ENSV - Enservco Reports 2020 First Quarter Financial Results
- Total revenue declined to $9.4 million from $24.8 million
- Production services revenue of $3.2 million vs. $4.1 million
- Completion services revenue of $6.2 million vs. $20.7 million
- Net loss of $2.8 million vs. net income of $4.3 million
- Adjusted EBITDA loss of $0.5 million vs. positive $7.9 million
DENVER, May 15, 2020 (GLOBE NEWSWIRE) -- Enservco Corporation (NYSE American: ENSV), a diversified national provider of specialized well-site services to the domestic onshore conventional and unconventional oil and gas industries, today reported financial results for its first quarter ended March 31, 2020.
“The sharp reduction in customer drilling and completion and activity in the fourth quarter carried into the first quarter and was exacerbated by the Saudi-Russia price war and the worldwide economic slowdown due to the Covid-19 pandemic,” said Ian Dickinson, President and CEO. “We continue to take steps to right size our cost structure. Since the first of the year we have taken approximately $2.0 million in annualized costs out of the business. This includes a significant headcount reduction, compensation cuts across the organization, closure of our Oklahoma facility and a temporary scaling back of operations at two other facilities. In addition, we have reduced our 2020 maintenance Capex budget by approximately $600,000 due to lower expected activity levels. These moves were difficult but necessary as we manage through the immediate challenges facing our industry.
“On a brighter note, we continue to build on the market share gains we achieved in 2019. We have won and are pursuing additional incremental business with new customers across our footprint, with a particular focus in Texas, Colorado, Pennsylvania and North Dakota,” Dickinson added. “We also continue to focus on strengthening our balance sheet and are in ongoing discussions with our lender and advisors regarding debt restructuring options.”
First Quarter Results
Total revenue in the first quarter ended March 31, 2020, declined 62% to $9.4 million from $24.8 million in the same quarter last year.
Production services revenue was down 22% year over year to $3.2 million from $4.1 million. Production services included hot oiling, which declined to $2.9 million from $3.6 million, and acidizing, which declined to $270,000 from $469,000.
Production services generated a segment loss of $292,000 in the first quarter as compared to a segment profit of $770,000 in the same quarter last year.
Completion services revenue was down 70% in the first quarter to $6.2 million from $20.7 million.
Completion services generated a segment profit of $1.2 million, down from a segment profit of $8.7 million in the same quarter last year.
Total operating expenses in the first quarter declined 37% year over year to $11.6 million from $18.5 million due primarily to lower costs of providing completion services. Sales, general and administrative expense increased 10% in the first quarter to $1.8 million from $1.6 million. The increase was attributable to higher costs associated with bad debt reserve as well as professional fees related to the Company’s efforts to restructure its debt. Those increases were partially offset by elimination of redundant costs related to the acquisition of Adler Hot Oil Service.
The Company reported an operating loss of $2.3 million in the first quarter compared to operating income of $6.3 million in the same quarter last year. Net loss in the first quarter was $2.8 million, or $0.05 per diluted share, versus net income of $4.3 million, or $0.08 per diluted share, in the same quarter last year.
Adjusted EBITDA in the first quarter was a negative $503,000, down from a positive $7.9 million in the same quarter last year.
Enservco used $1.0 million in cash from operations in the first quarter, down from $2.6 million in cash used in operations in the same quarter last year.
Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 2:30 p.m. Mountain Time (4:30 p.m. Eastern) and will be accessible by dialing 844-369-8770 (862-298-0840 for international callers). No passcode is necessary. A telephonic replay will be available through May 29, 2020, by calling 877-481-4010 (919-882-2331 for international callers) and entering the Conference ID #34739. To listen to the webcast, participants should go to the ENSERVCO website at www.enservco.com and link to the “Investors” page at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available until June 15, 2020. The webcast also is available at the following link: https://www.webcaster4.com/Webcast/Page/2228/34739.
About Enservco
Through its various operating subsidiaries, Enservco provides a wide range of oilfield services, including hot oiling, acidizing, frac water heating and related services. The Company has a broad geographic footprint covering seven major domestic oil and gas basins and serves customers in Colorado, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia. Additional information is available at www.enservco.com
*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing Enservco’s operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Operations table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.
