U.S. Silica (SLCA) 24 Feb 232022 Q4 Earnings call transcript

Good morning and welcome to the U.S. Silica Fourth Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. A brief question-and-answer session will follow the formal presentation. reminder, is a recorded. As Instructions] this being conference [Operator

your pleasure Gil, Please It my introduce proceed. host Relations. is now Investor to Patricia of Vice President

Thank our quarter our and XXXX to conference call. Don I’d us you Merril, call Executive for Officer, earnings morning, Chief today Bryan the for and are today fourth President you Executive Financial joining like Silica’s U.S. Leading and good Chief Vice thank Officer. everyone. Shinn;

of be and I our forward-looking which begin, Before which Such other would future are subject or regarding of remind you statements certain forward-looking projections cautionary like the assumptions, events standard are to we based nature the uncertainties. to remarks statements made statements some current of on predictions, and risks about that are will today. expectations

any a company’s file For read the do to and discussion documents risks forward-looking on our undertake these to complete encourage We with uncertainties, you we statements. of duty press SEC. update and any release the not

Additionally, as release margin, for net adjusted non-GAAP net segment our debt Please EBITDA, measures our this refer reconciliation press filings full margin, we EBITDA adjusted or income of net and such to net discussions call. public ratio. contribution debt and today’s net the a segment refer to contribution leverage may ratio leverage during to of the and

will call to over I Bryan the that, hand with And Shinn.

excellent out good quarter achievements Thanks, exceptionally close accomplishments. numerous We was year another to company, and Patricia, and which for by defined morning, delivered everyone. strong an the

sheet for results, executed impressive and while balance our our During strategic XXXX, success. plan bottom-line successfully Silica our positioning future U.S. delivered talented strengthening team and

cash significantly focus and maintain pricing operating X.X at across to expanding we segments effectively We for net demand In and cash long-term help and of We retire of segment customer leadership this to both helped us debt, while ratio our robust end. generated on our $XXX offerings best-in-class inflation. oil reducing margins market flow. times coverage, both to opportunistically year contract XXXX, our position. free offset segments significant raised plus combination use million increased in our and industry capitalized We gas customer leverage

I'm also our increased XX% achievements sold EBITDA increased Revenue grew XX%; and adjusted the operational proud during year. of overall by and financial tons very XX%.

Michigan delivered year-over-year. also performance. organic third safety of great Industrial ’XX, a achievements many to in -- New to row users non-financial facility American cover Park sold specialty glass year lot into enough end than the be XX,XXX for a and We We silica low to proud of Central and revenue football of. over of enough environmentally our Rockwood, in sales year sold to our sand York City. cover in panels employee by iron fields produce entirety flat insecticide including X% beneficial segment increased more a record our product solar Overall,

to now that first, the the more move our QX. just like Don of I'd performance we Let's to some important will quarter. moment, but detail in trends during review a saw in discuss

was Activity to tight West well logistics Gas and strong and proppant sand through our weather. out, in strong demand completion did from Let's start mile experience and disruptions in we holidays very or to effectively remained demand, segment. not with Supply Oil and balance last and due Texas. continue sold we meaningful the seasonality be especially

to levels in approximately prices range per and at $XX Permian $XX the from attractive continued Spot sand for ton Basin.

to oil in another and prices markets. U.S. and is multi-year we appears further are during what contract SandBox achieved constructive the be sales October. quarter delivered Energy margins and upcycle Our and supportive loads in SandBox sentiment for prices Current record a expanded for sand customer crude

contracts medium-term in contracts. during the We existing increased secure attractive multi-year addition some sand successfully to to and signed customer continue the encouraged that for quarter supply customers pricing incremental are realizing we on

sequentially our segment, earnings prior our on call. profitability quarterly declined as guided QX In Industrial

is this normal discussed, our seasonality As for industrial business.

manage natural increases perform and Partially November input impacts Xst facility December. in and Some year-end our and markets annual most naturally and seasonal trim at slow industrial offsetting customers gas previously November these maintenance inventory were cash year-end the announced of to lower costs products. on price non-contracted

customer filtration support We numerous agreed maintenance customer a of to also renewals facilities. contractor ramped renewable production the our terms diesel drove quarter. and reduced facilities also, up operational across numerous over with earth performance favorable improvements contract sales enhanced We through new substantial during products dozen to contracts and pricing of at And we or Diatomaceous spend.

