investor Presentation | January 2020 | 12 |
Our Operational Reach
Bakken | Marcellus / Utica |
Wisconsin | |
All Basins
Powder River
MidCon
Permian
Eagle Ford
Highlights
- Pronghorn last mile solutions operating in all
majorbasins
- Hi-Crushsand production facilities and terminal network meet customers demand for efficient sand supply
- NexStage deploying innovative equipment supporting efficient last mile delivery and wellsite management
- PropDispatch utilized for major market share of trucking logistics
Investor Presentation | January 2020 | 13 |
Mutually Beneficial E&P Partnership Strategy
E&P Benefits of Aligning with Hi-Crush
Dedicatedfrac sand provider with sand, silos and containers
Reliablesupply from multiple frac sand production facilities
Diversifiedacross regions from operations in multiple basins
Optionalityin last mile and in-basin delivery points
Integratedproduction and delivery process meet long planning cycles
Safetycentric culture with a track-record among the best in industry
HCR Benefits of Aligning with E&Ps
Relationships:Long project lead times and significant capital requirements drive E&Ps to value strategic relationships with suppliers who offer differentiated solutions
Better Visibility:Closer relationships provide greater visibility into evolving activity, demand trends and market fundamentals
Growth Opportunity:Addressing E&Ps'
need for a direct-sourced, preferred provider of flexible, full-scope proppant and logistics solutions
Reduces Volatility:Partnering with the right E&Ps enhances stability as drilling and completion "manufacturing" programs are more consistent through commodity cycles
Investor Presentation | January 2020 | 14 |
PropDispatch: Real-Time Logistics Management
Advancing our last mile platform with best in class technology
PropDispatch Software
- Manages and displays on-pad inventory, in containers or silos, to accurately provide volume delivered downhole and minimize or eliminate trucking demurrage
- Enables dispatching and real-time monitoring of truck loads between the transload and pad
- Simplifies back office truck load reconciliation process
- Comprehensive dashboards and real-time KPIs
- Ability to integrate seamlessly to virtually any application
Last mile simplified | Real-time visibility | Central dispatch | ||
Simplifies ordering, dispatching, | Enables real-time decision making | Efficiently dispatch drivers based | ||
hauling, tracking, reconciling and | utilizing constant data flow of truck | on location and proximity to supply | ||
invoicing of trucks and sand | loads vs. inventory | points | ||
Investor Presentation | January 2020 | 15 |
Driving Efficiency Through Technology & Equipment
Meaningful opportunities exist to capture efficiencies that lead to
lowest cost at the blender
Dispatch to | Load Time at |
Load Time | Origin |
- Creates significant logistics efficiencies with effectiveness of dispatch team
- PropDispatch technology employs systematic approach to the load, dispatch and monitoring process
- Enhances ability to make informed real-time decisions
Travel Time to | Unload Time at |
Destination | Destination |
- Flexible selection of equipment solutions maximizes wellsite efficiency
- Proprietary conveyor and hopper bottom equipment meaningfully reduces offload times and maximizes truck turns
- Precise measurement of sand into the blender results in better inventory management
Investor Presentation | January 2020 | 16 |
Financial Update
Key Financial Metrics
$ in 000s, except per ton | Q3 2018 | Q4 2018 | Q1 2019 | Q2 2019 | Q3 2019 |
Revenues | $ 213,972 | $ 162,235 | $ 159,910 | $ 178,001 | $ 172,972 |
Adjusted EBITDA1 | $ 52,048 | $ 14,889 | $ 17,574 | $ 24,701 | $ 17,900 |
Average selling price ($/ton) | $ 64 | $ 58 | $ 48 | $ 47 | $ 43 |
Sales volumes (tons) | 2,775,360 | 1,976,805 | 2,411,262 | 2,662,086 | 2,685,736 |
Contribution margin ($/ton)2 | $ 23.92 | $ 14.35 | $ 12.19 | $ 13.80 | $ 10.99 |
- Revenues remained relatively flat, driven by increased logistics and wellsite operations services and steady frac sand volumes, offset by decreased frac sand pricing
- Adjusted EBITDA decreased to $17.9mm, and contribution margin per ton was $10.99, a sequential decrease of 20%, driven by pricing pressure on spot volumes
- Recorded $346.4mm of non-cash asset impairments, principally related to the Augusta and Whitehall facilities, goodwill, and railcar right-of-use assets
- EBITDA is defined as net income, plus: (i) depreciation, depletion and amortization, (ii) interest expense, net of interest income, and (iii) income tax expense
(benefit). We define Adjusted EBITDA as EBITDA, plus: (i) non-cash impairments of goodwill and assets, (ii) change in estimated fair value of contingent consideration, (iii) earnings (loss) from equity method investments, (iv) gain on remeasurement of equity method investments, (v) loss on extinguishment of debt, and (vi) non-recurring business development costs and other items. - Contribution margin is defined as total revenues less costs of goods sold excluding depreciation, depletion and amortization.
