FTS International (FTSI) 13 Feb 202019 Q4 Earnings call transcript

Greetings and welcome to the FTS International Fourth Quarter and Year-End 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded Thursday, February 13, 2020.

I would now like to turn the call over to Michael Messina. Please go ahead, sir.

Thank you and good morning everyone. us review FTS XXXX fourth joining and conference results. you to webcast quarter appreciate for International the call We and full-year

purposes. As recorded conference this replay a is reminder, for being

CEO, today’s who Lance Presenting CFO; Petersen, of Q&A Buddy for and is the remarks Mike call. Turner, will be joined prepared also by the portion COO Doss,

predictions the Private are differ Before Act I would intentions, comments cause of statements uncertainties forward-looking call today's on expressed These management’s meaning we the like plans, to XXXX. that of future forward-looking begin, from could that expectations, beliefs, materially subject for within risks the or anticipations, made forward-looking to remind Securities Litigation the any include that to Reform statements in are results everyone those company’s actual statement. and

does the as uncertainties These update on Form the may available and be sec.gov. in risks obligation to contacting SEC’s filings and files by reports company’s ftsi.com, on discussed are required SEC. by law, and undertake the XX-K are with or The statements. publicly and company Annual on company website, the company any the company’s not other obtained Except Report company’s SEC website, the forward-looking in any revise the

conference discussions This call of includes measures. also non-GAAP financial

includes their directly comparable most release non-GAAP financial of to measures measures, about earnings further Our these reconciliations GAAP information non-GAAP as well these as measure.

over FTSI’s to that, Doss, Mike. call with turn Mike the And I’ll now CEO.

Thank you, morning and good everyone.

schedule $XX of quarter we the result of our efficiencies call. Despite reductions ahead in operational came discussed better was on million last slowdown This very the in the seasonal cost on our of than annualized fourth strong expected. tracking

customers count XX%. during down declined their quarter. revenue while providing about which our drop was more X% own the to Revenue was in XX% lower and sand pricing sequentially activity, $XXX lower down million was due the The state's

$X.X annualized $XX.X fleet adjusted quarter. Adjusted in $X.X million in quarter, the third third from the was EBITDA million EBITDA was compared $XX.X per million million to up

due SG&A million layoffs. million was $XX.X of accelerated to higher quarter comp to in stock the to $X.X third than related

stock Excluding from quarter, was the $XX.X million fourth the in third comp down quarter. million SG&A in $XX.X

For the is million for about or was comp. $X.XX $XX $X Net of the stock million be quarter $XX including SG&A fourth loss to per expected quarter first million share.

from increase dual CapEx have for five driven the million dual was seven ended third conversion We month. $XX.X end with up next and fleets, kits. in million capable by we'll of $XX expenditures by quarter year fuel the the with fuel the

$XX.X million approximately cash is million For remain fleet. and expect for we to at XXXX. same about per year, the CapEx was or Free CapEx the full $XX $X.X million expected Maintenance and cash flow totaling of we sale was million million the full including year fourth year. for $XX in $XX.X million, proceeds $XX.X the during asset the was million $XXX.X generated it quarter,

we million, of million year. $XXX was our As million cash and of year-end had the for a debt $XX reduction net $XXX

of We alternatives management a evaluate due of term year and We're extend maintaining we consists possible of to million $XXX significant to $XX have total our outstanding maturities. million which a notes term optionality while loan XXXX. debt pieces, $XXX of of liability in next increase due senior million liquidity two

calendar. whitespace stages Texas. fourth an Mid-Con, in and in seasonally X in X% those and per ended West in more X in completed working. the Our quarter was fleet in despite the currently over Of fourth in quarter, the Texas, fleet We third X XXX average Northeast the XX in X count increase We quarter. the South the in with active have located quarter are compared XX.X driven X XX.X quarter the fleets to XX east Texas, third

fleet per We day XXXX. per hours every quarter pumping have stages in increased in steadily single

