U.S. Silica (SLCA) 27 Feb 242023 Q4 Earnings call transcript

Good morning, and welcome to the U.S. Silica Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure Investor you Relations my Vice Patricia now of President and is to to introduce Gil, It Sustainability.

Officer. Fourth today Thank I'd you, today President and U.S. are us Executive our the Executive Vice Kevin like everyone. Earnings Financial Silica's for Officer; to thank Bryan and Call. and you for call good Leading Quarter XXXX morning, Hough, Chief Interim Conference Shinn, joining Chief our

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

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

net over supplemental filings, Please the ratio. to we of Additionally, call, turn website segment net full accompany the net CEO, today's reconciliation earnings I net adjusted we margin, to On or today's and adjusted our have would like call provided such non-GAAP today's EBITDA, our discussion. leverage press presentation Bryan release, as public ratio. and section debt discussion accompanying debt, fourth quarter the now measures the for a margin, Investors to segment Shinn. contribution in leverage EBITDA, presentation refer to refer to our may contribution on earnings and a

everyone. morning, good and Patricia, Thanks,

out for exceptionally growth our financial the strategy strong to and During the while and foundation strengthen year fourth advance quarter, company. historic continued our an closing we

adjusted net XX%. profit guidance we EBITDA and company increasing delivered year-over-year XXXX, contribution income During margin XX% growth XX% with while on

debt, increased Gas structure. lean year-end. extinguished We pricing industrials, by both were and cash delivering ratio product mix at for customer Oil repurchased profitability XX% and & pricing by in These worth $XXX balance of optimized a results It's noting $XXX disciplined EBITDA of growth our with low demand million flow segments dollar & all a leverage in Gas. also of cost driven and during X.Xx annual XX% approximately Furthermore, generated combination and delivered TTM of and improved record and operations. of we annual that million of contribution impressive net from total a supported strong year also our business the sequential and ISP for Oil annual margin sheet improving

we XXXX, enough of year worth bleaching pools performance, many including achievements, play enough oil, diatomaceous aid edible delivered swimming safety filter filter purify earth and XX,XXX fourth selling nonfinancial of Olympic-size to During billion beer. also our in record X.X row to gallons of selling a employee

like FFA December. of as along volunteer and In of. used fantastic product sponsoring I'm pleased be to XXXX an XXX news, with vials students, We've country. CFO across participating to education strategy. and Controller that opportunity accounting our turn appointed of team with albumin year, purified plasma in and blood search place very and call corporate I'm and leadership all, I'll serving to the backgrounds. millions excited CFO company now process the search. the expect XH completed I'd we of certainly the to processing months. events the medicine detail. including proud have roughly we far in advance will a growth in as sports in range in and update so Accounting very the in events our local our will Gene meet to In of leagues provide in results more our few broad for patients numerous lot President, company a with the and had recreational was Kevin? financial we for And Padgett to While believe to also Chief new finally, protein Officer Gene to his next with to the a a Vice over late key welcome produce candidates continue had year. high-quality financial XXXX, multiple be expertise our extensive discuss local was X in asset a we who our community number talented organizations, million Kevin, of on

and good Bryan, morning, Thanks, everyone.

As Oil by cash full driven year reported Bryan Gas from the in supported improved market pricing by adjusted for a both historic value cost levels product structures of we further and activity industrials. despite mentioned, mix in segments. & disciplined EBITDA XXXX, This of softer flow for operations higher and was

and quarter. of to increased Looking XX% decreased results nonrecurring the sequentially to covering when the made quarter the primarily costs to in driven group the in due Depreciation, Selling, depletion, quarter general the decreased quarter. at X% quarter, X% and X.X X% adjustment compared purchase to Total administrative company and revenue $XX.X pension in to contracts X% for sequentially the and insurance tons to total participants fourth margin sequentially contribution million. million million. company $XXX.X million, decreased overall fourth annuity by $XX.X prior decreased amortization prior million, expenses to to Adjusted EBITDA a XX% expense sold $XX.X million. and decreased quarter $XXX beneficiaries