Investor Presentation | January 2020 | 18 |
Q3 2019: Summary - Statements of Operations
Unaudited Quarterly Consolidated Statements of Operations (Amounts in thousands, except per share amounts)
Q3 2018 (1) | Q4 2018 | Q1 2019 | Q2 2019 | Q3 2019 | |||||||||||||||||||||
Revenues | $ | 213,972 | $ | 162,235 | $ | 159,910 | $ | 178,001 | $ | 172,972 | |||||||||||||||
Cost of goods sold (excluding depreciation, depletion and amortization) | 147,583 | 133,877 | 130,522 | 141,272 | 143,460 | ||||||||||||||||||||
Depreciation, depletion and amortization | 10,241 | 9,762 | 11,272 | 14,062 | 14,320 | ||||||||||||||||||||
Gross profit | 56,148 | 18,596 | 18,116 | 22,667 | 15,192 | ||||||||||||||||||||
Operating costs and expenses: | |||||||||||||||||||||||||
General and administrative expenses | 14,164 | 16,982 | 12,613 | 15,210 | 12,020 | ||||||||||||||||||||
Depreciation and amortization | 1,347 | 1,457 | 1,676 | 1,697 | 1,773 | ||||||||||||||||||||
Accretion of asset retirement obligations | 124 | 125 | 129 | 130 | 107 | ||||||||||||||||||||
Asset impairments | - | - | - | - | 346,384 | ||||||||||||||||||||
Change in estimated fair value of contingent consideration | - | - | - | (672) | (5,181) | ||||||||||||||||||||
Other operating expenses, net | 754 | 1,072 | 431 | 469 | 658 | ||||||||||||||||||||
Income (loss) from operations | 39,759 | (1,040) | 3,267 | 5,833 | (340,569) | ||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||
Earnings from equity method investments | 1,624 | 1,250 | 1,116 | 1,284 | 1,880 | ||||||||||||||||||||
Gain on remeasurement of equity method investment | - | - | - | 3,612 | - | ||||||||||||||||||||
Interest expense | (8,012) | (10,140) | (10,590) | (11,806) | (11,790) | ||||||||||||||||||||
Loss on extinguishment of debt | (6,233) | - | - | - | - | ||||||||||||||||||||
Income (loss) before income tax | 27,138 | (9,930) | (6,207) | (1,077) | (350,479) | ||||||||||||||||||||
Income tax expense (benefit): | |||||||||||||||||||||||||
Current tax expense | - | - | - | 259 | 1,087 | ||||||||||||||||||||
Deferred tax expense (benefit) | - | - | - | 660 | (83,069) | ||||||||||||||||||||
Deferred tax resulting from conversion to a corporation | - | - | - | 115,488 | - | ||||||||||||||||||||
Income tax expense (benefit) | - | - | - | 116,407 | (81,982) | ||||||||||||||||||||
Net income (loss) | $ | 27,138 | $ | (9,930) | $ | (6,207) | $ | (117,484) | $ | (268,497) | |||||||||||||||
Earnings (loss) per common share: | |||||||||||||||||||||||||
Basic | $ | 0.30 | $ | (0.08) | $ | (0.06) | $ | (1.16) | $ | (2.67) | |||||||||||||||
Diluted | |||||||||||||||||||||||||
$ | 0.29 | $ | (0.08) | $ | (0.06) | $ | (1.16) | $ | (2.67) | ||||||||||||||||
1) Financial information has been recast to include the financial position and results attributable to the sponsor and general partner. | |||||||||||||||||||||||||
Investor Presentation | January 2020 | 19 | ||||||||||||||||||||||||