customers these a on fleets more With or us that see pumping together focused pump routinely efficient effective to hours month. performance to of leadership leading kind which XX to away due fleets our crews’ is service with only XX our us complete possible day. able dedication plus efficiency XXX That working achieve quality, to maintenance operations’ performance continue with moves industry are stages to per outstanding allows team. put We pads, highly between and

challenging Natural have turn areas XX basins where sales in months terms activities, we to X the activity fallen beginning XX today. we and presence, to in mid-XXXX fleets a quarter. declined. from XX In fleets current period, We indications went of Over gas the in but has are gas last prices have that are this gassy had big been month just

relocated those but has at instead XXXX West work transactional more solidifying peers. resources emphasis a of pricing relationships - cost to competitive. than the longer-term new our that work We've Texas we had to on directing Also of both several late came areas towards work as margins primarily work. caused market works became but historically fleets chasing of more in to always types increasingly sensitive be to We heavier of of of for changes transactional sales some other us our began

change lowest I transactional spot. engaging in that sales is those cost beginning partnerships allow provider to share on to primarily mean bear dedicated distinction parties focused work, customers The using successes. By strategy fruit. don't and in the business rather in Transactional between are both the than

have Over long we two as the partners. fleets strategic that view last six term months accounts with placed we

used converted our to one of dedicated we us efficient more addition, a a In had spot as stable highly provider swing which customers have customer.

the firmed receiving than time of our for are this RFPs overall, market usual While more the operations the year. we has frac for remains and calendar first quarter up oversupplied

resulted market. competitors in of being more disciplined tightness the our some has It which that are appears some spot unexpected in

power is While we do development. not yet have pricing a this welcome

rolled pricing, about of year. the lost to In on X% that we new terms contracts over

active. a we cost slightly further average off sustained this to However, and XX XX quarter by first work of we kicked reductions. pricing into stabilized. gains quarter terms year with expect pricing we believe end XX Currently driven year fleets lower on and for has and about new in the going fleets in second or footing the results the that Despite stronger efficiency

our expect and between quarter. EBITDA million fleet to $X the also $X per annualized improve first million We in adjusted to

technology a me Next, you let update. brief give

which Our in been the to has Computer-assisted probable pumps. It be is to action automation the seamlessly soon to pumps other to show down will making now project redistribute take load able years can failure. automatically now control indicators of live. shut pump

us by maintain consistent more This of our out get hours costly our reduce performance more for damage customers. accumulation innovation will excessive caused and allow reliable repairs to equipment, stage

redesign example equipment the new reflecting over and operations continually blender being a more in of operate improvements, one is improve the perks durable, This with considerably mind. where to effectively can is to XXX completed recently easier of is project a significant manufacturer of perfect of and our a our cost maintain. blender Another easier we

of on dual can we’ll We've Lastly We costs. earlier fuel only outlay months X from significant mentioned last customers dual in the dual Tier I as interest million. the $X.X fuel a have fuel, of over fuel or next fuel dual X to month. to way that convert by capable fleet capital reduce conventional seen end fleets a six

a the $XX CAT more rate a significant a involve fleet from commitment proceeding. capability better X We profile upgrade of They with about a fleet. million higher a our engines. they would BGB also firm customer Tier emissions have outlay We have new and per to but the need before displacement

However looks there is some really we test interest initial engines the results good. field performance in the have on

lets remarks. go prepared That's please all Operator have for I Q&A. to

Holt. [Operator Instructions] line first Pickering, of the Tudor, Our comes Zurcher question with from Taylor

proceed your question. may with You

what the how much left QX First because to reduced question the is just could in there on is geographic go extent are some you're in on as I guide to moving whitespace room front just do? for for sounds there, and maybe a QX mix in mix quarter but Probably, is played in efficiency efficiency performance it embedded or able stages for in the efficiency fleet you that and customer frame there well. a like us incremental role forward, some had QX