Cautionary Note Regarding Forward-Looking Statements
This news release contains information that is "forward-looking" in that it describes events and conditions Enservco reasonably expects to occur in the future. Expectations for the future performance of Enservco are dependent upon a number of factors, and there can be no assurance that Enservco will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond Enservco's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in Enservco’s annual report on Form 10-K for the year ended December 31, 2019, and subsequently filed documents with the SEC. Forward looking statements in this news release that are subject to risk include the ability to continue growing market share and taking costs out of the business and the ability to restructure debt. It is important that each person reviewing this release understand the significant risks attendant to the operations of Enservco. Enservco disclaims any obligation to update any forward-looking statement made herein.
Contact:
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
Phone: 303-880-9000
Email: jay@pfeifferhigh.com
| ENSERVCO CORPORATION |
| CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS |
| (in thousands except per share amounts) |
| (unaudited) |
| For the Three Months Ended |
| March 31, |
| 2020 |
| 2019 |
| Revenues |
| Production services |
| $ |
| 3,202 |
| $ |
| 4,116 |
| Completion services |
| 6,184 |
| 20,696 |
| 9,386 |
| 24,812 |
| Expenses |
| Production services |
| 3,494 |
| 3,346 |
| Completion services |
| 4,971 |
| 12,020 |
| Sales, general and administrative expenses |
| 1,762 |
| 1,602 |
| Patent litigation and defense costs |
| - |
| 9 |
| Loss on disposals of equipment |
| 15 |
| - |
| Impairment loss |
| - |
| 127 |
| Depreciation and amortization |
| 1,396 |
| 1,400 |
| Total operating expenses |
| 11,638 |
| 18,504 |
| (Loss) Income from Operations |
| (2,252 |
| ) |
| 6,308 |
| Other (expense) income |
| Interest expense |
| (641 |
| ) |
| (884 |
| ) |
| Gain on settlement |
| - |
| Other income (expense) |
| 20 |
| (65 |
| ) |
| Total other income expense |
| (621 |
| ) |
| (949 |
| ) |
| (Loss) income from continuing operations Before Tax Benefit |
| (2,873 |
| ) |
| 5,359 |
| Income tax expense |
| - |
| - |
| (Loss) Income from continuing operations |
| $ |
| (2,873 |
| ) |
| $ |
| 5,359 |
| Discontinued operations |
| Income (Loss) from operations of discontinued operations |
| 36 |
| (1,056 |
| ) |
| Income tax benefit |
| - |
| - |
| Income (Loss) on discontinued operations |
| 36 |
| (1,056 |
| ) |
| Net (loss) income |
| $ |
| (2,837 |
| ) |
| $ |
| 4,303 |
| (Loss) earnings from continuing operations per Common Share - Basic |
| $ |
| (0.05 |
| ) |
| $ |
| 0.10 |
| Loss from discontinued operations per Common Share - Basic |
| - |
| (0.02 |
| ) |
| Net (loss) income per share - basic |
| $ |
| (0.05 |
| ) |
| $ |
| 0.08 |
| (Loss) earnings from continuing operations per Common Share - Diluted |
| $ |
| (0.05 |
| ) |
| $ |
| 0.09 |
| Loss from discontinued operations per Common Share - Diluted |
| - |
| (0.01 |
| ) |
| Net loss per share - diluted |
| $ |
| (0.05 |
| ) |
| $ |
| 0.08 |
| Basic weighted average number of common shares outstanding |
| $ |
| 55,518 |
| $ |
| 54,266 |
| Add: Dilutive shares |
| - |
| 951 |
| Diluted weighted average number of common shares outstanding |
| $ |
| 55,518 |
| $ |
| 55,217 |
| ENSERVCO CORPORATION AND SUBSIDIARIES |
| Calculation of Adjusted EBITDA * |
| Three Months Ended |
| March 31, |
| 2020 |
| 2019 |
| EBITDA* |
| Net (loss) income |
| $ |
| (2,837 |
| ) |
| $ |
| 4,303 |
| Add Back (Deduct) |
| Interest Expense |
| 642 |
| 884 |
| Provision for income tax expense |
| - |
| - |
| Depreciation and amortization (including discontinued operations) |
| 1,403 |
| 1,683 |
| EBITDA* |
| (792 |
| ) |
| 6,870 |
| Add Back (Deduct) |
| Stock-based compensation |