improving [S&OP] chain profitability. processes a line we're efficiency and finally, increasing our focus supply product on with (ph) And total

the of our to outlook for our of developments portfolio morning, my of this I'd For exciting and full-year update summary like finish an XXXX. on the industrial then give some rest time first with and in a of quarter the

has main and three Industrial Our consistent strategy drivers. segment remains

a increasing at is plus first GDP business our base of profitability The rate.

chain this items We have existing continuously several commitment, pricing customers, support improving growing share effectiveness. and and new at efficiency supply value-added including implementing and that

These capacity products. most high and market driver this the need are currently We're fillers, include in generally high second earth silica, growth category of products to sold demand sales of Our ground strong new are is in and diatomaceous diatomaceous for meet these earth fine out. Examples existing high-value in differentiated offerings. purity filtration investing powders, products substrates.

we're development in near site EverWhite in high technical industrial flagship advanced Cristobalite, driver third and materials addressable mine expansion include minerals Advanced and new filtration these value scale new examples offerings. our development center industrials Granules, in media materials. Roof specialty commercialization Illinois product to accelerate and sales of standing Our micron growth these renewable diesel is technology Cool in with pigment, investing categories and strategically We're market a up applications. new for

to Also improvement in projects, large to growth adding production progress developments during shipments investments to continue company support high and Industrial our make biomedical product other noteworthy including and to capacity cost with pharmaceutical Georgia We Jackson, ERP purified capacity products. for of including side commencing of at our good filtration support industrial several Millen, QX, increase segment in on with products, of edible which expanding production our purity a data insights purification systems to the two improved facility our and at facility business Integration efficiencies cost finally year-end. will oil renewable along our of products. business, capacity diesel of ground deliver Mississippi approving our by

freight And finally, new international implementation export to significant of system management a support savings.

increases XXXX, We as the X year second-best and on lastly for in contracted our ever we also price delivered segment. planned our Industrial achieved safety January

flow and success of our increasing in We strong $XXX outlook. associated business forecasting market XX% let's that well this we growth and generation performance are with robust company to XX% to million. year Now than adjusted free believe are XXXX financial and and more positioned turn for year-over-year cash EBITDA

Gas Our further is delivering positioned sequential while and Oil to well continue segment cash, growth. generate and to earnings strong

flow effectively us in positive Proppant January to contractual stand sector future Gas at Oil and segment providing we reach remain momentum proppant out the last XX by projected capacity is in energy delivering and We XX% the commitments XXXX, history. XXXX sand in levels profitability visibility. robust strong and best of Demand logistics. sold mile XX and for similar cash with with our began are

we allows capitalize strength pricing. nature market secure Further, us the on our attractive contracts and of to to contracts new continue staggered at customer

levels dedicated also efficiently and maximizing running capacity. incremental without production our operations adding to remain We

attractive proppant constructive of and expect the year the contract this small levels increased by recent proppant commitment sentiment demand. the XX believe XX we be amount market we Additionally, additions conversations support absorbed that next forecasted strong margins to this supply months. by will Moreover, customer and over

and contribution to to volumes We're XXXX our to % Gas quarters. dollars we earnings. to we Given additional margin those increase which and we segment, X offerings in And QX contribute that, also X% coming the commercializing forecast lines new sequentially. in expect product plan discuss to wellsite Oil

we segment, Industrial absorbent and and our fine to strong and factors markets. Customer overall, chemicals XXXX the monitor beverage, in macroeconomic and Pivoting general food full-year tune our and end remains refining, continue to industrial Specialty demand outlook. particularly products

activity weakness. improvement products from as price customer showing and of sequential typical However, quarter demand full potential in we profitability building realize some fourth in, seasonality a increases. applications All we is quarter rebounds anticipate

sales Our improving for with current increased in XXXX. base case forecast volumes margins is

increase dollars expect for to We industrials. contribution margin volumes year-over-year XX% basis a X% on to QX and