Sure.

to relates up though quarter as So did fourth efficiency did we the whitespace. it the have more even tick

the it more do tighter doing lot customer know well, less between the opposed of I between in a that stages, single those to and gain. efficiency has factors it’s think you we're type, time work of locations as lot of operations time a to really less resulted PTOs type zipper just with in net

of whitespace think as customers of the the of quarter the first was utilization main Fourth a off lot very expected you - terms just rather a and gappy months, everyone For couple just terms weeks of for I driver for couple the in very calendar. took know quarter. efficiency typical of gain of is example in quarter last the less in

with And quarter but a that first in operations the performance great so do and fourth in to the up see pleased going we're quarter, they're job. to tighten continuing very

as have way frame think of capital for then for cash XXXX think And impact of over profitability But status the sort quo flow. QX expectations flow be XXXX? of necessarily is in quarters you the What going XXXX to might of the is the we looking course for couple year clearly cash in working and any higher guidance free QX free in the sort not and of to XXXX. first about within

on Sure. you comments, can make a answer few I'll capital. and Lance the working

starting the in off like ago. I a always stronger than there's had footing we know you market we on couple So expected said are uncertainty higher but of months a considerable

third to be quarters second for are I quarter and think us. going good quarter a

quarter reasonable given that third assume another on second we currently into quarter. think to RFP may just fleet up activity I going flex the the

probably measure year, I'd manage we're then the but that hard load bit seem what off drop tend way Fourth anticipating. know, that but front that's that capital companies it’s as does budgets at repeat of to the change E&P quarter currently year. end the a and be that's a will last really from to like their to it of some

layout, quarter better just So first probably similar last I reasonable year, a quarter and quarter that fourth to quarter third then and would of quarter the say better than second just fourth passed. quarter

Yes.

working a flow so to then your wouldn't I decent cash I cash. year-over-year impact produce we'll then and QX think capital of in know this terms you've I interest you usually expectation same so and a coming amount a expect is big have the In year that interquarter be release obviously in of a have I usage and expect QX to we in CapEx the got think

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

You proceed. may

I first You and you said XXXX. up going fleet QX that fleet a just flex in Well, I XX couple out? were number potentially comments. careless might the here to XXXX mentioned have fiscal you referring you another got a in is Mike

go into of Potentially by end XXXX Yes. the quarter. second the

Okay.

of And that bit a a is guess.

assumption. reasonable a We that haven't that's yet given secured but momentum the

That’s mean of EBITDA I that fine we XXXX would is XXXX, XXXX doing you in be fleet at excess that is when wonder fair? per the where that question then I here - activate you're and and are a guess for you guiding QX, potentially all an presumably rate

in would I it’s guide. the say of right the probably middle

Fair enough.

- should the do you are Okay. now? the reactivation And any to as want re-activation costs building model be into then we

Now the we just fleet we doing maybe got there just per $XXX,XXX - mean a cover OpEx. business. those cost I of $X million

you then in and jerk, one out. point guys the a sound fleet know for looking and look know or are in significantly have one guys to just pull to make presumably this Texas need we basin not do a otherwise your And go working. at last a customer We what at you does fleet the when operation you isn't relationship one say but what me that as you you different you've hey you here at East Northeast and that say, sense got like an to

So how walk does process? that, can that me through you just

Yes. comments couple as ask well. I'll comment Buddy I'll and make to a of

are additional we the very terrible obviously to fleet fault, really to are working we have me trying area them pressure Northeast that's up make moment. carry and I So particularly a another doesn't to sense, fleet look are in just the for are would to margins not outlook The on overhead. that and to think get at of the But in district say customer there lot their so but an that for good. absorb doesn't not good I up the gas apply course prices the of

the lean made very to can only one and as currently. possibly response in really have having fleet the we thin We district

would it it's really trying we're think so fantastic through. abandon got Northeast. I really And a good the district just to I manage rather had term us. long been a for potential. do not Historically

today. depressed working fleets but I nine had the obviously think at area, right we one in time

So you have to Buddy, do anything add?

echo believe that to No. sentiment piece. carry because Texas I’d Texas the cost the flexibility The Northeast the really social we I in to the some again I pieces we Ford social you Eagle and the because East there the mean, as East higher be. both with proximity are Mike. won for Northeast we know want just is enough that long-term Texas in Texas concur pull is than East of the the with issues don't East having out of your - would close

Our next question Tillman from Dustin Fargo. the of Wells comes with line

You may proceed.