| 39 |
| 92 |
| Patent Litigation and defense costs |
| - |
| 9 |
| Gain on disposal of equipment |
| (39 |
| ) |
| - |
| Impairment loss |
| - |
| 127 |
| Other (income) expense |
| 279 |
| 64 |
| EBITDA related to discontinued operations |
| 10 |
| 774 |
| Adjusted EBITDA* |
| $ |
| (503 |
| ) |
| $ |
| 7,936 |
| *Note: See below for discussion of the use of non-GAAP financial measurements. |
| Use of Non-GAAP Financial Measures: Non-GAAP results are presented only as a supplement to the financial statements and for use within management’s discussion and analysis based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the reader's understanding of the Company’s financial performance, but no non-GAAP measure should be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided herein. |
| EBITDA is defined as net (loss) income (earnings), before interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA excludes stock-based compensation from EBITDA and, when appropriate, other items that management does not utilize in assessing the Company’s ongoing operating performance as set forth in the next paragraph. None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. |
| All of the items included in the reconciliation from net income to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, impairment losses, etc.) or (ii) items that management does not consider to be useful in assessing the Company’s ongoing operating performance (e.g., income taxes, gain or losses on sale of equipment, severance and transition costs, gain on settlement, expenses to consolidate former Adler facilities, patent litigation and defense costs, other expense (income), EBITDA related to discontinued operations, etc.). In the case of the non-cash items, management believes that investors can better assess the company’s operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company’s ability to generate free cash flow or invest in its business. |
| We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Additionally, our fixed charge coverage ratio covenant associated with our Loan and Security Agreement with East West Bank require the use of Adjusted EBITDA in specific calculations. |
| Because not all companies use identical calculations, the Company’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company’s performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures. |
| ENSERVCO CORPORATION |
| Condensed Consolidated Balance Sheets |
| (In thousands) |
| March 31, |
| December 31, |
| ASSETS |
| 2020 |
| 2019 |
| (Unaudited) |
| Current Assets |
| Cash and cash equivalents |
| $ |
| 217 |
| $ |
| 663 |
| Accounts receivable, net |
| 5,695 |
| 6,424 |
| Prepaid expenses and other current assets |
| 722 |
| 1,016 |
| Inventories |
| 359 |
| 398 |
| Income tax receivable, current |
| 57 |
| 43 |
| Current assets of discontinued operations |
| - |
| 187 |
| Total current assets |
| 7,050 |
| 8,731 |
| Property and equipment, net |
| 25,450 |
| 26,620 |
| Goodwill |
| 546 |
| 546 |
| Intangible assets, net |
| 777 |
| 828 |
| Income taxes receivable, noncurrent |
| - |
| 14 |
| Right-of-use asset - financing, net |
| 499 |
| 569 |
| Right-of-use asset - operating, net |
| 3,563 |
| 3,793 |
| Other assets |
| 407 |
| 445 |
| Non-current assets of discontinued operations |
| 1,301 |
| 1,430 |
| TOTAL ASSETS |
| $ |
| 39,593 |
| $ |
| 42,976 |
| LIABILITIES AND STOCKHOLDERS' EQUITY |
| Current Liabilities |
| Accounts payable and accrued liabilities |
| $ |
| 3,600 |
| $ |
| 4,470 |
| Senior revolving credit facility |
| 34,589 |
| 33,994 |
| Subordinated debt |
| 2,394 |
| 2,381 |
| Lease liability - financing, current |
| 205 |
| 207 |
| Lease liability - operating, current |
| 853 |
| 848 |
| Current portion of long-term debt |
| 148 |
| 147 |
| Current liabilities of discontinued operations |
| 31 |
| 72 |
| Total current liabilities |
| 41,820 |