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

interest the & & our million operating $XXX.X of our used of par. As at of debt of X.Xx. by the extinguished delivered environment our performed adjusted high Oil of SandBox to the the the million EBITDA Volumes providing gas estimated segment quarter. through $XX.X to guidance, third a ratio annual The At expense X% decreased decreased net Gas while decreasing a and you prior compared XX-month reducing the today's below balance sequential $XX.X we debt, of per compared These ton which margin remained in interest have results. million second XX%. pricing. revenue loads reported savings. contribution lower completions Bryan of total for with segment will X.X tons, cost debt driven by million, below excess walk decline oil trailing was decrease fourth million to rate an U.S. year-end a fourth on fourth quarter, debt in the and our million an we third for service our segment activity the quarter, to results X.Xx, Segment XX% of quarter quarter, I mentioned, $XXX cash end target on were to X% basis sheet incrementally $XX.XX. sequential extinguish in XXXX, at $XX additional quarter outstanding the Since of now

compared results and high mix, basis XX% was and $XX.XX. ISP, Our was Industrial contribution margin increased initiatives. million, per to expanded on year-over-year basis X% segment, million, cost pricing sequential & improved sequential On increase or ISP contribution to increases, for grading the the X% the due dollars a costs. Specialty which and the The margin basis, revenues prior improvement and for of segment the which Volumes in lower pricing due quarter. a sequentially product and tons. increased decreased XX% was percentage to on of flat margin totaled ISP a $XXX.X totaled Segment reported segment contribution XXX,XXX $XX.X ton

earnings million delivered cash the in working capital. efficient strong statement. We flow to $XX.X Turning operations driven of cash strong from by fourth quarter, net and flow the

During $XX.X cost maintenance, capital, million primarily QX, projects. for growth we ISP of improvement invested facility and

million impact As of million the of of under had drawn revolver the credit. and cash million, loan quarter a XX%, $XXX which available $XXX.X million increase letters company's facility includes December after sequential for XXXX, At extinguishment. XX, the the cash credit $XXX.X dollars equivalents allocating with our zero totaled of end, $XX

in high gives in & our level with coupled consistent the contracts customer of ISP The in profit reasonable Oil varied Gas us and our visibility segment, guidance. XXXX. to segment, for customer base our confidence Turning

expect flow plan free this debt reduce net needs growth we generation continue to level. cash to flow We to operating while our our cash direct capital our year fund strong and

expectation the below net Our will is it current leverage X.Xx through year. that remain ratio

profitable in continue we'll will Regarding capital our at maintaining and investment pursuing disciplined on operating be allocations while to growth. spending, levels our facilities we focus

with be we million look that forecasting high the as opportunistically return year spending during For full for year $XX to potential XXXX, our increase capital accelerate to our we to are possibility the capital approximately projects. investment

given be full Finally, become XXXX are to SG&A we investments assets X% up higher year-over-year, are spending depletion is years X% for becoming approximately in CapEx or driven XXXX have expense levels fully amortization year in expense depreciated. for primarily by approximately depreciation, forecast and full forecasting year that workforce. down The prior of our

call Bryan. that, back year tax estimated is XXXX full rate turn effective approximately I'll Our to over the XX%. And with for

Kevin. Thanks,

sandbox our QX the the during contribution saw segment. Next, some our typical driven logistics let's quick up activity variable that by our XX% of & overall weather to for reduction digits strong with ton coupled sequentially completions we and as QX. mid-single and disciplined land margin approach, cost pricing of and Oil experienced efforts, price offerings for Demand in down less our sequentially Gas quarter-over-quarter. trends the a lower us complex than to $X Due were initiatives, drilling was proppant energy starting seasonality. our review per with quarter, U.S. and deliver These allowed proppant flexible

the capability X scale, to customer amendments to our at reliability, extensions due in Additionally, contract signed quarter. reputation, and and trusted market deliver we proppant

patent repair to uptime total to market Finally, a increased our maintenance continue filtration continues gain and frac pump with and pending XX Guardian costs. momentum units perform of date. decreased Customers well new in system enjoy to fluid efficiency the and and installed

oil, products. was now ton will key then our I of these Advanced seasonal our year-end afforded customer declined benefited quarter's a updates market of a our on the levels, basis. as for increases provide systems particularly demand from Given and recreation activity quarter first XXXX. year-over-year margin we and year-over-year in double us in expect which on reduction, fleet lower in reductions, In a Materials, summary ISP and normal and sequential greater on maintenance with and a volumes ongoing profitability basis. combination on last the fiberglass, in of This to strong price guided our call, outlook and industrial and facility we inventory industrial a customer customer improved portfolio segment, contribution due increase the sales acceptance we management, the adoption, structural finish to from XXXX. developments per Despite XX% for cost

made on of key X During business. all our ISP elements strategic the fourth growth quarter, we progress significant

the a projects, We're rate. and also costs. mind, cost continue capture lower plant committed improved increasing in to at is help automation, of efficiency offset savings reliability, to costs, element business pricing goal first to our logistics prices. maintaining product With Our raising gas from reduced that we base profitability natural GDP plus and increased

numerous for XX% ISP to up products of into increase noncontracted price recent beginning shipments for X. went January most Our effect