call And CFO, I to the detail. more in Don results will financial our with turn our Don? over discuss Merril, that, who will

and good Brian, Thanks, everyone. morning,

revenue Brian of million, total sequential contribution $XXX.X segment. with decreased margin million. stated, and total reported and to X% results overall the to margin increased increased sold company As improved we in increased driven $X.X X% pricing million X% to $XXX.X Oil tons EBITDA QX, $XXX.X Adjusted expansion quarter, million. Compared prior to our by Gas in

and $XX quarter. amortization X% the inflation a $XX.X increased quarter depletion the for total by expenses administrative Depreciation, and in higher to spend X% million, expense to driven general fourth the overall quarter. million and sequentially sequentially decreased of Selling, in

for December tax items. rate Our the ended discrete was XX.X% effective including XX, quarter XXXX

Now the when for Volumes and an to the X% tons quarter. The a quarter. move fourth increased review Oil of quarter, SandBox of segment segment $XXX.X Gas million our and prior by and X%, operating to total compared third increased on compared results. let Oil segment detailed [Indiscernible] revenue me reported with for loads of increase X%, Gas delivered the to the

improved driven increased to increased margin by a X% results strength and markets per positive Logistics. ton million customer margins Mile which Last $XX.XX. especially Texas demand, basis to on Northeast the pricing for for contribution in and proppant, sequentially $XX.X XX% Segment were rose in ongoing quarter-over-quarter These West

with decreased reported to X%, tons. an Our Industrial quarter decrease, and and X.XXX when totaled compared prior ISP quarter. third when Specialty the Products of million, for X% Volumes $XXX.X compared segment revenues the segment sequential the

by own $XX.XX. inflation a the on contribution gas inventory results year-end opportunistically ton a were seasonal management, sequential segment with offset price demand facility impacts the which Segment typical prices. on were of levels The lower ISP XX% due the These which costs natural the per million, totaled sequential margin maintenance, maintenance. benefit facility for seasonal to and decrease expected paired and reduction basis partially we energy in our basis $XX lower customer the and was of decreased in from increases customer

cash to statement. Turning the flow

the December after totaled flow maintenance. a at and of During we discount loan $XX.X The operations a company's par. facility on completing from capital quarter, cash for million cash we of million $XX million invested $XXX.X to fourth primarily October extinguishment million in equivalents of $XX.X increase XXXX XX, a cash delivered XX% and sequential

had available $XXX credit. under after the facility At million zero quarter with dollars end, of letters credit allocating for drawn $XX.X our million revolver

ahead year was end Our began handily debt X adjusted initiatives successful. schedule. EBITDA significantly basically year to beating month the the of of of quarter, trailing-XX we the times, and sheet and ratio times actions the fourth balance target At levered our to below one have net strengthen X.X our been net where XXXX

total which In XXXX, and from represented a XX% total cash cash of flow year-over-year a opportunistically a million discount par our increase. at operations, flow our million we reducing this generated of of of $XXX term a gross extinguish loan to leverage. utilized $XXX.X net to meaningly We

high we the Looking in customer good and visibility believe forward, Gas level have the sticky that Oil and given customer of segment. for and in segment profit today base our Products and XXXX we the Industrial diverse Specialty contracts

robust delever fund this cash to and our continued the forecasting with to organically provide further This year is year-over-year. are increase cash We expected business free sheet us generation flow flow with growth. expected balance to our operating flexibility

at in an to managing segment profitability. maximize investing our levels accordingly will growth spending, future capital with maintaining disciplined continue the be in operating and facilities emphasis projects our for ISP to selective on effectively We

upgrades the spending that XX% merger tax expenses full-year is year-over-year, effective for $XX new to are approximately place be year between and investments product XXXX the is prior anticipated XX%. range took that routine plant approximately forecast X% capital million during the We with with termination estimated IT SG&A to supplier full-year Full-year maintenance DD&A not approximately expected to primarily capacity XXXX X% our expenses and the due guide XXXX contract recur. Our equipment down and XXXX and to XX% expense rate along to in to and expansions, decrease cost expected projects. acquisition-related production and to is for million $XX full-year

the In segments. two actions provide contracting company manage allowing conclusion, inflation quarters issues are business the and that for pricing to cost for have to future taken we stability and effectively and our continue improve