| 42,119 |
| Long-Term Liabilities |
| Long-term debt, less current portion |
| 175 |
| 198 |
| Lease liability - Financing |
| 207 |
| 259 |
| Lease liability - Operating |
| 2,805 |
| 3,009 |
| Other liability |
| 33 |
| 33 |
| Long-term liability of discontinued operations |
| 27 |
| 34 |
| Total long-term liabilities |
| 3,247 |
| 3,533 |
| Total liabilities |
| 45,067 |
| 45,652 |
| Commitments and Contingencies (Note 8) |
| Stockholders' Equity |
| Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding |
| - |
| - |
| Common stock. $.005 par value, 100,000,000 shares authorized, 55,612,829 and 55,642,829 shares issued, respectively; 103,600 shares of treasury stock; and 55,509,229 and 55,539,229 shares outstanding, respectively |
| 275 |
| 278 |
| Additional paid-in capital |
| 22,108 |
| 22,066 |
| Accumulated (deficit) earnings |
| (27,857 |
| ) |
| (25,020 |
| ) |
| Total stockholders' equity |
| (5,474 |
| ) |
| (2,676 |
| ) |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ |
| 39,593 |
| $ |
| 42,976 |
| - |
| - |
| ENSERVCO CORPORATION |
| CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) |
| For the Three Months Ended |
| March 31, |
| 2020 |
| 2019 |
| OPERATING ACTIVITIES |
| Net (loss) income |
| $ |
| (2,837 |
| ) |
| $ |
| 4,303 |
| Net (income) loss from discontinued operations |
| 36 |
| (1,056 |
| ) |
| Net (loss) income from continuing operations |
| (2,873 |
| ) |
| 5,359 |
| Adjustments to reconcile net (loss) income to net cash used in operating activities |
| Depreciation and amortization |
| 1,396 |
| 1,400 |
| Loss on disposal of equipment |
| 15 |
| - |
| Impairment loss |
| - |
| 127 |
| Stock-based compensation |
| 39 |
| 92 |
| Amortization of debt issuance costs and discounts |
| 47 |
| 179 |
| Provision for bad debt expense |
| 300 |
| - |
| Changes in operating assets and liabilities |
| Accounts receivable |
| 429 |
| (11,199 |
| ) |
| Inventories |
| 39 |
| 118 |
| Prepaid expense and other current assets |
| 333 |
| 124 |
| Amortization of operating lease assets |
| 230 |
| - |
| Other assets |
| 15 |
| 69 |
| Accounts payable and accrued liabilities |
| (869 |
| ) |
| 1,069 |
| Operating lease liabilities |
| (204 |
| ) |
| - |
| Other liabilities |
| - |
| 84 |
| Net cash used in operating activities - continuing operations |
| (1,103 |
| ) |
| (2,578 |
| ) |
| Net cash provided by (used in) operating activities - discontinued operations |
| 134 |
| (68 |
| ) |
| Net cash used in operating activities |
| (969 |
| ) |
| (2,646 |
| ) |
| INVESTING ACTIVITIES |
| Purchases of property and equipment |
| (164 |
| ) |
| (123 |
| ) |
| Proceeds from disposals of property and equipment |
| - |
| 155 |
| Net cash (used in) provided by investing activities - continuing operations |
| (164 |
| ) |
| 32 |
| Net cash provided by (used in) investing activities - discontinued operations |
| 178 |
| 553 |
| Net cash provided by investing activities |
| 14 |
| 585 |
| FINANCING ACTIVITIES |
| Net line of credit borrowings |
| 595 |
| 2,016 |
| Repayment of long-term debt |
| (23 |
| ) |
| (11 |
| ) |
| Payments of finance leases |
| (30 |
| ) |
| - |
| Repayment of note |
| - |
| (200 |
| ) |
| Other financing activities |
| - |
| (1 |
| ) |
| Net Cash provided by financing activities - continuing operations |
| 542 |
| 1,804 |
| Net Cash provided by (used in) - discontinued operations |
| (33 |
| ) |
| Net Cash provided by financing activities |
| 509 |
| 1,804 |
| Increase (Decrease) in Cash Flows |
| (446 |
| ) |
| (257 |
| ) |
| Cash and cash equivalents, beginning of period |
| 663 |
| 257 |
| Cash and cash equivalents, end of period |
| $ |
| 217 |
| $ |
| - |
| - |
| Supplemental Cash Flow Information: |
| Cash paid for interest |
| 537 |
| 595 |
| Supplemental Disclosure of Non-cash Investing and Financing Activities: |
| Non-cash proceeds from revolving credit facility |
| - |
| 39 |