QX of fillers, powders element ISP high-purity strategy as such our diatomaceous ground differentiated and a this productive products to grow is and second in filtration fine substrates. The was high-value substantially regard. our earth current very quarter silica,

this pricing we additional $X.X demand silica we quarter, the have with solar supply mine passage total end to Lower industry. Silica of billion industry contracts finalized a low capacity IRA. solar produce the expansion growth, and customer for of the domestic is for $XX.X developed projects billion strong solar U.S. During amended domestic with that and during customer silica panel to the a and manufacturers recently have volume key from growing commitments. second X U.S. a bringing We contract signed capability remains and an iron key To estimate quarter, since investment improved glass panel product. announced support announced the

levels, for high out at earth Additionally, products our our catalyst sold across and DE continues demand remain facilities. powders natural diatomaceous

customer of early demand come that strength are capacity in to for mid-XXXX. products, pursuing the Given online expansion these we will

as Our TiOX and advanced addressable Armor of applications expanding and roofing continue White element to sales Sales accelerate. high-value third such is pigment cristobalite, EverWhite new our partial of solar replacement Pigment, reflective EverWhite strategic with markets materials our materials. product,

early capacity forward multiple of next markets. scheduled year. move qualifications total that production and for selling with remains expanded production trials Customer would our is this addressable feedback come capacity, line as applications we out which online positive product and to We for further expand our several to existing sight have our

ensures the During even customers in in This and center we a launched meet roofing we're fully across cool to reflectives. location. performance roof continue at Plus, North Rochelle, the our innovation product and codes from inquiries we distributors processing commissioned cool with America. customers stringent solar qualified about state-of-the-art new also new improved receiving and Illinois increase most quarter, that can granular materials new numerous this

market and maintain ratio as year business and net Kevin again a we'll X.Xx. below outlook, Turning flow to robust operating that noted, generate leverage now our we this anticipate cash

to through-cycle to floor few in contribution that have level a attractively $XX million in segment margin These our of and percent mid-XXs basis sacrificing Gas variabilization to Our have our and We've contribution annual earnings per effect cost earnings maximize ton is segment repositioned the reduction years, costs improved past over our margin and peak up per substantially. the average positioned Oil in had our by which forecast market. upside year. a $XX the on & fixed the raising market without annual softer the will the ton actions low for efforts due the our cut to

the healthy Permian completions. mines impacted constructive for the pricing X% dollars anticipate from we QX supply has energy just were with continued to demand recorded ongoing XX% winter that will sales segment second for we best business additional our well first slightly maintain and this proved be sales slightly started as market. negatively to proppant U.S. capitalize multiyear a volumes off stronger-than-anticipated The Overall, to with and January Silica mini volumes. proppant prices mile oversupplied last for on down the margin competitor sequentially For customers flat out remains proppant for beneficial pressures due and to reached up upcycle us month in West contribution harsh commodity positioned logistics. as with to Texas well Basin expectations to for quarter, weather current

and production are discipline of have maintaining continue pricing with strong for sand approximately capacity our committed to contractual for XX% XXXX. commitments We

requiring margins. and plan and the remains we translating service and contracted acreage to for heavily disciplined lead continue believe more while length, to maximizing and to well pricing greater should reiterate, proppant positions to sand healthy To that We recent for profit consolidation operator demand increased better sand intensity on completions. strong, and remain lateral our

numerous we Industrial to we growth customer investments margins are Furthermore, profitability continue Specialty we & the year to in segment, and end structural strength expect coupled should achieve emerging current Products profit to reductions, expanding near-term increases domestic our price the potential with serve. investments that product to These of Moving well XXXX offset initiatives, to market cost in development. markets due another of through continue in weakness. and any positioned manufacturing

product single forecasted quarter, mix. low volumes first to year-over-year down the For are be digits to due demand

ongoing contribution expect favorable improvements. to X% dollars efficiency on and due in XX% margin year-over-year supply increase we basis Industrials improved to a However, to pricing, operational product mix, chain and

to results Products like Oil White business Industrial are to Specialty you & with I'd forward. Additionally, we segment the on segment reporting management a change business offerings of moving oilfield the careful the XXXX. Sand and After from first & consideration, and our Northern our segment to alignment beginning update quarter Gas going reporting in

