Liberty Energy (LBRT) - 2019 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and related management discussion for the periods ended June 30, 2019 Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements for Q2 and H1 2019, detailing financial position, operational results, and cash flows Condensed Consolidated Balance Sheets Total assets increased to $1.30 billion due to new lease accounting and receivables, with liabilities rising to $510.9 million and equity to $792.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 (unaudited) | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | $1,303,375 | $1,116,501 | | Cash and cash equivalents | $32,503 | $103,312 | | Accounts receivable—trade | $248,160 | $153,589 | | Finance & Operating lease right-of-use assets | $120,565 | $— | | Total Liabilities | $510,929 | $375,687 | | Current liabilities | $270,696 | $219,736 | | Finance & Operating lease liabilities | $113,712 | $— | | Total Equity | $792,446 | $740,814 | Condensed Consolidated Statements of Income Q2 2019 revenue decreased to $542.1 million and net income to $40.5 million, with H1 2019 revenue at $1.08 billion and net income at $74.4 million Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2019 | Q2 2018 | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $542,147 | $628,084 | $1,077,295 | $1,123,244 | | Operating Income | $51,203 | $114,211 | $95,354 | $182,771 | | Net Income | $40,523 | $94,741 | $74,432 | $148,728 | | Diluted EPS | $0.32 | $0.71 | $0.58 | $1.05 | Condensed Consolidated Statements of Cash Flows H1 2019 operating cash flow was $97.7 million, with $130.1 million used in investing and $38.5 million in financing, leading to a $70.8 million net cash decrease Six Months Ended June 30 Cash Flow Summary (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $97,713 | $109,201 | | Net cash used in investing activities | ($130,064) | ($137,843) | | Net cash (used in) provided by financing activities | ($38,458) | $95,652 | | Net (decrease) increase in cash | ($70,809) | $67,010 | Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies, including ASC 842 adoption, debt, equity, related party transactions, and significant commitments - Adoption of ASC Topic 842 on January 1, 2019, led to recognition of $57.2 million in finance lease assets and $64.0 million in operating lease assets[33][37] - As of June 30, 2019, $111.3 million was outstanding on the Term Loan Facility, with $233.9 million available on the $250.0 million ABL Facility, and all debt covenants were in compliance[56][57][61] - The company repurchased 1,303,003 Class A Common Stock shares for $18.4 million in H1 2019, with $98.7 million remaining authorized for future repurchases[81][82] - Significant future purchase commitments for proppants and chemicals total approximately $546.6 million through 2022[102][105] - In July 2019, unitholders redeemed 6,190,483 Liberty LLC Units for Class A Common Stock, increasing the company's ownership in Liberty LLC[110] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses decreased revenue and profitability in Q2 and H1 2019 due to frac service pricing pressure, covering operational results, non-GAAP measures, liquidity, and accounting policies Recent Trends and Outlook Q2 2019 saw lower WTI prices and rig counts, with frac service pricing reductions due to oversupply, and stable demand expected through Q3, potentially decreasing in Q4 - Oversupply of staffed frac fleets and reduced customer activity led to rapid pricing reductions for frac services starting in Q4 2018[118] - Demand for frac services is expected to remain stable through 2019, with a potential decrease in Q4 due to customer budget exhaustion[119] Results of Operations Operating results declined in Q2 and H1 2019 due to significant pricing pressure on revenue per average active fleet, leading to lower operating and net income Q2 2019 vs Q2 2018 Performance | Metric | Q2 2019 | Q2 2018 | Change | | :--- | :--- | :--- | :--- | | Revenue | $542.1M | $628.1M | -13.7% | | Operating Income | $51.2M | $114.2M | -55.2% | | Revenue per average active fleet | $23.6M | $29.5M | -20.1% | | Average active fleets | 23.0 | 21.3 | +8.0% | H1 2019 vs H1 2018 Performance | Metric | H1 2019 | H1 2018 | Change | | :--- | :--- | :--- | :--- | | Revenue | $1,077.3M | $1,123.2M | -4.1% | | Operating Income | $95.4M | $182.8M | -47.8% | | Revenue per average active fleet | $47.7M | $55.1M | -13.4% | | Average active fleets | 22.6 | 20.4 | +10.8% | Comparison of Non-GAAP Financial Measures Adjusted EBITDA decreased in Q2 and H1 2019, primarily due to lower revenue outpacing operating expense reductions Adjusted EBITDA Reconciliation (in thousands) | Period | Adjusted EBITDA 2019 | Adjusted EBITDA 2018 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $92,120 | $148,600 | ($56,480) | | Six Months Ended June 30 | $176,935 | $248,767 | ($71,832) | Liquidity and Capital Resources Cash and cash equivalents decreased to $32.5 million due to increased receivables, but operating cash flow and credit facilities are deemed sufficient for the next twelve months - Cash and cash equivalents decreased by $70.8 million in H1 2019, mainly due to a $94.6 million increase in accounts receivable and a $19.0 million increase in unbilled revenue[149] - Net cash from operating activities decreased by $11.5 million in H1 2019, and financing activities used $38.5 million, a shift from $95.7 million provided in H1 2018 including IPO proceeds[150][151][153] - The company has access to a $250.0 million ABL Facility, with $233.9 million available as of June 30, 2019[154] Quantitative and Qualitative Disclosure about Market Risk The company reports no material changes to its market risk exposure, particularly interest rate risk, since December 31, 2018 - No material changes in the company's exposure to market risk have occurred since December 31, 2018[164] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded the company's disclosure controls and procedures were effective as of June 30, 2019[165] - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2019[166] PART II: OTHER INFORMATION This section addresses legal proceedings, risk factors, equity sales, and required exhibits Legal Proceedings The company is involved in ordinary course legal proceedings, with no expected material adverse effect on financial position or operations - The ultimate costs to resolve current legal matters are not expected to have a material adverse effect on financial condition or operations[169] Risk Factors The company reports no material changes to the risk factors previously disclosed in its Annual Report - No material changes in risk factors have occurred from those described in the company's Annual Report[170] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no repurchases of Class A Common Stock during the three months ended June 30, 2019 - No shares of Class A Common Stock were repurchased during the three months ended June 30, 2019[171] Exhibits This section provides an index of exhibits filed with the Form 10-Q, including certifications and XBRL data files