Industrial flow Our the cash remain our extinguish and Products sheet, of segment. consistent. organically to generation our capital invest debt priorities to free allocation Strengthening in using Specialty balance growth and

Our our leverage below very goal for to be we ratio believe times, year-end net X XXXX is should which for achievable. be

to the that, With I'll turn back call over Brian.

high of visibility our sheet. team proud Don. balance the and been inflation very our against Thanks, flow market XXXX positions, in of future accomplished leading cash what and strengthening very in securing successful market I'm backdrop our We've uncertainties. expanding

on initiatives be a marked setting to continue to for numerous I that as expect us XXXX will Silica. also leader execute further We growth position U.S. record and year another

that, please you for With will lines open questions? operator, the

Thank you.

now conduct from proceed. Please comes question-and-answer question Our first with will Instructions] We Stifel. a session. Stephen [Operator Gengaro

Thank you and good morning, everybody.

Stephen. morning, Good

So can just the the Can ‘XX believe think you talk you comments of lot of components how oil about a growth, start, that? we from you EBITDA to XX% to bit any little clarity ISP the mentioned XX%. add to given I'm and gas about driven pieces? I side? But your a its of assuming should

XXXX. macro backdrop, of, to to of both see on parts on really to this oil demand gas kind that the by but have don't business. company don't good from we in So you a of have specific expect I all of, overall. we guidance year we side, morning, you and industrial We can constructive oilfield infer the side continue the both a [Indiscernible] destruction individual segments strong think demand that In expect our segments expect for the lot the

material things have industrials the general in good all think place So right building there. spite a we of of in in at there is don't we to out products over seeing mentioned now headwinds going some kind of look but in headwinds that little we're pretty The sector, bit that's a any impact. the only

in both on of year sides to have really So good expectation a going company. the XXXX we're that is

when capacity you. of is is gas contracted that XX% for mentioned where and ‘XX. given capacity Thank And oil your different you now What sit? your right mines

squeeze million of side, XX So on finding in always ton any And per but se, in creative capacity there. ways the not here are we're about capacity proppant pretty another teams total, got out our to tons incremental active we've or adding Stephen.

increases So expansions that or invest planned capital we'll specifically. capacity any continue would but no to do in that, we

to or Thanks. And one of follow-up the oil talk higher think the sort to of contracts, volumes, pricing just supportive about in the your current some it and approach contribution embedded is contracted laddered then gas When that. you when we about of margins?

price. number a example. in each of got that contracts for So we we had new of in I And signed think QX those, we additional

continue and gas is we price at look some oil to in as we'll expectation get So and XXXX, SandBox side.

kind same dynamic; the there. pretty have over things we think look I of good

you. Thank great. Okay,

Thanks, Stephen.

question comes Evercore next with proceed. from Samantha ISI. Please The Hoh

Hey, quarter. the good morning, guys. Congrats on great

Thanks, Samantha.

that I wanted you and a maybe to seeing the being seeing Is the versus geographically on with that of you're in the February? maybe of there gas talk the just what a Can numbers Permian oil months little speak replace with bit some about in you're seeing the gas. best to component weaker strong you're start January mix XXXX Basin? maybe

proppant side supply So I would in the mile. general, in remains say tight and and really demand last

for last best since business, we so. been over that oil we As the in we the decade our as that or ever we've January about think January had, said, the gas and

going doing rest is the sort as almost gotten business the some pricing is what interesting. well. in that's the to strong know think of well natural from I our happens is with also. be of everywhere. to gas I really demand questions and investors of And SandBox one very strong super Proppant weakness we've is quarter

the any gas. ago impacting kind several that's for Haynesville proppant Haynesville will, mostly the and years We because -- weakness to the always you see swing just invest not if the in that basin, decided natural of in we mines

just other shift ironically, bit there, a So And as and the think everywhere just tighten focus few that and Haynesville, happened. companies we're there's exposure Samantha, but other outside have SandBox seeing it up basins on perhaps basins pretty few things really we a budgets now, in service have might limited I -- ironic things right crews. strength a

so Northern well. demand the and I it's there things ago, been as up really prices Marcellus that down really that in that's year or tighten seeing reported the and the in for actually white Utica. up local and widely going are up strong a was think recently We're just mine up was sand a profit Northeast, shut opened