You mentioned south stabilizing? have and think you and you of that you How about repurchasing about cash do that bonds growing are into now position trading going management. the see liability you thinking XX, are bonds market your

to the loan. as know notes the consider this at want one far we just year is is it's for Lance couple term You under a consideration. that's and But loan are months. maturity attractive to you so that been an thing be we doing a of looking considering, of offer, discount pay-off know any? we is something term but still and next possibility may mindful And as so repurchasing One it carefully tender we've

the Yes, at I'd point. this table are options say on all

flow it likely it purchase - stability to that Is it cash ago looking makes say fair more a were versus you to the where at quarter today bonds?

would I think Yes, so.

very - make the you we've sure dealt we a that And but and well so loan want liquidity sound can again be got with that term to know comfortably.

causing of us path. just right going pause and trying what's that really the all balance so we make to are just to is that sure down And

next comes Stifel. Gengaro with Stephen question the Our from of line

You may proceed with your question.

Two one how the to follow think to prior do much you about actually just on sheet? things on up question, need how your cash carry you balance

patches to around working low the sufficient operating business I Well, be in quite capital hundreds - able swings probably handle XXX probably rough think cyclically. cash and

around you we so you broad loan know And carrying of and us thoughts kind that the higher our term $XX bit But today. little gets a management. that have plus on know million than cash for million $XXX that's

we that then probably? I pricing that as it, reflected the XQ rest and the the on think X% am, first the guidance? about rolling sort comments the based how thinking then And you you of that over guide imagine about think year. Isn't I in of down your at quarter about mentioned already that is about

Yes absolutely it is.

you months next kind equipment XX which market look the - And the crystal of the are industry out? mean but sort next equipment we've about then seen at quality the How plays some it I hard you predict How thinking in the side looking sort of do over mix. how market from of are in the demand sort the the of at just XX-plus and is finally you your to as removed over, about months think the still you certainly over of and of total. it's ball thinking I some from the fleet know

think announced Yes. of very just attrition course you but I know healthy. is my the is Well, opinion, this

of not slightly need imagine anything any really the today's does see intuition, the but as just quality unable to really go just second can't market. really generate markets. or I probably half competitive in quality sufficient to based kind of factors just analysis the the equipment, that of of on maybe it's and equipment that's aren't macro and leave companies careful I the lesser think - just I in nature. stable, I would quite the better or any returns comment market on

behavior, I think that's more think mentioned earlier competitors, story and seeing - I thing call a that's healthy the today. more disciplined probably our industry are than we some the for so larger you among attrition impactful particularly the and very of some on But I know than the

Chris Our Voie next Wells question comes from of the line Fargo. with

with proceed question. may You your

kind how I is give us just and quarter visibility third on first quarter. the quarter the the and you into that second in visibility much I and guidance of calendar wanted check Can full for to that. some you whether on have the the have beyond then anything first of

a have this and the I rest is first filled we've quarter. really the that, and point on don’t read out, think any remaining space Well, mean calendar quarter, at firm we the of for good I but got so

the - that's fleet full additional or And second I'm of building an much to your so - in result dedicated. but I our so, could right but we for question of There on our quarter, many the quarter is second not are. was that's we're if now that - quarter, we're is just bids working the going sure evergreen that some where first or exactly mean that work currently that for continue

stages I down of revenue that the trying of there to just size was in - little handle have. you how sand, visibility how the mentioned you was might on you on I get X% a much as a on mix in the customers’ pricing, much can shift color stage in be in well. the follow-up give was the There of a XX%. a Obviously terms shift sand in the basins per to quarter? guess length writing shift in there

a Yes, quite bit actually.