Q3 2019: EBITDA, Adjusted EBITDA and Free Cash Flow
Unaudited EBITDA and Adjusted EBITDA (Amounts in thousands)
Q3 2018 | Q4 2018 | Q1 2019 | Q2 2019 | Q3 2019 | ||||||
Reconciliation of Adjusted EBITDA to net income (loss): | ||||||||||
Net income (loss) | $ | 27,138 | $ | (9,930) | $ | (6,207) | $ | (117,484) | $ | (268,497) |
Depreciation, depletion and amortization expense | 11,588 | 11,219 | 12,948 | 15,759 | 16,093 | |||||
Interest expense | 8,012 | 10,140 | 10,590 | 11,806 | 11,790 | |||||
Income tax expense (benefit) | - | - | - | 116,407 | (81,982) | |||||
EBITDA | 46,738 | 11,429 | 17,331 | 26,488 | (322,596) | |||||
Non-cash impairments of assets | - | - | - | - | 346,384 | |||||
Change in estimated fair value of contingent consideration | - | - | - | (672) | (5,181) | |||||
Earnings from equity method investments | (1,624) | (1,250) | (1,116) | (1,284) | (1,880) | |||||
Gain on remeasurement of equity method investment | - | - | - | (3,612) | - | |||||
Loss on extinguishment of debt | 6,233 | - | - | - | - | |||||
Non-recurring business development costs and other items (1) | 701 | 4,710 | 1,359 | 3,781 | 1,173 | |||||
Adjusted EBITDA | $ | 52,048 | $ | 14,889 | $ | 17,574 | $ | 24,701 | $ | 17,900 |
Free Cash Flow
Q2 2019 | Q3 2019 | Q3 2019 YTD | ||||||
Net cash provided by operating activities | $ | 17,582 | $ | 3,123 | $ | 12,098 | ||
Less: Maintenance capital expenditures | (3,717) | (3,328) | (11,051) | |||||
Less: Growth capital expenditures (2) | (8,089) | (4,893) | (24,060) | |||||
Free cash flow | $ | 5,776 | $ | (5,098) | $ | (23,013) |
- Non-recurringbusiness development costs and other items for Q3 2018 costs are associated with legal fees related to our Senior Notes offering and
business development costs, Q4 2018 costs are associated with the acquisition of the sponsor and general partner, as well as severance costs. Q1 2019, Q2 2019 and Q3 2019 costs are primarily associated with the Conversion, business acquisitions, and severance costs. - We have excluded growth capital expenditures of $5,840, $174, and $31,219 spent during the three months ended June 30, 2019, and three and nine months ended September 30, 2019, respectively, related to construction projects associated with completion of our second Kermit facility and expansion at our Wyeville facility, both of which were fully-funded in 2018. All other growth capital expenditures related to investments in our logistics and wellsite operations are included in the above.
Investor Presentation | January 2020 | 20 |
Investor Contacts
Caldwell Bailey
Manager, Investor Relations
Marc Silverberg
Managing Director (ICR, Inc.)
Phone: (713) 980-6270
E-mail: ir@hicrushinc.com
Investor Presentation | January 2020 | 21 |
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Hi-Crush Inc. published this content on 07 January 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 January 2020 14:47:01 UTC