So be up natural going might that see a a gas. even the getting margins there. to We're right basin of actually counterintuitive trajectory positive incremental pricing now in it with little

exciting So and the time for gas oil it's on side pretty sure.

like years with Okay, question give update of in us great. into My kind actually target? in -- the of an I year-end follow-up think that kind you've us another give XXXX well, terms I'm towards in you're run the I margin ISP the you curious products, another terms side that for of the guess, that maybe initiative? on update of Can contribution making past, progress new rate

Sure, sure.

remarks, the growing I have our time for So that is and three that ISP. things of engines a in continues. so the at consistently mentioned as just kind that had growth One business, GDP some in long base rate, we plus been we've prepared of we've a

have of, that high our is The growth second, value we more products. of selling kind engine existing

like things in system across products some diatomaceous high mostly So end ground other products. diatomaceous sold fillers products earth markets earth are and out. powders, those high the of our purity silica, But filtration our

things starting is for products. the So do capacity those one to increased now of we're

about site. things And most capacity at and our some we're the fine right And into that a ground our this overall investment across the company ground are of is announcing morning for so strategy for increase ISP of of to that's our should XX% products. nice Millen, going XX%. that products by those profitable our growing fine business the to that plays new one and And capacity Georgia be

like things that. doing we're So

a that new development that Granule, that materials, also we're making some this EverWhite of, in with talked of engine, kind Illinois by it Cool will the of advanced is our the, a and There, equipment the morning kind development. like to investment of charge we're kind of that’s cristobalite, us allow we prepared announced opening and up other an remarks market also end and product Roof That the turbo pigment We're the in staffed year. really things. products growth about or up of variety new center third people market which working on

but little general, I fast So can we we're get good in doing these probably that, out really a we we to say as products new would everything can, feel about we're bit behind. as

Some say of reasons I put out that that. couple for of would there's we expectations there. a the And initial

in the in have been slower generally of Just pandemic ‘XX mostly their like to and post-pandemic new products, customers with we're environment, improve that back half the issues into really priorities, that seeing to and just respond and dealing but things own ‘XX.

was for that is have then scale the lab production. thing another issue us And work commercial, on these from scale to pilot the scale didn't do that we an to pilot to facilities products up scale to a go and we eventually as

product, try that. one facilities of have might a out need of their we on that didn't it one side the five they customer likes to truckloads have We produce lines. So our to commercial but new

that's going the facility that Illinois the few in the of by probably So we're I this just year. starting ago that up a end minutes be to area mentioned

help out up facilities a work, that in lot. getting to so And scale the us think I do will

rate to Don And remarks, debt in other these cash that new in $XXX in cases. environment, some diverted then his we over some invest debt to repurchased or And million a a interest in the at just the discount. in of choice as rising repurchase products we we the to is about some mentioned background and do had thing given

cash I to the in investments to the need and continue sheet margins there's in balance So generation the we to attractive continue our really we But improve repurchase industrial. now make make debt, company, with there. can think

terms probably we'll million that said, XXXX, would product we're all to new continue as range. I that $XX would grow we in So I $XX offerings in in to expect say $XX to in the million exited and million the million XXXX, range the probably be $XX of

up to running. have products best-selling, kick that get of of facilities start projects kind So those larger of, that capacity up, out highest we margin, ramping definitely for we're once sold will increase in are to and some we some and these as our into really XXXX

something longer effort and So it's a a probably but area we're putting complex a it's energy you and it's of answer a lot into than wanted, Samantha.

details for of much Thank on all that. you and best so luck that

Thank you.