ISP. an we sand has business over we value White offering positioned unit. Given to operations, oilfield have as all better within will today streamline our years, allow us business offerings Northern reduce how maximize it's and that change one This as costs, now Sand business based white believe in the evolved the will

numerous a our product for efficiency strong which making this roof needs online progress strengthen on for sold-out our meet maximizing our our the be discuss powders launching will sheet optimization next beginning expansion cost new line earnings to earth a which granular in company incremental and new early come including To domestic to second cool of we while and debt quarter capacity at to will of panel the fourth in financial on developing of and company. reductions in the call prices new product, and line business and EverWhite prior across offer We historical efforts will our in pigment continued extinguishment finally, the continuing plan the both solar a source examples contracts iron diatomaceous coming reporting results mid-XXXX, next improved year, bridge to summarize, alignment. increase balance further quarter to further cost industry, low segments, launching the early several online growing areas, through silica capacity signing attractive growing and

the We and taking can customers, transformational increase growth with please And capacity, that actions we contracts improve company help the the stakeholder questions? for expect unlock are that, blue-chip value. to lines efficiency our operations with that our and and expand for Operator, you will enhance open

Our Stephen the you. with from at be line [Operator first session. will question Instructions] And question-and-answer a Thank this of time, Gengaro Stifel. comes we conducting

mentioned I dynamics segment. A things evolving. out start couple you of market me. But to jump know for just ISP are the with,

as X% suggested applicable event margin analyst that 'XX? XX% to Is growth had to trend held. the contribution a you You during

Yes.

and We expect going that that window to forward, growth CAGR average in Stephen. be as our

when what accessible we over average the margin contribution of And about now? Gas Oil of is gas & right and does or current capacity, sort per oil that for frac ton in mean what And sand nameplate either think capacity reallocation time? the

you about the White When about sort are you else? change were about something reallocation, Sand? geographic talking of on the talking Northern talk you Or

said Northern you White It Oil be used were & Industrial reclassifying does When it for will into ISP, your not that into mean Gas you selling Yes. applications? you're anymore?

that what Sand. team that going manage the have Northern Basically, to all of means White the no. No, industrial is we're

the White Sand. company description. basically, meets And in profits we reality think is in that foundry, And the glass how run with into we like that that the I anyway. ways team line little the And by and maybe some allow profitability the Internally, makes of if by that I optimize about some of doing the think technical team we'll think about of oilfield, still having etc. we're industrial I sell oilfield kind ongoing is, that the of management supply will that White sort around one under we're it bringing that bit we long managed What the we capacity we vying think and this, by sort and for of kind all of for and that of management company. logistics into will sand of doing team, the into the sell if a chain. and to together of sand and there's manufacturing, X within Industrial team. all capacity, lot we've company that when efficiency have company but got allocation confusion that Northern can applications Northern management industrial that that Sand, that's a teams the the of some we sense. expect one of Today, in the management done term optimize be the

Okay. a which That I you not. Oil makes Northern was misread thought I you're I Gas sense. & exiting -- White basically that. business, the little were

that's Okay, helpful.

we're No, not.

a And morning. big then back There line. one announced for just a and acquisition get was me, earlier I'll final in this

helps pricing think then of But I the think of of the impact, at was that kind bit capacity. close the out was potentially entity There which about to industry a that and things of it couple Permian? consolidation impact me with XX%s and low. valuation the kind how paid the that consolidates just a in quite a little I maybe the talk probably XX%, supply/demand that, consolidation jumped the and seemed Permian dynamic you high could potential combined of for

sure. Sure,

more industry, and for parts and to that it off positive think is a this, companies. tough if to But that's the I about I in fragmented tough in can think industry, industry calls, valuations compared chain the real to them It's discipline the And needing chain. on fragmented. definitely the will always we a around long pretty it. to and our it the congratulations an -- when step our sector kinds this chain this frac doing so overall frac look our get industry, industry, to And back deconsolidated. very a earnings pull both off start know consolidations at great all it's all stability to lot see it's basically consolidation as I look and positive be And for should Which to acquisition and We've of sand is sand the value of I of Stephen. of a within off, and bring talked all of some to hats accretive meetings sort oilfield other for you it at value happening. to really the term. industry, think First

Our comes Daniel from next with the of line John question Daniel Energy.

follow on pursue to equal Gas the & an In would to Oil just else I or questions. world, Industrial? Stephen's in consolidation rather you being in want all

than of we And dropping side. dollar oilfield stock on the part to into a that sort the premium the and we if plays to talked if have investing side certainly growth side lot like specified. Industrial We parts to same of different think we both the of of cool on overall about Industrial Industrial we're energy earth mental many that. capital the for I moat I certainly of strategy you cash well. on get part that have Xx certainly we say have generated the opportunities the we EV so the ultimately company why dollar rarely company's Oil that because and think disproportionately every if It it across That in towards It's at a probably a kind over growth of company entrants diatomaceous side industrial that we've X generate really lot said, we of & there. at how Well, of around look and a the We're there's enough company, we there. would see commands share more look and company, minerals of of today, optionality valuation. strategy. of the and invest of important and EBITDA, managing the kind the part that you business. the silica Gas more valued new through dynamics businesses, price part look technically the the the It's the the fortunate in energy an generates our we as is

appropriate give we that X think I and industries of the effort like we the to the both amount of businesses we're in.

