Atlas Energy Solutions (AESI) - 2023 Q4 - Annual Results

Fourth Quarter and Year End 2023 Results Financial and Operational Highlights Atlas Energy Solutions reported strong financial performance for the full year 2023, with significant growth in sales and Adjusted EBITDA, alongside key operational achievements and a transformative acquisition Full Year Financial Summary (2021-2023) | Metric | 2023 (in thousands) | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | :--- | | Sales | $613,960 | $482,724 | $172,404 | | Net Income | $226,493 | $217,006 | $4,258 | | Net Income Margin | 37% | 45% | 2% | | Adjusted EBITDA | $329,655 | $264,026 | $71,968 | | Adjusted EBITDA Margin | 54% | 55% | 42% | | Net cash provided by operating activities | $299,027 | $206,012 | $21,356 | | Adjusted Free Cash Flow | $291,131 | $228,553 | $64,253 | - Announced a transformative agreement to acquire Hi-Crush Inc., which is expected to further Atlas's position as a premier proppant and logistics provider in the Permian Basin[1][5][6] - Key operational milestones in 2023 included completing the IPO, placing the new Kermit plant in-service, launching a high-capacity trucking business, and making significant progress on the Dune Express construction[5] - The quarterly dividend was increased by 5% to $0.21 per share, consisting of a $0.16 fixed and $0.05 variable component[5][17] Detailed Financial Results The company experienced significant year-over-year growth in 2023, driven by higher sales volumes and prices, though the fourth quarter saw a sequential decline in sales due to a slowdown in activity Full Year 2023 Financial Results For the full year 2023, total sales grew 27.2% to $614.0 million, driven by a 14.6% increase in product sales and a 96.3% surge in service sales, supported by higher volumes and improved pricing Full Year 2023 vs 2022 Sales Performance | Sales Category | 2023 Sales ($M) | 2022 Sales ($M) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Product Sales | $468.1 | $408.4 | +14.6% | | Service Sales | $145.8 | $74.3 | +96.3% | | Total Sales | $614.0 | $482.7 | +27.2% | - The increase in product sales was driven by a rise in both sales volumes (11.0 million tons vs. 10.2 million tons) and average sales price ($42.63/ton vs. $40.10/ton)[6] - Cost of sales increased by 30.9% YoY to $260.4 million due to higher sales volumes and increased trucking and logistics costs[7] - SG&A expenses doubled to $48.6 million, primarily due to increased wages, and professional fees associated with the IPO, corporate reorganization, and the Hi-Crush acquisition, including $5.3 million in non-recurring transaction costs[8] Fourth Quarter 2023 Financial Results In the fourth quarter of 2023, total sales decreased 10.5% sequentially to $141.1 million, attributed to a slowdown in drilling and completions activity that impacted both sales volumes and pricing Q4 2023 vs Q3 2023 Financial Performance | Metric | Q4 2023 ($M) | Q3 2023 ($M) | Sequential Change (%) | | :--- | :--- | :--- | :--- | | Total Sales | $141.1 | $157.6 | -10.5% | | Product Sales | $100.0 | $114.8 | -12.9% | | Net Income | $36.1 | $56.3 | -36.0% | | Adjusted EBITDA | $68.7 | $84.1 | -18.3% | - The decline in product sales was driven by decreases in both sales volumes (2.6 million tons vs. 2.8 million tons) and average price ($39.00/ton vs. $40.62/ton)[10] Liquidity and Capital Expenditures As of December 31, 2023, Atlas maintained a strong liquidity position of $384.1 million, with net cash used in investing activities primarily allocated to the new Kermit facility and Dune Express project - Total liquidity as of year-end 2023 was $384.1 million, composed of $210.2 million in cash and cash equivalents, $73.9 million available under the ABL Facility, and $100.0 million available under the Delayed Draw Term Loan Facility[12] - Net cash used in investing activities totaled $365.5 million for the year, largely for the construction of the new Kermit facility and the Dune Express[13] - The company's fully diluted share count outstanding was 100,025,584 as of December 31, 2023[14] Subsequent Events Following the year-end, Atlas announced a definitive agreement to acquire Hi-Crush's Permian assets for $450 million and secured additional financing, while also