a with have Stephen We Please Gengaro Instructions] from Stifel. [Operator proceed. follow-up

just to you plus, two was mines year Can big as there be guess like I just things. has cetera, filed the far over And on coming of way hasn't industry et curious, I we supply the recently. way kind the there Thanks. that they're new was acting One, pretty because sand materialized. seem it in of curious additions capacity prior and ease the IPO and that dynamics as overall been sand in of is a change And structured, last any -- a they feels up sort pricing demand? saw your player. cycles take I'm

the an some Atlas say that say I quite But astute the have obviously a and changes. competitor IPO and market Stephen the I'd No, filed, great for has there got Atlas been regarding some time. S-X about it's in been they've observation, talking and would you're been

one for -- other against like a well day, while really market. compete new and the companies there's they've currently up them as they about of just course It's private. around that showed there's them nothing not been as in So are many we

industry the seen been been early rest point, come like mines coming have online few a value the in and The oil think disciplined gas have like other we in have has seen sites. But Certainly, up the of coming or a much less in in that one general much mobile I there's two definitely capacity many to But feel things very days. the frequent that I chain. many, not and additions. we seeing mines we've your been we're did of slowing

future. balance just or cash or to sheets investments something to of about competitors in like like and investors either the think our point into return being are that other able thinking that perhaps back some I thinking sometime their some generation, us about at cash

more But years different feel anymore it kind settled. did a West much it feels Wild couple like very of the than me. and ago, disciplined of to doesn't It

it's a over last been years. So the few quite change

Great. cut other And for I and question got second. I only off the then had just a

the So business, as -- may and most products ‘XX? that look have this any Samantha's be about, there you we are to ISP like are we new that in the answered the of, should product in But ‘XX at, innovation when success having questions. there thinking key kind driving are

So I think there are a few things that are really interesting.

You’ve industry. have heard filtration that us talk biomedical fine about the products we for the

And of, really a big, so kind up and industry. it's coming

of proteins So you market to And ultimately the things that. and biologic products CM today do today a or and a separate into out, probably And plasma have entering of million very are at that's million off our that. see are things which we're good $XX $XX like of basically a that that's lot market. drugs and certain to that you kind out there plasma blood derive

but grow. going nothing to that's do So

XX So real I years be one next of coming that a lots opportunities is that's target think there'll to there. over the five and us for

a big market. is so just white addressable big think the market it's the the because one that's market other for us, I market large, a pigment is really

a other a TiOX sector. $X EverWhite are Generation is really got pipeline perhaps quite Generation, so in that product market lines, There's we've the and are coming that smaller of million million, other more like this them us. Generation things with that a $XX $XX million, ultimate But X, product, trying in of X So that's number replace things few of lot products. products for to potential a our large

things or There's So a there we're not best hits. is our a about stuff line on of lot like just big dependent one in of doubles lot and exciting product one like well. the I and singles two of as

able bring And have out be to sort the do a it the chain we have we along that whole just get to in of in products those together way continue market. those and to to

scale able to to to to the scale that. the to we on do of the work have bench and at the So able pilot product we commercialize have up do size got kind development we've be then be

a just go lot of additional There And question a were you challenges through I all going and behind question where through the Samantha's the particularly to be, think of products diesel, we're response there, to talking lot getting that, them of after, and challenges era. the of the getting was aspire originally some there we things my the bit little and just that in pandemic a as lines a the of to market. more most so product post-pandemic still probably the green but out

for Thanks color. the Great.

welcome. You're

back like Thank management I closing turn would over you. to this At time, to the call for comments.

Thank you operator. very much,

for First, I want hard colleagues year Silica. an to X,XXX thank my U.S. U.S. to their all for at Silica XXXX outstanding dedication make more than and work

in of ESG. about heard numerous profitability, us You've meaningful improvements talk today the strong the sales, the cash and generation areas

over the or lot proud last a XX certainly so. of months to So be

capital reaffirm to that want we're market discipline. to I Second, committed and

beyond. our flow and We to to cash significant free also we generate and on in expect to continue our further are sustainably meaningfully promise sheet strengthen delivering balance XXXX

a robust substantial organic growth remain and And value on strategy, portfolio, culture that execution focused finally, as look our shareholders business and and deliver we leading other creating will emphasis industry best-in-class our continued diverse segments, confident stakeholders. product ahead, for we inclusive

Thanks again next quarter. everyone. all look for and joining forward call with well you our today speaking be safe and to Stay we again

does This you. teleconference. conclude today's Thank

your disconnect lines and day. your may Have participation. time for You at you thank a great this