as if incorrect more, Gas & with you I consolidation. -- that may. about is for I'd more I'm assuming -- opportunities you One you Oil think Okay. acquisition, you that Or through view? growth see -- within can be When

there's there actually I is much parties issue as like of not good And usually conversations definitely cycle the imagine, get overlap of you like oilfield of opportunities. time where I depending in the where to a different the the other the buyer feel sides are on we've you and can one think And Well, going had or over know they're on both expectations with is, well, terms in years side a transactions. number seller deal. feels valuation. not as

think show something done. that. that's this to frankly, doubly in particular has down do And so done hard quite things it worth. getting and makes terms be biggest will might It frac to things over around it been Hopefully, valuation, establishes I the getting expectations issue, the certainly path a been here. what up in sand years towards of some

get takes it the in see you if I'm that light do that's we part hopeful fuse And of Sometimes of kind really done. more consolidation our that what will, business. to more to

with next line comes question of from Instructions] [Operator Gengaro Stifel. Our Stephen the

follow-ups. quick X just Bryan,

how of contribution the obviously in contracted But sand ton I I you XX% the margin you -- think? mention the is Gas supportive business mean assume & right Does for now slight what mentioned XXXX. supply-demand did of what underlies Oil pricing think right stable frac you provided. what now, we situation think that fairly You do right I now? -- sand overcapacity about the for but dynamics is

a question. It's great Yes.

of there's see remarks, where a from, capacity, versus my slight ton in said I we a of prices down right from we'll couple dollars As now a and prepared oversupply QX. exited

down look to pretty on at stabilized and today. have last you pricing pricing. will do I see market we feel QX bit of be consistent things But like in things XXXX the out a just year, If

this. the I to year dollars feel contract. 'XX for many still contracts we think in I But was how a think that in we've the around, bit stabilized strong in we're And price versus be is thin, a spot, to But history. capacity the than to 'XX. few market year. view and well, of was have we've really good the about I really off to particularly have year confidence XX% I that companies anywhere I that's service always, company be that and gives healthy minus and very chain, in us spot able think. in contract a As again, that to And visibility signed. historic have of a are that pricing probably plus you like very the a kind where us to But long-term our XXXX continuing really under or XXXX of good the and relative here a little 'XX. most for going less in going

through second think about between when And etc., you is levels the cash a you flow dividends, to when and would more asked a Great. I of to of buybacks and about reducing the and debt, capital with balance shareholders back comfortable little start ultra one think directly then but just about buybacks bit allocation, John M&A, debt sort where you the where are know quick dividends?

reduced I think that's mentioned. do needs I for is TTM growth out want and good we've the look have of we priority your others lot to you still things just are of finished given up year interest backing repurchases. the capital to looking then And say X.Xx for levels, EBITDA that about industrial That's would leverage debt QX look specifically that we first we last have at to we that of at the debt Obviously, debt like since that and thing a couple our relatively think basis. hard $XXX funded, we'll million fully the sure of that about question, last 'XX. kind allocation, I Thinking of rates net kind always high there, place X over a make us. at to so years, about start.

about, might that room think sitting and just bit there. we to And where feels bit through we growth a to about say to do net to go more. I think -- under as that still we want well. cycle I If levered the a take place lower pretty Xx tend We're be? like well, I through so a good a there's under be little levered think down stay Xx cycle, can let's

We a metrics we look of that at, lot have different Stephen.

chat what where we making be right about all and monitor want think We in pick our our that for choices about constantly and opportunistic and decisions go, we'll exactly think with and calls. we with make stakeholders. to the want to our Just those the investors so we'll every quarter cash, Board

Thank you.

We back end now call to I'll of the the have reached CEO, closing remarks. Bryan question-and-answer over Shinn session. for turn the

much, you very Thank Operator.

this business and we our for our in industry-leading here grow next today. other As new new commitment and offerings, begin forward very will everyone, value well. XXXX, about the confident for to the our and and are be strategy, call we free want I with visibility, joining current us, we that to thank cash on safe, further substantial speaking deliver and year in flow stakeholders believe earnings to already you shareholders all our you do we've Stay again again quarter. and talked all look as we

lines you And for this today's disconnect your Thank you conference, your and participation. concludes time. may this at