the - fourth a X% the we high. provided pumped so is quarter customers are is using that for XX% we of which So and provided only sand stages

third the quarter I but and highest think ever was it second in less quarter.

down I fuel continued, a customers. didn't was fuel XX% hardly was pretty we also getting think any we closer didn't it shift big provide to - it and so have for

much it markup picture. these doesn’t put - materials these the we just at days revenue cost definitely don't it’s But of big the so any and of stage. really revenues per sales, so on looking have it's materials in on specially matter revenues - a and we don't the have of Yes, impact an

squeeze one in more. we’ll just Maybe

of there all second in cost something ahead in schedule cost the the within guide going tailwind savings quarter it’s - quarter. your savings, the of you're is So first be those to a are or complete

a first little but quarter time to some cost reductions of I takes second estimates just wouldn't largely say terms - - into of bit the realized all quarter. the - quarter reduction pushed There's a get material through. it's in it of the bleed second tailwind the in the G&A will in those

the Instructions] Our from Scotiabank. of comes question next with Vaibhav Vaishnav [Operator line

with your You may proceed question.

frame to Can to about. And move to efficiency I what but guess already XX the spoken we months we much think last the how months here XX months? just efficiency have months over - gains us have efficiency - do XX about we next All think be help you over right, trying go gains XX could if like. you forward seen? from

Yes, months looking the months XX%, know XX we're - to over XX months - that. larger you at - XX than last months XX

I number big is in up back us for percentage in - wells. zipper a of had think that well came in high the come one XXXX. the it's now and XXXX, back XXXX down factors zipper We

of And that's this. so a big driver

we've ever more now had XX focus more what just in on before. possible customers than efficiencies. Secondly ago, more and XX ago efficiency you are those months is and customers efficiency leading edge realized the now achieving more focused on months got so focused customers

hard we And forward say. look so as to it’s

think starting zipper well well. to well QX, probably as see the maximizes driver a think - as I the that the from zipper industry you're and saturation in effect in I

QX, QX so, improvement modest And it's at this and point. in but maybe improvement some to hard expect past say I

- - through things other minutes there any still that on there are something - stage here minutes, a we like next frac can can off Zipper XX year? besides continue that shave like or So and XX

mean time at right we’re now, stages. I what I think looking is Yes, between

to on the we're period on as can of time exactly a be. it and that you to it. XX go small shrinks So stages. We natural there's can hit I crews, wells, still know our shave minutes number right, XX zipper think focused of how we to but transition you - between think And limit you’re minutes a that we've

have wanted may just to not as clarification it I written And on guidance. the get fast. I

or active. So XX XX thinking $X utilized? that million And the to XX be EBITDA you XX the active $X fleets $X is to that is to million working guys there fleets with based annualized XX million on of being my $X fully are fleet, understanding that million, will

Yes.

Fleets to or was is asking? it XX XX

I no that. can Yes, clarify

So, is quarterly the average. XX the

just out started we XX with fleet so to average XX end And blended is the we're going zero and XX. or and with

what that million. by multiply $X be you million the XX would would $X to So

Our comes the next Dushkin Bank of America with question from Merrill Matt of line Lynch.

question. your You may proceed with

regarding to the on contracts quarter, to going out you work And these these are the Just pricing incremental two spot. going difference can dedicated markets? or the on fleets between speak are this two