declaring a quarterly cash dividend Acquisition of Hi-Crush Atlas entered into a definitive agreement to acquire Hi-Crush's Permian Basin assets and North American logistics operations for $450 million, funded by a mix of cash, stock, and a deferred seller's note, supported by upsized credit facilities Hi-Crush Acquisition Consideration | Consideration Type | Value ($M) | | :--- | :--- | | Cash at Close | ~$150 | | AESI Shares | $175 (9.7M shares) | | Deferred Cash (Seller's Note) | $125 | | Total Value | $450 | - Financing for the acquisition includes upsizing the ABL facility to $125.0 million and adding a new $150.0 million acquisition term loan facility[16] Quarterly Cash Dividend On February 8, 2024, the Board of Directors declared a quarterly dividend of $0.21 per common share, payable on February 29, 2024, comprising a $0.16 base and $0.05 variable component - A dividend of $0.21 per share was declared, comprising a $0.16 base dividend and a $0.05 variable dividend[17] - The dividend is payable on February 29, 2024, to shareholders of record as of February 22, 2024[17] Company Overview Founded in 2017, Atlas Energy Solutions is a leading provider of proppant and logistics services exclusively serving the Permian Basin, focused on maximizing stockholder value through strong cash flow generation and disciplined capital allocation - Atlas is a leader in the proppant and proppant logistics industry, with a sole focus on the Permian Basin[22] - The company operates strategically located facilities in Kermit, TX, and Monahans, TX, designed to maximize supply reliability and product quality[22] - The core mission is to maximize stockholder value by generating strong cash flow and providing a regular return of capital to investors[23] Financial Statements and Non-GAAP Reconciliations This section provides the condensed consolidated financial statements for the fourth quarter and full year ended December 31, 2023, including detailed definitions and reconciliations of non-GAAP financial measures to their nearest GAAP equivalents Condensed Consolidated Financial Statements The financial statements detail the company's performance, showing total sales of $614.0 million and net income of $226.5 million for the year ended December 31, 2023, with total assets growing to $1.26 billion due to investments in property, plant, and equipment Key Income Statement Data (Year Ended Dec 31, 2023) | Metric | Amount (in thousands) | | :--- | :--- | | Total Sales | $613,960 | | Gross Profit | $313,766 | | Operating Income | $265,130 | | Net Income | $226,493 | Key Cash Flow Data (Year Ended Dec 31, 2023) | Metric | Amount (in thousands) | | :--- | :--- | | Net cash provided by operating activities | $299,027 | | Net cash used in investing activities | $(365,486) | | Net cash provided by financing activities | $194,623 | | Net increase in cash | $128,164 | Key Balance Sheet Data (As of Dec 31, 2023) | Metric | Amount (in thousands) | | :--- | :--- | | Total Current Assets | $318,686 | | Property, plant and equipment, net | $934,660 | | Total Assets | $1,261,686 | | Total Current Liabilities | $92,592 | | Total Liabilities | $393,862 | | Total Stockholders' Equity | $867,824 | Non-GAAP Financial Measures and Reconciliations This section defines non-GAAP metrics like Adjusted EBITDA and Adjusted Free Cash Flow, which management uses to evaluate operating performance and cash generation, providing detailed reconciliations to their nearest GAAP equivalents - The company defines Adjusted EBITDA as net income adjusted for items like depreciation, interest, taxes, stock-based compensation, and non-recurring transaction costs[38] Reconciliation of Net Income to Adjusted EBITDA (FY 2023) | Metric | Amount (in thousands) | | :--- | :--- | | Net Income | $226,493 | | Depreciation, depletion and accretion | $41,634 | | Interest expense | $17,452 | | Income tax expense | $31,378 | | Stock and unit-based compensation | $7,409 | | Non-recurring transaction costs | $5,289 | | Adjusted EBITDA | $329,655 | Reconciliation of Adjusted EBITDA to Adjusted Free Cash Flow (FY 2023) | Metric | Amount (in thousands) | | :--- | :--- | | Adjusted EBITDA | $329,655 | | Less: Maintenance Capital Expenditures | $(38,524) | | Adjusted Free Cash Flow | $291,131 |