Yes so, this would be for fleets. dedicated

of in once the per there probably improvement so, out customer our relief in the And pricing do of range in second where the some for for into adjusted the middle guide EBITDA we market and But starting with groove think terms be we get on a possibly goes. is the would fleet. room depending efficiency pricing half

additions of this good quality customers in terms quarter. So,

between And you fleets any I - your for potential fuel dual market then between give bifurcation you I point? pricing markets, expect to do seeing mean you at on or pricing some the guess one the just the sticking are

bit an that minimal said no to some of an getting cost to It’s we there in situations. addition. it’s in capital of that, us the cases a to in additional a want conversions throw if XX stage over to the advantage it maybe as with away like give kind - a helpful a - cost for so. was allow I customer capital or minimal our for say be if No, new us in nice - customer, access just that us, In largely a really uplift bidding dual recover gives us rate, other outlay but we it’s greater so fuel partner months it gap would on a them. just we it's We’ve

of question Stan the line with next from Independent Our comes Manoukian Credit Research.

may your proceed with question. You

per deployed your fleet? - average each the of working of representation is what capital about is demand question of My your sort

$X million working capital the to fleet. to $X incremental per be estimate range would in million I So

our sheet you conclusion Well, $XXX that sort with consider, balance carry the have - how of you cash timing to think efficient $XXX are capital the quarter. of on where that previously. this, and the do million It’s you second right more of sensitive to real needs sort I digitalization potential some to that alluded this of need you of just, million you mean of so to visibility we needed

You balance serious all have with do something the to sheet? more

Well I outlook. a - we sensitive that and to - this think certainly yes is year priority are the how

think is one of terms I terms sure the of this priorities function if a it's important liquidity to I'm pretty progress not that outlook question we but in year, the I the expect full priorities got top I make think corporate the in capital on of but. of structure.

I Yes little a add bit. can on

yes. Yes,

Yes is I maintain sure just advisors talking would optimize maturity take a But course make just well and term wanting a just straight to liquidity just push of one of out and something do. to just end may comfortable to And just the best think goal we the we're for is to prudent the like be years. us. to that the we're is more I trying think - pay - off be action that structure option strong we Stan The just situation. number loan which then

stock., of of more in And that your sort continuously your very to this point really clear [indiscernible] sort - regard at and Obviously more are to despite shareholders fleets, of strategy. able pour my low to been dedicated contractor dedicated So the change this marketing you you have of sort - sort is and energetically question two the a of price interested is it about get obviously contracts? with more

is of longer to the dedicated sort your this your strategy - the opinion? except And focus? competitive? changing then towards successful to and you is your - continue - price meet demands utilization equipment how of of think contracts this of the the drivers today term to spot question marketing from you was point sort more is shift segment how your Do in the your at are the in this equipment making a competitive condition what do that fleet think that is market of your What better increase previous year and

I there four unpack. guess things to three there or is Well

the into the So forward to first a future. our equipment the is ability move condition and of

absolutely based working that well-maintained of over on and anything we calls as our the in Genesis in fleets Haynesville. equipment years. the robustness tackle talked to and the last have Our about several are starting ready We've our several alluded

vertically being market to to doing the with to technology us the customer's advantages necessarily automation and continue we're gives keep So coming the allows and others that window which integrated additional push additional demands into meeting that of some continue life the us our wouldn't have.

and As them achieve to as things that far efficiencies of zipper lock our anything the moving rig the some hand help reality achieving price through those efficiencies. is the forward other and - well are than customers worked today other hand we've in

the at disadvantaged other market we're that all believe on necessarily than don't overall anything conditions. we so, And

think us to going going leveraging we're futures that keep we're So be pushing and successful to to we're keep our that customers efficiencies, long-term customers, continue continue the blue give to in I strategy. chip to going pushing and

disclose you’re a if and curious shareholder can you of holders your bonds? was I lastly if strategic And

to them I to know answer don't that you'd I'm ask the that, think I have - question. not

Yes not aware any of significant thing.

no further at There questions time. are this back call now will turn you. to I the

with All for FTSI in well, to speaking again we you and look next your you quarter. thank forward interest right

That does for you line. conclude disconnect for participation you please your ask call thank the and We that your today. conference